Chapter 3
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
1. A state long arm statute allows a court to exercise jurisdiction over out–of-state
defendants based on activities that took place within the state.
2. Generally, a state court’s power is limited to the territorial boundaries of the state
in which it is located and the immediately adjacent states.
3. Cases involving diversity of citizenship arise only between citizens of different
states.
4. The amount in controversy in a diversity of citizenship case must be more than
$1 million before a federal court can take jurisdiction.
5. Concurrent jurisdiction exists when both federal and state courts have the power
to hear a particular case.
6. State courts cannot have exclusive jurisdiction.
7. A state court can exercise jurisdiction over an out–of-state defendant who does
business in the state over the Internet.
8. A business firm may have to comply with the laws of any jurisdiction in which it
actively targets customers.
9. Federal courts are superior to state courts.
10. Lawyers are not allowed to represent people in small claims courts in any of the
states.
11. Small claims courts hear both civil and criminal cases.
12. All states have intermediate appellate courts.
13. There is at least one federal district court in every state.
14. U.S. district courts have original jurisdiction in federal matters.
15. There are twelve justices on the United States Supreme Court.
16. The United States Supreme Court has original jurisdiction in some situations.
17. There is one set of procedural rules for federal courts and one set for state
courts.
18. A default judgment is a judgment entered against the party who brought the claim
before the court.
19. An answer never admits to the allegations made in a complaint.
4 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
20. On a motion for judgment on the pleadings, a court may consider evidence
outside the pleadings.
21. A summary judgment is granted only if there is no genuine question of law.
22. A deposition is a sworn testimony by a party to a lawsuit or any witness.
23. Interrogatories are written questions for which written answers are prepared and
signed under oath.
24. Any relevant material, except information stored electronically, can be the object
of a discovery request.
25. A closing argument is a statement by a party that results in a summary judgment
in that party’s favor.
26. A motion for a new trial will be granted only if a constitutional issue is involved.
27. A motion for a directed verdict is also known as a motion for judgment as a
matter of law.
28. Any judgment is enforceable.
29. Arbitration is always legally binding.
30. In mediation, the mediator proposes a solution that includes what compromises
are necessary to reach an agreement.
31. Negotiation is the most complex form of alternative dispute resolution.
32. ADR proceedings are always strictly regulated by federal statutes.
33. A court’s review of an arbitrator’s award may be restricted.
34. The verdict in a summary jury trial is binding.
35. Most online dispute resolution services apply general, universal legal principles
to resolve disputes.
MULTIPLE-CHOICE QUESTIONS
1. Justin wants to file a suit against Mikayla. For a court to hear the case
a. Mikayla must agree.
b. the court must have jurisdiction.
c. the court must issue a deposition.
d. the parties must own property.
2. Hua, a resident of Illinois, owns a warehouse in Indiana. A dispute arises over
the ownership of the warehouse with Jac, a resident of Kentucky. Jac files a suit
against Hua in Indiana. Regarding this suit, Indiana has
a. federal jurisdiction.
b. in personam jurisdiction.
c. in rem jurisdiction.
d. no jurisdiction.
3. Megan, a resident of Ohio, runs a red light in Texas and hits Sarah, a Texas
resident. Sarah files suit against Megan. The statute that allows the Texas court
to exercise jurisdiction over Megan is called a(n)
a. long arm statute.
b. in personam statute.
c. in rem statute.
d. out–of–state jurisdiction statute.
4. A Montana state court can exercise jurisdiction over Endurance Insurance
Corporation, an out-of-state defendant, but the defendant must have
a. minimum contacts with the state.
b. maximum contacts with the state.
c. legitimate contacts with the state.
d. legal contacts with the state.
5. Fresh Harvest Company, which is based on Georgia, packages and sells
vegetables. Jack, who is a resident of North Carolina, buys a Fresh Harvest
product, eats it, and suffers severe food poisoning. Jack wants to file a suit
against Fresh Harvest. The diversity of citizenship between these parties means
that
a. federal and state courts have concurrent jurisdiction.
b. federal courts have exclusive jurisdiction.
c. no court has jurisdiction.
d. state courts have exclusive jurisdiction.
6. The case of Max v. National Credit Co. is heard in a trial court. The case of O!
Boy! Ice Cream Co. v. Refrigerated Transport, Inc. is heard in an appellate court.
The difference between a trial and an appellate court is whether
a. the proceedings focus on the presentation of evidence and the
examination of witnesses.
b. the court is appealing.
c. the parties question how the law applies to their dispute.
d. the subject matter of the case involves complex facts.
7. Laney is a resident of Maine. Delacorte is a Canadian. They dispute the
ownership of Petite Isle, an island in North Rapids River on the border between
Canada and the United States. The diversity of the parties’ citizenship could
serve as a basis for
a. federal jurisdiction.
b. general jurisdiction.
c. limited jurisdiction.
d. universal jurisdiction.
8. Sandy, a resident of Illinois, wants to file suit against Carl, a resident of Kansas,
over Carl’s failure to pay Sandy for work on his house. The amount in dispute is
$15,000. Under diversity of citizenship requirements
a. no court can exercise jurisdiction.
b. a state court cannot take jurisdiction because the amount in controversy is
less than $25,000.
c. a federal court cannot take jurisdiction because the amount in controversy
is more than $10,000.
d. a federal court cannot take jurisdiction because the amount in controversy
is less than $75,000.
9. Tyler, a citizen of West Virginia, files a suit in a West Virginia state court against
Louisville Sales Corporation, a Kentucky state company that does business in
West Virginia. The court has original jurisdiction, which means that
CHAPTER 3: COURTS AND ALTERNATIVE DISPUTE RESOLUTION 9
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.
10. Jack and Jill, citizens of Vermont, are involved in a case related to the adoption
of their child. The Vermont state courts
a. have concurrent jurisdiction with federal courts over this case.
b. have original jurisdiction over this case.
c. have exclusive jurisdiction over this case.
d. do not have jurisdiction for over case.
11. David, an Alabama resident, files a suit in an Alabama court against QuickAds, an
Internet company based in Georgia that provides advertising services. QuickAds only
contact with persons in Alabama has been through QuickAds’s passive advertising.
The Alabama court is
a. likely to have jurisdiction over the case.
b. not likely to have jurisdiction over the case.
c. likely to refer the case to a higher district court.
d. likely to refer the case to an appellate court.
12. Milo files a suit against Nick in an Ohio state court, noting that Nick operates a Web
site through which Ohio residents have done substantial business with him. The court
is most likely to have jurisdiction over Nick if Milo’s claim arises from
a. anything an Ohio resident has done.
b. Nick’s Web site activities.
c. nothing an Ohio resident has done.
d. something other than Nick’s Web site.
13. 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.
14. Lora files a suit in Michigan against Ned over the ownership of a boat docked in a
Michigan harbor. Lora 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.
15. Elinor sells Cathy a horse for $2,000. When Elinor goes to the bank to deposit
Cathy’s check, the check bounces. Elinor is furious and files suit against Cathy.
Elinor probably filed her suit in
a. a small claims court.
b. a domestic relations court.
c. a municipal court.
d. a probate court.
16. Carol files a suit against Andy in a state trial court and loses. Carol
a. cannot take her case any higher in the court system.
b. can insist that the United States Supreme Court hear her case.
c. can plead her case before an appellate court.
d. can plead her case before a small claims court.
17. 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.
18. Martha brings a suit against SafeCars, Inc. claiming that she was injured during a
car crash due to defects in the car she had purchased from SafeCars. There is
no evidence that Martha was injured in the accident, but the trial court awards
her $1 million in damages. SafeCars appeals the decision. The appellate court
will most likely
a. not modify the trial court’s finding of fact because appellate courts are
forbidden to look at questions of fact.
b. modify the trial court’s finding of fact because the finding was clearly
erroneous.
c. modify the trial court’s finding of fact because the award amount was more
than $25,000.
d. modify the trial court’s finding of fact because the award amount was less
than $5 million.
19. Drummond wants to make a federal case out of his dispute with Elena. Federal
cases originate in
a. federal courts of appeals.
b. federal district courts.
c. state trial courts.
d. the United States Supreme Court.
20. The Arizona Supreme Court rules against Jennifer in a case against Kut Rate
Stores, Inc. Jennifer wants to appeal her case to the United States Supreme
Court. She must ask the Court to issue a writ of
a. appeal.
b. certiorari.
c. jurisdiction.
d. summons.
21. Ben files a suit in a federal district court against Cathy. Cathy loses the suit,
appeals to the U.S. Court of Appeals for the Second Circuit, and loses again.
CHAPTER 3: COURTS AND ALTERNATIVE DISPUTE RESOLUTION 13
Cathy asks the United States Supreme Court to hear the case. The Court
agrees to hear the case. This means that
a. at least four justices approve of hearing the case.
b. Cathy’s petition does not raise a possibility of an important constitutional
question.
c. the amount in controversy in Cathy’s suit is greater than $100,000.
d. the Court feels that the lower courts’ judgments were erroneous.
22. Uma wants to initiate a suit against Valley Vacation Tours by filing a complaint.
The complaint should include
a. an explanation to refute any defense the defendant might assert.
b. a motion for summary judgment.
c. a motion to dismiss.
d. a statement of the facts necessary to show Uma is entitled to relief.
23. To initiate a lawsuit, Darla files a complaint against E-Sales Company, which
responds with an answer. Together, the complaint and answer are
a. a motion to dismiss.
b. a summons.
c. a writ of certiorari.
d. the pleadings.
24. Jason files a suit against Maybelline. If Maybelline fails to respond, Jason
a. must appeal the case to a different court.
b. must refile the suit in the same court.
c. will be awarded the remedy sought.
d. will have a default judgment entered against him.
25. Lyn files a suit against Karl. Karl denies Lyn’s charges and sets forth his own
claim that Lyn breached their contract and owes Karl money for the breach.
Karl’s claim is
a. a contrary charge.
b. a counterclaim.
c. a counterpoint.
d. a cross complaint.
26. iTablets, Inc., files a suit against Andromeda Pads Corporation. Suri is a witness
for iTablets. Kevin is a witness for Andromeda. iTablets may direct interrogatories
to
a. Andromeda.
b. Suri.
c. Kevin.
d. the judge.
27. Solar Power, Inc., files a suit against Thunder Bay Utility Company and seeks
to examine electronic documents in Thunder’s possession. A legitimate reason
for this examination is that the documents contain
a. evidence about the case.
b. private information about Thunder’s operations.
c. public information about energy generation.
d. irrelevant data that can be eliminated from consideration.
28. During the trial phase of Fuel Corporation’s suit against Gas Stations, Inc., their
attorneys engage in voir dire. This is
a. an assessment of the validity of the arguments for both parties.
b. a determination of the issues to be argued before the court.
c. the trial.
d. the selection of jurors.
29. Kelly files a suit against Lewis in a state court. The case proceeds to trial, after
which the court renders a verdict. The case is appealed to an appellate court.
After its review of Kelly v. Lewis, the appellate court upholds the lower court’s
verdict. The appellate court has
a. affirmed the case.
b. reversed the case.
c. remanded the case.
d. reversed and remanded the case.
30. In Kettle Cafe’s suit against Food Services, Inc., the court issues a judgment in
Kettle’s favor. The judgment can be appealed to an appropriate court of appeals by
a. either party.
b. Kettle only.
c. Food Service only.
d. neither party.
Fact Pattern 3-1 (Questions 31–33 apply)
Bean Vendors, Inc., and Java Bistros Corporation dispute a term in their contract.
31. Refer to Fact Pattern 3-1. The least expensive method of resolving the dispute
between Bean and Java may be
a. arbitration because the case will be heard by a mini-jury.
b. litigation because each party will pay its own legal fees.
c. mediation because the dispute will be resolved by a non-expert.
d. negotiation because no third parties are needed.
32. Refer to Fact Pattern 3-1. If Bean and Java have a long-standing business
relationship that they would like to continue, they may prefer to settle their
dispute through mediation because
a. the case will be heard by a mini-jury.
b. the dispute will eventually go to trial.
c. the process is not adversarial.
d. the resolution of the dispute will be decided an expert.
33. Refer to Fact Pattern 3-1. If Bean and Java resolve their dispute by having a
neutral third party render a binding decision, they will have used the method of
a. arbitration.
b. conciliation.
c. intervention.
d. mediation.
34. Transnational Corporation and United Shipping, Inc., agree to a contract that
includes an arbitration clause. If a dispute arises, a court having jurisdiction may
a. monitor any arbitration until it concludes.
b. order an arbitrator to rule in a particular way.
c. order a party to bring the dispute to court.
d. order a party to submit to arbitration.
35. 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.
ESSAY QUESTIONS
1. Norwest Trucking Corporation files a suit in a state court against Bob’s Service
Company (BSC), and wins. BSC appeals the court’s decision, asserting that the
evidence presented at trial to support Norwest’s claim was so scanty that no
reasonable jury could have found for the plaintiff. Therefore, argues BSC, the
appellate court should reverse the trial court’s decision. Is the appellate court
likely to reverse the trial court’s findings with respect to the facts? If not, why not?
What are an appellate court’s options after reviewing a case?
18 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
2. Discount Mart, Inc., files a suit in a state court against Elements Computer
Corporation, alleging that Elements breached a contract to sell 500 notebook
computers to Discount. During the course of the suit, Discount files a motion for
judgment on the pleadings, Elements files a motion for a directed verdict, and
both parties file motions for summary judgment. When and for what purpose are
each of these motions made?
