978-0077733711 Chapter 2 Lecture Note

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Chapter 02 – The Resolution of Private Disputes

CHAPTER 02

THE RESOLUTION OF PRIVATE DISPUTES

I. OBJECTIVES:

As its title suggests, this chapter is concerned with the resolution of disputes that give rise to civil

cases. For the most part, it is a nuts-and-bolts chapter intended to acquaint the student with

courts, their civil jurisdiction, and the procedures they use in civil cases. The chapter also

contains a discussion of alternative dispute resolution. After reading the chapter and attending

class, the student should:

A. Be familiar with the various kinds of state and federal courts and the common bases of their

trial and appellate jurisdiction;

B. Understand the various procedural steps in a civil case; and

C. Have knowledge of the significant forms of alternative dispute resolution and their

advantages and disadvantages.

The Learning Objectives that appear near the beginning of the chapter provide a further roadmap

for the chapter’s coverage.

II. ANSWERS TO INTRODUCTORY PROBLEM:

A. Wilson clearly may pursue her case in New Jersey, where the defendant corporation’s

principal offices are located. Depending upon how the applicable long-arm statute is worded

and upon whether constitutional principles of due process would be satisfied, Wilson may be

able to pursue the case in her own state, Illinois. See the chapter’s discussion of in personam

jurisdiction and the use and operation of long-arm statutes.

B. Wilson would not be restricted to suing in state court. She would have the option of suing in

federal court, either in an appropriate court in the district of New Jersey or in an appropriate

court in the district of Illinois (assuming in personam jurisdiction could be established on the

part of a federal court in the Illinois district) Again, see the chapter’s discussion of in

personam jurisdiction and the use and operation of long-arm statutes. The reason that federal

court would be an option for Wilson is that the requirements of diversity of citizenship

jurisdiction (one of the forms of subject matter jurisdiction in federal court) would be

satisfied. Wilson and XYZ are parties from different states, and there is more than $75,000 in

controversy. See the chapter’s discussion of diversity jurisdiction.

C. Assuming Wilson sues in state court, XYZ will have the option of removing the case to

federal court if XYZ acts promptly. XYZ has the power of removal because this would be a

case of concurrent jurisdiction–one that was properly brought in state court but could have

been brought in federal court (in this instance, because of the diversity jurisdiction principle

discussed above). See the chapter’s discussion of concurrent jurisdiction and the power of

removal.

D. The procedural steps are those outlined and discussed in the chapter’s section on civil

procedure (see text, pp. 39-46).

E. Yes, if the documents and e-mails are relevant to the case. See the discussion of legal and

ethical issues at pp. 41-43.

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Chapter 02 – The Resolution of Private Disputes

III. SUGGESTIONS FOR LECTURE PREPARATION:

A. State Courts and their Jurisdiction

1. This section’s description of state courts themselves (as opposed to their jurisdiction)

probably can be dealt with briefly in class. Emphasize, however, that appellate courts

only decide questions of law, not fact. Of course, the line between fact and law is

indistinct, and appellate courts often consider legal issues with factual dimensions.

Examples include the trial court’s evidentiary rulings, and its rulings on the motions for

summary judgment, directed verdict, and judgment not withstanding the verdict. See also

Problem #1.

2. With regard to state court jurisdiction:

a. Emphasize that this is based on the state’s power. The various examples of state court

jurisdiction may generally be seen as reflecting a state’s ability to issue binding legal

decisions that affect persons, property, and activities within the state’s borders.

b. Emphasize that for state trial courts to have jurisdiction in a civil case, both subject-

matter jurisdiction and either in rem or in personam jurisdiction are necessary. (Both

subject-matter jurisdiction and in personam jurisdiction are also necessary in federal

courts.)

c. Discuss the role that long-arm statutes may play in allowing a state court to have in

personam jurisdiction over a non-resident. Mention that federal courts may rely on

state long-arm statutes as a means of obtaining in personam jurisdiction over a

defendant who does not reside in the federal district where the litigation is being

pursued.

d. Note that according to the typical long-arm statute, a non-resident defendant may be

subjected to suit in the forum state if he, she, or it has: done business in the forum

state; contracted to supply goods or services in the forum state; committed a tort

within the state; or committed a tort outside the state, if the resulting damage occurs

within the state. (The chapter’s opening vignette/introductory problem may raise

issues along these lines.) The chapter states, at p. 30, that “[s]ome long-arm statutes

are phrased with even broader application in mind.” Note, therefore, that some long-

arm statutes allow the forum state’s in personam jurisdiction to extend to the full

limits of due process. (Once again, the chapter’s opening vignette/introductory

problem may raise issues along these lines.) When such a broad provision appears in

a long-arm statute, the due process inquiry merges with the due process analysis that

must be applied as a constitutional matter. As the text points out, the due process

analysis must always be applied–for constitutional reasons—even though the

provisions of the long-arm statute have been satisfied. This is true even if the long

arm statute does not contain a to-the-limit-of-due-process provision.

e. Abdouch v. Lopez (p. 30): The Supreme Court of Nebraska holds that the defendants,

a Massachusetts resident and his Massachusetts-based company, are not subject to the

in personam jurisdiction of a Nebraska court in a case that centered around

statements in an advertisement that appeared on the defendants’ website.

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Points for Discussion: Note the court’s discussion of specific jurisdiction:

jurisdiction over a defendant in a case arising out of or related to the defendant’s contacts

with the forum. Emphasize that such jurisdiction can be acquired by a court over a

defendant who resides in a different state if the long-arm statute of the forum state and

the constitutional due process standard are both satisfied. After reviewing the categories

of non-resident defendants’ behaviors that are typically covered by long-arm statutes (see

the text’s discussion at p. 30), point out that some states’ long-arm statutes contain a

provision allowing the statute’s application, for in personam jurisdiction purposes, as far

as principles of due process will allow. The Nebraska long-arm statute, at issue in this

case, is such a statute. In such a situation, the statutory and constitutional issues merge

into a single due process inquiry in which the “minimum contacts” issue becomes critical.

Ask the students why the court concluded that the defendants did not possess the requisite

minimum contacts with Nebraska. Ask about the court’s discussion of the Zippo test for

whether a defendant’s website will or may support a determination that a state’s court has

in personam jurisdiction over the defendant even though he, she, or it does not reside in

that state. Ask about the three categories of websites identified in Zippo, the effect of

each on the in personam jurisdiction issue, and what to make of the defendants’ website.

Note that the nature of the defendants’ website was a factor in the court’s conclusion that

in personam jurisdiction did not exist regarding the defendants, but that it was not solely

determinative. Ask about what the court also considered important in determining

whether the defendants possessed the necessary minimum contacts: whether the

defendants, through their website, specifically targeted Nebraska. (The court said “no.”

Instead, the website was directed at the entire world.)

f. The Global Business Environment box at p. 33 deals with Daimler AG v. Bauman, a

2014 Supreme Court decision dealing with whether the U.S. District Court for the

Northern District of California could assert general in personam jurisdiction over a

German company. Discuss with the students the difference between specific in personam

jurisdiction and the general variety of in personam jurisdiction. (See the Court’s

explanation.) Ask why the Court concludes that the defendant corporation’s contacts

with the forum district were neither significant enough nor continuous enough to warrant

the exercise of general jurisdiction.

g. For further examples of long-arm statute-related issues and due process concerns, see

Problems #3, #7, and #10.

h. Explain the difference between in personam jurisdiction and in rem jurisdiction.

i. Although the text mentions it only in a footnote, you might want to discuss quasi-in-

rem or “attachment” jurisdiction, which (along with subject-matter jurisdiction) also

gives a court the power to decide a case. Here, the court bases its jurisdiction on the

location of property within the state, but issues a judgment affecting rights unrelated

to the property (unlike what occurs in cases involving in rem jurisdiction). In some

cases, the property in question may be intangible. One example of quasi in rem

jurisdiction is based on Harris v. Balk, 198 U.S. 215 (1904). Suppose Y owes X a

debt, but Y is outside the in personam jurisdiction of X’s state. Suppose also that Z

owes Y a debt, and Z comes into X’s state. X may get quasi in rem jurisdiction over Y

on the basis of Z’s debt, which is considered to reside wherever the debtor (Z)

resides. This gives the court the power to determine Y’s obligation to X--a matter

unrelated to the property on which jurisdiction is based. In such cases, however, the

most the plaintiff should be able to recover is the value of the property on which

jurisdiction is based.

j. Be sure to distinguish jurisdiction from venue. Emphasize that a court may have

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Chapter 02 – The Resolution of Private Disputes

jurisdiction even when proper venue is lacking. Also note that jurisdiction

presupposes venue in the sense that the latter is not an issue until the former exists or

is assumed to exist.

k. Note the role that contractual forum selection clauses may play in determining

matters of jurisdiction and venue. As the text indicates, “clickwrap” provisions of

this nature tend to be honored if their terms do not seem unreasonable, even though

genuine, informed consent to such provisions may often be lacking.

C. Federal Courts and their Jurisdiction

1. Briefly describe the various federal courts and their functions. Be sure to emphasize the

territorial organization of the district courts and the courts of appeals. See Figure 1,

which appears at p. 39. You may want to make only passing mention of the specialized

federal courts.

2. With regard to federal district court jurisdiction and venue:

a. Emphasize the elements necessary for diversity jurisdiction: (1) the case is between

citizens of different states (or is between a citizen of a state and either a citizen of a

foreign nation or the government of a foreign nation); and (2) the amount in

controversy exceeds $75,000. Note that for federal question jurisdiction, there is no

dollar test. Such jurisdiction exists as to any claim that “arises under” federal law.

b. Point out that the traditional reason for diversity jurisdiction was the possibility of

prejudice against out-of-state defendants in state courts. You might ask whether this

justification packs much weight today. Note, also, that Congress has increased the

requisite amount in controversy various times over the years, and that there have

been many defeated proposals to eliminate the district courts’ diversity jurisdiction.

c. Note that the rule regarding a corporation’s citizenship may sometimes have the

effect of limiting a plaintiff’s ability to rely on diversity jurisdiction. The Hertz case

(discussed below in the section dealing with the power of removal) clarified what

constitutes a corporation’s principal place of business for purposes of the diversity

rule that a corporation is a citizen of the state in which it is incorporated and of the

state of its principal place of business.

d. Stress that diversity jurisdiction and federal question jurisdiction are forms of

subject-matter jurisdiction. In order to have the power to render a decision that is

binding on the parties, a federal court must have both subject-matter jurisdiction and

in personam jurisdiction. As noted above and in the chapter, the analysis of in

personam jurisdiction issues in the federal court system is essentially the same as in

the state court systems. Remind the students that federal courts may rely on state

long-arm statutes as a means of obtaining in personam jurisdiction over a defendant

who does not reside in the federal district where the litigation is being pursued.

e. Again, note the Global Business Environment box at p. 33. (See the earlier

discussion.)

f. Consider using a simple example to illustrate the options potentially available to a

plaintiff who wants to sue an out-of-state defendant. (You might use the chapter’s

introductory problem or something similar to it.) The plaintiff might: (1) try to

establish state court in personam jurisdiction over the defendant in the plaintiff’s

home state (through a long-arm statute or otherwise); (2) try to establish federal

court in personam jurisdiction over the defendant in the plaintiff‘s home federal

district (through a long-arm statute or otherwise); (3) sue the defendant in a state

court in the defendant’s home state; or (4) sue the defendant in a federal court in the

defendant’s home district. (Options #2 and #4 would be available only if the amount

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Chapter 02 – The Resolution of Private Disputes

in controversy exceeds $75,000.)

g. Explain the power of removal that is available to a defendant when the case was filed

in state court but concurrent jurisdiction exists (i.e., the case could properly have

been filed in state court or in federal court). Assuming the defendant acts promptly,

the case can be removed to federal court.

h. Hertz Corp. v. Friend (p. 36): The U.S. Supreme Court holds that for purposes of

federal diversity jurisdiction, a corporation’s principal place of business is where its

“nerve center” is located. Applying the nerve center test to the facts, the Court

concludes that the plaintiff and the defendant were citizens of different states, that

federal jurisdiction would have existed (on the basis of that fact and the further fact

that more than $75,000 was in controversy), and that the defendant was therefore

entitled to have the case removed from state court (where the plaintiff filed it) to

federal court.

Points for Discussion: Begin by asking when the power of removal applies and about

strategic issues associated with deciding whether to exercise it when it does apply.

Then ask for an overview of the basic facts here. Ask what state or states in which a

corporation is considered to be a citizen for diversity jurisdiction purposes. (State of

incorporation and state of principal place of business.) What test for principal place

of business does the plaintiff ask the Court to apply? (What might be called a

greatest-volume-of-business test.) If the Court had adopted that test, what would

have happened here? (Hertz would have been considered a citizen of California

because it allegedly did more business there than in any other state. If Hertz were

considered a citizen of California—the same state of which the plaintiff was a citizen

—the diversity requirements would not have been met and Hertz would not have

been entitled to remove the case to federal court.) What principal-place-of-business

test does the Court adopt instead? (Nerve center test.) What’s the nerve center?

(Where the big corporate decision are made—usually the corporate headquarters.)

Why that test? (More reliable, more consistent and predictable, etc.) What’s the

effect of that test here? (Hertz is citizen of state where incorporated (state other than

California) and of New Jersey, where corporate headquarters located. Plaintiff is

California citizen. With more than $75,000 in controversy, diversity jurisdiction

requirements are met, concurrent jurisdiction exits, and Hertz can remove case to

federal court.)

i. The federal venue statute, whose details were omitted in the text, says that a diversity

case may be brought only in a judicial district where: (1) any defendant resides, if all

defendants reside in the same state; (2) a substantial part of the events giving rise to

the case occurred, or the property to which the case relates is located; or (3) the

defendants are subject to in personam jurisdiction, if there is no other district in

which suit may be brought. In other cases, the litigation may be brought only in a

district where: (1) any defendant resides, if all defendants reside in the same state; (2)

a substantial part of the events giving rise to the case occurred, or the property to

which the case relates is located; or (3) the defendant may be found, if there is no

other district in which suit may be brought.

j. Note that the federal courts generally apply state substantive law in cases in which

jurisdiction is based solely on diversity of citizenship. Sometimes, however,

determining which state’s substantive law to apply is a problem, especially in cases

involving multistate transactions. The resulting choice-of-law issues are beyond the

scope of this text. You may want to do little more than note the existence of these

issues.

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3. Note that the Supreme Court’s mandatory “appeal” jurisdiction no longer exists, and that

most appeals coming to the Supreme Court now do so through its discretionary certiorari

jurisdiction. Thus, the Court continues to hear only a small percentage of the appeals

directed to it.

4. On the Supreme Court’s original jurisdiction, see Problem #9.

D. Civil Procedure

1. In presenting civil procedure, it is probably best to proceed sequentially, as the text does.

Instructors with the time to do so might concoct a hypothetical civil action and use it to

illustrate each procedural step.

2. You should note that the adversary system is at work throughout the procedural steps to

be discussed. A few words on the pros and cons of the adversary system may be useful.

Briefly explain the operation and effect of the preponderance of the evidence standard.

3. Emphasize that jurisdiction and adequacy of service of process are separate questions.

Also, regarding service of process, you might note that the text’s discussion is only

illustrative. For example, so-called constructive service–service by publication in some

communications medium–may still be permissible as a sort of “last resort” in certain

instances. One possible example is where a state court has in rem jurisdiction over

property in which an out-of-state party has an interest, and neither that party nor his

domicile can be located.

4. Discuss the pleadings and distinguish among the complaint, answer, counterclaim, and

reply. Note that there is no need for an answer if the defendant successfully moves to

dismiss the case. Be sure to note the possibility of an affirmative defense in the answer.

Throughout, stress the general movement away from technical pleading rules.

5. Emphasize that a demurrer attacks the legal sufficiency of the plaintiff’s complaint and

assumes the truth of the factual allegations in the complaint for purposes of the motion.

The example in the text is intended to drive home the first point. Note also that if a

demurrer or other motion to dismiss fails, the defendant normally must answer the

complaint.

6. The text contains an extensive discussion of discovery. Comment on discovery’s

purposes, usefulness, and broad scope in civil cases. Note, also, that discovery is

available to each party to the case and that it generally occurs without judicial

involvement or oversight unless a problem develops. Explain these forms of discovery:

a. Depositions. Note how depositions are conducted and why an attorney would want

to take the deposition of an opposing party or a potential witness (to find out what

that person knows, to pin that person down to a particular story, to see what sort of

witness that person would be, etc.). Note, also, the ways in which depositions may

be used at trial and the circumstances under which use is allowed. See pp. 42-43 of

the text on this.

b. Interrogatories and requests for admission. Note their similarities and differences.

Explain the obligation to respond, under oath, within the appropriate time period.

Stress that a request for admission is deemed admitted if no response is made within

the allotted time. See Problem #8. Note how answers to interrogatories and requests

for admission may be used at trial.

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Chapter 02 – The Resolution of Private Disputes

c. Requests for production of documents and other physical items. Stress that when a

proper request is made, a party to litigation may have to produce–from its own files

and records–copies of documents and other items that it would prefer not to release.

Note that sometimes the most effective evidence presented by a party at trial may

consist of copies of documents that came from the opposing party’s files and records.

d. Motions for physical or mental exam (where relevant to the case). Note that unlike

the other main forms of discovery, this one requires a court order.

7. Although the discovery process normally is conducted without judicial involvement or

supervision, there are instances in which courts must become involved. If a party raises a

privilege objection or some other legally recognized objection to a discovery request, the

court must decide whether the objection has merit. Judicial involvement is also necessary

if a party does not comply with discovery obligations (e.g., doesn’t answer

interrogatories, doesn’t produce a requested document that is relevant, etc.).

8. The Cyberlaw in Action box at p. 42 deals with the relatively new federal rules governing

discovery of electronically stored information (ESI). Note what is covered by the ESI

definition. Work through the steps in the ESI discovery process, as outlined in the

Cyberlaw box. Note what the discoverability of ESI means for businesses’ retention and

preservation of potentially discoverable electronic information.

9. Remind your students of something noted earlier: that the discovery process sometimes

makes one’s own files and records the source of evidence that may be very helpful to the

opposing party. The temptation to destroy the potentially damaging material in one’s

files may lead to significant legal problems if the destruction occurs. This temptation

also raises serious ethical questions. The Ethics in Action box at p. 44 discusses such

legal and ethical issues, which have been given heightened media attention in the wake of

recent scandals involving corporate misconduct and accounting fraud.

10. Stress that summary judgment involves both law-identifying and fact-resolution

functions. Note why the summary judgment option is available in appropriate cases.

(Why go to the trouble and expense of a full-scale trial if the material facts aren’t in

dispute and the correct legal treatment of the facts is clear?)

11. With regard to the civil trial:

a. Note the purpose and role of the pre-trial conference and any order emerging from it.

b. You may want to go beyond the text by saying a few words about the issues

surrounding the availability of a jury trial. Briefly, a jury trial is available at the

demand of either party if certain tests are met. The federal and state constitutions set

minimum standards for the availability of a jury trial. For example, the Seventh

Amendment (which does not apply to the states) makes a jury trial available “in suits

at common law” exceeding $20, and most states have similar provisions in their

constitutions or statutes. The test for determining whether the case is “at common

law” is generally whether the claim was traditionally one classed as “at law,” rather

than “in equity.” The complex body of law devoted to this question cannot be

discussed in detail here, although it is accurate to say that a high percentage of cases

in which money damages would be the typical remedy are cases “at law” and thus

likely to be covered by a jury trial right. In addition, because the constitutional

standards merely state a minimum, Congress and the state legislatures have

authorized jury trials in other situations.

c. You might also want to say more about the process of jury selection—especially voir

dire, challenges for cause, and peremptory challenges. Challenges for cause are

unlimited in number but require the judge’s approval. Peremptory challenges do not

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Chapter 02 – The Resolution of Private Disputes

require the judge’s approval but are limited in number. Of course, peremptory

challenges are generally used to eliminate potential jurors who, the attorney suspects,

may be likely to be unsympathetic toward his or her client but could not successfully

be challenged for cause.

d. Note the basic division of labor between judge and jury in jury trials.

e. With the above preliminaries out of the way, the stage is set for the text’s summary of

the typical trial scenario. Work through the basics of trial procedure outlined in the

text. Note the differences between direct and cross-examination. Explain how

typical TV show and movie depictions of courtroom scenes usually don’t depict

direct and cross-examination accurately and show even less accuracy when they

depict the making of objections during trial. (On TV and in the movies, merely

saying “Objection!” seems to be enough. In the real world, a legal basis for the

objection must also be cited.)

f. Note the difference between lay witnesses and expert witnesses. Explain the standard

for whether a party may testify as an expert witness.

g. Following the basic trial scenario, discuss the different procedures followed in trials

before a judge and trials before a jury. Also, discuss the pros and cons of the general

verdict. This can lead those who are so inclined into a general discussion of the jury’s

role in the American legal system.

h. Continuing the theme of the jury’s role, discuss the motion for a directed verdict and

the motion for judgment notwithstanding the verdict. Stress that both are “jury-

policing” devices designed to take the case away from the jury in certain situations

(with the directed verdict doing so before the jury decides the case and the judgment

n.o.v. doing so after the jury’s decision). Mention the similarities between the two

motions–especially the stern nature of the test applicable to each and the reality that

such motions are denied most of the time. You might add that in many jurisdictions,

the motion for a directed verdict is a necessary prerequisite to a motion for judgment

n.o.v. On these two motions, see Problem #6.

i. Regarding the motion for a new trial, see Problem #6.

13. When discussing the appeal of civil judgments, re-emphasize that appellate courts are

limited to the resolution of “legal” issues. Supplement the examples at p. 46 with

additional examples of legal issues. Ask about Problem #1. Note the options available to

appellate courts: affirm (in whole or in part); reverse (in whole or in part); and reverse

and remand.

14. Regarding the text’s discussion of enforcement of a judgment, emphasize the bearing

effective enforcement has on the decision to sue a particular party in the first place.

15. Explain the nature of class actions, the rationale for allowing them in appropriate

instances, and the usual standards that must be met in order for a court to certify a case as

a class action. On the latter point, emphasize that a case cannot proceed as a class action

unless a court has approved its going forward in that form. Discuss the 2005 statute

enacted by Congress in an effort to restrict the number of class actions in state courts and

to require that many class actions, if they are to be litigated at all, must be pursued in

federal court. Also, discuss the views among some that the 2005 statute did not go far

enough and that some proposed classes are simply “too big.” Then note the opposing

concerns that may arise if courts become less inclined to certify cases as class actions.

16. Wal-Mart Stores, Inc. v. Dukes (p. 47): The Supreme Court holds that class action

certification should not have been granted with regard to a lawsuit in which a supposed

class of 1.5 million women alleged that Wal-Mart committed sex discrimination in

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deciding on promotions and salary increases.

Points for Discussion: Note that this decision almost certainly will be very influential

as lower courts decide on whether to certify a case as a class action. The decision may in

some instances make it harder for plaintiffs to convince courts to certify cases as class

actions. Ask the students why the Court said class action certification should not have

been granted. Note the Court’s emphasis on the varying nature and specifics of the

female employees’ claims, even though they all dealt with sex discrimination in some

sense. The claims, therefore, were not sufficiently common in their facts and in the

issues they presented. Simply put, the employees’ claims were not similar enough to

warrant treatment in a single legal action. Was the Court influenced by “too big”

concerns of the sort noted above? Perhaps such a thought crossed the mind of some of

the justices, but the differences among the various claims provided the Court with a

reasonable basis on which to hold that the case could not proceed as a class action. Note,

of course, that the individual plaintiffs could still bring their own cases, but it seems

doubtful that all 1.5 million persons would file separate lawsuits,

E. With regard to ADR:

1. Emphasize the main reasons for the growing popularity of ADR: the “litigation

explosion;” the demands this has placed on the courts and the social costs these demands

have generated; and the cumbersomeness, expense, and aggravation associated with using

normal judicial procedures for resolving disputes. Also note the possible costs of ADR

mentioned in the text

2. Explain the major forms of ADR. You may wish to focus most of your attention on

arbitration and mediation, being sure to clarify the ways in which they are different.

3. The text indicates that arbitrators sometimes may have freedom to ignore substantive

rules of law that would apply in court. Stress, however, that most of the time, the

substantive rules of law that apply in court also apply in arbitration proceedings.

4. Additional example of situations in which “private” mediation may be used: school

disputes. Court-annexed mediation sometimes tends to be associated with small claims,

housing, and family courts.

5. AT&T Mobility LLC v. Concepcion (p. 51): The U.S. Supreme Court holds that if an

arbitration clause in a contract not only requires that disputes be arbitrated but also bars

class-wide arbitration, the clause is valid and enforceable under the Federal Arbitration

Act.

Points for Discussion: Ask students about the basic facts here and about why the

plaintiffs who filed suit would have wanted this case to proceed in court as a class action,

as opposed to having to go through arbitration on an individual-claims basis. (Because

the damages for them individually and for other individual consumers would be

miniscule in amount—meaning that the vast majority of consumers probably wouldn’t

bother to proceed with a complaint.) Ask why the plaintiffs thought they could proceed

in court despite the arbitration provision. (Because California cases had established that

arbitration clauses prohibiting class arbitration were unenforceable on the ground of

unconscionability, and because the Federal Arbitration Act’s general command that

arbitration clauses must be enforced was subject to an exception for state law-based

grounds for attacking the validity of a contract.) Work through the Supreme Court’s

reasoning in support of the conclusion that the FAA’s general command controls here and

that the exception for state law-based grounds doesn’t apply. The effect, of course, is that

arbitration clauses are enforceable even if they bar class-wide aggregation of claims.

What do your students think about the Court’s reasoning? What do they think will

happen as a result of this decision? (Almost certainly, companies will respond to the

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Chapter 02 – The Resolution of Private Disputes

decision by adding prohibitions on classwide aggregation of claims to the arbitration

clauses they put into their contracts. Class arbitration is very likely to become a seldom-

encountered breed.) Note the objections raised by Justice Breyer in the brief excerpt

from his dissent.

6. For additional examples of arbitration and FAA issues, see Problems #2 and #5.

IV. RECOMMENDED REFERENCES:

A. G. HAZARD & M. TARUFFO, AMERICAN CIVIL PROCEDURE: AN INTRODUCTION.

B. M. KANE, CIVIL PROCEDURE IN A NUTSHELL.

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