Class Notes for Business Law, 8th Edition

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1
“Where there is no law, there is no freedom.”
John Locke
I. Teacher to Teacher Dialogue
One of the most common dilemmas facing instructors of business law is the issue of topic
choice. By the very nature of the subjects we teach, the breadth of materials is so wide that
choosing what to focus on in the limited classroom time we have with our students can be a most
daunting task. This problem is especially exacerbated when the topics we are dealing with are all
of deep interest and can stand alone as separate courses.
In this chapter, for example, we are asked to introduce students to topics ranging from the
definitions and purposes of law to how our system affects business decisions, to some of the most
important provisions found in the U.S. Constitution. Any one of these subparts can provide the
raw materials for an entire course at the law school level. Our job must start with a self-evident,
but sometimes forgotten, point: this is not law school. We are here not to train future lawyers but
rather students who need to know enough about these issues to recognize that they are issues. The
technical legal problems they may be facing later will ultimately need to be resolved using law
and other practitioners.
The plus side of this dilemma is that because we have such a diverse menu to select from, we
are able to pick and choose our areas of emphasis. For example, if your particular teaching and
research interests lie in the area of ethics and the schools of jurisprudential thought from which
they are derived, then by all means, run with it! Rather than trying to be all things to all people,
it is better to focus your efforts on your strengths. This does not mean that you can shortchange
the other material. All key objectives of the chapter should be fully outlined and incorporated in
both your lecture and materials outline. But if you have a particular interest and expertise in, for
example, the Law and Economics School of jurisprudential thought, then use them as focal points
of comparison in the evolutionary process that seeks to distinguish the older schools of
jurisprudence from newer approaches to these issues. In any event, remember that philosophical
studies of what law is and what its role is in the larger scheme of things have always posed
questions virtually impossible to answer. As mentioned in the student study guide, this chapter
represents attempts by great thinkers to answer the unanswerable. It would be far too
presumptuous for us to think that we can teach, in a few hours, what the great philosophers of the
world have tried to do over hundreds of years. Perhaps this is an early lesson in what wisdom is
really all about: the more we know of history, the more we know of our own limitations. If we
can get that point across, the course is off to a good start.
LEGAL HERITAGE
AND THE DIGITAL AGE
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Chapter 1
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II. Chapter Objectives
• Define law.
• Describe the functions of law.
• Explain the development of the US legal system.
• List and describe the sources of law in the United States.
• Discuss the importance of the U.S. Supreme Court’s decision in Brown v. Board of
Education.
III. Key Question Checklist
• What is law?
• Once you have identified the kind of societal expectation of behavior, what standard of
behavior is most appropriate? Does law codify the standard? Do one or more of the
schools of jurisprudence support the standard?
• What are the sources of law in the United States?
• What body of law and/or ethical standards apply?
• How would you apply these standards to the facts?
IV. Text Materials
The first chapter’s objective is an introduction to the historical underpinnings of jurisprudential
thought. This would include not only the functions of law listed in the summary, but also an early
opportunity to introduce the role of ethics based on the various schools of jurisprudence
discussed.
What is Law?
Laws consist of rules that regulate the conduct of individuals, businesses, and organizations,
forbidding undesirable activities.
Definition of Law – Law is a group of rules promulgated by a controlling authority, with legal
consequences for lack of compliance.
Functions of the Law – Laws are created to keep the peace, shape morals, promote social
policies, maintain the status quo, facilitate change or planning, promote compromise, and/or to
maximize individual freedoms.
Fairness of the Law – The American legal system is, overall, a comprehensive and fair system.
Yet it is occasionally misused and abused.
Flexibility of the Law – U.S. law has evolved and grown as a reflection of changes in society,
technology, and commerce. The same general principles that we were established on still exist.
The modifications exhibit the flexibility and maturity of our system to be able to adapt to the
changing commercial, social, and ethical environments.
Landmark U.S. Supreme Court Case: Brown v. Board of Education

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This box discusses the application of law where the Supreme Court overturned the “separate buy
equal” doctrine that condoned separate schools for black children and white children.
Case Questions
Critical Legal Thinking: The states must treat all individuals in the same manner as others that
are in similar positions or situations, without favoring residents or any other group. Equal
application is the important idea here.
Ethics: Separate but equal cannot be applied when it comes to education, so the decision in
Plessy v. Ferguson was wrong. The Plessy decision was based on the idea of granting political
and civil equality to African Americans, but left out social equality.
Contemporary Business: The US Constitution was drafted to reflect changing social, economic,
technical, and intellectual ideas. This is what makes the Constitution unique, as it slowly adapts to
the changing world around us.
Schools of Jurisprudential Thought
There are several different philosophies about how the law developed, ranging from the classical
natural theory to modern theories of law and economics and critical legal studies.
The different schools jurisprudential thought include the Natural Law School, based on the moral
theory of law; the Historical School, with its recognition of the social traditions and customs that
have developed over time; the Analytical School where law is shaped by logic; the Sociological
School where law is applied to advance sociological goals; the Command School whose laws are
established by the ruling party rather than the society as a whole; the Critical Legal Studies
School who claim that laws are there only to maintain the status quo; and the Chicago School, or
Law and Economics School, which promotes market efficiency.
International Law: Command School of Jurisprudence of North Korea
North Korea—the Democratic People’s Republic of Korea (or DPRK)—is a one party communist
dictatorship that has been ruled by one family since 1948. North Korea’s legal system is based on
communist theory and the Command School of jurisprudence. There is no judicial review of
government-enacted laws or activities.
History of American Law
English Common Law – English common law, the primary basis for U.S. law, was based on
judges issuing opinion when deciding a case. These opinions became the basis for precedent used
by later judges.
The historical underpinning of U.S. law can be further reinforced with some discussion of the tie-
ins between the country’s political history with that of the legal traditions of England and other
countries. This portion of the chapter material can be used to introduce students to a broad
overview of the roles that the world’s major legal systems play in the world economy. For
example, the role of the Law Merchant and its influence on international trade is critical to
understanding most international rules on import/export laws today. The origins of the Law
Merchant, in turn, are traceable in large part to the Roman civil law. In the end, the U.S. legal
system represents the “Cuisinart” effect. There are ingredients from English common law, Roman
civil law, and Judeo-Christian canon law all thoroughly processed into a bread of law. The
individual ingredients are all present, but each is no longer independently identifiable.

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Law Courts – These were established following the Norman Conquest of England in
1066 to administer laws in a uniform method. Law Courts emphasized form over
substance.
Chancery Courts – These courts were established to serve when Law Courts provided
inadequate remedies; they provided equitable solutions. These courts reviewed the merits
of the case, rather than the procedural aspects.
Merchant Courts- Law Merchant courts were developed as a separate entity to solve
commercial disputes in the Middle Ages. They were not merged into the regular court
system in England until the early 1900s.
International Law: Adoption of English Common Law in America
All the states of the United States of America except Louisiana base their legal systems primarily
on the English common law. Currently, the law of the United States is a combination of law
created by the judicial system and by congressional legislation.
International Law: The Civil Law System of France and Germany
The Romano-Germanic civil law system dates back to 450 B.C., when Rome adopted a set of
laws based on civil codes that applied to all Romans. The sole source of civil law in a country is
the application of code or statutes. Court decisions do not have the force of law.
Sources of Law in the United States
Constitutions – One of the goals of this chapter is to introduce students to the role of the U.S.
Constitution and its pivotal role in the ultimate distribution of powers between the federal
government and the states vis-à-vis the control of business conduct in the U.S. This section also
explains the three branches of the federal government: the legislative, executive, and judicial
branches.
Treaties – The Constitution establishes that only the president, upon the advice and consent of
the Senate, can enter into treaties with foreign powers.
Federal Statutes – Statutes are written laws that establish and enforce certain courses of conduct.
Congress enacts federal statutes, whilst state legislatures enact state statutes. Ordinances are
adopted by local governmental bodies.
Contemporary Environment: How a Bill Becomes Law
The U.S. Congress is composed of two chambers, the U.S. House of Representatives and the U.S.
Senate. Thousands of bills are introduced in the U.S. Congress each year, but only a small
percentage of them become law. First, a bill must be sponsored by a member of the U.S. House of
Representative or the U.S. Senate. Then, it is referred to the appropriate committee for review and
study. Bills that receive the vote of a committee are reported to the full chamber, where they are
debated and voted on. If the bill receives majority vote from the full chamber, and a subsequent
second chamber, then it is forwarded to the president’s desk. The bill becomes law when it is
signed by the president.
State Statutes – State legislatures enact state statutes. Such statutes are placed in code books.
State statutes can be assessed in these hardcopy code books or online.

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Ordinances – State legislatures often delegate lawmaking authority to local government bodies,
including cities and municipalities, counties, school districts, water districts, and such. These
governmental units are empowered to adopt ordinances. Ordinances are also codified.
Executive Orders – The executive branch of the government is empowered to issue executive
orders.
Regulations and Order of Administrative Agencies – Agencies are created to interpret and
enforce statutes enacted by both federal and state Congresses.
Judicial Decisions – Judges issue written decisions explaining their legal reasoning. Doctrine of
stare decisis establishes past court decisions as a precedent for future decisions.
Priority of Law in the United States – The U.S. Constitution and treaties take precedence over
all other laws, followed by federal statutes and federal regulations. Federal law takes precedence
over conflicting state law, which has precedence over local laws. Similarly, state constitutions
take precedence over state statutes and regulations.
International Law: Immigrants Who Came Through Ellis Island
One of the major strengths of the United States is its cultural diversity. Ellis Island was the
primary entry point for immigrants entering the United States from the late 1800s until 1954.
Digital Law
The electronic age arrived before new laws were written that were unique and specific for this
environment. Courts have applied existing laws to the new digital environment by requiring
interpretations and applications. In addition, new laws have been written that apply specifically to
this new environment. The U.S. Congress has led the way, enacting many new federal statutes to
regulate the digital environment
V. Case Problem
1.1 Fairness of the Law: Many students will react that the statute is unfair as it does not afford
women equal status in the workplace. In light of today’s standards, that position is well founded.
However, it is a useful exercise to consider arguments for the opposite position in the context of
the time period. In enacting such a statute, the legislature presumably entertained the view that
women had special needs, were subject to certain weaknesses, and therefore the demands made
on them had to be accommodated in the workplace. That these premises, i.e., special needs and
presumed weaknesses, might be false does not necessarily preclude one from acting morally.
Moralists might label this ignorance as excusable in that it is “invincible,” i.e., an ignorance that
cannot be destroyed or offers no moral reason for doing so. Of course, modern experience and
knowledge require that we question these premises. It almost certainly would not be lawful today.
Not only have the items relevant to the test of equal protection broadened under present
constitutional interpretations, but also Title VII of the Civil Rights Act of 1964 prohibits any
discrimination on the basis of sex in the “terms, conditions and benefits of employment.” W. C.
Ritchie & Co. v. Wayman, Attorney for Cook Country, Illinois, 244 Ill. 509, 91 N.E. 695, Web
1910 Ill. Lexis 1958 (Supreme Court of Illinois).
VI. Ethics Case

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1.2 Ethics: The better case is made by the dissent. The law has not been progressive in this
instance. It is likely that legislators entertained an unconscious premise that women should not be
required to fight a war. This speculation might be supported by the fact that the majority of the
Supreme Court summoned a technical legal point to justify their ruling. The Court held that
Congress was the proper party to articulate the public policy that women should not fight at the
front, thereby removing themselves from any further consideration of the substantive issue, i.e.,
whether equality was being served as a matter of fairness. Rostker, Director of Selective Service
v. Goldberg, 453 U.S. 57, 101 S. Ct. 2646, 69 L. Ed. 2d 478, Web 1981 U.S. Lexis 126 (Supreme
Court of the United States)
VIII. Terms
• Administrative agencies—Agencies (such as the Securities and Exchange Commission
and the Federal Trade Commission) that the legislative and executive branches of federal
and state governments are empowered to establish.
• Administrative rules and regulations—Used by administrative agencies to enforce
statutes. These rules and regulations have the force of law.
• Analytical School—School of jurisprudence maintains that the law is shaped by logic.
• Bill—Many bills are introduced each year at the U.S. Congress, out of which a few are
passed as law.
• Brown v. Board of Education—A landmark Supreme Court case in which a unanimous
decision reversed prior precedent and held that the separate but equal doctrine violated
the Equal Protection Clause of the Fourteenth Amendment to the Constitution. The
decision led to the banning of school segregation.
• Chamber—The U.S. Congress is composed of two chambers, the U.S. House of
Representatives and the U.S. Senate.
• Civil Law—A code of laws applicable to Romans. Also known as the Romano-Germanic
civil law system.
• Code book—Federal statutes are organized by topic into code books.
• Codified law—Federal statutes that have been organized into code books.
• Command School—School of jurisprudence that believes that the law is a set of rules
developed, communicated, and enforced by the ruling party rather than a reflection of the
society’s morality, history, logic, or sociology.
• Committee—Bills from either of the two chambers of the U.S. Congress are reviewed
and studied by an appropriate committee. The committee may reject the bill, report it to
the full chamber for a vote, not act on it, or send it to a subcommittee for further study.
• Conference committee—Committee made up of members of both the U.S. House of
Representatives and the U.S. Senate.
• Constitution of the United States of America—The supreme law of the United States.
• Court of Chancery—Court that granted relief based on fairness. Also called equity court.
• Critical Legal Studies School—School of Jurisprudence that proposes legal rules are
unnecessary and are used as an obstacle by the powerful to maintain the status quo.
• English common law—Law developed by judges who issued their opinions when
deciding a case. The principles announced in these cases became precedent for later
judges deciding similar cases.
• Executive branch—A branch of the U.S. government that has the power to enforce the
law. The president of the United States constitutes the executive branch of the
government.
• Executive order—An order issued by a member of the executive branch of the
government.

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• Federal Statute—Written laws, enacted by the U.S. Congress, that regulate foreign and
interstate commerce.
• French Civil Code of 1804—One of the models used by countries that adopted civil
codes. Also known as the Napoleonic Code.
• German Civil Code of 1896—One of the models for countries used by countries that
adopted civil code. Such codes act as the sole source of law in most civil law countries.
• Historical School—School of jurisprudence that believes the law is an aggregate of social
traditions and customs that have developed over the centuries.
• Judicial branch—A branch of the U.S. government that has the power to interpret and
determine the validity of the law. Also known as the courts.
• Judicial decision—A decision about an individual lawsuit issued by federal and state
courts.
• Jurisprudence—The philosophy or science of law.
• Law—That which must be obeyed and followed by citizens, subject to sanctions or legal
consequences; a body of rules of action or conduct prescribed by controlling authority
and having binding legal force.
• Law court—A court that developed and administered a uniform set of laws decreed by
the kings and queens after William the Conqueror, legal procedure was emphasized over
merits at this time.
• Law and Economics School—School of jurisprudence that believes that promoting
market efficiency should be the central goal of legal decision making. Also called
Chicago School.
• Law Merchant—Rules based on based on common trade practices and usage that were
applied by merchants around England and Europe, in the Middle ages, to solve
commercial disputes. Also known as “law of merchants.”
• Legislative branch—A branch of the U.S. government that has the power to enact the
law. Also known as the U.S. Congress.
• Merchant Court—The separate set of courts established to administer the “law of
merchants.”
• Moral theory of law—Theory that proposes that the law should be based on morality and
ethics.
• Natural Law School—School of jurisprudence that postulates that the law is based on
what is “correct.”
• Order—A decision of an administrative agency.
• Ordinance—Laws enacted by local government bodies, such as cities and municipalities,
counties, school districts, and water districts.
• Precedent—A rule of law established in a court decision. Lower courts must follow the
precedent established by higher courts.
• Romano-Germanic civil law system—Legal system that dates back to 450 BCE when
Rome adopted the Twelve Tables, a code of laws applicable to the Romans. Commonly
known as civil law.
• Sociological School—School of jurisprudence that asserts that the law is a means of
achieving and advancing certain sociological goals.
• Stare decisis—Latin for “to stand by the decision.” Adherence to precedent.
• State Constitution—Constitutions that establish the legislative, executive, and judicial
branches of state government and establish the powers of each branch.
• State Statute—Statute enacted by state legislatures and placed in code books.

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• Statute—Written law enacted by the legislative branch of the federal and state
governments that establishes certain courses of conduct that covered parties must adhere
to.
• Subcommittee—Studies bills sent by the committee. After review the subcommittee may
either let the bill die or report it back to the full committee.
• Treaty—A compact made between two or more nations.
• U.S. Congress—Branch of the government that creates federal law by enacting statutes.
• U.S. House of Representatives—A chamber of the U.S. Congress.
• U.S. Senate—A chamber of the U.S. Congress.

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“I was never ruined but twice: once when I lost a lawsuit, and once when I won one.”
Voltaire
I. Teacher to Teacher Dialogue
Twenty-first century technological advances have provided our students with all kinds of
instant access to information. These devices have provided the students with a variety of
preconceptions.
Among these is the average undergraduate’s notion of how trials are conducted and the role
of attorneys in that process. Invariably these perceptions center on popular television series such
as “Law and Order” and “Court TV”. This is not all bad. Current media focus on numerous law-
related issues has generated a whole new wave of public interest in the workings of our legal
system. The downside is that the media has created many myths on the folklore of law and
lawyers. In the world of pop culture, no one knows until the end who really did it until a surprise
witness shows up to identify the bad guy. In more modern versions, the attorney first has a
business relationship with the client and then proceeds to get him or her acquitted. Regardless of
the outcome, the process is always full of glamour and intrigue.
The problem is that a trial rarely resembles the goings on found in the entertainment media.
Trials are long, tedious, emotionally and financially draining processes for all parties concerned.
In many ways, a trial represents a failure by the parties to reach some sort of satisfactory solution
of the issue beforehand. Rarely do the parties actually want to go through a labyrinth of
pleadings, motions, and the like, feeling all the while totally dependent on the sometimes
questionable competence of their attorneys. Unlike the make-believe world of entertainment, the
job of an attorney is to keep his or her client out of court. (This often needs some reinforcement
with the student.) The attorney’s professional advice should anticipate and resolve potential legal
problems before, rather than after, the fact if at all possible.
It is against this backdrop that we should try to present a more realistic picture of how our
system works. We can basically start by discussing how few controversies actually get to the trial
stage and how even fewer of those are actually reported in the National Reporter System.
Additionally, a fair amount of time should be spent reviewing the growing trend toward
alternative dispute resolution (ADR) mechanisms. Personal experience examples might be helpful
in illustrating the growing trends toward ADR. To complete the cycle we can then proceed to
itemize the key steps used in a court trial in this chapter and in these that follow.
COURTS
AND JURISDICTION
2

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II. Chapter Objectives
• Describe state court systems.
• Describe the federal court system.
• List and describe the types of decisions that are issued by the U.S. Supreme Court.
• Compare the jurisdiction of state courts with that of federal courts.
• Define personal jurisdiction, standing to sue and venue.
III. Key Question Checklist
• If the dispute or controversy needs to be resolved in a court of law, which court has
jurisdiction?
• Once jurisdiction is established, was the proper sequence of pretrial steps taken?
• Was the trial sequence properly followed?
• After the trial is completed, are any appeals from the decision applicable?
IV. Text Materials
One objective of this chapter is to familiarize students with the role of the major players in those
events.
The federal court system and the court systems of the 50 states and the District of Columbia are
the two major court systems in the U.S. Litigation is the process of bringing, maintaining, and
defending a lawsuit. In addition, there are a number of alternative dispute resolutions that can be
used.
State Court Systems
Limited-Jurisdiction Trial Court – Inferior trial like traffic courts, juvenile courts, justice-of-
the peace courts, probate courts, family law courts hear specialized matter. Another example of
these is the small claim courts that hear limited dollar amount civil cases.
General-Jurisdiction Trial Court – Courts of Record keep a record of the testimony and
evidence presented at trial for future reference. These courts hear felony cases, civil cases over a
certain dollar amount, and other items.
Intermediate Appellate Court – Courts of Appeal hear appeals from trial courts, reviewing
records of trials for errors without hearing any new evidence.
Highest State Court – State supreme courts hear appeals from intermediate state courts and
some trial courts, without hearing new evidence.
Contemporary Environment: Delaware Courts Specialize in Hearing Business Disputes
Delaware has created a special Chancery Court to decide business litigation, with a reputation for
handling corporate matters. Delaware’s laws also tend to favor corporate management, so
together with the Chancery Court, the state has created an environment that encourages
incorporation in that state. Other states are beginning to follow suit and create their own variation
of Delaware’s Chancery Court.

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Federal Court System
Special Federal Courts – There are six courts of limited jurisdiction: the U.S. tax court, federal
claims court, the Court of International Trade, bankruptcy court, and the courts of appeals for the
armed services and for veteran’s claims.
U.S. District Courts – These are the federal court system’s 94 trial courts of general jurisdiction.
U.S. Courts of Appeal – These are the federal court system’s 13 intermediate appellate courts.
Supreme Court of the United States
The Supreme Court is composed of nine justices who are nominated by the President and
confirmed by the Senate. The President appoints one as the chief justice who is responsible for
the administration of the Court, while the other eight are considered associate justices.
Contemporary Environment: The Process of Choosing a U.S. Supreme Court Justice
The President appoints Supreme Court justices, with the advice and consent of the Senate
(majority vote). This allows a form of balance of power between the executive and legislative
branches of the government.
Jurisdiction of the U.S. Supreme Court – The Supreme Court hears appeals from the federal
district courts and from the highest state courts. Legal briefs are filed, oral arguments are made,
lower court records are reviewed, but neither new evidence nor testimony is heard. The Supreme
Court decision is final.
Decisions by the U.S. Supreme Court – Congress has established the rules for the mandatory
appellate review by the Supreme Court, which may also elect to hear cases at its discretion.
Petitioners file a petition for certiorari asking for the Supreme Court to review their case. If the
court decides to sit on the matter, it issues a writ of certiorari. The court hears about 100 cases per
year.
Unanimous Decisions – All the justices voting agree as to both the outcome and the
reasoning. These decisions become precedent.
Majority Decision – Decisions by the Supreme Court are considered majority decisions
if a majority of the justices agree on the outcome and reasoning. These decisions become
precedent.
Plurality Decision – A plurality decision is when the majority of the justices agree on the
outcome, but not the reasoning. This settles the case, but does not serve as precedent.
Tie Decision – In this case the winner in the lower court prevails. This does not serve as
precedent.
Concurring Opinion – When a justice agrees with the outcome of the majority, but not
the reasoning, they will issue a concurring opinion explaining their stand.
Dissenting Opinion – Any justice who does not agree with the decision may state their
opinion.

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Contemporary Environment: “I’ll Take You to the U.S. Supreme Court!”
This discusses the process necessary to win a review by the U.S. Supreme Court.
Jurisdiction of Federal Courts
Federal Question – Federal courts have limited jurisdiction to hear cases involving federal
questions with no dollar amount limit.
Diversity of Citizenship – The federal courts have jurisdiction to hear cases involving diversity
of citizenship. There must be diversity of state citizenship or the cases must be between a citizen
and a subject of a foreign country. The amount in controversy must be over $75,000.00.
Case 2.1 U.S. SUPREME COURT Diversity of Citizenship: Hertz Corporation v. Friend
Facts: Melinda Friend, a California citizen, sued the Hertz Corporation in California state court
seeking damages for Hertz’s alleged violation of California’s wage and hour laws. Hertz filed
notice to remove the case to federal court, asserting diversity of citizenship of the parties because
the company was incorporated in the state of Delaware and had its headquarters in New Jersey.
Friend argued that Hertz was a citizen of California as a large number of its operations were
based in the state. The U.S. District Court held that Hertz was a citizen of California and that the
case could not be moved to federal court. The U.S. Court of Appeals affirmed this decision. Hertz
appealed to the U.S. Supreme Court.
Issue: Is Hertz Corporation a citizen of California?
Decision: The U.S. Supreme Court held that due to a diversity of citizenship between Hertz and
Friend the case could be moved to federal court.
Reason: The court held that as the Hertz Corporation headquarters are located in New Jersey, it is
a citizen of that state and there is a diversity of citizenship. Hence, the case can be moved to
federal court.
Case Questions
Critical Legal Thinking: The federal courts have jurisdiction to hear cases involving diversity of
citizenship. There must be diversity of state citizenship or the cases must be between a citizen and
a subject of a foreign country. The amount in controversy must be over $75,000.
Ethics: It was ethical for Hertz to have tried to avoid the trial in California state court. As a
nonresident, Hertz probably wanted to prevent state court bias and thus moved the case to the
federal court.
Contemporary Business: If a plaintiff brings a diversity of citizenship case in federal court, it
remains there. If the plaintiff brings a diversity of citizenship case in state court, it will remain
there unless the defendant removes the case to federal court.
Jurisdiction of State Courts – State courts hear cases that the federal courts do not have the
jurisdiction to hear.
Federal courts may have concurrent jurisdiction with state courts to hear cases involving diversity
of citizenship.
Standing to Sue, Jurisdiction and Venue
Standing to Sue – The plaintiff must have a stake in the outcome of the lawsuit.
In Personam Jurisdiction – In personam jurisdiction over the person is achieved by the plaintiff
filing a lawsuit with a court and by serving a summons on the defendant.

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If personal service is unavailable, notice of the case by mail or publication in newspapers is
allowed.
Defendants disputing the jurisdiction of a court may make a special appearance to argue their
case, and cannot be served while making this appearance.
Long-Arm Statute - A court can obtain jurisdiction over persons and businesses located in another
state through use of a long-arm statute, provided the defendant has had some minimum contact
with the state.
Landmark U.S. Supreme Court Case: International Shoe Company v. State of Washington
International Shoe had salespeople that sold shoes door-to-door within the state of Washington,
and were paid on a commission basis. They had no office in the state. Washington State
determined that they had failed to pay unemployment taxes on International’s employees, and
serve notice to the organization on one of their Washington sales representatives as well as by
mailing the notice to the headquarters in St. Louis. International made a special appearance to
argue that it had insufficient contacts within the state to warrant payment of the tax. The
unemployment office and appeals board, as well as various courts within the state ruled against
International, which appealed to the U.S. Supreme Court.
The Supreme Court ruled that International had neither casual nor irregular contacts within the
state, and was, therefore, subject to in personam jurisdiction and service upon one of their agents,
based on their “minimum contacts” within the state. The Supreme Court clearly stated that the
Due Process Clause permits jurisdiction over a defendant in any state in which the defendant has
“certain minimum contacts such that the maintenance of the suit does not offend traditional
notions of fair play and substantial justice.”
In Rem Jurisdiction- Courts may have jurisdiction over property found within the state, based on
in rem (over the thing) jurisdiction.
Quasi In Rem Jurisdiction – Attachment jurisdiction occurs when a plaintiff who has obtained a
judgment attempts to satisfy the judgment by attaching property located in another state.
Venue – The court with the jurisdiction that is located closest to where the incident occurred or
where the parties live should hear the lawsuit.
Pretrial publicity may prejudice jurors and may lead to a request for a change of venue in order to
get a more impartial jury. Forum shopping is the process of looking for a more favorable court
without a valid reason, and it is frowned upon by most courts.
Forum-Selection and Choice-of-Law Clauses – Because many business agreements are formed
between people from different states and different countries, many contracts have clauses that
specifically address the state’s or country’s laws that will be applied in the case of a dispute, in
what are known as choice-of-law clauses. Additionally, they will often agree as to which court
will have jurisdiction over any dispute in forum-selection clauses.
Jurisdiction in Cyber Space
Today, with the advent of the Internet and the ability of persons and businesses to reach millions
of people in other states electronically, particularly through websites, modern issues arise as to
whether courts have jurisdiction in cyberspace. Zippo Manufacturing Company v. Zippo Dot
Com, Inc. is an important case that established a test for determining when a court has jurisdiction
over the owner or operator of an interactive, semi-interactive, or passive website.

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Case 2.2 Jurisdiction over an Internet Seller: Chanel, Inc. v. Banks
Facts: Chanel, Inc. filed suit in U.S. District Court in Maryland against defendant Ladawn Banks,
a resident of Florida. Chanel alleged that Banks owned and operated the fully interactive website
www.lovenamebrands.com, through which she sold handbags and wallets bearing counterfeit
trademarks identical to the registered Chanel marks. The goods at issue in this case were sold to a
resident of Maryland. Chanel sought a default judgment against the defendant, an award of
damages, and a permanent injunction against the defendant’s further violation of its trademarks.
The court first had to address the issue of whether it had personal jurisdiction over the defendant.
Issue: Does the court have personal jurisdiction over the defendant?
Decision: The U.S. Court of Appeals for Maryland held that defendant Banks was subject to
personal jurisdiction of the court.
Reason: Even though Banks is a resident of Florida, she used her website to sell counterfeit
goods to a customer in Maryland. Moreover, her website was highly interactive and provided a
platform for exchange of information, goods, and funds. Thus, the court has personal jurisdiction
over Banks in this matter.
Case Questions
Critical Legal Thinking: Zippo Manufacturing Company v. Zippo Dot Com, Inc. is an important
case that established a test for determining when a court has jurisdiction over the owner or
operator of an interactive, semi-interactive, or passive website.
Ethics: Student answers may vary. But Banks did not act ethically.
Contemporary Business: Obtaining personal jurisdiction over a defendant in another state has
always been difficult for courts. Today, with the advent of the Internet and the ability of persons
and businesses to reach millions of people in other states electronically, particularly through
websites, modern issues arise as to whether courts have jurisdiction in cyberspace.
International Law: Judicial System of Japan
There is very little litigation in Japan when compared to the United States. A primary reason for
the difference is cultural because Japan nurtures the attitude that confrontation should be avoided.
Other reasons include the high cost that must be borne by plaintiffs who want to file a lawsuit.
Even if the plaintiff wins, the damages awarded are low. In the past, a relatively low number of
lawyers graduated every year from the few law schools in Japan. But now, due to increasing
business and personal disputes, the government is building new law schools and plans to double
the number of lawyers by the year 2020.
V. Case Problems
2.1 Standing to Sue: The Court of Appeals of Ohio held that Michigan law applied to the case.
The court noted that because the accident took place in Michigan, there is a presumption that
Michigan law applies absent any other jurisdiction having more substantial contacts. Plaintiff
Bertram, however, contended that Ohio law should apply, because all of the parties were
residents of Ohio at the time of the accident and all consequences flowing from his injury
occurred in Ohio. The court disagreed. The court stated, ”Because the snowmobiling accident
took place in Michigan, the place where the conduct causing Bertram’s injury occurred in
Michigan and Michigan has enacted specific legislation involving the risks of snowmobiling, we
find that Michigan law clearly controls in this case. While all parties are residents of and have
their relationships in the State of Ohio, we are not persuaded by Bertram’s argument that this
issue should control.” The Court of Appeals of Ohio held that the law of the state of Michigan,
where the accident occurred, and not the law of the state of Ohio, the state of the residence of the
parties, applied. The court applied the Michigan assumption of the risk statute and granted
summary judgment to the three defendant friends of plaintiff Bertram. Bertram v. Norden, et al.,

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159 Ohio App.3d 171, 823 N.E.2d 478, Web 2004 Ohio App. Lexis 550 (Court of Appeals of
Ohio)
2.2 Federal Question: Yes, the federal courts have the jurisdiction to hear Nutrilab’s case.
Federal courts have limited jurisdiction, granted to them by the Constitution and Congress. Part of
this limited jurisdiction is to hear cases involving federal questions. Federal question cases are
cases arising under the U.S. Constitution, treaties, and federal statutes and regulations. Federal
courts have original jurisdiction to hear federal question cases. Nutrilab was disputing the FDA’s
application of a federal statute to stop their distribution of Starch Blockers. The Starch Blockers
case was therefore one arising under a federal statute, and this gave the federal court original
jurisdiction to hear the case. Any lawsuit, such as this one brought by Nutrilab, that involves a
federal question must be brought in a federal court. Nutrilab, Inc. v. Schweiker, 713 F.2d 335,
Web 1983 U.S. App. Lexis 25121 (United States Court of Appeals for the Seventh Circuit).
2.3 Forum Selection Clause: Yes, the forum-selection clause contained in the Carnival Cruise
Lines ticket is enforceable against Mrs. Shute. Including a reasonable forum clause in a form
contract is permissible for several reasons. First, a cruise line has a special interest in limiting the
number of jurisdictions in which it could potentially be subject to a lawsuit. Because a cruise ship
typically carries passengers from many locales, it is likely that a mishap on a cruise could subject
the cruise line to litigation in several different jurisdictions. Second, a clause establishing the
forum for dispute resolution dispels any confusion as to where lawsuits arising from the contract
must be brought and defended, sparing litigants the time and expense of pretrial motions to
determine the correct forum and conserving judicial resources needed to decide such issues.
Finally, passengers who purchase tickets containing a forum-selection clause benefit in reduced
fares that reflect the savings that the cruise line enjoys by limiting where it may be sued. The
forum-selection clause in the Carnival Cruise Lines ticket was fair and reasonable and therefore
enforceable against Mrs. Shute. If Mrs. Shute wishes to sue Carnival Cruise Lines, she must do so
in a court in the state of Florida, not in a court in the state of Washington. Carnival Cruise Lines,
Inc. v. Shute, 499 U.S. 585, 111 S.Ct. 1522, 113 L.Ed.2d 622, Web 1991 U.S. Lexis 2221
(Supreme Court of the United States)
2.4 Jurisdiction. In this situation, the case was removed to federal court because of the diversity
of citizenship and because the claim was greater than $75,000. Although it is true that both
Allison and Tru-Amp (by virtue of its incorporation) were citizens of the state of Mississippi, the
manufacturer of the switchboard and breakers was incorporated in Pennsylvania. This produced
the needed diversity of citizenship to remove the case from the Mississippi court to federal court.
Allison v. ITE Imperial Corp. 729 F. Supp. 45, Web 1990 U.S. Dist. Lexis 607 (United States
District Court for the Sothern District of Mississippi).
VI. Ethics Cases
2.5 Ethics: No. Based on the de minimis theory, i.e., “the law disregards trifles,” the trial court
was correct in dismissing the case. Justice King believed that this lawsuit is an absurd waste of
the resources of the courts and of the taxpayers’ money. The courts are already too heavily
burdened to be used to punish advertisers who use junk mail. The students should question how
the failure to deliver an inexpensive calculator watch to a three year old who cannot tell time
could ever be worth $15M in punitive damages. Harris v. Time, 191 Cal. App.3d 449, 237 Cal.
Rptr. 584, Web 1987 Cal. App. Lexis 1619 (Court of Appeal of California)

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2.6 Ethics: Yes, the defendants are subject to suit in California. The U.S. Supreme Court held
that jurisdiction of the California court over the petitioners, who were residents of Florida, was
proper because of their intentional conduct in Florida that was allegedly calculated to cause injury
to plaintiff Shirley Jones in California. The Supreme Court applied the rule of International Shoe
Co. v. Washington, 326 U.S. 310, that the Due Process Clause permits jurisdiction over a
defendant in any state in which the defendant has “certain minimum contacts such that the
maintenance of the suit does not offend traditional notions of fair play and substantial justice.”
The Court applied this rule to the case at hand and found that California was the focal point both
of the article that appeared in the National Enquirer and of the distress suffered. The Court noted
that the magazine has its largest circulation in California, that the defendant knew that plaintiff
Shirley Jones, a professional entertainer and television personality, lived and worked in
California, and that the article would have its greatest impact in California. The Supreme Court
concluded that the defendants, as Florida residents, must “reasonably anticipate being hauled into
court” in California to answer for the truth of the statements made in the article. Thus, the
minimum contacts rule and the Due Process Clause were not violated. Calder v. Jones, 465 U.S.
783, 104 S. Ct. 1482, 79 L.Ed.2d 804, Web 1984 U.S. Lexis 4 (Supreme Court of the United
States).
VIII. Terms
• Article III of the U.S. Constitution— It provides that the federal government’s judicial
power is vested in one “Supreme Court.” This court is the U.S. Supreme Court.
• Associate Justices of the U.S. Supreme Court—The eight other justices apart from the
Chief Justice of the U.S. Supreme Court.
• Change of Venue—In certain circumstances, when pretrial publicity may prejudice
jurors, a change of venue may be requested so that a more impartial jury can be found.
• Chief Justice of the U.S. Supreme Court—Appointed by the president and responsible for
administration of the U.S. Supreme Court.
• Choice-of-law clause— A contract provision that designates a certain state’s law or
country’s law that will be applied in any dispute concerning nonperformance of the
contract.
• Circuit— The geographical area served by each U.S. court of appeals.
• Concurrent jurisdiction—Jurisdiction shared by two or more courts.
• Concurring opinion—An opinion that can be issued by a justice of the Supreme Court
who agrees with the outcome of a case but not the reason proffered by the other justices.
• Court of Appeals for the Federal Circuit—A court of appeals in Washington, D.C., that
has special appellate jurisdiction to review the decisions of the Claims Court, the Patent
and Trademark Office, and the Court of International Trade.
• Delaware Court of Chancery—A special court which decides cases involving corporate
governance, fiduciary duties of corporate officers and directors, mergers and acquisitions,
and other business issues.
• Dissenting opinion—An opinion which sets forth the reason why a justice of the Supreme
Court does not agree with a decision.
• District—The geographical area served by a U.S. district court.
• District of Columbia Circuit—The 12th circuit court, located in Washington, DC.
• Diversity of citizenship—A case between (1) citizens of different states and (2) a citizen
of a state and a citizen or subject of a foreign country.
• En banc review—A review that can be requested by a petitioner in the U.S. court of
appeals after a decision is rendered by a three-judge panel.
• Exclusive jurisdiction—Jurisdiction held by only one court.

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• Federal question case—A case arising under the U.S. Constitution, treaties, and federal
statutes and regulations.
• Forum shopping—Looking for a favorable court without a valid reason.
• Forum-selection clause—Contract provision that designates a certain court to hear any
dispute concerning nonperformance of the contract.
• Full Faith and Credit Clause—A clause of the U.S. Constitution under which a judgment
of a court of one state must be given “full faith and credit” by the courts of another state.
• General-jurisdiction trial court—A court that hears cases of a general nature that are not
within the jurisdiction of limited-jurisdiction trial courts. Testimony and evidence at trial
are recorded and stored for future reference.
• Highest state court— The highest court in a state court system; it hears appeals from
intermediate appellate state courts and certain trial courts.
• In personam jurisdiction—Jurisdiction over the parties to a lawsuit.
• In rem jurisdiction—Jurisdiction to hear a case because of jurisdiction over the property
of the lawsuit.
• Intermediate appellate court—An intermediate court that hears appeals from trial courts.
• International Shoe Company v. State of Washington— A landmark U.S. Supreme Court
case that established the minimum contacts standard.
• Limited-jurisdiction trial court—A court that hears matters of a specialized or limited
nature.
• Long-arm statute—A statute that extends a state’s jurisdiction to nonresidents who were
not served a summons within the state.
• Majority decision—A decision of the U.S. Supreme Court where a majority of the
justices agree as to the outcome and reasoning used to decide a case.
• Minimum contact— A nonresident defendant in a civil lawsuit must have had some
minimum contact with the state such that the maintenance of that lawsuit in that state
does not offend traditional notions of fair play and substantial justice.
• Petition for certiorari—A petition asking the Supreme Court to hear one’s case.
• Plurality decision—A decision of the U.S. Supreme Court where a majority of the
justices agree as to the outcome of a case but not as to the reasoning for reaching the
outcome.
• Quasi in rem jurisdiction—Jurisdiction allowed a plaintiff who obtains a judgment in one
state to try to collect the judgment by attaching property of the defendant located in
another state.
• Rule of four— The votes of four justices are necessary to grant an appeal and schedule an
oral argument before the Supreme Court.
• Service of process—A summons is served on the defendant to obtain personal
jurisdiction over him or her.
• Small claims court—A court that hears civil cases involving a small dollar amounts.
• Special federal courts—Federal courts that hear matters of specialized or limited
jurisdiction.
• Standing to sue—The plaintiff must have some stake in the outcome of the lawsuit.
• State courts—A separate court system that is present in each state, Washington, DC and
each territory of the United States. It includes limited-jurisdiction trial courts, general-
jurisdiction trial courts, intermediate appellate courts, and a supreme court.
• State supreme court—The highest court in a state court system; it hears appeals from
intermediate state courts and certain trail courts.
• Supreme Court of the United States— The highest court in the land located in
Washington, DC.

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• Tie decision—A Supreme court decision where the number of votes cast by the justices
leads to a tie and the decision of the lower court is affirmed. It occurs when all nine
judges are not present.
• Unanimous decision— A Supreme court decision where all the justices voting agree as
to the outcome and reasoning used to decide a case.
• U.S. Bankruptcy Court—Special federal court that hears cases involving federal
bankruptcy laws.
• U.S. Courts of Appeals—The federal court system’s intermediate appellate court.
• U.S. Court of Appeals for the Armed Forces—Special federal court that exercises
appellate jurisdiction over members of the armed services.
• U.S. Court of Appeals for Veterans Claims—Special federal court that exercises
jurisdiction over decisions of the Department of Veterans Affairs.
• U.S. Court of Federal Claims—Special federal court that hears cases brought against the
United States.
• U.S. Court of International Trade—Special federal court that handles cases that involve
tariffs and international trade disputes.
• U.S. district courts—The federal court system’s trial courts of general jurisdiction.
• U.S. Tax Court—Special federal court that hears cases that involve federal tax laws.
• Venue—A concept that requires lawsuits to be heard by the court with jurisdiction that is
nearest the location in which the incident occurred or where the parties reside.
• Writ of certiorari—An official notice that the Supreme Court will review one’s case.
• Zippo Manufacturing Company v. Zippo Dot Com, Inc.—An important case that
established a test for determining when a court has jurisdiction over the owner or operator
of an interactive, semi-interactive, or passive website.

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“We’re the jury. Dread our fury!”
William S. Gilbert
I. Teacher to Teacher Dialogue
Only a small percentage of cases make it to trial. The reality is that most cases settle at some
point in the process. Settling is safer, quicker, and usually less costly. In my practice, I can
remember having several cases settle whilst the jury was out deliberating.
I try to present a more realistic picture of how our system works. I basically start by
presenting statistics on how few controversies actually get to the trial stage and how even fewer
of those are actually reported in the National Reporter System. In addition, I spend a fair amount
of time reviewing the growing trend towards alternative dispute resolution (ADR) mechanisms. I
illustrate the key identifying features of each method. I use both personal experience examples, as
well as local statutory enactments, to help illustrate the growing trends towards ADR.
If none of these out-of-court methods are feasible, proceed to itemize the key steps used in a
court trial. For those of you who are practicing trial attorneys or who have worked in that arena
before coming to academia, this material gives you an obvious area of focus and further
elaboration. In any event, I always try to use this opportunity to ask students about their own
personal contact with our court system. I do, however, preface these conversations with the
caveat that they need not volunteer information that might be embarrassing, confidential, or
inappropriate.
II. Chapter Objectives
• Describe the pretrial litigation process.
• Describe how a case proceeds through trial.
• Describe how a trial court decision is appealed.
• Explain the use of arbitration and other nonjudicial methods of alternative dispute
resolution.
• Describe e-courts and e-dispute resolution.
III. Key Question Checklist
• Does the dispute or controversy lend itself to out-of-court resolution?
• If the dispute or controversy needs to be resolved in a court of law, which court has
jurisdiction?
JUDICIAL, ALTERNATIVE,
AND E-DISPUTE RESOLUTION
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• Once jurisdiction is established, was the proper sequence of pretrial steps taken?
• Was the trial sequence properly followed?
• After the trial is completed, are any appeals from the decision applicable?
IV. Text Materials
One objective of this chapter is to familiarize students with the court trial sequence.
Litigation is the process of bringing, maintaining, and defending lawsuits. Because it is often
difficult and expensive, people turn to various forms of non-judicial dispute resolution, or
alternative dispute resolution.
Pretrial Litigation Process
The pretrial litigation process can be divided into the following major phases: pleadings,
discovery, pretrial motions, and settlement conference.
Pleadings
The paperwork filed to initiate and respond to a lawsuit is known as the pleadings. These include
the complaint and summons, the answer, and any cross-complaints and replies, as well as
interventions and consolidation requests.
Complaints and Summons – To initiate a lawsuit, the party who is suing (the plaintiff) must file
a complaint in the proper court. A summons is a court order directing the defendant to appear in
court and answer the complaint. The complaint and summons are served on the defendant. This is
called service of process.
Answer – The defendant, the party who is being sued, must file an answer to the plaintiff’s
complaint.
Cross-Complaint and Reply – A defendant who believes that he or she has been injured by the
plaintiff can file a cross-complaint against the plaintiff in addition to an answer. The original
plaintiff must file a reply (answer) to the cross-complaint.
Intervention and Consolidation – If other persons have an interest in a lawsuit, they may
intervene and become parties to the lawsuit. This is called intervention. If several plaintiffs have
filed separate lawsuits stemming from the same fact situation against the same defendant, the
court can consolidate the cases into one case if doing so would not cause undue prejudice to the
parties.
Class Action – A class action occurs when a group of plaintiffs collectively bring a lawsuit
against a defendant.
Case 3.1 U.S. SUPREME COURT Class Action Lawsuit: Walmart Stores, Inc. v. Dukes
Facts: The lawsuit alleged that Walmart systematically engaged in sex discrimination, in
violation of Title VII of the Civil Rights Act of 1964. The class would consist of about one and a
half million plaintiffs, current and former female employees of Walmart. The plaintiffs sought an
injunction and declaratory relief and the award of back pay from Walmart. The U.S. District
Court certified the class to permit the class action lawsuit to proceed. The U.S. Court of Appeals

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affirmed the certification of the class. Walmart appealed to the U.S. Supreme Court, challenging
the certification of the class.
Issue: Is the certification of the class justified by law?
Decision: The U.S. Supreme Court held that the case did not qualify for class certification.
Reason: Federal Rule of Civil Procedure 23 does not authorize class certification when each class
member would be entitled to an individualized award of monetary damages. Walmart is entitled
to individualized determinations of each employee’s eligibility for backpay.
Case Questions
Critical Legal Thinking: A class action occurs when a group of plaintiffs collectively bring a
lawsuit against a defendant. Usually, one or several named plaintiffs file a lawsuit against a
defendant on behalf of herself, himself, or themselves and other similarly situated alleged
aggrieved parties. The party seeking certification must demonstrate that there are questions of law
or fact common to the class, the claims or defenses of the representative parties are typical of the
claims or defenses of the class, and the representative parties will fairly and adequately protect
the interests of the class.
Ethics: There are possibilities that Walmart may face individual sex discrimination lawsuits.
Contemporary Business: Attorneys are often more likely to represent a class of plaintiffs, with
aggregate monetary claims, than an individual plaintiff with a small claim. Where appropriate,
class action lawsuits increase court efficiency and lower the costs of litigation. Class actions are
usually disfavored by defendants.
Statute of Limitations – This statutory period during which the plaintiff must file his lawsuit or
lose the right to sue.
Discovery
Discovery is a pretrial procedure designed to allow both sides to uncover information through
depositions, interrogatories, production of documents, and physical or mental examinations.
Deposition – A deposition is oral testimony given by a party or witness prior to trial. The person
giving a deposition is called the deponent.
Interrogatories – Interrogatories are written questions submitted by one party to a lawsuit to
another party.
Production of Document – One party to a lawsuit may request that the other party produce all
documents that are relevant to the case prior to trial. This is called production of documents.
Physical or Mental Examination – In cases that concern the physical or mental condition of a
party, a court can order the party to submit to certain physical or mental examinations to
determine the extent of the alleged injuries.
Pretrial Motions
Pretrial motions like a motion for judgment on the pleadings and a motion for summary judgment
are used to try to dispose of all or part of the lawsuit prior to trial.
Motion for Judgment on the Pleadings – A motion for judgment on the pleadings can be made
by either party once the pleadings are complete. This motion alleges that if all the facts presented

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in the pleadings are true, the party making the motion would win the lawsuit when the proper law
is applied to these facts.
Motion for Summary Judgment – A motion for summary judgment asserts that there are no
factual disputes to be decided by the jury and that the judge should apply the relevant law to the
undisputed facts and decide the case.
Settlement Conference
Many courts require that the parties appear for a pretrial hearing known as a settlement
conference in order to identify relevant issues and attempt settlement.
Contemporary Environment: Cost-Benefit Analysis of a Lawsuit
Plaintiffs should always perform a cost-benefit analysis before filing a lawsuit; taking into
account both the tangible and intangible costs of the suit and weighing these against the expected
return. Similarly, the defendant should consider all costs because it may prove to be more
expedient to settle the suit.
Trial
Under the Seventh Amendment, parties to a lawsuit are guaranteed the right to a jury trial. If the
parties wave their right to a jury trial, the judge sits as the trier of fact. Each party submits a trial
brief to the judge, containing legal support for its side.
Jury Selection – Jury selection is made through a process called voir dire, where lawyers for
both sides and the sitting judge question prospective jurors to determine potential biases that
would eliminate them from being seated on the jury.
Opening Statements – Opening statements are made by both attorneys to summarize the factual
and legal issues of the case.
The Plaintiff’s Case – The plaintiffs present their case first and bear the burden of proof. They
will call witnesses to give testimony, after which the defendant’s attorney will have the right to
question them. The plaintiff’s attorney then has the chance to ask more questions.
The Defendant’s Case – The defendant then has the opportunity to present his case, rebutting the
plaintiff’s evidence, proving affirmative defenses, and proving any allegations in his cross-
complaint.
Rebuttal and Rejoinder – After the defendant’s case, the plaintiff’s attorney may call witnesses
to rebut the defendant’s case and introduce other evidence through a rejoinder.
Closing Arguments – Following all testimony, each party’s attorney will make their closing
arguments.
Jury Instructions, Deliberation and Verdict – The closing arguments are followed by the Judge
reading the jury instructions. The jury retires to deliberate and then returns their verdict.

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Entry of Judgment – The judge then either enters judgment or issues a judgment
notwithstanding the verdict, overturning the jury verdict for bias or jury misconduct. The judge
may reduce the monetary award through remitter.
Appeal
In a civil trial, either party can file a timely appeal once a final judgment is entered. In fact, both
parties may file an appeal. The petitioner or appellant files the appeal against the appellee, or
respondent. The appellant usually files an opening brief, while the appellee files a responding
brief.
Ethics: Frivolous Lawsuit
The Chung’s operated three dry cleaning stores in the Washington, D.C. area. They advertised
that satisfaction was guaranteed and offered same day service. Roy Pearson claimed that the
Chung’s lost a pair of his pants, and sued for $67 million, alleging a violation of the D.C.
consumer protection act, claiming that there was a violation of the customer satisfaction clause,
with additional claims for mental suffering and inconvenience, rental car fees to drive to another
cleaners, legal fees, and $51 million dollars toward helping other unsatisfied D.C. customers.
The court denied the attempt to file a class action suit, stating that the plaintiff was acting in bad
faith, and eventually ruled for the Chung’s. Subsequently, Pearson also lost on a motion to
reconsider, and eventually lost a reappointment as and administrative law judge, because the suit
was held as evidence of his lack of judicial temperament.
Students should be able to easily understand that this is a frivolous lawsuit, particularly when they
compare the amounts sued for against the cost of a pair of trousers. Since the Chung’s were
saddled with $83,000 in fees defending this case, plus all the negative publicity, they probably
suffered a great deal of emotional distress, further evidenced by their selling that store.
International Law: British Legal System
English law is based on common law, that is, law made by judges who decide cases by applying
legal precedent established in prior cases (stare decisis) and their common sense. The court
system of England consists of trial courts that hear criminal and civil cases and appellate courts.
The House of Lords, in London, is the supreme court of appeal.
Alternative Dispute Resolution
One solution to the expense of litigation in terms of both time and money is alternative dispute
resolution.
Negotiation – A procedure by which the parties to a dispute try to voluntarily settle their dispute.
This is usually done through a series of offers and counteroffers. Successful negotiations will
culminate in a settlement agreement.
Arbitration – An impartial third party hears evidence and testimony and decides the dispute in
arbitration. Arbitration clauses have become common in labor union agreements, franchise
agreements, and commercial contracts.
Landmark Law: Federal Arbitration Act
Enacted in 1925, this act provides that commercial agreements calling for arbitration are valid,
irrevocable, and enforceable.

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Arbitration Procedure – The arbitration agreement usually describes the procedures that must
be followed, including the notices that must be given and how the arbitrator will be selected.
The arbitrator issues an award after the hearing. The parties usually agree that this will be a
binding decision. If a party fails to abide by the decision in binding arbitration, the other party
may file an action in court to enforce the decision.
Mediation – Mediation calls for a neutral third party to act as a mediator, but not decision maker.
His job is to encourage settlement between the parties.
If the two sides choose an interested third party to act as a mediator, he is considered a
conciliator.
Mini-trial – The attorneys for both sides present their cases to the representatives of both of the
parties that have the authority to settle the case.
Fact-Finding – The parties hire a neutral third party to investigate the dispute and recommend a
settlement.
Judicial Referee – The court can appoint a referee to conduct a private trial and render a
judgment.
Case 3.2 U.S. SUPREME COURT Class Action Waiver: AT&T Mobility LLC v. Concepcions
Facts: The Concepcions purchased AT&T services in California and they were given a free
phone as part of AT&T’s promotional campaign. Even though the phone was free, the
Concepcions still had to pay sales tax based on it. They filed a complaint against AT&T in U.S.
District Court, alleging that AT&T had engaged in false advertising and fraud because the phones
were not free. Their complaint was consolidated into a class action against AT&T. The AT&T
contract contained an arbitration agreement, therefore, the company made a motion to compel
arbitration. The Concepcions contested the motion, alleging that the class action waiver was
unconscionable under California law. AT&T alleged that the Federal Arbitration Act (FAA)
preempted the California state law. The U.S. District Court and the U.S. Court of Appeals agreed
with the Concepcions, finding AT&T’s class action waiver unconscionable. AT&T appealed to
the U.S. Supreme Court.
Issue: Does the Federal Arbitration Act (FAA) preempt California’s law that outlaws class action
waivers?
Decision: Yes.
Reason: The U.S. Supreme Court held that California’s law prohibiting class action waivers was
preempted by the Federal Arbitration Act (FAA), and therefore the Concepcions must arbitrate
their claim against AT&T individually and not within a class of consumers.
Case Questions
Critical Legal Thinking: When a claimant waives his or her right to bring or join a class action
proceeding.
Business Ethics: It is not unethical to include arbitration clauses. But students may argue
otherwise.
Contemporary Business: The employer would benefit most from class action waiver clauses in
arbitration agreements. The switch to class arbitration sacrifices the principal advantage of
arbitration—its informality— and makes the process slower, more costly, and more likely to
generate procedural morass than final judgment.
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E-Courts –Due to the Internet and other technologies, electronic courts, or e-courts, also referred
to as virtual courthouses, are substantially being used by courts. Technology allows for the
electronic filing—e-filing—of pleadings, briefs, and other documents related to a lawsuit.
Digital Law: E-Dispute Resolution
Legal disputes are now often resolved using electronic dispute resolution, or e-dispute resolution.
Many ADR providers offer electronic arbitration, or e-arbitration services. Most of these services
allow a party to a legal dispute to register the dispute with the service and then notify the other
party by e-mail of the registration of the dispute. Several websites offer electronic mediation, or
e-mediation services.
International Law: Solving Tribal Disputes, Mali, West Africa
In resolving disputes, the Dogan usually do not go to government courts. Instead, a council of
elders from the village hears and decides disputes between members of the village and
administers justice in the local area.
V. Case Problems
3.1 Summary Judgment: No, the court did not grant Pathmark’s motion for summary judgment.
The court held that there were material and genuine issues of fact to be decided by a jury and
affirmed the motion court’s denial of Pathmark’s motion for summary judgment. The court noted
that the plaintiff alleged that she tripped over cases of soda that were stacked on the floor of
defendant’s supermarket. It appears that at the time of the accident, the supermarket’s shelves, in
accordance with usual practice, were being “packed out” with soda by an employee of either
defendant bottling company or defendant soda distributor. The supermarket moved for summary
judgment, contending that it did not create the alleged dangerous condition and that plaintiff’s
deposition testimony, to the effect that she walked to the soda aisle immediately after entering the
store and did not see any soda on the floor before falling, shows that she cannot establish how
long the soda had been on the floor before she fell. The appellate court found that the motion
court correctly held that such testimony does not establish, prima facie, the supermarket’s lack of
prior actual or constructive notice of the soda on the floor. The appellate court held that there
were material and genuine issues of fact that must be decided by a jury and upheld the motion
court’s denial of summary judgment to the defendant. Toote v. Canada Dry Bottling Company of
New York, Inc. and Pathmark Stores, Inc., 7 A.D.3d 251, 776 N.Y.S.2d 42, Web 2004 N.Y. App.
Div. Lexis 6470 (Supreme Court of New York, Appellate Division)
3.2 Long-Arm Statute: Yes, the Oklahoma state court can use the state’s long-arm statute to
gain jurisdiction over Magna Verde. A long-arm statute gives a court the ability to gain
jurisdiction over an out-of-state business if that business has minimum contacts with the state and
the maintenance of the suit does not offend traditional notions of fair play and substantial justice.
The exercise of long-arm jurisdiction is generally permitted over nonresidents who have a
contract that affects the state, or who transact other business in the state. Oklahoma’s long-arm
statute gave the Oklahoma court jurisdiction over Magna Verde for several reasons. Magna Verde
had entered into a contract that would affect Oklahoma, a contract to stage a fight in that state.
Magna Verde had also transacted business in Oklahoma, promoting the O’Grady prizefight.
Because of these contacts with the state, the Oklahoma court gained jurisdiction over Magna
Verde through Oklahoma’s long-arm statute. Brooks v. Magna Verde Corp., 619 P.2d 1271, Web
1980 Okla. Civ. App. Lexis 118 (Court of appeals of Oklahoma).
3.3 Physical Examination: The court will only order Schlagenhauf to be examined by an
ophthalmologist. A court has the power to order the physical and mental examination of a party to

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a case. However, this power is limited to situations where the physical or mental condition that is
the subject of the examination is at issue in the case. The court in this case stated the rule as
requiring that parties making a request for examination must make an affirmative showing that
the other party’s “mental or physical condition was in controversy and that there was good cause
for the examinations requested.” In this case the only issue was Schlagnehauf’s eyesight.
Therefore, the court concluded that:
Nothing in the pleadings would affect a basis for a belief that Schlagenhauf was
suffering from a mental or neurological illness warranting wide-ranging
psychiatric or neurological examinations. Nor is there anything stated justifying
the broad internal medicine examination.
Therefore, the only examination that the court ordered Schlagenhauf to undergo was one
conducted by an ophthalmologist. Schlagenhauf v. Holder, 379 U.S. 104, 85 S.Ct. 234, 13
L.Ed.2d 152, Web 1964 U.S. Lexis 152 (Supreme Court of the United States).
3.4 Interrogatories: Yes, Cine is required to answer the questions submitted by Allied Artists’
attorneys. These written questions are known as interrogatories. Interrogatories are an important
part of the legal process known as discovery. The purpose of interrogatories, like other forms of
discovery, is to obtain facts about the case from the other parties and witnesses before the trial
begins. Interrogatories are usually directed at parties, not witnesses. A party is required by the
court to answer the interrogatories in writing within a specified time period. Because the person
answering the interrogatories must sign them under oath, that person must be careful to answer
them truthfully. The interrogatories that were served upon Cine sought to discover information
about its theater’s box office receipts. This information was crucial in determining potential
damages in the suit. Because interrogatories are an important part of the discovery process, Cine
was required to answer them in a timely and truthful manner. Cine Forty-Second Street Theatre
Corp. v. Allied Artists Pictures Corp., 602 F.2d 1062 (2nd Cir. 1979), Web 1979 U.S. App. Lexis
13586 (United States Court of Appeals for the Second Circuit).
3.5 Arbitration: Yes, the arbitration agreement between AMF and Brunswick is valid under
Federal law. To promote the arbitration of disputes, Congress has enacted the Federal Arbitration
Act (FAA). The act provides that arbitration agreements involving “commerce” are valid,
irrevocable, and enforceable as long as the agreement is not illegal. The arbitration agreement
between Brunswick and AMF was clearly one involving commerce. Because of this fact, the
court held that the FAA covered the agreement. The court gave the following reasons for
enforcing the agreement, citing the language of the legislation that enacted the FAA:
Arbitration agreements are purely matters of contract and the effect of the bill is
simply to make the contracting party live up to his agreement. He can no longer
refuse to perform his contract when it becomes disadvantageous to him.
Because AMF and Brunswick had signed an arbitration agreement involving commerce, the court
held that their dispute had to be submitted for arbitration. AMF Incorporated v. Brunswick Corp.,
621 F.Supp. 456 (E.D.N.Y. 1985), Web 1985 U.S. Dist. Lexis 14205 (United States District
Court for the Eastern District of New York).
VI. Ethics Cases
3.6 Ethics: Yes, the service of process served on Mr. Burnham is good. A court must have
personal jurisdiction over the defendant in a lawsuit. One method of obtaining personal
jurisdiction over a defendant is to serve personal service on the defendant when he is within the
territorial boundaries of the state. In this case, Mrs. Burnham filed a divorce action in California
after she and her husband separated and she moved to California from New Jersey. She then filed
a divorce action in California Superior Court, naming her husband, who lived in New Jersey, as

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the defendant. When Mr. Burnham was in California on business, he decided to visit his children
who were living with Mrs. Burnham. There he was served the summons and complaint of Mrs.
Burnham’s divorce action. In this case, the U.S. Supreme Court held that jurisdiction might be
obtained over a nonresident by personal service in the forum state. The Supreme Court reasoned
that the fact that American courts have announced the rule since the latter part of the 19th century
provides a defendant voluntarily in a particular state today with clear notice that he is subject to
suit in that forum. The Court held that service of process was good in this case. Therefore, Mr.
Burnham must answer and defend himself in the California divorce action filed by his wife.
Burnham v. Superior Court of California, 110 S.Ct. 2105, 109 L.Ed.2d 631 (1900),
Web 1990 U.S. Lexis 2700 (Supreme Court of the United States).
3.7 Ethics: No, Kristi Norgart McBrides’ parents cannot pursue their wrongful death lawsuit
against The Upjohn Company. This is because the Norgarts’ action for wrongful death against
Upjohn was barred by the one-year statute of limitations. The purpose of the statute of limitations
is to protect defendants from the stale claims of dilatory plaintiffs. It has as a related purpose to
stimulate plaintiffs to assert fresh claims against defendants in a diligent fashion. Under the one-
year statute of limitations relevant to this case, the plaintiffs must have brought their cause of
action for wrongful death within one year of accrual—that is, one year from their daughter’s
death. The Norgarts were too late—exactly five years too late—in bringing their wrongful death
action against Upjohn. The Upjohn Company was entitled to judgment as a matter of law, based
on the fact that the one-year statute of limitations for a wrongful death action had run out, thus
barring the plaintiff’s lawsuit.
This is a case where the law—the statute of limitations—is raised by the defendant to
avoid a lawsuit against it. The defendant had a legal right to assert this defense. However, an
issue is whether a defendant acts ethically in avoiding a lawsuit rather than facing the merits of
the lawsuit in a courtroom. In answering that question, it must be considered that the public
policy of the statute of limitations is to bring certainty and closure to an unasserted legal claim.
Norgart v. The Upjohn Company, 21 Cal.4th 383, 87 Cal.Rptr.2d 453, Web 1999 Cal. Lexis 5308
(Supreme Court of California)
VIII. Terms
• Affirmative defense—May be asserted by a defendant along with an answer to a
complaint.
• Alternative dispute resolution (ADR)—Methods of resolving disputes other than
litigation.
• Answer—The defendant’s written response to the plaintiff’s complaint that is filed with
the court and served on the plaintiff.
• Appeal—The act of asking an appellate court to overturn a decision after the trial court’s
final judgment has been entered.
• Appellant—The appealing party in an appeal. Also known as petitioner.
• Appellee—The responding party in an appeal. Also known as respondent.
• Arbitration clause—A clause contained in many international contracts that stipulates that
any dispute between the parties concerning the performance of the contract will be
submitted to an arbitrator or arbitration panel for resolution.
• Arbitration—A form of alternative dispute resolution in which the parties choose an
impartial third party to hear and decide the dispute.
• Arbitrator—The neutral party in an arbitration.
• Binding arbitration—The type of arbitration where the parties agree to be bound by an
arbitrator’s decision and remedy.

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• Burden of proof—Borne by the plaintiff to persuade the trier of fact of the merits of his
or her case.
• Class action—A lawsuit where a group of plaintiffs with common claims collectively
bring a lawsuit against a defendant.
• Closing argument—An argument made to the jury by each party’s attorney at the
conclusion of the presentation of evidence.
• Complaint—The document the plaintiff files with the court and serves on the defendant
to initiate a lawsuit.
• Consolidation—The act of a court to combine two or more separate lawsuits into one
lawsuit.
• Cost-benefit analysis—Performed by both the plaintiff and defendant to determine
whether to bring or defend a lawsuit in court.
• Cross-complaint—Filed by the defendant against the plaintiff to seek damages or some
other remedy.
• Cross-complainant—The defendant who files a cross-complaint against the plaintiff.
• Cross-defendant—The original plaintiff against whom a cross-complaint has been filed.
• Defendant—The party who is being sued.
• Defendant’s case—Proceeds after the plaintiff’s case. It must rebut the plaintiff’s
evidence, prove any affirmative defenses asserted by the defendant, and prove any
allegations contained in the defendant’s cross-complaint.
• Default judgment—Entered against a defendant of he or she fails to answer to a
complaint.
• Deponent—Party who given his or her deposition.
• Deposition—Oral testimony given by a party or witness prior to trail. The testimony is
given under oath and is transcribed.
• Direct examination—Examination carried out by the plaintiff’s attorney, during the
plaintiff’s case, after a witness has been sworn in.
• Discovery—A legal process during which both parties engage in various activities to
discover facts of the case from the other party and witnesses prior to trial.
• Electronic arbitration—The arbitration of a dispute using online arbitration services.
• Electronic court— A court that either mandates or permits the electronic filing of
pleadings, briefs, and other documents related to a lawsuit. Also called a virtual
courthouse.
• Electronic dispute resolution—The use of online alternative dispute resolution services to
resolve a dispute.
• Electronic filing—The online filing of pleadings, briefs, and other documents related to a
lawsuit.
• Electronic mediation—The mediation of a dispute using online mediation services.
• Error of law—Error in court records which may lead an appellant court to reverse a lower
court’s decision.
• Fact-finding—The employment of a neutral third party to act as a fact-finder to
investigate a dispute.
• Federal Arbitration Act (FAA)—Enacted by the Congress to promote arbitration of
disputes.
• Final judgment—A court’s decision or remedy.
• Finding of fact— An appellate court will not reverse a finding of fact made by a jury, or
made by a judge if there is no jury, unless such finding is unsupported by the evidence or
is contradicted by the evidence.

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• Impanel— Once the appropriate number of jurors is selected, they are impaneled to hear
the case and are sworn in.
• Interrogatories—Written questions submitted by one party to another party. The
questions must be answered in writing within a stipulated time.
• Intervention—The act of others to join as parties to an existing lawsuit.
• Judgment—A decision entered by a judge based on the verdict given by the jury.
• Judgment notwithstanding the verdict—The overturning of a verdict by a court due to
bias or jury misconduct.
• Judicial referee—Appointed by the court to conduct a private trial and render a judgment.
• Jury deliberation—The retiring of the jury to consider the evidence and attempt to reach a
verdict.
• Jury instruction— Instructions that the judge gives to the jury that inform the jurors of the
law to be applied in the case.
• Jury trial—A trial which involves a jury.
• Litigation—The process of bringing, maintaining, and defending a lawsuit.
• Mediation—A form of ADR in which the parties chose a neutral third party to act as the
mediator of the dispute.
• Mediator—A neutral third party who assists in mediation.
• Mini-trial— A voluntary private proceeding in which lawyers for each side present a
shortened version of their case to the representatives of both sides.
• Motion for judgment on the pleadings—Motion that alleges that if all the facts presented
in the pleadings are taken as true, the moving party would win the lawsuit when the
proper law is applied to these asserted facts.
• Motion for summary judgment—Motion that asserts that there are no factual disputes to
be decided by the jury; if so, the judge can apply the proper law to the undisputed facts
and decide the case without a jury. These motions are supported by affidavits, documents,
and deposition testimony.
• Negotiation—A procedure whereby the parties to a dispute engage in discussions and
bargaining to try to reach a voluntary settlement of their dispute.
• Nonbinding arbitration—An arbitration where the decision and award of the arbitrator
can be appealed to the courts.
• Nonjudicial dispute resolution—The resolution of disputes outside of the court judicial
system.
• Notice of appeal—Notice that must be filed by a party within a prescribed time after a
court judgment is entered.
• Opening brief—Filed by the appellant’s attorney; it sets forth legal research and other
information to support his or her contentions on appeal.
• Physical or mental examination—A court may order another party to submit to a physical
or mental examination prior to trial.
• Plaintiff—The party who files the lawsuit.
• Plaintiff’s case— A plaintiff bears the burden of proof to persuade the trier of fact of the
merits of his or her case. This is called the plaintiff’s case.
• Pleadings—The paperwork that is filed with the court to initiate and respond to a lawsuit.
• Pretrial motion—A motion a party can make to try to dispose of all or part of a lawsuit
prior to trial.
• Production of documents—Request by one party to another party to produce all
documents relevant to the case prior to the trial.
• Rebuttal— After the defendant’s attorney has finished calling witnesses, the plaintiff’s
attorney can call witnesses and put forth evidence to rebut the defendant’s case.

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• Record—An account of court proceedings.
• Re-direct examination— After the defendant’s attorney completes his or her questions,
the plaintiff’s attorney can ask questions of the witness.
• Rejoinder— The defendant’s attorney can call additional witnesses and introduce other
evidence to counter the rebuttal.
• Remittitur—The judge’s decision to reduce the amount of monetary damages awarded by
the jury if he or she finds the jury to have been biased, emotional, or inflamed.
• Reply—Filed by the original plaintiff to answer the defendant’s cross-complaint.
• Responding brief—May be filed by the appellee to answer the appellant’s contentions.
• Sequester—The separation of the jury from family, etc. Can be done during important
cases.
• Service of process—A summons is served on the defendant to obtain personal
jurisdiction over him or her.
• Settlement agreement—An agreement that is voluntarily entered into by the parties to a
dispute that settles the dispute.
• Settlement conference— A hearing before a trial in order to facilitate the settlement of a
case.
• Statute of limitations—Statute that establishes the time period during which a lawsuit
must be brought; if the lawsuit is not brought within this period, the injured party loses
the right to sue.
• Submission agreement—Agreement by parties to submit a dispute to arbitration after the
dispute arises.
• Summons—A court order directing the defendant to appear in court and answer the
complaint.
• Trial briefs—Documents submitted by the parties’ attorneys to the judge that contain
legal support for their side of the case.
• Trier of fact—the jury in a jury trial; the judge where there is not a jury trial.
• Uniform Arbitration Act—An act which promotes the arbitration of disputes at the state
level.
• Verdict—The decision reached by a jury after deliberation.
• Virtual courthouse— A court that either mandates or permits the electronic filing of
pleadings, briefs, and other documents related to a lawsuit.
• Voir dire— The process whereby the judge and attorneys ask prospective jurors questions
to determine whether they would be biased in their decisions.
• Written memorandum—It is issued by the trial court and sets forth the reasons for the
judgment.

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