Suggested Additional Assignments
Research: Class Actions
Students should find a current article on a pending class action against a large pharmaceutical, tobacco,
automobile, or other company. Students should answer these questions:
1. What is a class action?
2. How long has this class action been going?
3. How does a class action change the stakes for the parties?
4. What are the plaintiffs’ claims?
5. Have developments in the class action favored the plaintiffs or defendants?
6. What are the long-term business, legal, and social consequences of class actions such as this one? Do
those consequences support class actions as a valid form of litigation?
Voir Dire
Divide students into three groups, and then each group into two sides. Each group is assigned a high
profile case: the O.J. Simpson murder case, the Martha Stewart obstruction of justice case, and the
Michael Jackson child abuse case (the professor may need to educate the students about these cases). One
side in each group is the prosecution and the other side is the defense. Ask each side to explain to the
class what type of juror it thinks would be most beneficial to its side, and why.
Martha Stewart was found guilty in March 2004 of conspiracy, obstruction of an agency proceeding, and
making false statements to federal investigators and sentenced in July 2004 to serve a five month term in
a federal correctional facility and a two year period of supervised release (to include five months of home
confinement). Prosecutors showed that Peter Bacanovic, Stewart’s broker at Merrill Lynch, ordered his
assistant to tell Stewart that the CEO of ImClone, Samuel Waksal, was selling all his shares in advance of
an adverse Food and Drug Administration ruling. The FDA action was expected to cause ImClone shares
to decline. 1
Michael Jackson was charged with four counts of lewd conduct with a child younger than 14; one count
of attempted lewd conduct; four counts of administering alcohol to facilitate child molestation; and one
count of conspiracy to commit child abduction, false imprisonment or extortion. On June 13, 2005, the
jury found Jackson not guilty on all charges.2
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.
Quote of the Day
“Facts are ventriloquists’ dummies. Sitting on a wise man’s knee they may be made to utter words of
wisdom; elsewhere, they say nothing, or talk nonsense, or indulge in sheer diabolism.” –Aldous Huxley
(1894 1963), British author, Time Must Have a Stop (1944).
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
1 “Stewart Convicted on All Charges,” CNN.com, March 5, 2004.
2 “Jackson Not Guilty,” CNN.com, June 14, 2005.
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, and 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 3
3 326 U.S. 310 Supreme Court of the United States, 1945
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?
Excerpts from Chief Justice Stone’s Decision: Appellant insists that its activities within the state were
not sufficient to manifest its “presence” there and that in its absence the state courts were without
jurisdiction, that consequently it was a denial of due process for the state to subject appellant to suit.
Appellant [International Shoe] refers to those cases in which it was said that the mere solicitation of
orders for the purchase of goods within a state, to be accepted without the state and filled by shipment of
the purchased goods interstate, does not render the corporation seller amenable to suit within the state.
[D]ue process requires that [a defendant] have certain minimum contacts with it such that the
maintenance of the suit does not offend “traditional notions of fair play and substantial justice.”
Since the corporate personality is a fiction, its “presence” without can be manifested only by those
activities of the corporation’s agent within the state which courts will deem to be sufficient to satisfy the
demands of due process.
“Presence” in the state in this sense has never been doubted when the activities of the corporation
there have not only been continuous and systematic, but also give rise to the liabilities sued on, even
though no consent to be sued or authorization to an agent to accept service of process has been given.
Conversely it has been generally recognized that the casual presence of the corporate agent or even his
conduct of single or isolated items of activities in a state in the corporation’s behalf are not enough to
subject it to suit on causes of action unconnected with the activities there. To require the corporation in
such circumstances to defend the suit away from its home or other jurisdiction where it carries on more
substantial activities has been thought to lay too great and unreasonable a burden on the corporation to
comport with due process.
But to the extent that a corporation exercises the privilege of conducting activities within a state, it
enjoys the benefits and protection of the laws of that state. The exercise of that privilege may give rise to
obligations.
Applying these standards, the activities carried on in behalf of appellant in the State of Washington
were neither irregular nor casual. They were systematic and continuous throughout the years in question.
They resulted in a large volume of interstate business, in the course of which appellant received the
benefits and protection of the laws of the state, including the right to resort to the courts for the
enforcement of its rights. The obligation which is here sued upon arose out of those very activities. It is
evident that these operations establish sufficient contacts or ties with the state of the forum to make it
reasonable and just, according to our traditional conception of fair play and substantial justice, to permit
the state to enforce the obligations which appellant has incurred there.
The state may maintain the present suit to collect the tax.
Affirmed.
Question: Why is this case important?
Question: What were some of the factors in the decision?
Answer: (1) International Shoe had conducted “systematic and continuous” business operations in
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 that 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.
Federal Courts
As discussed in Chapter 1, federal courts are established by the U.S. 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 – 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. And, a twelfth, the Circuit Court of Appeals for the District of Columbia which hears appeals
from the district court of Washington, D.C., and a Thirteenth Circuit Court of Appeals, known as the
Federal Circuit.
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.
Role Play: Finding Facts versus Reading Transcripts
Students must understand the critical differences between trial and appellate courts, between hearing
evidence and finding facts on the one hand, and determining whether a lower court applied the law
correctly on the other. To demonstrate, use the role play script later in this manual. Can the class
determine who is telling the truth and who is lying? How did they decide which was which? Students
will mention body language, tonal inflection, eye movement, and other factors. Students should note that
this is the function of trial courts, to hear evidence and find facts. After this exercise, the instructor should
ask students if they could determine the truth merely by reading a transcript of the testimony. The point,
of course, is that people rely primarily on non-textual clues to determine truth and falsehood, clues that
are not present in an appellate court’s review of a trial court’s decision.
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: Missing Facts
Discovery in civil litigation is rarely the subject matter for legal dramas on television or in the movies, so
the discussion of discovery will be unfamiliar to many students. Students should understand its role in
our adversary system as defined in the text: “the best way to bring out the truth is for the two contesting
sides to present the strongest case possible to a neutral factfinder.” Forms of discovery include
interrogatories, depositions, production of documents and things, physical and mental examination, and
e-discovery. The purpose of discovery is to enable the parties to understand their opponent’s case as
clearly as possible in order to encourage settlement—by allowing objective appraisal of the strengths and
weaknesses of each side—and to allow a trial to uncover all relevant facts with a minimum of surprises.
To emphasize these points, students might consider the case of Enviro-Vision v Coastal Insurance
Company that is woven throughout the chapter.
Question: In Enviro-Vision 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
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?
Additional Case: Stinton v. Robin’s Wood, Inc.4
Facts: Ethel Flanzraich, 78 years old, slipped and fell on property owned by Robin’s Wood and broke her
left arm and left leg. Flanzraich sued, claiming Robin’s Wood employee, Anthony Monforte, had
negligently painted the stairs on which she fell. Robin’s Wood denied the allegations.
The parties agreed to hold depositions on August 4. Flanzraich appeared for the deposition but
Robin’s Wood did not furnish Monforte or any other Robin’s Wood representative. The court ordered the
deposition of Monforte and Robin’s Wood for April 2. Again Robin’s Wood did not produce Monforte or
any other representative. On July 16, the court ordered Robin’s Wood to produce its representative within
30 days. Again, no one showed for the deposition.
On August 18, Flanzraich moved to strike Robin’s Wood’s answer, meaning she would win by
default. The company argued that it had made diligent efforts to locate Monforte and force him to appear,
but that Monforte no longer worked for Robin’s Wood. The trial judge granted the motion to strike. The
only remaining issue was damages: Robin’s Wood owed $22,631 for medical expenses, $150,000 for past
pain and suffering, and $300,000 for future pain and suffering. Robin’s Wood appealed.
Issue: Did the trial court abuse its discretion by striking Robin’s Wood’s answer?
Holding: No. The court found no merit to Robin’s Wood’s claim that the trial judge abused his discretion in
striking its answers. Although cases should be heard on the merits whenever possible, a court may invoke a
drastic remedy such as striking an answer when a parties’ failure to comply with discovery is willful.
The willful nature of Robin’s Wood’s conduct can be inferred from the company’s failure to comply with
three court orders and to explain why it did not produce Monforte or any other representative. Had it produced
another representative at the deposition, Flanzraich could have questioned the representative about the
whereabouts of Monforte, and would have learned information regarding his location because the record
indicates that Robin’s Wood had such information. This conduct is especially flagrant here where Flanzraich is
elderly. Any delay in the proceedings would have a particularly detrimental affect on her. Moreover, Robin’s
Wood failed to explain why they did not produce Monforte for deposition when he was still employed with
them.
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
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
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?
4 45 A.D. 3d 203, 842 NYS2d 477, New York App. Div., 2007.
Answer: While the court might have opted for such a remedy, it did not. As noted above, it is not the
Summary Judgment
Summary judgment can be difficult to grasp. It is important because many cases in the text are appellate
rulings on summary judgments entered by trial courts. Summary judgment makes the court focus on legal
questions, not factual disputes. If there are essential facts in dispute summary judgment is not
appropriate, and there must be a trial.
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
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
LEGENDS ARE FOREVER, INC. V. NIKE, INC.
2013 WL 6086461, 2013 U.S. Dist. LEXIS 164091
U.S. District Court, Northern District, New York, 2013
Facts: Legends are Forever, Inc. (Legends) trademarked the slogan “Legends are Forever.” When Nike
used the slogan in an ad campaign featuring basketball player Kobe Bryant, Legends sued Nike.
But, during discovery, Legends repeatedly failed to comply with Nike’s reasonable requests. Ultimately,
Nike was forced to file a motion to compel Legends to produce the requested documents and witnesses.
So, Nike requested more than just discovery: It also asked the court for recovery of all of the costs and
fees it incurred in litigating the motion to compel, totaling $25,186.91. This sum included Nike’s
attorney’s fees (ranging from $250 to $450 per hour) and all the travel expenses incurred by the two Nike
attorneys who attended the hearing on the motion to compel.
The court agreed with Nike, granting it both discovery and its fees. Legends challenged the order,
arguing that a small company should not have to pay for Nike’s high-priced attorneys.
Issue: What is a reasonable penalty for unacceptable behavior during discovery?
Excerpts from Magistrate Judge Peebles’s Decision:
Discovery in this case has proceeded at an unacceptably slow pace, and Nike has experienced
considerable difficulties in obtaining compliance by plaintiff with legitimate discovery demands. An
award of costs and attorney’s fees is warranted.
Now the task of the court shifts to determining the appropriate amount to award. Fee awards are awarded
by determining a reasonable fee, reached by multiplying a reasonable hourly rate by the number of
reasonably expended hours.
When establishing a reasonable rate, courts consider the time and labor required, the novelty of the
questions, and the level of skill required to perform the legal service properly [among other factors].
Attorney’s fees awarded as sanctions are not intended only as compensation of reimbursement for legal
services, but also serve to deter abusive litigation practices and, as such, district courts have discretion in
determining the amount of an attorney’s fee awarded as sanctions. I conclude that the court should apply
the following rates: $350 to $250 per hour.
I have reduced the number of hours upon which fees will be awarded for two reasons. First, it appears that
several of the entries are excessive, given the description of the work performed. As one example, Nike
chose to send two attorneys to the hearing, apparently as a result of a strategic decision. The motion,
however, was relatively straightforward and not particularly complex. While Nike certainly retains the
prerogative to send multiple attorneys to such a hearing, I decline to award costs and attorney’s fees based
upon that duplication of effort. Based upon the foregoing, I am awarding attorney’s fees in the amount of
$11,146.25,
In addition to attorney’s fees, Nike has also sought recovery of costs representing travel expenses incurred
for the hearing. It is appropriate to award the expense associated with [only one of Nike’s attorneys] travel
to the hearing, in the amount of $1,186.57.
Plaintiff Legends now complains that, as a small corporation, it would be economically disadvantaged by
the award. Nike, however, despite its size and prominence, having been sued, is entitled to the same
discovery as any other litigant. When discovery is sought but not provided, it is fair and appropriate to
award costs and attorney’s fees, notwithstanding the disparity in size of the two parties involved.
Nike, Inc., is hereby awarded the sum of $12,332.82, representing reasonable costs and attorney’s fees
associated with having to bring and argue the recent motion to compel discovery.
Question: What are three factors a court considers when establishing a reasonable hourly rate for
attorney’s fees?
Question: Why is the amount awarded to Nike, $12,332.82, less than the amount it asked for, $25,186.91?
Question: What did the Court say about the argument that Legends will be economically disadvantaged
by the award?
Answer: Nike, a large corporation, was sued and it is entitled to the same discovery as any other litigant.
Case: Jones v. Clinton5
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
5 990 F. Supp. 657, 1998 U.S. Dist. LEXIS 3902 United States District Court East. Dist Ark. 1998
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: Did Jones make out a claim of sexual harassment?
Holding: Summary judgment for Clinton. Jones had failed to demonstrate any tangible job detriment.
She had never been downgraded in her job, and in fact had been reclassified upward. She received every
merit increase for which she was eligible. A mere change in job responsibilities, with no loss of status or
pay, is not a job detriment. The facts that her work station was changed, that she sometimes had nothing
to do, and that she did not receive flowers on Secretary’s Day do not add up to a federal claim of sexual
harassment.
Note: As Jones’s appeal of this decision was pending, the parties settled. Without acknowledging any of
the allegations, Clinton agreed to pay Jones $850,000 to drop the suit.
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: This gets to the essence of summary judgment. The judge does indicate that the alleged
Question: What is the judge obligated to decide?
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 he did them, because even if did,
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