Civil Procedure Flashcards
(8 cards)
Summary
Because the woman’s claim is based on state law and the amount in controversy exceeds the jurisdictional amount ($75,000), the key issue in determining whether subject-matter jurisdiction exists is whether the plaintiff, the woman, and the defendant, the distributor, are citizens of different states. The woman is most likely a domiciliary and therefore a citizen of State A, where she has lived continuously all her life and which she still calls “home.” While an argument can be made that she has become a citizen of State B, the fact that she spends the majority of her time each year in State B and treats it as her residence for certain purposes probably does not
amount to an abandonment of her State A domicile under the circumstances. For diversity purposes, corporations may have dual citizenship. The distributor is a citizen of State C, where it is incorporated. The distributor is also a citizen of State B, the state
where it has its principal place of business. Because the distributor is a citizen of States B and C, and the woman is probably a citizen of State A, complete diversity exists and the court should not dismiss the action for lack of jurisdiction. Assuming that diversity jurisdiction exists, venue is proper in State A, and the court should not dismiss for improper venue. In an action founded solely on diversity, venue is proper in a district in which the defendant resides. Corporate defendants are deemed to “reside” in any state where they are subject to personal jurisdiction. Although the distributor is incorporated in State C and its headquarters are in State B, it conducts sufficient business activities to subject it to personal jurisdiction in State A, and thus is deemed to reside there for venue purposes.
A federal court has jurisdiction of a complaint based on state law if the amount in controversy exceeds $75,000 and there is complete diversity between the parties. Here, the amount-in controversy requirement is satisfied.
Federal district courts have original jurisdiction over state-law–based suits involving citizens of different states where the amount in controversy exceeds $75,000. 28 U.S.C. § 1332. In determining the amount in controversy, a court will accept the plaintiff’s good faith allegations as to damages unless it appears to a legal certainty that the plaintiff cannot recover that amount. St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283 (1938). Here, the woman’s claim
for $400,000 in damages appears to have been made in good faith, given that the woman had earned $80,000 a year in the first two years of the contract and that the distributor breached the contract with eight years remaining. Certainly, there is nothing to suggest that the woman will recover less than $75,000 to a legal certainty. Accordingly, the key issue is whether the woman and the distributor are citizens of different states.
The woman is probably a citizen of State A. But an argument can be made that she has acquired a new domicile in State B and therefore has become a citizen of State B.
To determine an individual U.S. citizen’s state citizenship for diversity purposes, courts look to the state of the individual’s domicile when the complaint was filed. Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 830–31 (1989). A person’s domicile is generally determined by two elements: (1) residence in a state, and (2) an intent to remain in that state. In cases like this one, where an individual resides for extended periods in more than one state, the determination
of domicile often turns on “a complex inquiry into an individual’s intent.” Ner Tamid Congregation of North Town v. Krivoruchko, 620 F. Supp. 2d 924, 931 (N.D. Ill. 2009). Courts look at a variety of facts, none of which is dispositive on its own (and many of which can be
manipulated by the individual concerned) in an attempt to determine the individual’s true, fixed, permanent home and the place to which the individual intends to return when absent. Relevant facts include the individual’s residence, the location of the person’s property, the person’s voting behavior, the location of bank accounts, the individual’s memberships and personal associations,
automobile registration, place of employment, and other matters. 13E CHARLES ALAN WRIGHT, ARTHUR R. MILLER & EDWARD H. COOPER, FEDERAL PRACTICE AND PROCEDURE § 3612 (3d ed.
2009).
Application
It is unclear whether the woman is domiciled in State A or State B. The woman was clearly a domiciliary of State A, the only state in which she had ever lived, until she bought the farm and farmhouse in State B. Despite her purchase of the State B farm, she maintains many social connections with State A, continues to secure medical and dental treatment in State A, returns to State A to live every winter, and continues to vote and attend church there. One could
argue that these facts show that the woman never intended to abandon her State A domicile but always retained the intent to return there. On the other hand, the woman did acquire property in State B, she moved many of her personal belongings there, and she lives there for most of the year. Moreover, she took several steps that suggest her intent to establish a State B domicile, including registering her car there, obtaining a State B driver’s license, filing state income taxes only in State B, and listing State B as her residence on her federal tax returns. Although the matter is debatable, the facts suggest that the woman did not move to State
B with the requisite intent to remain there. Instead, it appears that she always intended that State A would remain her home, although her livelihood requires her presence in State B for much of the year. In cases of this sort, some courts seek to determine the “center of gravity” of an individual’s life. See, e.g., Galva Foundry Co. v. Heiden, 924 F.2d 729 (7th Cir. 1991). Despite the fact that the woman lives in State B for two months more of the year than she lives in State
A, it appears that the “center of gravity” of her life is State A, and that a court would conclude that she is a domiciliary and therefore a citizen of State A.
[NOTE: Examinees who demonstrate an understanding of the complexity of this issue, and who use the key facts to develop a cogent argument, should receive full credit regardless of their conclusion on this point.]
The distributor is a citizen of both State C, where it is incorporated, and State B, where it has its principal place of business (i.e., where its corporate headquarters are located).
By statute, a corporation is a citizen both where it is incorporated and where it has its principal place of business. 28 U.S.C. § 1332(c)(1). The distributor is incorporated in and therefore is a citizen of State C. So, the question is where the distributor has its principal place of business. Until the Supreme Court’s decision in Hertz Corp. v. Friend, 559 U.S. 77 (2010), the federal courts were divided about how to identify a corporation’s principal place of business. See generally JACK H. FRIEDENTHAL, MARY KAY KANE & ARTHUR R. MILLER, CIVIL PROCEDURE 36–37 (4th ed. 2005). Some courts used a nerve-center test that focused on where the corporation’s decision-making authority was located. Other courts applied a corporate activities/operating-assets test that focused on where a corporation’s business activities occurred. In Hertz Corp., the Supreme Court decided that a corporation’s principal place of business for diversity purposes would be deemed to be “the place where a corporation’s officers direct, control, and coordinate the corporation’s activities,” its so-called “nerve center.” 559 U.S. at 92–93. In this case, the distributor’s corporate headquarters are in State B, its top officers have their offices and staff in State B, and its decisions regarding the contract with the woman were made in State B. All of these facts suggest that State B is the place where the corporate officers
“Direct, control, and coordinate” the distributor’s activities, and that State B is therefore the distributor’s principal place of business.
The distributor, therefore, is a citizen of State B (as well as of State C). If the woman is a domiciliary of State A (see Point One(b)), there is complete diversity of citizenship and the motion to dismiss for lack of jurisdiction should be denied.
[NOTE: If an examinee previously concluded that the woman is a domiciliary of State B, then that examinee should also conclude that the action must be dismissed for lack of subject matter jurisdiction because there would not be diversity of citizenship between the woman and the distributor.]
Because the distributor has sufficient contacts with State A to be subject to personal jurisdiction there, the distributor resides in State A for purposes of venue.
The woman brought this action in the United States District Court of State A. The issue, therefore, is whether a State A venue can be justified under the general federal venue statute. When, as here, a federal court’s jurisdiction is based on diversity, 28 U.S.C. § 1391(b) provides that venue is proper (1) in any district where a defendant resides if all defendants reside in the same state, or (2) in any district where a substantial part of the acts or omissions giving rise to
the action occurred, or (3) in any district where any defendant is subject to personal jurisdiction, if there is no other district in which the action might be brought. A State A venue is appropriate if the distributor “resides” in the District of State A for purposes of the venue statute. According to 28 U.S.C. § 1391(c), a corporation resides where it is subject to personal jurisdiction at the time the action is commenced. So, the question is whether the distributor is subject to personal jurisdiction in State A.
Rule 4(k) indicates that a federal district court may exercise personal jurisdiction to the same extent as a state court of general jurisdiction in the state where the district court sits. State A’s long-arm statute extends jurisdiction as far as the Due Process Clause of the 14th
Amendment allows. The Due Process Clause permits the exercise of personal jurisdiction over out-of-state defendants like the distributor if they have minimum contacts with the forum state such that the exercise of jurisdiction would not offend traditional notions of fair play and substantial justice. International Shoe Co. v. Washington, 326 U.S. 310 (1945). The nature of the contacts required depends on whether the suit arises out of or is related to the defendant’s contacts with the forum state
Application
Here, the distributor maintains its business facilities in State A, including food processing, warehousing, and distribution facilities. Regardless of whether the woman’s cause of action is deemed to be related to those contacts, these continuous and substantial business
connections with State A would warrant a State A court to exercise jurisdiction over the distributor. Moreover, requiring the distributor to defend this action in State A is not likely to be viewed by the court as unfair or unreasonable. Whether the exercise of personal jurisdiction is fair and reasonable depends on various considerations such as the burden on the defendant of having to litigate in the forum state, the plaintiff’s interest in a convenient forum for obtaining relief, the state’s interest in providing a forum, and the interests of the interstate judicial system in efficient resolution of disputes. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985).
Given modern transportation and communication, the distributor’s burden of defending in a state where it does continuous and substantial business is minimal even if the suit is unrelated to the
distributor’s business in that forum.
While the woman lives in State B for most of the year, the State A federal court is located close to her home in the city, where she lives for part of the year. Furthermore, because the woman is a part-year resident of State A, State A has some interest in providing a forum where she can obtain redress for legal harms. On the other hand, adjudication in State A is not particularly efficient. Aside from the woman, who resides in State A for part of the year, it appears that the bulk of the evidence and witnesses relevant to her case will be located in State B. Nonetheless, that fact alone would not be enough to defeat State A’s jurisdiction over the distributor in this case.
Because State A could assert personal jurisdiction over the distributor at the commencement of the action (had the issue been raised), the distributor will be deemed to “reside” in State A, rendering the District of State A an appropriate venue under 28 U.S.C. § 1391(b)(1). The motion to dismiss for improper venue should be denied
Notes
[NOTE #1: By failing to raise the defense of personal jurisdiction in its motion, the distributor waived the defense. See FED. R. CIV. P. 12(b) & (h). However, the venue statute asks whether the distributor was subject to personal jurisdiction at the commencement of the suit, so
the distributor’s waiver of possible personal jurisdiction defense does not affect the venue inquiry. An examinee should receive credit for a personal jurisdiction analysis ONLY if it is offered in the context of determining where the distributor “resides” for venue purposes.
[NOTE #2: Here, neither the second nor the third basis for venue is applicable. As to the second basis for venue (a district where a “substantial part” of the relevant acts occurred), the woman’s claim is based on an alleged breach of contract. The facts state that this contract was negotiated in State B, that performance occurred in State B, and that the decision to stop performing on the contract was made in State B. It does not appear that any of the acts or omissions giving rise to the woman’s claim occurred in the District of State A.
The third basis for venue is applicable only if there is no other district where the case could be brought. Here, as just noted, the actions giving rise to the woman’s claim took place in State B, and there were no impediments to her bringing the claim there. Because there is another district where suit could have been brought, a State A venue cannot be based on the absence of such a district.]
