Civil Procedure Class Notes 10/21/03


More on Caterpillar


When do enough wrongs make a right?  This started off as a regular old state case.


Lewis sued Caterpillar and Whayne.  There was no diversity at that point.  However, when Lewis settles with Whayne, that claim falls out of the picture, but not Whayne as a party.


At the last possible moment, Caterpillar removes to federal court, but it was wrongful at the time.  Lewis points this out, but the federal court denies the motion to remand, and that was a mistake at the time.  BAD!  BAD!


Subsequently, Whayne is dismissed as a party.  By the time we get to trial, we have a perfectly decent and respectable federal diversity case.


But what’s our rule?  You must have jurisdiction at the time the action is initiated.  Allowing this case to go forward violates this fundamental rule.


Lewis appeals to the Sixth Circuit, which reverses because they find there was no jurisdiction.


The Supreme Court reverses, and Ginsburg says that it’s not worthwhile from a cost standpoint to send the case back down after it’s already been, in some sense, properly adjudicated insofar as jurisdiction became proper by the time of trial.


Recall Mottley: how does this go together with Caterpillar?  Mottley was supremely inefficient.  The same issues were tried and appealed through the federal court system and then again through the whole state court system and right back up to the Supreme Court again!


What happened in the initial federal trial in Mottley?  There was never a trial on the merits.  On the other hand, Caterpillar had already gone to a trial and a verdict.


What about Saadeh?  This went to trial and the plaintiff won.  But the D.C. Circuit dismissed for lack of jurisdiction after the trial!  Why didn’t efficiency win out here like it apparently did in Caterpillar?  Could there be a constitutional question here?  It might be unconstitutional if the court in Saadeh lets the case go forward.  Furthermore, there has never been jurisdiction in federal court at any level for alien v. alien.


Also, Caterpillar was removed, rather than initiated in federal court.


But it’s tough to distinguish Saadeh.  The Supreme Court has recently granted cert in a case called Atlas Global.  Atlas is suing Data Flux for breach of contract.  Atlas sued in federal court based on diversity.  Atlas is a partnership, and as was mentioned with Gibbs, partnerships’ citizenships are determined by all of their members.


Atlas had members from three places: Texas, Delaware, and Mexico.  Dataflux is a Mexican corporation.  What does § 1332(a) tell us?  This case violates the rule of complete diversity!  But nobody complained (at least at first).


What the plaintiffs did was boot the Mexican partner.  Nobody complained.  The case went to trial, and the plaintiff won.  Then, Dataflux filed to dismiss for lack of subject matter jurisdiction.  Why can they make this motion that late?  It’s the most favored motion!  You can raise it at any time!  Even the court can raise the motion sua sponte!  Why did Dataflux wait?  Had Dataflux won, they wouldn’t have made this motion.  They’re trying to get “two bites of the apple”.  They want to either win on the merits or get a dismissal for lack of subject matter jurisdiction.


There wasn’t complete diversity at the time of filing, but there was complete diversity at the time of trial.


The motion to dismiss for lack of subject matter jurisdiction is granted.  The plaintiff appeals to the Fifth Circuit.  The Fifth Circuit cites Caterpillar’s efficiency argument to reverse the motion to dismiss.


A case like Caterpillar, which suggests that we can ignore an established rule of law for efficiency reasons, can cause a lot of mischief.  Fairman guesses that the Supreme Court will limit the holding of Caterpillar.


SLUSA is a federal statute that (1) preempts state securities class actions, (2) makes purely state law securities fraud cases removable, and (3) orders the dismissal of the removed class actions.


Steve Y. says that SLUSA uses removal as a tool not just to move things around, but as a tool to restrict a substantive right.  That’s not what we usually think of when we think of the uses of civil procedure.


Are we ready to move on and leave subject matter jurisdiction?  Noooooo!  Don’t make us do Erie!!!


Two big questions:


1.     Does any court in the state have power to hear the case?  (Personal jurisdiction)

2.     If so, which court? (Subject matter jurisdiction)


Federal courts can hear federal questions, diversity cases, supplemental jurisdiction, and removal cases.


Another big question: what law applies in federal court?


What does a federal court do when it sits in diversity?  What law does it apply?


The Erie Problem


It’s all the Founding Fathers’ fault for creating the dual court system and allowing federal courts to hear diversity cases based on state law.  But what state law are the federal court going to apply in such cases?


The Erie problem is a lot broader than Erie the case.


Fairman says that most of the time, the Erie issue is not difficult at all.  We have a rule: when Congress created the federal court and empowered them to hear diversity cases, it had to tell them which law to use in those cases.


That’s where the Rules of Decision Act (RDA) comes in.  It says that federal courts will use state law to decide diversity cases.  The RDA has survived virtually unchanged to the present day: 28 U.S.C. § 1652.


But what does the statue mean by “the laws of the several states”?


Yeazell spared us from having to read Swift v. Tyson and its interpretation of the phrase “the laws of the several states”.


In modern times, almost everything is statutory and not a whole lot is common law.  In the old days, there was a lot more common law and a lot fewer statutes.


If you want to look up the law, we might look up statutes as well as case law.  Swift had to figure out what law applied.


Justice Story says that court decisions are not laws.  Story said that “laws equal statutes”.[1]


The Court finds that state statutes will bind federal courts.  But what if there are no statutes?  How do we will the gap?  The Swift Court decided that we could fill in the gaps with federal common law.


Story says that the law is The Law, and is the same and unchangeable everywhere.  This is an idea grounded in Natural Law philosophy.  It’s hard for us to get our minds around this philosophy of law.


That leads us to…


Erie Railroad v. Tompkins


What are the facts?  Tompkins is going to Pennsylvania.  What’s he doing?  He’s walking along the railroad tracks.  A train goes by and he gets hit by the train and his arm gets severed.  One-Arm Tompkins is going to sue Erie.  He’s MAD!


The suit is brought in the Southern District of New York against the railroad.  The subject matter jurisdiction is diversity.  No problem with personal jurisdiction because the plaintiff sues the railroad in its home state.  But what law shall we apply?  There’s a very specific legal issue they’re trying to settle: will the Pennsylvania common law of negligence apply, or will New York common law of negligence apply, or something else altogether?


So the issue is: what is level of duty owed by the railroad to the guy walking by the railroad tracks?  Different jurisdictions have different ways of describing that duty.


Pennsylvania law would describe Tompkins as a trespasser who can only collect damages if the railroad showed “wanton negligence”.  The “general federal common law” only applied “ordinary negligence” and “reasonable care”…good for the plaintiff!  The New York had some kind of law too, but it seems that it won’t apply here.


Why does this matter?  This is all or nothing: the choice of law will determine the outcome of the case.  The greater the duty owed to Tompkins, the greater the chance is that he will win.


Why won’t New York law apply if Tompkins sues in New York?  What law does he want applied?  He wants federal common law.  This all stems from the RDA: Tompkins sued the railroad.  The district court will apply Swift.  Since there is no statute, federal common law is applied and Tompkins prevails.


The railroad appeals, and the Second Circuit affirms.  The Second Circuit says that Swift applies because there is no statute, and thus federal common law is applied.


Then it goes up to the Supreme Court, and they reverse.  How come?


·        There is a claim that something is unconstitutional.

·        The Court says that Swift allows federal judges too much discretion.

·        Swift was designed to create uniformity of law, but it failed to do so.


Easy Erie


(C.f. Glannon)


In diversity cases, a federal court must apply the law that would be applied by the courts of the state in which they sit.  By “the law”, we mean court decisions as well as statutes.


Therefore, on these facts, the New York federal district court should have applied New York’s choice of law rules, which would, in turn, cause the court to apply Pennsylvania’s tort law.  There aren’t Pennsylvania statutes that would apply, but there were cases that applied and should have been used by the federal court.


This isn’t the problem; the problem is all the stuff Brandeis says in the opinion.


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[1] I think this is what most laymen think of as laws.