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Chapter Overview
Chapter Theme
The process of litigation may influence the outcome of a dispute as strongly as the substantive law. That is
all the more reason to use preventive law, and stay out of court. This chapter examines the structure of the
United States court system, and introduces litigation and alternative dispute resolution as methods of
resolving conflicts.
Proof versus Right
Students often confuse whether a person can prove her case at trial with whether she suffered a legal
wrong and has a cause of action. For instance, suppose students are considering a simple oral contract, in
which Manny offers David $50 to shovel Manny’s driveway, and David accepts. There are no witnesses.
David shovels the driveway and Manny refuses to pay. In considering whether Manny’s obvious breach
has violated David’s rights under the contract some students will say “no, because David cannot prove
there was a contract—it was not in writing and there were no witnesses.” The instructor must explain the
difference between whether Manny violated David’s contract rights—he has—and whether David can
prove the terms of the contract at trial. Since class discussion more often involves substantive legal rights
than burdens of proof, the instructor should make the point that hearing evidence and finding facts is the
job of trial courts and then move the discussion to the substantive issue.
Three Fundamental Areas of Law
The case used in this chapter is a fictionalized version of several real cases based on double indemnity
insurance policies. In this chapter, we follow Beth’s dispute with Coastal from initial interview through
appeal, using it to examine three fundamental areas of law: the structure of our court systems, civil
lawsuits, and alternative dispute resolution.
Litigation vs. Alternative Dispute Resolution
There are two methods of dispute resolution: litigation and alternative dispute resolution. Litigation refers
to lawsuits, the process of filing claims in court, and ultimately going to trial. Alternative dispute
resolution is any other formal or informal process used to settle disputes without resorting to a trial, and it
will be the focus of the last part of this chapter. It is increasingly popular with corporations and
individuals alike because it is generally cheaper and faster than litigation.
Court Systems
The United States has over 50 systems of courts. One nationwide system of federal courts serves the
entire country. In addition, each individual state – such as Texas, California, and Florida - has its own
court system. The state and federal courts are in different buildings, have different judges, and hear
different kinds of cases. Each has special powers and certain limitations.
State Courts
The typical state court system has a single superior court over the lower trial and appellate courts. A few
states have two courts at the top level, each with a different purpose.
Trial Courts
Determine the facts of a particular dispute and apply to those facts the law given by earlier appellate court
decisions.
Jurisdiction
A court’s power to hear a case.
Subject matter jurisdiction means that a court has the authority to hear a particular type of case.
Trial Courts of Limited Jurisdiction -- may hear only certain types of cases.
Trial Courts of General Jurisdiction -- can hear a very broad range of cases.
Personal jurisdiction is the legal authority to require the defendant to stand trial, pay judgments, and the
like. A long-arm statute gives a state jurisdiction over non-residents in certain situations.
Landmark Case: International Shoe Co. v. State of Washington 1
Facts: Although International Shoe manufactured footwear only in St. Louis, Missouri, it sold its products
nationwide. It did not have offices or warehouses in the state of Washington, but it did send about a dozen
salespeople there. The salespeople rented space in hotels and businesses, displayed sample products, and
took orders. They were not authorized to collect payment from customers.
When the State of Washington sought contributions to the state's unemployment fund, International
Shoe refused to pay. Washington sued. The company argued that it was not engaged in business in the
state, and, therefore, that Washington courts had no jurisdiction over it.
The Supreme Court of Washington ruled that International Shoe did have sufficient contacts with the
state to justify a lawsuit there. International Shoe appealed to the United States Supreme Court.
Issue: Did International Shoe have sufficient minimum contacts in the state of Washington to permit
jurisdiction there?
Decision: Yes, the company had minimum contacts with the state.
Reasoning: Agents for International Shoe have operated continuously in Washington for many years.
Their presence has been more than occasional or casual. And the agents’ activities have generated a
significant number of sales for the company. Washington’s collection action is directly related to
commercially valuable activities that took place within the state’s borders.
Due Process merely requires reasonable fairness. International Shoe has benefitted greatly from activities
in Washington, and it faces no injustice if this suit proceeds. The minimum contacts doctrine is satisfied.
Affirmed.
Question: What part of the U.S. Constitution requires minimum contacts?
Question: Did the Court find that International Shoe conducted regular business activities in
Washington?
Appellate Courts
Generally accept the facts given to them by trial courts and review the trial record to see if the court made
errors of law.
Court of Appeals
The party who loses at the trial court may appeal to the intermediate court of appeals. This court allows
both sides to submit written arguments on the case, called briefs. Each side then appears for oral
argument, usually before a panel of three judges.
State Supreme Court
This is the highest court in the state, and it accepts some appeals from the court of appeals. In most states,
there is no absolute right to appeal to the Supreme Court. If the high court regards a legal issue as
important, it accepts the case.
1 326 U.S. 310 Supreme Court of the United States, 1945.
Federal Courts
As discussed in Chapter 1, federal courts are established by the United States Constitution, which limits
what kinds of cases can be brought in any federal court. Two kinds of civil lawsuits are permitted in
federal court: federal question cases and diversity cases.
Federal Question Cases
A claim based on the United States Constitution, a federal statute, or a federal treaty is called a federal
question case. Federal courts have jurisdiction over these cases.
Diversity Cases
Even if no federal law is at issue, federal courts have diversity jurisdiction when (1) the plaintiff and
defendant are citizens of different states and (2) the amount in dispute exceeds $75,000. The theory
behind diversity jurisdiction is that courts of one state might be biased against citizens of another state. To
ensure fairness, the parties have the option to use a federal court as a neutral field.
Trial Courts
United States District Court
This is the primary trial court in the federal system. The nation is divided into about 94 districts, and each
has a district court.
Other Trial Courts
There are other, specialized trial courts in the federal system. Bankruptcy Court, Tax Court, and the
United States Court of International Trade all handle name-appropriate cases.
Judges
The President of the United States nominates all federal court judges, from district court to Supreme
Court. The nominees must be confirmed by the Senate.
Appellate Courts
United States Courts of Appeals
These courts are the intermediate courts of appeals. They are divided into “circuits,” which are
geographical areas. There are 11 numbered circuits, hearing appeals from district courts. A twelfth circuit,
the Court of Appeals for the District of Columbia, hears appeals only from the district court of
Washington, D.C.
United States Supreme Court
This is the highest court in the country. The Supreme Court has the power to hear appeals in any federal
case and in certain cases that began in state courts. Generally, it is up to the Court whether or not it will
accept a case.
Litigation
Pleadings
The documents that begin a lawsuit are called the pleadings. These consist of the complaint, the answer,
and sometimes a reply. In addition to the answer, there may be a counter-claim or a class action suit
may be filed. Finally, a party can ask the court for a judgment on the pleadings, by filing a motion to
request the court to dismiss the case based solely on the pleadings. Assuming the case continues, the next
step is discovery, during which both sides gather information on their opponent’s case.
Discovery
Discovery is the critical, pre-trial opportunity for both parties to learn the strengths and weaknesses of the
opponent’s case.
The purpose of discovery is to enable the parties to understand their opponent’s case as clearly as possible
in order to encourage settlement, and to allow a trial to uncover all relevant facts with a minimum of
surprises. Discovery includes (1) sworn answers to written questions; (2) depositions consisting of sworn
testimony taken out of court; (3) production of documents and physical objects; and (4) physical and
mental examination. To emphasize these points, students might consider the case of Smiles v Coastal
Insurance Company that is woven throughout the chapter.
Question: In Smiles v Coastal Insurance Company, what critical discovery ruling helps Coastal
Insurance?
Question: Why is the ruling so important?
Answer: It ends the plaintiff's hope for a class action. Without discovery on other claims that the
Question: What critical ruling helps plaintiff Beth Smiles?
Answer: The judge reduces Coastal's depositions to only ten. Coastal's attorney decides not to depose
Question: If Coastal learned of Bergson’s story after it settled the case or lost at trial could it re-open
the lawsuit on the grounds it had new information?
Case: Stinton v. Robin’s Wood, Inc.2
Facts: Ethel Flanzraich, 78 years old, slipped and fell on the steps of property owned by Robin’s Wood.
She broke her left leg and left arm. Flanzraich sued, claiming that Robin’s Wood caused her fall by
negligently painting the stairs. The defendant’s employee, Anthony Monforte, had painted the steps. In its
answer to the complaint, Robin’s Wood denied all the significant allegations.
During a preliminary conference with the trial judge, the parties agreed to hold depositions of both parties
on August 4. Flanzraich appeared for deposition, but Robin’s Wood did not furnish its employee,
Monforte, nor did it offer any other company representative. The court then ordered the deposition of the
defendant to take place the following April 2. Again, Robin’s Wood produced neither Monforte nor
anyone else. On July 16, the court ordered the defendant to produce its representative within 30 days.
Once more, no one showed up for deposition.
On August 18—over one year after the original deposition date—Flanzraich moved to strike the
defendant’s answer, meaning that the plaintiff would win by default. The company argued that it had
made diligent efforts to locate Monforte and force him to appear. However, all the letters sent to Monforte
were addressed care of Robin’s Wood. Finally, the company stated that it no longer employed Monforte.
The trial judge granted the motion to strike the answer. That meant that Robin’s Wood was liable for
Flanzraich’s fall. The only remaining issue was damages. The court determined that Robin’s Wood owed
$22,631 for medical expenses, $150,000 for past pain and suffering, and $300,000 for future pain and
suffering. One day later, Flanzraich died of other causes. Robin’s Wood appealed.
Issue: Did the trial court abuse its discretion by striking the defendant’s answer?
Decision: No, the trial court did not abuse its discretion. Affirmed.
2 45 A.D. 3d 203, 842 NYS2d 477, New York App. Div., 2007.
Reasoning: Normally, a lawsuit must be decided on the evidence and reasonable conclusions. However,
if a defendant fails to respond to discovery requests, and its failure is willful, extreme, and disrespectful of
the court, a trial judge may strike the defendant’s answer altogether.
Robin’s Wood failed to comply with three orders to appear for deposition. The company never produced
Monforte while he worked there. It failed to notify the plaintiff when Monforte left, and it made no effort
to produce another employee for deposition. The company did everything it could to ensure that
Flanzraich would never speak with its worker. Had the company at least produced another representative,
Flanzraich could have learned where Monforte had gone because the record indicates Robin’s Wood knew
his whereabouts.
These delays were particularly menacing to Flanzraich’s case because she was elderly—a fact well known
to the company. A trial judge may respond to such offensive conduct with appropriate orders.
Question: What standard does the appellate court use to review the trial court’s striking of Robin’s
Wood’s answer?
Answer: The appellate court asks whether the trial court abused its discretion in striking the answer.
Question: Why doesn’t the appellate court ask itself that question?
Answer: Our legal system grants considerable discretion to trial court judges. It is their job to oversee
Question: What is the result of striking Robin’s Wood’s answer?
Question: Is it fair that Robin’s Wood does not get a chance to defend itself based on the actions of
one employee?
Answer: Robin’s Wood’s loss was the result of more than just the actions of Monforte. Robin’s Wood
should have produced Monforte for deposition while he still worked for them. In Monforte’s absence,
Robin’s Wood could have produced another representative from the company for the deposition, but
Question: This is still a harsh result. Why didn’t the trial judge order Robin’s Wood to pay for the
costs of delay, or something else less drastic than striking its answer?
Answer: While the court might have opted for such a remedy, it did not. As noted above, it is not the
Summary Judgment
After discovery, either party may move for summary judgment. Summary judgment is a ruling by the
court that no trial is necessary because the essential facts are not in dispute. If there are essential facts in
dispute, then summary judgment is not appropriate, and the trial process continues.
To illustrate, suppose that Bob and Susan meet at a church pancake breakfast, chat about Bob's Ferrari,
and end up signing an agreement that Susan can buy it at the extraordinarily low price of $30,000. Bob
refuses to honor the agreement, claiming he was intoxicated when he signed. Susan has 35 witnesses who
swear that Bob was sober; Bob has only himself testifying that he was drunk.
Question: Susan moves for summary judgment. The ruling?
Answer: Summary judgment denied. The parties have a key factual dispute: whether Bob was drunk.
Question: Suppose Bob and Susan orally agree that she can buy the car for $30,000. Bob refuses to
honor the deal and she sues. Discovery indicates that Susan has 30 witnesses who will testify that the
parties orally agreed to the deal. Bob has five witnesses who will testify that the parties never even
orally agreed. Bob moves for summary judgment, based on the statute of frauds provision of the
Uniform Commercial Code: this kind of contract (for the sale of goods over $500) must be in writing
to be enforceable. The ruling?
Answer: Summary judgment granted. There is no need to decide which of the witnesses is telling the
Case: Jones v. Clinton3
Facts: In 1991, Bill Clinton was Governor of Arkansas. Paula Jones worked for a state agency, the
Arkansas Industrial Development Commission (AIDC). When Clinton became president, Jones sued him,
claiming that he had sexually harassed her. She alleged that, in May 1991, the Governor arranged for her
to meet him in a hotel room in Little Rock, Arkansas. When they were alone, he put his hand on her leg
and slid it toward her pelvis, and later he lowered his trousers, exposed his penis, and told her to kiss it.
Jones claimed that she was horrified, jumped up, and left. Jones remained at AIDC until February 1993,
when she moved to California because of her husband’s job transfer. President Clinton denied all of the
allegations. He also filed for summary judgment, claiming that Jones had not alleged facts that justified a
trial. Jones opposed the motion for summary judgment.
Issue: Was Clinton entitled to summary judgment, or was Jones entitled to a trial?
Decision: Jones failed to make out a claim of sexual harassment. Summary judgment was granted for the
president.
Reasoning: To establish this type of sexual harassment case, a plaintiff must show that her refusal to
submit to unwelcome sexual advances resulted in specific harm to her job.
Jones received every merit increase and cost-of-living allowance for which she was eligible. Her only job
transfer involved a minor change in working conditions, with no reduction in pay or benefits. Jones
Question: The court seems to regard Jones’s allegations as trivial. In fact, hasn’t she alleged
disgusting behavior by her employer? How can the court regard her claims so lightly?
Answer: The judge does indicate that the alleged behavior, if it occurred, was crude and revolting.
That is not the issue, however. The judge is saying that it is not her job to decide whether this
Question: Doesn’t summary judgment mean that there will be no trial?
Question: How can a judge decide whether there was sexual harassment without holding a trial? We
do not know whether Clinton did these things or not.
Answer: Summary judgment means that it does not matter whether Clinton did such things, because
3 990 F. Supp. 657, 1998 U.S. Dist. LEXIS 3902 United States District Court East. Dist Ark. 1998.
Question: What is missing from Jones’s allegations?
Answer: A claim of a significant job loss. If she had claimed that following the alleged encounter
Multiple Choice Questions
1. The burden of proof in a civil trial is to prove a case _____________________. The burden of proof
rests with the ____________________.
a beyond a reasonable doubt; plaintiff
b by a preponderance of the evidence; plaintiff
c beyond a reasonable doubt; defendant
d by a preponderance of the evidence; defendant
2. Alice is suing Betty. After the discovery process, Alice believes that no relevant facts are in dispute, and
that there is no need for a trial. She should move for a
a judgment on the pleadings
b directed verdict
c summary judgment
d JNOV
3. Glen lives in Illinois. He applies for a job with a Missouri company, and he is told, amazingly, that the
job is only open to a white applicant. He will now sue the Missouri company under the Civil Rights
Act, a federal statute. Can Glen sue in federal court?
a Yes, absolutely.
b Yes, but only if he seeks damages of at least $75,000. Otherwise, he must sue in a state court.
c Yes, but only if the Missouri company agrees. Otherwise, he must sue in a state court.
d No, absolutely not. He must sue in a state court.
4. A default judgment can be entered if which of the following is true?
a A plaintiff presents her evidence at trial and clearly fails to meet her burden of proof.
b A defendant loses a lawsuit and does not pay a judgment within 180 days.
c A defendant fails to file an answer to a plaintiff's complaint on time.
d A citizen fails to obey an order to appear for jury duty.
5. Barry and Carl are next-door neighbors. Barry's dog digs under Carl's fence and does $500 damage to
Carl's garden. Barry refuses to pay for the damage, claiming that Carl's cats "have been digging up
my yard for years."
The two argue repeatedly, and the relationship turns frosty. Of the following choices, which has no
outside decision maker and is most likely to allow the neighbors to peacefully coexist after working
out the dispute?
a Trial
b Arbitration
c Mediation
Essay Questions
1. You plan to open a store in Chicago, specializing in rugs imported from Turkey. You will work with a
native Turk who will purchase and ship the rugs to your store. You are wise enough to insist on a
contract establishing the rights and obligations of both parties and would prefer an ADR clause. But
you do not want a clause that will alienate your overseas partner. What kind of ADR clause should
you include, and why?
Answer: Yes. Try blending ADR mechanisms. Have the ADR clause state that in the event of a
dispute, the parties will negotiate it in good faith, and take no further steps for 30 days. If negotiation
fails, an additional 30-day cooling-off period follows. The next step could be a mini-trial in front of
2. Which court(s) have jurisdiction as to each of these lawsuits – state or federal? Explain your reasoning
with each.
a Pat wants to sue his next-door neighbor, Dorothy, claiming that Dorothy promised to sell him the
house next-door.
b Paula, who lives in New York City, wants to sue Dizzy Movie Theatres, whose principal place of
business is Dallas. She claims that while she was in Texas on holiday, she was injured by their
negligent maintenance of a stairway. She claims damages of $30,000.
c Phil lives in Tennessee. He wants to sue Dick, who lives in Ohio. Phil claims that Dick agreed to
sell him 3,000 acres of farmland in Ohio, worth over $2 million.
d Pete, incarcerated in a federal prison in Kansas, wants to sue the United States government. He
claims that his treatment by prison authorities violates three federal statutes.
Answer:
(b) The general trial court of Texas, only. There is no federal court diversity jurisdiction because
(c) Ohio's general trial court has jurisdiction. United States District Court has concurrent
(d) United States District Court has federal question jurisdiction, based on the federal statutes at
3. British discovery practice differs from that in the United States. Most discovery in Britain concerns
documents. The lawyers for the two sides, called solicitors, must deliver to the opposing side a list of
all relevant documents in their possession. Each side may then request to look at and copy those it
wishes. Depositions are rare. What advantages and disadvantages are there to the British practice?
Answer: Discovery is more efficient in Britain, since the solicitors are honor-bound to notify of
4. Trial practice also is dramatically different in Britain. The parties’ solicitors do not go into court.
Courtroom work is done by different lawyers, called barristers. The barristers have very limited rights
to interview witnesses before trial. They know the substance of what each witness intends to say but
do not rehearse questions and answers, as in the United States. Which approach do you consider more
effective? More ethical? What is the purpose of a trial? Of pre-trial preparation?
5. Claus Scherer worked for Rockwell International and was paid over $300,000 per year. Rockwell
fired Scherer for alleged sexual harassment of several workers, including his secretary, Terry Pendy.
Scherer sued in United States District Court, alleging that Rockwell’s real motive in firing him was
his high salary.
Rockwell moved for summary judgment, offering deposition transcripts of various employees.
Pendy’s deposition detailed instances of harassment, including comments about her body, instances of
unwelcome touching, and discussions of extramarital affairs. Another deposition, from a Rockwell
employee who investigated the allegations, included complaints by other employees as to Scherer’s
harassment. In his own deposition, which he offered to oppose summary judgment, Scherer testified
that he could not recall the incidents alleged by Pendy and others. He denied generally that he had
sexually harassed anyone. The district court granted summary judgment for Rockwell. Was its ruling
correct?
Answer: Yes. The court of appeals affirmed. Scherer v. Rockwell International Corp., 975 F.2d 356,
1992 U.S. App. LEXIS 22080 (7th Cir. 1992). “When questioned about the specific instances of
sexual harassment, he did not deny that the incidents occurred, but instead stated that he could not
Discussion Questions
1. In the Tony Caruso case described throughout this chapter, the defendant offers to settle the case as
several stages. Knowing what you do now about litigation, would you have accepted any of the
offers? If so, which ones? If not, why not?
2. The burden of proof in civil cases is fairly low. A plaintiff wins a lawsuit if he is 51% convincing, and
then he collects 100% of his damages. Is this result reasonable? Should a plaintiff in a civil case be
required to prove his case beyond a reasonable doubt? Or, if a plaintiff is only 51% convincing,
should he get only 51% of his damages?
3. Large numbers of employees have signed mandatory arbitration agreements in employment contracts.
Courts usually uphold these clauses. Imagine that you signed a contract with an arbitration agreement,
that the company later mistreated you, and that you could not sue in court. Would you be upset? Or
would you be relieved to go through the faster and cheaper process of arbitration?
4. Imagine a state law that allows for residents to sue "spammers" – those who send uninvited commercial
messages through email - for $30. One particularly prolific spammer sends messages to hundreds of
thousands of people.
John Smith, a lawyer, signs up 100,000 people to participate in a class action lawsuit, According to
the agreements with his many clients, Smith will keep 1/3 of any winnings. In the end, Smith wins a
$3,000,000 verdict and pockets $1,000,000. Each individual plaintiff receives a check for $20.
Is this a lawsuit reasonable use of the court's resources? Why or why not?
5. Higher courts are reluctant to review a lower court's factual findings. Should this be so? Would appeals
be fairer if appellate courts reviewed everything?
