Chapter 2
Courts and Alternative
Dispute Resolution
N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows.
N A question new to this edition of the Test Bank.
+ A question modified from the previous edition of the Test Bank.
= A question included in the previous edition of the Test Bank.
TRUE/FALSE QUESTIONS
B1. The function of the courts is to interpret and apply the law.
B2. State courts are independent of federal courts.
B3. The executive branch is the final authority concerning the constitutionality of a law.
B4. A long arm statute permits a court to obtain jurisdiction over an out-of-state
defendant.
B5. A state court cannot exercise jurisdiction over property located within the state’s
boundaries regardless of the property owners’ location.
B6. For purposes of diversity of citizenship, a corporation is a citizen only of the state in
which it is incorporated.
B7. A business firm may have to comply with the laws of any jurisdiction in which it
actively targets customers.
B8. To have standing to sue, a party must have been injured or have been threatened
with injury by the action about which he or she is complaining.
B9. Small claims courts are inferior state trial courts.
B10. Courts of appeals conduct new trials in which evidence is submitted to the court and
witnesses are examined.
B11. U.S. district courts have original jurisdiction in matters involving federal questions.
B12. The United States Supreme Court can review any case decided by any of the federal
courts of appeals.
B13. Most lawsuits are settled or dismissed before they go to trial.
B14. In mediation, the mediator proposes a solution that includes what compromises are
necessary to reach an agreement.
B15. Mediation is adversarial in nature.
B16. A court’s review of an arbitrator’s award may be restricted.
B17. Mandatory arbitration clauses in employment contracts are generally enforceable.
B18. A mini-trial is a private proceeding in which each party’s attorney argues the party’s
case before the other party.
B19. The verdict in a summary jury trial is binding.
B20. A choice-of-law clause designates the jurisdiction for the litigation of disputes arising
under a contract.
MULTIPLE CHOICE QUESTIONS
B1. Harvey, a resident of Indiana, has an accident with Janette, a resident of Kentucky,
while driving through that state. Janette files a suit against Harvey in Kentucky.
Regarding Harvey, Kentucky has
a. diversity jurisdiction.
b. in personam jurisdiction.
c. in rem jurisdiction.
d. no jurisdiction.
B2. Tyler, a citizen of Utah, files a suit in a Utah state court against Veritas Sales
Corporation, a Washington state company that does business in Utah. The court has
original jurisdiction, which means that
a. the case is being heard for the first time.
b. the court has a unique method of deciding whether to hear a case.
c. the court has unusual procedural rules.
d. the subject matter of the suit is interesting and new.
B3. Lora is a resident of Illinois. Ned is a resident of Wisconsin. They dispute the
ownership of a boat docked in a Michigan harbor. This diversity of citizenship could
serve as a basis for
a. federal jurisdiction.
b. general jurisdiction.
c. limited jurisdiction.
d. state jurisdiction.
B4. Jo files a suit against Lara in a Missouri state court. Lara’s only connection to Missouri
is an ad on the Web originating in Nebraska. For Missouri to exercise jurisdiction, the
issue is whether Lara, through her ad, has
a. a commercial cyber presence in Missouri.
b. conducted substantial business with Missouri residents.
c. general maximum contact with Missouri.
d. solicited virtual business in Missouri.
B5. Lacey files a suit in Michigan against Ned over the ownership of a boat docked in a
Michigan harbor. Lacey and Ned are residents of Ohio. Ned could ask for a change of
venue on the ground that Ohio
a. has a sufficient stake in the matter.
b. has jurisdiction.
c. has sufficient minimum contacts with the parties.
d. is a more convenient location to hold the trial.
B6. Child’s Play, Inc., sells a toy with a dangerous defect. Drew buys the toy for his son but
discovers the defect before the child is injured. Drew files a suit against Child’s Play.
The firm’s best ground for dismissal of the suit is that Drew does not have
a. certiorari.
b. jurisdiction.
c. standing to sue.
d. sufficient minimum contacts.
B7. Kit loses her suit against Lou in a Minnesota state trial court. Kit appeals to the state
court of appeals and loses again. Kit would appeal next to
a. a U.S. district court.
b. the Minnesota Supreme Court.
c. the United States Supreme Court.
d. the U.S. Court of Appeals for the Eighth Circuit.
B8. The Idaho Supreme Court rules against Jiffy Mart in a case against Kwik Stop Stores,
Inc. Jiffy Mart files an appeal with the United States Supreme Court. The Court does
not hear the case. This
a. is a decision on the merits with value as a precedent.
b. indicates agreement with the Idaho court’s decision.
c. means nothing.
d. means that the Idaho court’s decision is the law in Idaho.
B9. Milo files a suit against Otis. At the trial, each party’s attorney presents the party’s
case before a judge who hears the dispute and renders a legally binding decision. This
is
a. a mini-trial.
b. a summary jury trial.
c. litigation.
d. not a legitimate form of dispute resolution.
B10. Jackson files a suit against Lance. Before going to trial, the parties, with their
attorneys, meet to try to resolve their dispute. A third party suggests or proposes a
resolution, which the parties may or may not decide to adopt. This is
a. arbitration.
b. mediation.
c. negotiation.
d. not a legitimate form of dispute resolution.
B11. Pixie files a suit against Quiver. Before going to trial, the parties meet, with their
attorneys to represent them, to present their dispute to a third party who is not a
judge but who imposes a resolution on the parties. This is
a. arbitration.
b. mediation.
c. negotiation.
d. not a legitimate form of dispute resolution.
B12. Owen, in Pennsylvania, and Quonset Structures, Inc., in Maryland agree to have their
dispute resolved in arbitration according to the law of Virginia. This is a ground for a
court to
a. do nothing.
b. review the merits of the dispute.
c. review the sufficiency of the evidence.
d. set aside the award.
B13. Eager Workers Union and Factory Assembly Company have their dispute resolved in
arbitration. The arbitrator makes a mistake in a conclusion of law. This is a ground for
a court to
a. do nothing.
b. review the merits of the dispute.
c. review the sufficiency of the evidence.
d. set aside the award.
B14. Far Trade Company and Global Shipping. Inc., have their dispute resolved in
arbitration. The arbitrator meets with Far’s representative to discuss the dispute
outside the presence of Global’s representative, before determining the award. If this
meeting substantially prejudiced Global’s rights, a court will most likely
a. do nothing.
b. review the merits of the dispute.
c. review the sufficiency of the evidence.
d. set aside the award.
B15. Massive Equipment Company and Wastewater Management Corporation agree in
writing to submit a dispute to arbitration. In most circumstances, submission to
arbitration is possible
a. for any commercial matter.
b. for no commercial matter.
c. only after a dispute arises.
d. only before a dispute arises.
B16. Seaside Resort, Inc., adopts an alternative dispute resolution (ADR) program. Tess, a
current employee, signs an agreement under which arbitration is subject to “Seaside’s
rules, with the employee to bear all costs of the proceeding.” When a dispute arises,
Tess refuses to arbitrate. Seaside files a suit to compel arbitration. The court will most
likely
a. order arbitration according to Seaside’s rules.
b. order arbitration but suspend Seaside’s rules.
c. refuse to order arbitration if a resolution of the dispute is clear.
d. refuse to order arbitration if Tess lacks the ability to pay.
B17. Kobe files a suit against Joanna. They meet, and each party’s attorney argues the
party’s case before a judge and jury. The jury presents an advisory verdict, after which
the judge meets with the parties to encourage them to settle their dispute. This is
a. a mini-trial.
b. a summary jury trial.
c. early neutral case evaluation.
d. not a legitimate form of dispute resolution.
B18. To resolve a dispute, Amy in Boston and Chris in Denver utilize E-Solution, an online
dispute resolution (ODR) service. This limits these parties’ recourse to the courts
a. not at all.
b. until the ODR service has issued a decision.
c. with respect to any dispute arising between them.
d. with respect to this dispute only.
B19. Pan American Pancake House, Inc., a U.S. firm, and Wallaby Waffles, Ltd., an
Australian firm, enter into a contract that does not have a forum-selection or choice-
of-law clause. Litigation between Pan American and Wallaby over a dispute involving
this contract may occur in
a. Australia only.
b. Australia or the United States, but not both.
c. Australia, the United States, or both.
d. the United States only.
B20. A clause in a contract between Tall Timber Corporation, a U.S. firm, and Wang Woods,
Ltd., a Japanese firm, specifies that disputes over the contract will be adjudicated in
the United States. This is
a. a domestic–dispute clause.
b. a forum-selection clause.
c. an adjudication clause.
d. an arbitration clause.
ESSAY QUESTIONS
B1. MicroWare hosts a Web site that advertises its software products, features upgrades
and “patches” for its existing software products, and accepts orders for the products
from consumers throughout the world. Mary, who owns and operates Business
Records, Inc,, a small bookkeeping and payroll business in Colorado, orders from the
Web site a copy of MicroWare’s Office Books software. Office Books is designed to
help accountants and bookkeepers keep accurate business records. When Office
Books is found to have a defect in its calculating program, MicroWare offers a patch
on its Web site to fix the problem. Mary has already lost several customers because of
the miscalculating defect, however, and files a suit against MicroWare in a Colorado
state court. Can the court exercise jurisdiction over MicroWare? Why or why not?
B2. Worldwide Trucking Corporation files a suit in a state court against XL Service
Company, and wins. XL appeals the court’s decision, asserting that the evidence
presented at trial to support Worldwide’s claim was such that no reasonable jury
could have found for the plaintiff. Therefore, argues XL, the appellate court should
reverse the trial court’s decision. May an appellate court ever reverse a trial court’s
findings with respect to questions of fact?