James M. Concannon
Spring 2004 Civil Procedure
Exam and Grading Answers
Civil Procedure Examination
Four Hours
Friday, May 7, 2004 -- 1:00 p.m.
Spring 2004
FINAL EXAMINATION
INSTRUCTIONS: Write LEGIBLY on only one side of each Blue Book page. You may use the blank backs of pages to write inserts with arrows into your original answer. If you unintentionally violate this instruction, do not erase what you have already written. You may write on both sides of the last two pages of the Blue Book if doing so will avoid the need to use an additional Blue Book.
You are expected to make pertinent alternative arguments even when one argument alone seems sufficient to dispose of the case. ANSWERS MUST BE EXPLAINED TO RECEIVE SUBSTANTIAL CREDIT.
You may use all required class materials (i.e. textbook, Federal Rules Supplement, Kansas Supplement, class handouts and emails, BUT NOT Glannon's) and other materials such as your class notes and outlines, including your study group's outline if you participated in preparing it. You may NOT use any other materials such as commercial outlines or books, answers to previous examinations or outlines prepared by others or in prior years.
Unless stated to the contrary in the question, ASSUME STATES OTHER THAN KANSAS (SUCH AS TEXAS IN QUESTION I) have statutes identical to those of Kansas. Point values are tentative only and may be revised slightly prior to grading.
I. (38 POINTS)
Deep South Cellars, Inc., is a small winery located in the suburbs of Houston, Texas. It is incorporated in Texas. When it planned to expand production, Deep South decided to purchase a new wine press and contacted RLK Machines, Inc., an independent distributor of equipment used in the wine and juice industries. RLK is a New York corporation with two offices, one in California and one in New York. RLK sells the equipment of numerous manufacturers. It directs its marketing efforts primarily toward California, which produces the great majority of American wine, but it also advertises in a nationally circulated magazine that is widely read in the wine industry. It was an RLK ad that prompted Deep South to contact RLK at its California office when it wanted to purchase the new wine press.
After Deep South described its needs, RLK determined that the best-suited wine press likely was the Vaslin CEP 700 press manufactured by Vin Rouge, Inc., a French corporation that has its only factory in Chalonnes, France. [France uses a civil law, rather than common law, system but, like the United States, is a party to major international agreements such as the Hague Conventions on Service of Process Abroad and on Obtaining Evidence Abroad through discovery.] Vin Rouge sells its wine production equipment primarily in Europe and does not directly market or advertise its products in the United States, although it does provide promotional material to RLK because of RLK's status as one of the leading distributors of wine making equipment. RLK's magazines depict equipment produced by various manufacturers, including on occasion Vin Rouge, but have never depicted the Vaslin CEP 700 press. Vin Rouge does not specifically authorize or approve material about its equipment that appears in the RLK magazines. Vin Rouge occasionally fills orders sent to it by individual winemakers in the United States, including one order four years ago for a different model wine press from another small vineyard in Texas. However, most of its sales in the United States are in response to orders from RLK. Vin Rouge and RLK have no continuing contractual relationship and share no employees; their relationship is on a transaction by transaction basis.
RLK contacted Vin Rouge in France and negotiated a discounted price of $82,000 at which Vin Rouge would produce and sell the required wine press. RLK then completed negotiation of a purchase price of $94,000 to re-sell the press to Deep South and those parties agreed Deep South would take title to the press at the port in Houston and be responsible for paying for transportation of the wine press to its vineyard. RLK then executed a contract with Vin Rouge which provided that the press had to be wired for use with the 110-volt electricity the United States uses, rather than for the 220-volt electricity used in the Europe. The contract further provided that Vin Rouge would arrange with a freight forwarder paid by RLK to transport the press from Challones to a ship upon which it would travel to the United States and that Vin Rouge would arrange for it to be shipped FOB [free on board] to the port of Houston to be claimed for delivery to the ultimate user there. At no time did representatives of Deep South and Vin Rouge ever talk with one another; they each communicated exclusively with RLK.
After the wine press arrived in Houston, Deep South paid the agreed price to RLK, which in turn paid the agreed price to Vin Rouge. Within days after the wine press was installed, the machine burst into flames and was totally destroyed. Worse than that, the machine's operator, Ernesto Salizar, was severely burned. Salizar is a native of Mexico City who entered the United States eight months earlier with a temporary work visa ("a green card") to work at Deep South Vineyard and who continues to live in an apartment near the vineyard. Deep South contacted Vin Rouge, claiming Vin Rouge had wired the machine improperly for 110 volt electricity and demanding replacement of the wine press prior to peak wine making season. It refused, contending the fire resulted from improper installation.
Deep South and Salizar have filed an action against Vin Rouge in the United States District Court for the Eastern District of Texas (the one that sits in Houston). [Recall that you are to assume Texas has adopted the same statutes as Kansas.] Deep South seeks to recover the $94,000 purchase price of the wine press, plus other consequential damages, based upon breach of the warranty of merchantability that the Uniform Commercial Code in Texas recognizes in sale of goods contracts. Salizar seeks to recover $600,000 for his personal injuries, based upon strict liability in tort on the theory that Vin Rouge sold the press in a dangerously defective condition. The summons and complaint were mailed by Federal Express, return receipt requested, to Vin Rouge, Inc., in care of its Chief Executive Officer Charolette Donay, at the vineyard in Chalonnes, France. The signed receipt is returned to plaintiffs' counsel bearing the signature of Char Donay.
DEFENDANT FILES A MOTION TO DISMISS THE ACTION. IDENTIFY ALL THE REASONABLE ARGUMENTS THE PARTIES MAY MAKE ON THIS MOTION? EXPLAIN FULLY.
II. (15 Points)
Hana A. Cord, a lifelong resident of Topeka, Kansas, purchased a new Honda Accord from Topeka Honda, Inc., a Kansas corporation operating a single dealership in Topeka. Hana financed the purchase by signing a promissory note for the amount of the purchase price, less a down payment, payable to Topeka Honda, Inc. in monthly installments, and by granting Topeka Honda a lien on the car to secure payment of the note. When she fell behind in her payments, Hana began receiving letters from Topeka Honda, signed by its credit manager, demanding payment and including language that Hana interpreted as threatening to ruin her credit rating and harm her reputation. These were followed by telephone calls in the middle of the night. Soon, Hana was unable to sleep and began to lose weight. On May 31, while she was attending the Topeka Jazz Festival, the credit manager of Topeka Honda, Inc., entered her garage and removed a late model Honda. [Assume Kansas substantive law permits a lien creditor to enter upon a debtor's land and to engage in self-help repossession of secured property when a loan is in default, so long as no breach of the peace is involved.] As it turned out, the car belonged to Hana's brother, Rip Cord, another lifelong Topekan, who asked Hana to store it for him while he was out of town.
Hana and Rip bring an action against Topeka Honda, Inc., in the United States District Court of Kansas. In Count 1, Hana claims that the letters and telephone calls violated the Federal Fair Debt Collection Practices Act and that she is entitled to recover damages for the loss of sleep and other distress she suffered, up to the $10,000 maximum recovery the Act authorizes against violators. The Act does not regulate self-help repossession. However, in Count 2, Hana seeks to recover an additional $30,000 for the tort of trespass committed by Topeka Honda's credit manager, contending that he had broken a lock on her garage and disabled a burglar alarm and that these actions constituted a breach of the peace voiding any right to self-help repossession. In Count 3, Rip seeks $45,000 for the tort of conversion of his car. Assume defendant is properly served with process. If the case is tried, Topeka Honda will contend that Hana misinterpreted the letters and that they complied with requirements of the Federal Act, that if the telephone calls were made at all they were not made by any employee of defendant, that the garage door lock and the security system already had been broken by someone else when the credit manager arrived at Hana's home, and that it is not liable for conversion because it acted in good faith [you should assume that Kansas tort law recognizes good faith as a defense to a claim for conversion]. However, defense counsel prefers not to litigate any claim in federal court unless absolutely necessary.
WHAT REASONABLE ARGUMENTS, IF ANY, CAN DEFENDANT MAKE THAT THE COURT SHOULD NOT HEAR ANY OR ALL OF THESE CLAIMS? WHAT REASONABLE ARGUMENTS, IF ANY, MAY PLAINTIFFS MAKE IN OPPOSITION TO DEFENDANT'S ARGUMENTS?
Civil Procedure EXAM NO. _______
Professor Concannon May 7, 2004
INSTRUCTIONS:
PART TWO: TRUE/FALSE QUESTIONS (39 Points)
TRUE/FALSE/EXPLAIN THE FALSE ANSWER INSTRUCTIONS:
Write your exam number in the space provided in the upper right corner of this page. Write all answers on these pages and TURN THESE PAGES IN with your Blue Book.
1. FOR EACH STATEMENT FOLLOWING EACH FACT SITUATION, MARK WHETHER THE STATEMENT IS TRUE (T) OR FALSE (F). EACH QUESTION MAY HAVE ANY NUMBER OF TRUE OR FALSE ANSWERS. TO RECEIVE ANY CREDIT FOR AN ANSWER OF FALSE (F), YOU ARE REQUIRED TO PROVIDE AN EXPLANATION IN ONE OR TWO SENTENCES WHY THE FALSE STATEMENT IS FALSE.
2. Blank space is provided at the end of all of the statements [e.g., after subpart (j) on question 1] in which you may write your explanation(s).
3. Each answer will receive 1, 1 1/2, 2, or sometimes 2 1/2, points depending on the degree of difficulty.
4. Unless otherwise stated, in each problem assume that each claim asserted is for in excess of $75,000.
GRADING ANSWER - CIVIL PROCEDURE - SPRING 2004
I.
Defendant Vin Rouge moves to dismiss for insufficiency of service of process. Rule 4(h)(1) permits corporations to be served using methods provided by state law only when service "shall be effected in a judicial district of the United States." Under Rule 4(h)(2), when service shall be effected upon a corporation in a place not within any judicial district of the United States, service must be made as prescribed in Rule 4(f). Because France is a member of the Hague Convention on Service of Process Abroad and service is being effected upon a French corporation in France, Rule 4(f)(1) requires use of methods of service provided by the Hague Convention, which involves use of the Central Authority designated by France. Plaintiff may use Rule 4(f)(2)(C)(ii) to serve by a form of mail requiring a signed receipt only if there is no internationally agreed means of service like the Hague Convention or such service is allowed under the Convention by the country where service is effected.
Defendant will move to dismiss for lack of subject matter jurisdiction, claiming that Salizar must be dropped from the action. Salizar is a citizen and subject of Mexico and cannot be a citizen of Texas even though he has an apartment there and even if he has an intent to remain there. Under 28 U.S.C. 1332(a), the only way a foreign national may be treated as a citizen of a state in the United States is for the foreign national to be admitted to permanent residency status. Here, Salizar entered the United States only on a temporary work visa. While 28 U.S.C. 1332(a) authorizes alienage jurisdiction in certain cases in which foreign nationals are parties, this case is not one of them. For (a)(2) to apply all parties on one side of the case must be citizens of states in the United States and the parties on the opposing side must be foreign nationals. Here, a foreign national and a citizen of a state join in suing a foreign national. Nor is jurisdiction authorized by subsection (a)(3) because it permits foreign nationals to be joined as additional parties only when the suit involves opposing parties from different states within the United States.
Plaintiffs may argue that subject matter jurisdiction exists for Salizar's claim through supplemental jurisdiction under 28 U.S.C. 1367. The federal court has subject matter jurisdiction over the claim by Deep South (Texas) v. Vin Rouge (France) under 28 U.S.C. 1332(a)(2). Salizar's claim meets 28 U.S.C. 1367(a) because it arose from the same fire that is the basis of Deep South's claim and thus is part of the same Article III, § 2 case or controversy as Deep South's claim that is properly within federal jurisdiction. Plaintiffs will further argue that § 1367(b) does not prohibit the exercise of supplemental jurisdiction in this case because Salizar's claim is not being asserted "against" a party joined pursuant to Rule 20. Rather, it is a claim "by" a party joined under Rule 20 and such claims are not excluded by the express language of subsection (b). Plaintiffs will argue the court should apply the plain meaning of the statutory language.
Defendant will respond that subsection (b) should be interpreted in light of congressional intent. The last line of the subsection suggests Congress meant to bar the exercise of supplemental jurisdiction in diversity cases whenever its exercise would be inconsistent with restrictions on jurisdiction of original actions found in 28 U.S.C. 1332. The legislative history exhibits no congressional intent to expand jurisdiction of original actions beyond that permitted by § 1332 and shows that its only purpose was to permit jurisdiction of claims by additional plaintiffs in federal question cases. Even if plaintiff's reasoning, as adopted in Stromberg Metals, is appropriate to permit federal courts to hear cases where one party's claim fails to meet the amount in controversy requirement, it should not be extended to undercut the complete diversity requirement.
Defendant will move to dismiss for lack of personal jurisdiction. Defendant will first argue that the Texas Long Arm statute does not confer jurisdiction. It will contend as to Deep South's claim that it did not transact any business in Texas. The only business it transacted was with R.L.K. and that business was transacted in either New York or California where R.L.K. is located. Furthermore, subsection (b)(5) does not apply because Deep South did not enter into a contract with a resident of Texas but instead contracted with a resident of California or New York. With respect to Salizar's claim, defendant will contend there is no jurisdiction under (b)(2) because any act that it committed that was tortious was committed during manufacture of the wine press in France, not Texas. Finally, defendant will argue there is no jurisdiction under subsection (b)(7). While injury occurred in Texas that is claimed to result from defendant's actions in France, defendant was not directly soliciting any business in Texas at the time and its products were not used in Texas in the ordinary course of commerce but rather in isolated, one-shot transactions.
Deep South will argue there is jurisdiction under subsection (b)(1) because defendant's actions in arranging delivery of the wine press to Texas suffices to constitute transaction of business there. Salizar's clearest argument for jurisdiction under the statute is that a tortious act occurs under subsection (b)(2) where the last act necessary to give rise to liability occurs, which in this case was the injury in Texas.
Defendant will argue that even if there is a statutory basis for jurisdiction, the assertion of personal jurisdiction will violate due process. It will claim it did not engage in a purposeful act directed at Texas. It did not solicit Deep South in Texas in the same way the life insurance company solicited the forum state in a single transaction in the McGee case. It was the plaintiff who solicited an interstate transaction by contacting R.L.K. in California. Defendant merely responded to the offer to contract that it received from R.L.K., from California not Texas. The connection to Texas thus resulted from the unilateral act of the buyer (R.L.K.) in deciding to sell the wine press to plaintiff. Mere awareness by defendant that its product might ultimately be used in Texas, arising from notification by R.L.K. about where it wished the product to be delivered, is insufficient to meet the minimum contacts test (Worldwide Volkswagen v. Woodson).
Defendant will further argue that its activities failed to meet the O'Connor test for jurisdiction in the Asahi case that insists that there be stream of commerce plus additional activities directed at the forum. Defendant does not directly advertise in Texas and it is not responsible for the limiting marketing of its wine presses that occurs through national media distributed in Texas. Instead, an independent distributor, R.L.K., is responsible for marketing. Further, defendant did not design its product for the market in Texas. While it re-wired the wine press to use 110 volt electricity, that is an act of design for the United States market in general, not the Texas market in particular. Moreover, defendant will argue that even Justice Brennan's opinion in Asahi does not support jurisdiction. While placement of the product into the stream of commerce, knowing it will be sold in the forum state confers jurisdiction under the Brennan test, defendant argues placement in the stream of commerce, even for Brennan, requires "regular and extensive sales to" a buyer defendant knew was making "regular sales of" the final product "in the forum state." (text p. 134) The evidence in Asahi showed numerous sales of Cheng Shen's valves in California. Here, the record discloses only a single sale in Texas through R.L.K. rather than a regular and anticipated flow of product to Texas. As the Texas Supreme Court phrased it in the case upon which this hypothetical is based, there was no stream of commerce to Texas, only a trickle of commerce. Finally, defendants will argue that the Stevens' test is not satisfied because of the lack of volume of sales, value of sales or hazardous character of the product.
Plaintiffs will distinguish Asahi, claiming it is inapplicable because it involved assertion of jurisdiction over a manufacturer of a component part that did not ship its product directly to the United States. This case is a suit against the manufacturer of the finished product (similar to Audi in Worldwide Volkswagen v. Woodson) and the manufacturer shipped its product directly to the United States as opposed to delivering it outside the United States. Even if the O'Connor test applies to manufacturers as well, her test is satisfied. Defendant should be treated as having designed its product for the Texas market because it altered the voltage to satisfy the voltage used in the United States, thus demonstrating its willingness to have its product used in any state within the United States. In addition, while it did not place advertising in magazines that reached Texas, it consented to advertising by R.L.K. and took affirmative steps to support R.L.K.'s distribution efforts by sending promotional material to the United States, which Cheng Shen did not do in Asahi. Finally, McGee makes clear that a single act in the forum state can be sufficient to support jurisdiction and, here, defendant had a clear expectation it could be hailed to a Texas forum to litigate any dispute regarding this sale of a wine press because it elected to ship the product to the customer in Texas at a time when it could have elected not to contract with R.L.K. for delivery to the forum state.
Defendant may argue that even if minimum contacts are present, exercise of jurisdiction would violate fair play and substantial justice. It will argue that the burden upon a defendant located exclusively in France, that is accustomed to litigating in a civil law system of defending in Texas, would be unusually great and that Asahi cautions that there should be a special reluctance to engage in extravagant assertions of jurisdiction over foreign defendants. Plaintiffs will argue the case is quite different from Asahi because this case involves assertion of jurisdiction by a United States plaintiff, rather than solely by a foreign plaintiff. Here, the forum has a strong interest in providing a forum not only to a citizen but also to a plaintiff who works and was injured in Texas. Plaintiffs will argue that, under Burger King, the fair play and substantial justice test overrides the presence of minimum contacts only in rare cases. Here, the burden of defending in Texas is no greater than in any other state and defendant's willingness to engage in multiple business transactions in the United States over several years, including at least one prior direct sale to Texas, shows it did not consider the prospect of litigation in the United States or Texas excessively burdensome.
Defendant may seek dismissal based upon forum non conviens. Defendant will argue that convenience of parties and witnesses factors strongly point toward trial in France. All evidence to establish that the wine press was not defectively manufactured is located at the place of manufacture in France. Plaintiffs will argue against dismissal because their choice of forum is to be respected unless convenience and interests of justices factors point overwhelmingly toward another forum. Here, all evidence supporting defendant's affirmative defense of improper installation of the machine is located in Texas. Furthermore, any charred remnants of the machine that could be used to demonstrate defective manufacture are located in Texas and a view of the location where the machine was installed and operated is only possible in Texas.
Conflicting opinions in Texas inspired this question. See Salinas v. CMMC, 903 S.W.2d 138 (Tex. Civ. App. 1995) (upholding personal jurisdiction), and CMMC v. Salinas, 929 S.W.2d 435 (Tex. 1996) (denying personal jurisdiction).
II.
While defendant must concede the federal court has subject matter jurisdiction over the claim in Count 1 because the Fair Debt Collection Practices Act creates both an express right and an express federal remedy, defendant will argue the court lacks jurisdiction over the claims asserted in Counts II and III because there is no diversity of citizenship. Defendant will further argue that supplemental jurisdiction is not authorized by 28 U.S.C. 1367(b). Defendant contends that Hana's claim for damages for trespass does not arise from the same nucleus of operative facts as the FDCPA claim and therefore is not part of the same Article III, Section 2 case or controversy as required by 1367(a). Defendant will argue that the federal claim focuses exclusively upon the letters and telephone calls plaintiff claims defendant made to her, while the trespass claim is based upon subsequent and unrelated actions by defendant. The trespass could have occurred even if the letters and phone calls were never sent. There is no overlap of proof or legal theory between the two claims because the trespass occurred at a different place and at a different time from the collection efforts, and because defendant's defenses to the federal claim and the trespass claim are wholly different. The federal claim requires only interpretation of the letters to determine whether they violated the federal act and resolution of the factual issue whether defendant made the calls. The trespass claim involves a wholly different factual inquiry, whether the lock on the garage had been broken and the alarm disabled before defendant's manager arrived at defendant's home.
Defendant will argue that if there is no supplemental jurisdiction over Hana's trespass claim, there can be no supplemental jurisdiction over Rip's claim. Further, while his claim occurred at the same time as the alleged trespass on Hana's property, it is insufficient that his claim arises from the same nucleus of operative facts as her trespass claim. It must arise from the same nucleus of operative facts as her FDCPA claim. Taking the wrong car from the garage is wholly unrelated to defendant's debt collection practices.
Plaintiff will argue that 28 U.S.C. 1367(a) is satisfied because all three claims are logically connected and arise from a single attempt by defendant to be repaid for the delinquent car loan. All of defendant's actions were pursuant to that single goal. Further, all claims involve the actions of defendant's credit manager. Proof of the credit manager's conduct in seeking to collect the loan through letters and phone calls and, under Hana's theory, his false denial of making the phone calls, may assist the jury in evaluating his claim of good faith regarding the taking of Rip's car (Count III) and in evaluating his credibility in claiming that the garage door lock was already broken. Evidence of the credit manager's purpose is important to all the claims.
Defendant will argue that even if the claims are closely enough related to satisfy § 1367(a), the court should invoke its discretion under § 1367(c) to decline to exercise supplemental jurisdiction over Counts II and III. Defendant will argue that the state claims totaling $75,000 predominate over the federal claim, which is limited to recovery of $10,000, and the divergence of issues and proof suggests that trial of the claims together would not further judicial economy. Further, defendant will argue that there is a compelling reason to decline jurisdiction because the decision by Congress not to include self-help repossession within the regulatory scheme of the FDCPA demonstrates the state claims are in no way tied to federal policy. Plaintiff will respond that predominance of state law issues is not determined solely by their dollar amount. The FDCPA reflects strong federal policy and the state claims do not involve novel issues of state law but rather involve only factual questions.
