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MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... Quick jump menu Search  TASK IS COMPLETED  BACK TO TOP Statutory citations within this outline are to Chapter 28 of the U.S. Code (e.g., “§ 1332”) and the Federal Rules of Civil Procedure (“Rule” or “Rules”), unless otherwise noted. I. SUBJECT MATTER JURISDICTION A. In General 1. Overview The term “subject matter jurisdiction” refers to a court’s competence to hear and determine cases of the general class and subject to which the proceedings in question belong. The ve most common congressional grants of subject matter jurisdiction are (i) federal question jurisdiction, (ii) diversity jurisdiction, (iii) supplemental jurisdiction, (iv) removal jurisdiction, and (v) legislative jurisdiction. 2. Presumption A federal court must presume an absence of jurisdiction until it determines that the matter falls within its rightful jurisdiction. The burden is on the party seeking to invoke the court’s jurisdiction. 3. Waiver Subject matter jurisdiction cannot be waived or agreed to by the parties, unlike personal jurisdiction (discussed in § II. Personal Jurisdiction, infra). 4. Objection to Jurisdiction An objection to subject matter jurisdiction can be presented by any party at any stage of a proceeding, including on appeal, or may be raised by the court. If, however, the issue of subject matter jurisdiction was not contested, then a judgment ordinarily may not be challenged collaterally on that basis. 5. Abstention In general, a federal court with subject matter jurisdiction is required to adjudicate the controversy despite the pendency of a similar action in a state court. A federal court may abstain from hearing a case or stay the matter pending the outcome of the state court action under the following limited circumstances: i) Resolution of a state law issue by the state court would eliminate the need for the federal court to decide a federal constitutional issue, R.R. Comm’n of Texas v. Pullman Co., 312 U.S. 496 (1941); ii) Avoidance of federal involvement with a complex state regulatory scheme or matter of great importance to the state, Burford v. Sun Oil Co., 319 U.S. 315 (1943); Louisiana Power & Light Co. v. City of Thibodaux, 360 U.S. 25 (1959); iii) The state action involves punishment of an individual for criminal activity or for contempt of court, or the imposition of a civil ne, and the federal court is asked to enjoin such activity, Younger v. Harris, 401 U.S. 37 (1971); and iv) Parallel proceedings that go beyond mere waste of judicial resources, such as when there is a federal policy of unitary adjudication of the issues, Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976). 1 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... There are limited circumstances when federal intervention is appropriate. If a plainti can demonstrate unusual circumstances calling for federal equitable relief, signi cant and dire irreparable injury, or prosecutorial bad faith, then a federal court may intercede. 6. Transfer to Another Federal Court A federal court that lacks jurisdiction must, if in the interest of justice, transfer the action to another federal court in which the action could have been brought at the time it was led. The action is treated as if it was led in the transferee court on the date upon which it was actually led in the transferor court. 28 U.S.C. § 1631. B. Federal Question Jurisdiction 1. Basis Article III, Section 2 of the U.S. Constitution provides that federal judicial power shall extend to all cases “arising under this Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority.” This constitutional provision authorizes Congress to give federal courts such jurisdiction. Today, the general congressional grant of federal question jurisdiction is codi ed at 28 U.S.C. § 1331, which provides, “The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.” 2. Concurrent versus Exclusive Jurisdiction State and federal courts have concurrent jurisdiction of federal question claims, except when Congress expressly provides that the jurisdiction of the federal courts is exclusive, as it has with cases under the Securities and Exchange Act of 1934, patent and copyright cases, and bankruptcy proceedings. See Charles Dowd Box Co. v. Courtney, 368 U.S. 502, 507 (1962) (“nothing in the concept of our federal system prevents state courts from enforcing rights created by federal law”). 3. Scope There is no uniform, bright-line standard for determining whether an action arises under the Constitution, laws, or treaties of the United States. In general, if the cause of action in question is expressly created by federal law, and federal law provides the underlying right, then federal question jurisdiction will exist. If a right is created by federal law, and a cause of action may fairly be implied and was intended by Congress, then federal question jurisdiction is likely to be found. If the cause of action is neither expressly nor implicitly created by federal law, then federal question jurisdiction over a state law claim will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress. Gunn v. Minton, 568 U.S. 251, 258 (2013). Federal law includes the U.S. Constitution, federal statutes, federal administrative regulations, and U.S. treaties. State laws incorporating standards of federal law are not considered laws of the United States for the purposes of § 1331. See Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804 (1986). Merrell Dow held that when a substantive federal statute (e.g., the Federal Food, Drug, and Cosmetic Act) does not provide a federal remedy, then an alleged violation of that statute as an element of a state law complaint does not automatically establish § 1331 jurisdiction. Rather, federal courts have discretion to determine whether a federal issue or interest is important enough in a speci c case to justify the exercise of jurisdiction. 4. Well-Pleaded Complaint Generally, federal question jurisdiction exists only when the federal law issue is presented in the plainti ’s complaint. E.g., Caterpillar, Inc. v. Williams, 482 U.S. 386 (1987). a. Consider only elements of the claim, not anticipated defenses While the federal question must appear on the face of the complaint, the determination of jurisdiction must be made by considering only the necessary elements of the plainti ’s cause of action (i.e., a “well-pleaded” complaint). It is not su cient to establish jurisdiction that the complaint alleges an anticipated federal law defense. Louisville & Nashville R.R. v. Mottley, 211 U.S. 149 (1908). b. Do not consider answers and counterclaims Answers and counterclaims are not considered in determining the existence of federal question jurisdiction. In The Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535 U.S. 826 (2002). 2 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... c. Declaratory judgment action Actions for declaratory relief anticipate some future action or infringement of rights and seek a declaratory judgment to resolve uncertainty and to avoid the possibility of a future lawsuit. Most states have enacted statutes permitting their courts to issue declaratory judgments. In an action for declaratory relief in which the complaint asserts a defense to an anticipated future action or infringement of rights, the character of the threatened action, and not of the defense, determines whether there is federal-question jurisdiction. Pub. Serv. Com. v. Wyco Co., 344 U.S. 237 (1952). d. Original and removal jurisdiction The well-pleaded complaint rule applies both to the original jurisdiction of the federal court and to removal jurisdiction (see § I.E. Removal Jurisdiction, infra). 5. No Amount-in-Controversy or Diversity Requirements Unlike federal diversity jurisdiction, federal question jurisdiction has does not have an amount-in-controversy requirement nor a diversity-between- parties requirement. C. Diversity Jurisdiction 1. Basis Article III, Section 2 of the U.S. Constitution permits Congress to extend federal judicial power to controversies “between citizens of di erent states … and between a state or the citizens thereof, and foreign states, citizens or subjects.” Under § 1332, Congress gave the U.S. district courts jurisdiction over civil actions when: i) The parties to an action are: a) Citizens of di erent states; b) Citizens of a state and citizens or subjects of a foreign state; c) Citizens of di erent states and citizens or subjects of a foreign state are additional parties; or d) A foreign state as plainti and citizens of a state or di erent states; and ii) The amount in controversy in the action exceeds $75,000. In general, when these requirements are met, a federal court may exercise jurisdiction over the action, regardless of the legal subject of the controversy. This is known as “diversity-of-citizenship jurisdiction” or, more commonly, “diversity jurisdiction.” a. State law exclusions Two areas of state law are generally excluded from diversity jurisdiction: probate matters (probate of a will or administration of an estate) and domestic- relations actions (divorce, alimony, custody disputes). Note, though, that these exceptions apply only to cases that are primarily probate or marital disputes. b. Suit against a foreign state Under the Foreign Sovereign Immunities Act (FSIA), a suit may not be brought in federal or state court against a foreign state, including a political subdivision or agency or instrumentality of a foreign state, unless an exception applies. Among the exceptions are engaging in a commercial activity, committing a tort in the United States, or seizing property in violation of international law. § 1602–1611. However, as noted, a foreign state may sue one or more citizens of one or more U.S. states in federal court. § 1332(a)(4). 2. Complete Diversity 3 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... a. Rule of complete diversity Diversity jurisdiction requires complete diversity between opposing parties in a case. There is no diversity of citizenship if any plainti is a citizen of the same state as any defendant. Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806). Two or more plainti s may be from the same state without destroying diversity, if no plainti is from the same state as any defendant. Similarly, two or more defendants may be from the same state without destroying diversity if no defendant is from the same state as any plainti. § 1332(a)(1). The term “state” includes the District of Columbia, Puerto Rico, and the U.S. territories. § 1332(e). b. Exceptions 1) Interpleader Under 28 U.S.C. § 1335, the Federal Interpleader Act, the holder of property that is claimed by two or more persons may deposit the property with a court to determine ownership. Under the Act, there need be only two adverse claimants of diverse citizenship to establish federal jurisdiction. (See § VI.C.1. Federal Interpleader Rule, infra, for a discussion of federal rule interpleader, which requires complete diversity). 2) Class actions greater than $5,000,000 For certain class actions in which the amount at issue totals more than $5,000,000, diversity will be met if any member of the plainti class is diverse with any defendant. § 1332(d)(2)(A). 3) Multiparty, Multiforum Trial Jurisdiction Act of 2002 Under § 1369(a), for a civil action that “arises from a single accident, where at least 75 natural persons have died in the accident at a discrete location,” only one plainti need be of diverse citizenship from one defendant for a federal court to have diversity jurisdiction, if: i) A defendant resides in a state and a substantial part of the accident took place in another state or other location, regardless of whether that defendant is also a resident of the state where a substantial part of the accident took place; ii) Any two defendants reside in di erent states, regardless of whether such defendants are also residents of the same state or states; or iii) Substantial parts of the accident took place in di erent states. Even if those requirements are met, however, under § 1369(b), the district court must abstain from hearing the case if: i) The substantial majority of all plainti s are citizens of a single state of which the primary defendants are also citizens; and ii) The claims asserted will be governed primarily by the laws of that state. The Act also provides: i) That anyone involved in the accident is permitted to intervene as a plainti ; and ii) Nationwide service of process. c. “Realignment” In evaluating whether true diversity exists, courts will look beyond the face of the pleadings to determine the “ultimate interests.” If necessary, they will “arrange the parties according to their sides in the dispute.” Thus, courts will not allow, for example, a party that is actually aligned with the plainti to be named as a defendant in order to present a false diversity. City of Dawson v. Columbia Ave. Sav. Fund, Safe Deposit, Title, & Trust Co., 197 U.S. 178 (1905). d. Date of determination of diversity Diversity is determined at the time the case is led. Janzen v. Goos, 302 F.2d 421 (8th Cir. 1962). There is no requirement that diversity exist at the time the cause of action arose. A change in citizenship or amount-in-controversy after the ling of the case will not a ect diversity jurisdiction that was in existence at the time of the ling. In addition, a change in the parties as a result of substitution or intervention will not a ect diversity jurisdiction. 4 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... 3. Citizenship of Parties a. Individuals To be a citizen of a state for the purposes of § 1332, an individual must be a citizen of the United States and a domiciliary of the state. 1) Domicile In general, an individual is a domiciliary of the state in which she is present and intends to reside for an inde nite period. Janzen v. Goos, 302 F.2d 421 (8th Cir. 1962). a) Only one domicile An individual can have only one domicile at a time. The presumption is that a place of domicile continues until it is de nitively changed, i.e., when a person: i) Establishes presence in the new place; and ii) Manifests intent to remain there inde nitely. Consequently, a compulsory change of residence, such as for incarceration or military purposes, will not result in a change in domicile. Similarly, an intent to move without actual relocation to another state will not result in a change in domicile. b) When determined Domicile is determined at the time the action is commenced. Once subject matter jurisdiction has been established, it will not be a ected by a party’s change of domicile. c) Factors considered Some factors used in determining domicile include whether a party exercises civil and political rights (e.g., registration to vote), pays taxes, owns real and personal property, and is employed in the state. 2) Noncitizens a) Noncitizens v. state citizens Diversity jurisdiction based on citizenship status generally exists if there are one or more citizens or subjects of a foreign country (i.e., noncitizens) on one side of the lawsuit, and one or more citizens of a state on the other. § 1332(a)(2). b) Noncitizens as additional parties There is no diversity jurisdiction if the only parties are noncitizens. However, when an action is between citizens of di erent states, noncitizens may generally be additional parties to the action as plainti s, defendants, or both. The noncitizens need not be from di erent countries from one another to preserve diversity. § 1332(a)(3). c) Noncitizens who are permanent residents Diversity jurisdiction does not exist when an action is between a citizen of a state and a noncitizen admitted to the United States for permanent residence who is domiciled in the same state as the citizen. § 1332(a). 3) Stateless persons Diversity jurisdiction does not exist if a party is a noncitizen who is present in the United States and is not a citizen or subject of a foreign country, or if a party is a U.S. citizen whose domicile is a foreign country. Such persons are neither citizens of the United States nor citizens or subjects of a foreign country for the purposes of diversity jurisdiction. 4) Minors, incompetents, decedents, and trusts The legal representative of a minor, an incompetent, or an estate of a decedent will be deemed a citizen of the same state as that minor, incompetent, or 5 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... decedent. § 1332(c)(2). As to trusts, the old rule was that they were deemed to be a citizen of the same state as the trustee. See Navarro Savings Ass’n v. Lee, 446 U.S. 458 (1980). However, this rule has been placed in doubt by Carden v. Arkoma Assocs., 494 U.S. 185 (1990), which held that the citizenship of unincorporated associations is determined by the citizenship of all its members. An unemancipated minor is generally deemed a citizen of the state in which his parents are domiciled. If a minor’s parents are not citizens of the same state, then the child will generally be deemed a citizen of the state of the parent who has custody. 5) Class actions Diversity in a class action brought pursuant to Rule 23 will generally be determined by the citizenship of the named members of the class bringing the lawsuit. (See § VI.E. Class Actions, infra, for a discussion of class actions under Rule 23.) For certain class actions, however, when the amount at issue totals more than $5,000,000, diversity will be met if any member of the plainti class is diverse with any defendant. § 1332(d)(2)(A). (See § I.C.5.c. Aggregation of claims, below.) b. Business entities 1) Corporations For the purposes of diversity jurisdiction, a corporation is deemed to be a citizen of every State and foreign state where it is incorporated and of the State or foreign state where it has its principal place of business. § 1332(c). Thus, a corporation, unlike an individual, may be a citizen of more than one state for diversity purposes, and diversity jurisdiction will not exist if any opposing party is a citizen of any of the states of which the corporation is a citizen. A pleader does not have the option of alleging that a corporation’s citizenship is either its state of incorporation or the state where the principal place of business is located; both states must be listed in the pleading. a) Incorporation A corporation’s state of incorporation is the state in which the corporate entity is legally established. Every corporation has at least one state of incorporation, and some have multiple states of incorporation. If a corporation is incorporated in more than one state or foreign country, then it is considered a citizen of each state and foreign country in which it is incorporated. b) Principal place of business Determining where a corporation maintains its principal place of business is a question of fact more complicated than determining where a corporation is incorporated. The Supreme Court has held that “principal place of business” refers to the “nerve center” of the corporation. Hertz Corp. v. Friend, 559 U.S. 77 (2010). The nerve center is generally the location from which the high-level o cers direct, control, and coordinate the activities of the corporation. Typically, the nerve center is the corporate headquarters. Unlike with incorporation, which may involve multiple states, a corporation’s principal place of business is in only one state or foreign country. c) Foreign corporations A foreign corporation will be deemed a citizen of the country in which it is incorporated. In addition, if the foreign corporation also has its principal place of business in the United States, then it will have citizenship in the state where the principal place of business is located. d) Date of determination The corporation’s citizenship at the time the action is commenced determines jurisdiction. e) Liability insurers A special rule applies when a plainti allegedly injured by an insured party brings a direct action against the liability insurer. The insurer is deemed to be a citizen of the state or foreign country in which its insured is a citizen, in addition to any other states or foreign countries where it is a citizen. § 1332(c). 2) Partnerships and other unincorporated associations a) Generally 6 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... An unincorporated association, such as a partnership, is a citizen of each state in which each of its members is domiciled. Thus, it is possible that a partnership could be a citizen of all 50 states, if it had partners domiciled in every state. This rule holds for both general and limited partnerships; a limited partnership is a citizen of every state in which its general and limited partners are domiciled. Carden v. Arkoma Assocs., 494 U.S. 185 (1990). b) Limited liability company (LLC) As is the case with a partnership, an LLC is considered a citizen of each state in which each of their members is domiciled. Americold Realty Trust v. Conagra Foods, Inc., 577 U.S. 378 (2016). c) Exception An unincorporated association may be treated as a class when “it appears that the representative parties will fairly and adequately protect the interests of the association and its members.” In that case, the citizenship of the representative parties controls for purposes of diversity jurisdiction. This exception may not be used merely to create diversity jurisdiction, nor may it be used if the association has the capacity under state law to sue or be sued as an entity. Rule 23.2. 4. Amount in Controversy a. Rule The amount in controversy must exceed the sum or value of $75,000, exclusive of interest, costs, and collateral e ects of a judgment. Although interests and costs are excluded from the amount in controversy, attorney’s fees may be made part of the amount in controversy if the fees are recoverable by contract or statute. Punitive damages, as well, may be permitted to be made part of the amount in controversy. The amount in controversy is determined at the time the action is commenced in federal court, or, if the action has been removed to federal court, at the time of the removal. The party seeking to invoke federal court jurisdiction must allege that the action satis es the amount-in-controversy requirement. § 1332(a). In the case of injunctive relief, when it is di cult to assess a dollar amount, some courts consider only the value of the injunction to the plainti in determining the amount in controversy and other courts consider the greater of the value to the plainti of the removal of the harm or the cost to the defendant of complying with the injunction in determining the amount in controversy. EXAM NOTE: Remember that the amount in controversy must exceed $75,000; a claim for exactly $75,000 fails. b. Standard of proof 1) Generally In general, a plainti ’s good-faith assertion in the complaint that the action satis es the amount-in-controversy requirement is su cient, unless it appears to be a legal certainty that the plainti cannot recover the amount alleged. St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283 (1938). If an alleged amount in controversy is challenged, then the burden is on the party asserting jurisdiction merely to show that it is not a legal certainty that the claim involves less than the statutory amount. 2) Reduction of a claim after ling If events after the action has been led reduce the amount in controversy below the statutory minimum, then jurisdiction will not be lost, as long as the original claim was made in good faith. Additionally, if the plainti eventually recovers an amount that is less than the statutory jurisdictional amount, then that fact will not render the verdict subject to challenge on appeal for lack of jurisdiction. c. Aggregation of claims 1) By a single plainti against a single defendant If the diversity action involves only one plainti and one defendant, then the total value of all the plainti ’s claims is calculated to determine the amount in controversy. 2) By multiple plainti s If the action involves multiple plainti s, then the value of their claims may be aggregated only if the multiple plainti s are enforcing a single title or right in which they have a common or undivided interest. 7 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... If multiple plainti s, each having separate and distinct claims, unite for convenience or economy in a single suit, then each plainti ’s aggregate claims are judged separately in determining whether the amount-in-controversy requirement has been met. If the aggregate claims of at least one plainti separately meet the amount-in-controversy requirement, then the court has diversity jurisdiction over that plainti ’s claims, provided the diversity-of- citizenship requirement is met. The court may also have supplemental jurisdiction over the claims of any other plainti , even though that plainti ’s claims do not meet the amount-in-controversy requirement (see I.D.3. Diversity Jurisdiction Cases, below). 3) By a single plainti against multiple defendants The value of a single plainti ’s claims against each defendant may not be aggregated if the claims are separate and distinct. If the defendants are jointly liable to the plainti , then aggregation to meet the amount-in-controversy requirement is permissible. 4) Class actions In general, if any member of the putative class does not have a claim that meets the statutory jurisdictional amount, then the amount-in-controversy requirement will not be met. Snyder v. Harris, 394 U.S. 332 (1969); Zahn v. International Paper, 414 U.S. 291 (1973). Note, though, that the Class Action Fairness Act of 2005 amended § 1332(d) to permit aggregation of claims in certain class actions. (See § VI.E.1.e., Class Actions under the Class Action Fairness Act of 2005, infra.) Additionally, when at least one representative plainti in a putative class action has a claim that meets the statutory jurisdictional amount, other persons with claims that do not meet the jurisdictional amount can be made part of the class under the doctrine of supplemental jurisdiction. Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546 (2005). (See § I.D. Supplemental Jurisdiction, infra.) d. Counterclaims A counterclaim by a defendant against a plainti is not counted for the purposes of determining whether the plainti has met the statutory jurisdictional amount. Under some circumstances, though, the counterclaim itself will need to meet the statutory jurisdictional amount in order to be considered by the court. 1) Compulsory counterclaims A compulsory counterclaim, which is generally a claim arising out of the same transaction or occurrence as the plainti ’s claim, does not have to meet the statutory jurisdictional amount requirement to be considered by the court. See Rule 13(a). The court will have supplemental jurisdiction over the compulsory counterclaim. (See § I.D. Supplemental Jurisdiction, infra.) To determine whether counterclaims or cross-claims arise out of the same “transaction or occurrence,” courts consider whether (i) the issues of fact and law in the claims are essentially the same; (ii) the same evidence would support or refute the claims; (iii) there is a logical relationship between the claims; and (iv) res judicata would bar a subsequent suit on either claim. The most frequently considered factor is whether there is a logical relationship between the claims, but any one of them can support a conclusion that the claims arise from the same “transaction or occurrence.” 2) Permissive counterclaims A permissive counterclaim, which is a claim arising out of a transaction that is unrelated to the plainti ’s claim (see Rule 13(b)), has to meet the statutory jurisdictional amount requirement. 3) Removal based on counterclaim a) Plainti A plainti is not allowed to remove a case to federal court, even if the defendant is diverse and has counterclaimed for more than the federal statutory jurisdictional amount. Removal is allowed only by defendants. (See § I.E. Removal Jurisdiction, infra.) b) Defendant—permissive counterclaim When a diverse defendant makes a permissive counterclaim under state law for more than the federal statutory jurisdictional amount, and the plainti ’s claim is for less than the federal statutory jurisdictional amount, the defendant is not permitted to remove the case to federal court. c) Defendant—compulsory counterclaim 8 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... When a diverse defendant makes a compulsory counterclaim under state law for more than the federal statutory jurisdictional amount, and the plainti ’s claim is for less than the federal statutory jurisdictional amount, courts are split on allowing removal by the defendant. Most courts, though, do not allow the defendant to remove the case to federal court. 5. Devices to Create or Destroy Diversity Federal jurisdiction is prohibited if a party uses improper or collusive devices to invoke such jurisdiction. § 1359. a. Assignment of claims When there is a legitimate assignment of a claim, the assignee becomes the real party in interest, and its citizenship, as opposed to the assignor’s citizenship, will be determinative. For example, when an insurance company pays an insured party for damages caused by a third party and sues the third party in a subrogation action, the company’s citizenship, and not the insured party’s citizenship, controls for diversity purposes. If the assignment is being e ected to manufacture or create diversity jurisdiction collusively, however, diversity jurisdiction does not exist. See, e.g., Kramer v. Caribbean Mills, Inc., 394 U.S. 823 (1969) (assignment to a nominal party having no real interest in the claim was collusive). b. Failure to name indispensable parties The parties may not manufacture diversity jurisdiction by failing to join a nondiverse indispensable party. (See § VI.A.2. Compulsory Joinder, infra, regarding the standards for compulsory joinder under Rule 19.) c. Voluntary change of state citizenship A party may voluntarily change state citizenship after the accrual of a cause of action, but before the commencement of a lawsuit, and therefore establish or defeat diversity jurisdiction. A party’s motive for changing citizenship is irrelevant, but the change of state citizenship must be genuine to be recognized. In determining whether a party’s change of state citizenship is genuine, a court may consider whether the party changed her domicile speci cally to create or destroy diversity, but as long as the party intends to stay in the new state inde nitely, this motive will not invalidate the change in domicile. Compare Williamson v. Osenton, 232 U.S. 619, 625 (1914) ( nding that a wife separated from her husband could establish her own domicile in a new state and maintain an action based on diversity jurisdiction) with Morris v. Gilmer, 129 U.S. 315, 328–29 (1889) ( nding that the plainti did not change his domicile, because he moved there only to create diversity and did not intend to remain in the new state inde nitely). d. Substitution versus replacement of parties Sometimes there is a need to exchange parties to a lawsuit. Two processes are in place to do so depending on the circumstances. Rule 25 allows for the substitution of a party due to death or incompetence. The newly substituted party does not have to satisfy the diversity requirement. When a party must be replaced, such as when the wrong party is named in the complaint, the new replacement party must satisfy the diversity requirement. Notice the subtle distinction between substitution and replacement. Substitution calls for the substituted party to step into the shoes of the original party, whereas replacement removes one party to the lawsuit for another party. D. Supplemental Jurisdiction 1. In General A district court with jurisdiction over a claim may exercise “supplemental jurisdiction” over additional claims over which the court would not independently have subject matter jurisdiction (usually state law claims against a nondiverse defendant) but that are so related to the original claim that the additional claims form part of the same case or controversy under Article III of the U.S. Constitution. § 1367(a). In judging whether the claims are related, the test is whether they arise out of a “common nucleus of operative fact” such that all claims should be tried together in a single judicial 9 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... proceeding. United Mine Workers v. Gibbs, 383 U.S. 715 (1966). 2. Federal Question Jurisdiction Cases When the district court’s subject matter jurisdiction for a claim is based on the existence of a federal question, additional claims against the same party can be heard by the court through the exercise of supplemental jurisdiction if the common-nucleus-of-operative-fact test is met. Example 1: Plainti sues Defendant, her corporate employer, in federal court under Title VII for sex discrimination and retaliation, matters over which the court has federal question jurisdiction. Plainti then seeks to sue Defendant for assault and battery under state law, a claim that arises under the same operative facts that applied to her Title VII claim. The federal court has discretion to exercise supplemental jurisdiction over the assault and battery claim. Similarly, a district court may have supplemental jurisdiction over claims that involve the joinder or intervention of additional parties over which the court would not otherwise have jurisdiction if the claims involving the additional parties satisfy the common-nucleus-of-operative-fact test. Such jurisdiction is also referred to as "pendent-party jurisdiction." Example 2: Plainti sues Defendant 1, her corporate employer, in federal court under Title VII for sex discrimination and retaliation, matters over which the court has federal question jurisdiction. Plainti then seeks to sue Defendant 2, her direct supervisor, for assault and battery, a claim that arises under the same operative facts that applied to her Title VII claim against the corporate employer. The federal court could exercise supplemental jurisdiction over the assault and battery claim against the supervisor. Dismissal of a federal claim on the merits does not preclude a federal court from exercising pendent-party jurisdiction over the state claim. 3. Diversity Jurisdiction Cases When a district court has diversity jurisdiction over a claim, the common-nucleus-of-operative-facts rule also applies to determine whether the court can exercise supplemental jurisdiction over an additional claim. a. Permissive joinder Although the additional claim is not required to satisfy the amount-in-controversy requirement for purposes of supplemental jurisdiction, when the additional claim is asserted by a plainti seeking to join the action under Rule 20 (permissive joinder), the addition of that party cannot result in a violation of the requirement for complete diversity of citizenship. Example 1: Plainti 1, a citizen of Pennsylvania, brings a negligence action in federal court for $500,000 against Defendant, a citizen of New York, based on an automobile accident. Plainti 2, also a citizen of Pennsylvania and a passenger in Plainti 1’s car at the time of the accident, seeks to join Plainti 1’s action by ling a negligence claim against Defendant for $30,000. While diversity jurisdiction does not exist for Plainti 2’s claim because it does not satisfy the $75,000 amount-in-controversy requirement, the court can exercise supplemental jurisdiction over that claim because it meets the common- nucleus-of-operative-facts test. Example 2: Assume for this example the same facts as those in Example 1 except that Plainti 2 is a citizen of New York. The federal court cannot exercise supplemental jurisdiction over Plainti 2’s claim because the presence of Plainti 2 would defeat the requirement for complete diversity. EXAM NOTE: Remember that supplemental jurisdiction does not apply to defendants sought to be joined under the permissive joinder rule in a case based exclusively on diversity jurisdiction in which exercising jurisdiction would destroy diversity. Thus, if the claims are made solely on the basis of diversity jurisdiction, then there must be complete diversity between the plainti s and the joined defendants, and the claims against each defendant must satisfy the amount-in-controversy requirement. b. Counterclaims A counterclaim may be asserted by a defendant against a plainti without satisfying the jurisdictional amount when the counterclaim is compulsory. A permissive counterclaim does not qualify for supplementary jurisdiction and therefore must satisfy the jurisdictional amount and the rule of complete diversity. c. Cross-claims 10 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... A cross-claim may be asserted by a defendant against another defendant or by a plainti against another plainti if the cross-claim arises out of the same transaction or occurrence as the initial claim, without regard to the amount in controversy or the citizenship of the parties to the cross-claim as long as the court has subject matter jurisdiction over the original complaint. d. Precluded claims in diversity cases Under § 1367(b), in actions in which the original jurisdiction of the federal court is based solely on diversity jurisdiction, when the exercise of supplemental jurisdiction over such claims would be inconsistent with the requirements for diversity jurisdiction, supplemental jurisdiction is precluded for: i) Claims by existing plainti s (but not defendants) against persons made parties under one of the following Federal Rules of Civil Procedure: Rule 14 (impleader), Rule 19 (compulsory joinder), Rule 20 (permissive joinder), or Rule 24 (intervention); ii) Claims by persons to be joined as plainti s pursuant to Rule 19; and iii) Claims by persons seeking to intervene as plainti s pursuant to Rule 24. Example 1: Plainti , a citizen of Iowa, sues Defendant, a Nebraska corporation, in federal court under diversity jurisdiction for the wrongful death of Plainti ’s husband. Defendant then impleads Contractor, a citizen of Iowa, under Rule 14, alleging that if Defendant is liable to Plainti , then Contractor must indemnify Defendant for any liability to Plainti. If Plainti then asserts a claim directly against Contractor, because they are both citizens of the same state (Iowa), supplemental jurisdiction in federal court will not apply to the claim, as it would be inconsistent with the requirements for diversity jurisdiction pursuant to § 1367(b). Note that Defendant’s claim against Contractor would fall within the federal court’s supplemental jurisdiction, as it is derived from the same operative facts being considered by the court under the claim over which it has original jurisdiction and is not precluded by § 1367(b). Example 2: Plainti , a citizen of Arkansas, sues Defendant 1 and Defendant 2, both citizens of Oklahoma, in federal court on the basis of diversity jurisdiction, alleging negligence. Defendant 1 seeks to assert a cross-claim for negligence, under the same operative facts, pursuant to Rule 13(g), against Defendant 2. Although there would be no original jurisdiction in federal court for the cross-claim, because Defendant 1 and Defendant 2 are citizens of the same state (Oklahoma) (see § I.C.2. Complete Diversity, supra), the federal court could exercise supplemental jurisdiction over the cross-claim, as it is derived from the same operative facts being considered by the court under the claim over which it has original jurisdiction, and it is not excluded under § 1367(b). 4. Discretionary Rejection of Supplemental Jurisdiction Under § 1367(c), a district court has discretion to decline to exercise supplemental jurisdiction over a claim that would otherwise qualify for supplemental jurisdiction in each of the following circumstances: i) The supplemental claim raises a novel or complex issue of state law; ii) The supplemental claim substantially predominates over the claims within original federal jurisdiction; iii) All of the claims within the court’s original jurisdiction have been dismissed; or iv) In exceptional circumstances, if there are other compelling reasons for declining jurisdiction. E. Removal Jurisdiction 1. Basis Any civil action commenced in a state court that is within the original jurisdiction of a U.S. district court may generally be removed by the defendant to the district court for the district and division in which the state court action is pending. § 1441(a). 11 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... Generally, the right of removal is a right of the defendant only and is not available to a plainti defending a counterclaim that could have originally been brought in federal court. Note that removal jurisdiction is not a substitute for either federal question or diversity jurisdiction, but it is simply a mechanism by which defendants in a state action over which a federal court otherwise has subject matter jurisdiction can get the action into federal court. a. Removal to another district or division within the same state The removal statute speci cally requires the case to be removed to the district court for the district and division in which the state court action is pending. Consequently, a case that is removed to a district court that is within the state but outside the district or division of the original state court is subject to a motion to remand. Addison v. N.C. Dep't of Crime & Pub. Safety, 851 F. Supp. 214 (M.D.N.C. 1994). However, since this requirement has been characterized as procedural rather than jurisdictional, some courts have transferred the case to the proper federal court instead of remanding it to the state court. E.g., Butler v. N.C. DOT, 154 F. Supp. 3d 252 (M.D.N.C. 2016). 2. Determination In general, the right of removal is determined by the pleadings led as of the time of the ling of the notice of removal. In diversity cases, however, diversity of citizenship must exist at the time of ling the original action as well as at the time the notice of removal is led, unless the plainti dismisses a party who would have destroyed diversity jurisdiction. Removal is permitted when a party who prevents diversity jurisdiction is voluntarily dismissed from the action. Moreover, removal is permitted when a party who prevents diversity was fraudulently joined to defeat diversity. However, joinder of a non-diverse party will prevent removal, even if that party was joined for the purpose of preventing removal, if the plainti has a colorable basis for recovering from the joined defendant. The federal court to which the action is removed is not precluded from hearing and determining any claim in the action because the state court from which the action was removed did not have jurisdiction over that claim. § 1441(f). 3. Other Removal Statutes In addition to the general rule regarding removal, other statutes authorize removal in speci c cases, including: i) Suits against the United States, any federal agency, or federal o cers for acts under color of o ce (§ 1442); ii) Suits against federal employees for injuries caused from their operation of a motor vehicle within the scope of their employment (§ 2679(d)); iii) Actions in which any party asserts a claim for relief based on a federal statute relating to patents, plant variety protection, or copyrights (§ 1454); and iii) Actions involving international banking (12 U.S.C. § 632). In addition, certain statutes prohibit removal for otherwise removable actions, including: i) Actions arising under the Federal Employers’ Liability Act (FELA) and under the Jones Act against a railroad or its receivers or trustees (§ 1445(a)); ii) Actions against carriers for delay, loss, or damage in shipments, when the amount in controversy does not exceed $10,000 (§ 1445(b)); iii) Actions arising under the workers’ compensation laws of the state in which the action is brought (§ 1445(c)); and iv) Actions arising under § 40302 of the Violence Against Women Act of 1994. 4. Limitation on Removal in Diversity Cases If removal is sought solely based on diversity jurisdiction, then the claim may be removed only if no defendant is a citizen of the state in which the action was led. § 1441(b). There is not a similar requirement for removal based on federal question jurisdiction nor for an action initially brought in federal court based on diversity jurisdiction. Example: If a Texas corporation sues an Illinois defendant in Illinois state court, then the Illinois defendant is not permitted to remove the action to federal court based on diversity jurisdiction. 5. Removal of Separate and Independent Claims in a Federal Question Jurisdiction Case 12 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... If removal is sought based on federal question jurisdiction, and the federal question claims in the state action are joined with claims that are not independently removable, then the entire case may be removed. The district court must then sever and remand to the state court any claims in which state law predominates. § 1441(c). 6. Procedure a. Notice of removal 1) Generally Under 28 U.S.C. § 1446, a defendant who wants to remove a state court action to federal district court generally must le a notice of removal with the district court within 30 days after receipt by or service on that defendant of the initial pleading or summons. The notice must be: i) Signed pursuant to Rule 11 (see § V.I. Rule 11, infra) and contain a short and plain statement of the grounds for removal; ii) Filed in the district court for the district and division in which the state action is pending; and iii) Accompanied by copies of all process, pleadings, and orders served on the defendants seeking removal. If the case stated by the initial pleading is not removable, a notice of removal may be led within 30 days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may rst be ascertained that the case is one which is or has become removable. § 1446(b). In general, all defendants who have been properly joined and served are required to join in or consent to the removal. If the defendants are served at di erent times and a later-served defendant les a notice of removal, then any earlier-served defendant may join in the removal even though that defendant did not previously initiate or consent to removal. § 1446(b). In cases of removal based on federal question jurisdiction, only those defendants against whom the federal claim is asserted must join in or consent to the removal. § 1441(c)(2). In addition, a class action based on the Class Action Fairness Act of 2005 (CAFA) may be removed by any defendant without the consent of all defendants. § 1453(b). 2) Removal based on diversity A matter cannot be removed based on diversity of citizenship more than one year after the action is commenced. This one-year rule does not apply, however, if the district court nds that the plainti has acted in bad faith (such as by deliberately failing to disclose the actual amount in controversy) to prevent a defendant from removing the action. § 1446(c). If removal is based on diversity and the plainti (i) seeks nonmonetary relief, (ii) is not required under state law to demand a speci c sum, or (iii) is permitted by state law to recover more than the amount demanded, then the notice of removal may assert that the amount in controversy exceeds $75,000, and the district court will have jurisdiction if it nds, by a preponderance of the evidence, that the amount does exceed $75,000. A defendant’s notice of removal need include only a plausible allegation that the amount in controversy exceeds $75,000; it does not need to contain evidentiary submissions. Dart Cherokee Basin Operating Co. v. Owens, 574 U.S. 81 (2014). b. Additional requirements Promptly after the notice of removal is led with the district court, the defendants must give written notice of the ling to all adverse parties and le a copy of the notice of removal with the clerk of the state court from which the action is sought to be removed. § 1446(d). Once a copy of the removal notice is led with the state court, the removal acts as a stay of the state court proceedings. The state court is not allowed to take any further action with regard to the case and can be enjoined by the federal court if it does take any action. c. Procedure in district court following removal Once the action is removed, procedure follows the Federal Rules of Civil Procedure. New pleadings are not required unless the court orders otherwise. Rule 81(c)(2). Pleadings led before removal can be amended pursuant to the federal rules. 13 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... The district court may issue all necessary orders and processes to bring before it all proper parties, regardless of whether those parties had been served by process issued by the state court. § 1447(a). If the action was removed before each defendant had been served with process, or if service of process was defective, then service of process can be completed or new process issued in the same manner as in cases originally led in district court. § 1448. State court orders issued before removal to district court remain in e ect but are subject to district court modi cation when necessary. § 1450. d. Procedure for a demand for a jury trial If an action is removed to federal court and neither party has exercised his right to a jury trial, the removing party must, if seeking a jury trial, le a demand for a jury trial within 14 days of ling the notice of removal. Similarly, the non-removing party also has 14 days to le a jury trial demand, but the countdown begins after service of notice of removal. If a party fails to timely le a jury trial demand, then the party's right to a jury trial is waived. When a party, prior to removal, exercised his right to a jury trial, the party need not make a jury trial demand after removal to preserve that right. 7. Remand a. For lack of subject matter jurisdiction If at any time before nal judgment it appears that the district court lacks subject matter jurisdiction, then the case must be remanded to the state court from which it came. § 1447(c). For the purposes of § 1447(c) and (d), however, when a case is remanded to a state court because the federal district court declines to exercise supplemental jurisdiction, the remand is not based on a lack of subject matter jurisdiction. Carlsbad Tech., Inc. v. HIF Bio, Inc., 556 U.S. 635 (2009). b. For other reasons A party must make any motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction within 30 days after the ling of the notice of removal. § 1447(c). c. Burden of proof If the propriety of the removal is challenged, then the burden of establishing proper removal is on the party who removed the case. d. Costs and attorney’s fees The district court’s order remanding the case may require payment of costs, including attorney’s fees, incurred as a result of the removal. § 1447(c). The Supreme Court has held that, absent unusual circumstances, federal courts may award attorney’s fees under § 1447(c) only when the removing party lacked an objectively reasonable basis for seeking removal. Martin v. Franklin Capital Corp., 546 U.S. 132 (2005). e. Procedure A certi ed copy of the remand order must be mailed by the district court clerk to the clerk of the state court. The state court may thereafter proceed with the case. § 1447(c). f. Not generally appealable A remand order is generally not reviewable on appeal or otherwise, with the following exceptions: i) There is statutory exception for an order remanding a civil rights case removed pursuant to § 1443; or ii) A remand order is also appealable in a class action, if the application for review is made to the court of appeals not more than 10 days after the entry of the order. §§ 1447(d), 1453(c)(1). g. Discretion to remand when the proposed joinder would destroy diversity jurisdiction Under § 1447(e), if, after removal, the plainti seeks to join a defendant who would destroy the federal court’s diversity jurisdiction, then the court has 14 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... discretion to deny the joinder and proceed with the action in federal court, or to permit the joinder and remand the action to state court. F. Legislative Jurisdiction In addition to the types of jurisdiction listed previously, there are federal courts created by Congress with jurisdiction over speci c types of cases. These include: i) The United States Claims Court (formerly “the Court of Claims”), with original jurisdiction over actions brought against the United States or its o cers, or concerning federal property; ii) The United States Court of Appeals for the Federal Circuit, with appellate jurisdiction over claims against the federal government or its o cers; iii) The United States Court of International Trade, with nationwide jurisdiction over civil actions arising out of United States customs and international trade laws; iv) The United States Tax Court, with jurisdiction over taxpayer challenges to Internal Revenue Service (IRS) de ciency determinations; and v) The United States Bankruptcy Court, with jurisdiction over bankruptcy matters. There is no amount-in-controversy requirement in the previously listed cases, unless an action is brought against a party other than the United States under the Consumer Product Safety Act. II. PERSONAL JURISDICTION A. In General In addition to having subject matter jurisdiction, a court must be able to exercise judicial power over the persons or property involved in the cases or controversies before it. This authority is broadly referred to as “personal jurisdiction” and is governed by state statutes regarding jurisdiction and the due process requirements of the U.S. Constitution. 1. Types There are three general types of personal jurisdiction: (i) in personam jurisdiction, (ii) in rem jurisdiction, and (iii) quasi-in-rem jurisdiction. 2. E ect of State Jurisdictional Statutes on Personal Jurisdiction in Federal Court Under Rule 4(k)(1)(A), the service of a summons in a federal action establishes personal jurisdiction over a defendant “who is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located.” A federal court must generally determine personal jurisdiction as if it were a court of the state in which it is situated. Thus, a federal court will look to state jurisdictional statutes (see § II.B.2.d. Long-arm statutes, infra) to determine if it has personal jurisdiction over the parties before it. a. Alternative sources of personal jurisdiction 1) Nationwide personal jurisdiction While a federal court generally is not vested with nationwide personal jurisdiction, Omni Capital Int’l, Ltd. v. Rudolf Wol & Co., 484 U.S. 97 (1987), a federal court does have national personal jurisdiction when authorized by federal statute, such as for federal statutory interpleader actions (see § VI.C.2.b. In personam jurisdiction, infra). Rule 4(k)(1)(C). 2) “Bulge provision” Under Rule 4(k)(1)(B), the so-called “bulge provision,” a federal court has personal jurisdiction over a party who is served within a U.S. judicial district and not more than 100 miles from where the summons is issued, even if state law would otherwise not permit such service. See Mississippi Publ’g Corp. v. Murphree, 326 U.S. 438 (1946); Robertson v. R.R. Labor Bd., 268 U.S. 619 (1925). This special rule applies to only two types of parties: a third-party defendant who is joined under Rule 14 (see § VI.D.4.d. In personam jurisdiction, infra) and a required party who is joined under Rule 19 (see § VI.A.2.c. In personam jurisdiction, infra). 15 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... 3) Rule 4(k)(2) Three conditions must be present for a federal court to have personal jurisdiction over a defendant under Rule 4(k)(2): i) The plainti ’s claims must be based on federal law; ii) No state court can exercise personal jurisdiction over the defendant; iii) The exercise of jurisdiction must be consistent with the U.S. Constitution and laws (i.e., the defendant must have “minimum contacts” with the United States). This provision is generally used for non-U.S. residents who have contacts with the United States generally, but not with any one state in particular. 4) Insurance companies Some courts have held that speci c personal jurisdiction over insurers is permitted when a car accident occurs within the territorial scope of the policy’s coverage. This applies even if the insurance company has no other contacts with the state. Rossman v. State Farm Mut. Auto. Ins. Co., 832 F.2d 282 (4th Cir. 1987); Farmers Ins. Exchange v. Portage La Prairie Mut. Ins. Co., 907 F.2d 911 (9th Cir. 1990) (if insurer has contracted to indemnify and defend the insured nationwide, litigation in a foreign forum is foreseeable under the contract). 3. Due Process Requirements for Personal Jurisdiction The Due Process Clause also limits a court’s exercise of personal jurisdiction over a defendant. A court may not exercise personal jurisdiction over a defendant unless the defendant has “minimum contacts” with the state in which the court sits (the forum state), and the exercise of jurisdiction would be fair and reasonable. A court is also required to notify a party of the commencement of an action in which his interests are at stake and provide an opportunity for the party to be heard. 4. Consent or Waiver Unlike with subject matter jurisdiction, a party may consent to personal jurisdiction. The consent may be express, implied, or made by a voluntary appearance. An objection to a court’s exercise of jurisdiction over persons and things may also be waived by a party. Under Rule 12(b), the defenses of lack of personal jurisdiction over the person, insu ciency of process, and insu ciency of service of process must be asserted in a responsive pleading or by motion before a responsive pleading is submitted. A failure to object in accordance with Rule 12 waives the objection. Rule 12(h). B. In Personam Jurisdiction 1. In General In personam jurisdiction is the power that a court has over an individual party. It is required whenever a judgment is sought that would impose an obligation on a defendant personally. When such personal jurisdiction exists, the court has the authority to issue a judgment against the party personally, which can be satis ed by seizure of all the party’s assets. Such a judgment is entitled to full faith and credit in other states (see § IX.C. Full Faith and Credit, infra). 2. Bases for In Personam Jurisdiction a. Voluntary presence If a defendant is voluntarily present in the forum state and is served with process while there, then the court has personal jurisdiction over the defendant. Burnham v. Superior Court of California, 495 U.S. 604 (1990). However, most courts today have two exceptions to this rule. If a plainti fraudulently brings a defendant into the state for the purpose of serving process on him, then the service will most likely be invalid. A defendant is also 16 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... immune if he is merely passing through the state to attend other judiciary proceedings. b. Domicile If authorized by statute, a court can have jurisdiction over a person who is domiciled in the state in which the court is located, even if the person is temporarily absent from that state. Domicile is established when a person with capacity resides in a state and intends to make that state his home. The same rules of domicile discussed in § I.C.3. Citizenship of Parties, supra, are applicable here. Statutory authorization can be enacted retroactively to apply to a cause of action arising before the enactment of the statute. McGee v. Int’l Life Ins. Co., 355 U.S. 220 (1957). Note that the United States has authority to subpoena a citizen of the United States living abroad to appear in court to testify. c. Consent Personal jurisdiction can be established by a party’s consent. Under Rule 12(b), the defense of lack of personal jurisdiction must be asserted in a responsive pleading or by motion before a responsive pleading is submitted. The failure to timely object to a court’s assertion of personal jurisdiction waives the objection. Rule 12(h). 1) Plainti s Plainti s consent to personal jurisdiction by ling the lawsuit. 2) Defendants a) Express consent A defendant may agree in advance by contract to submit to the jurisdiction of the court if a lawsuit is brought by the plainti. Such contractual consent is not e ective if the court determines that the contract was a contract of adhesion. A defendant may also stipulate to personal jurisdiction once an action is brought. Petrowski v. Hawkeye-Security Ins. Co., 350 U.S. 495 (1956). Consent is given when a person authorizes an agent to accept service of process. Usually, a state requires nonresidents doing business in a heavily regulated industry to appoint an agent. b) Implied consent A defendant may be deemed to have consented through conduct, such as ling a counterclaim or driving a vehicle within a state. c) Voluntary appearance Traditionally, voluntary appearance of the defendant in court automatically subjected the defendant to personal jurisdiction, unless he was present with the express purpose of objecting to personal jurisdiction. This was called a “special appearance” and was distinguished from a “general appearance” to litigate the merits of the case (which waives an objection to personal jurisdiction). The federal courts and many state courts have abolished this distinction and no longer require a “special appearance” to allow a defendant to object to personal jurisdiction; it can be done by motion or in the answer. Under the federal rule, the objection is waived if the personal jurisdiction objection is not raised in the rst of (i) a Rule 12 motion, if raised before the answer, or (ii) the answer itself. Fed. R. Civ. P. 12(h)(1). d. Long-arm statutes Most states have enacted statutes that authorize personal jurisdiction over nonresidents who engage in some activity in the state or cause some action to occur within the state. In many states, the long-arm statute either directly authorizes or has been interpreted as authorizing jurisdiction to the extent permissible under the Due Process Clause. Thus, a federal court in those states need only determine whether the exercise of personal jurisdiction comports with due process. In some states, the long-arm statute confers jurisdiction only over speci c activities undertaken in the state (e.g., owning property, committing a tort, or entering into a contract to supply goods or services in the state). In these states, the federal court must rst determine whether the statutory requirements have been met, before determining whether the exercise of personal jurisdiction comports with the Due Process Clause. e. Attachment Under “attachment” jurisdiction (a type of quasi-in-rem jurisdiction, see § II.C.2. Quasi-In-Rem Jurisdiction, infra), historically, a plainti asserting a personal claim against a defendant could use attachment of property owned by the defendant and located in the forum state as a device to obtain 17 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... jurisdiction and, if successful, satisfaction of the claim, at least to the extent of the value of the property attached. However, since Sha er v. Heitner, 433 U.S. 186 (1977), there must be minimum contacts between the defendant and the forum state in order to establish jurisdiction. If the claim is not related to the ownership of the attached property, mere ownership of the attached property is generally not su cient to satisfy the minimum contacts test. If there are such contacts, then the court generally has in personam jurisdiction over the defendant, and attachment jurisdiction is unnecessary. 3. Due Process Requirements In general, due process requirements are satis ed if the nonresident defendant has su cient minimum contacts with the forum state such that the maintenance of the action does not o end traditional notions of fair play and substantial justice. International Shoe Co. v. State of Washington, 326 U.S. 310 (1945). EXAM NOTE: When analyzing a personal jurisdiction question, the focus is on (i) the contacts that the defendant has or had with the forum state and (ii) whether the assertion of jurisdiction by the court would comport with fair play and substantial justice. Personal jurisdiction will depend on the facts of each case. a. Minimum contacts 1) Required by Sha er While before Sha er it was possible to gain jurisdiction over a person merely based on the presence within the state of that person’s property, since Sha er, such an attempt to gain in personam jurisdiction has been subject to the International Shoe requirement of minimum contacts. Note that Sha er expressly excluded actions to enforce previous judgments by such remedies as attachment, garnishment, and sequestration from the requirement of minimum contacts with the defendant. See Sha er v. Heitner, 433 U.S. at 210. 2) Purposeful availment To warrant the assertion of in personam jurisdiction, a defendant’s contacts with the forum state must be purposeful and substantial, such that the defendant should reasonably anticipate (foresee) being taken to court there. Foreseeability depends on whether a defendant recognizes or anticipates that by running his business, he risks being party to a suit in a particular state. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980). This is the “purposeful availment” requirement. There are situations, however, in which it is di cult to discern whether purposeful availment is present. Such is the case when a product is put into the stream of commerce, not by the manufacturer, but by a person who purchased the product from the manufacturer and incorporated it in the person’s own product, which is then put into the stream of commerce. The question remains, did the manufacturer avail himself of the bene ts and laws of the jurisdiction in which the product containing the manufacturer’s product is used? The Court has not been able to reach a cohesive answer. In Asahi, while four justices found su ciency with the mere knowledge that the product being sold would end up in the forum state, four other justices believed that the manufacturer needed to take an additional step to have availed itself of the forum. Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102 (1987). (Note: In that case, a majority of the justices concluded that, even assuming the manufacturer’s conduct constituted purposeful availment, it violated the notions of fair play and substantial justice for the manufacturer in question, a foreign corporation, to be subject to the jurisdiction of the forum court (see b. Fair play and substantial justice, below).) 3) Speci c and general jurisdiction The scope of the contacts necessary for the assertion of personal jurisdiction depends on the relationship that the cause of action has with the forum state. When a cause of action arises out of or closely relates to a defendant’s contact with the forum state, jurisdiction may be warranted over that action even if that contact is the defendant’s only contact with the forum state. This type of jurisdiction is often referred to as “speci c personal jurisdiction.” For speci c personal jurisdiction to exist, there must be “‘an a liation between the forum and the underlying controversy,’ principally, activity or an occurrence that takes place in the forum State and is therefore subject to the State’s regulation.” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011). A strict causal relationship between a plainti ’s cause of action and a defendant’s contacts with the forum state is not required, so long as “there is a strong relationship among the defendant, the forum, and the litigation.” Ford Motor Co. v. Montana Eighth Jud. Dist. Ct. 529 U.S. ___, 141 S. Ct.1017 (2021). On the other hand, “general personal jurisdiction” requires that a defendant be domiciled in the state or have continuous and systematic contacts with 18 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... the forum state. General jurisdiction confers personal jurisdiction even when the cause of action has no relationship with the defendant’s contacts with the state. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408 (1984). 4) Imputed contacts Under some circumstances, the contacts of one defendant with the forum state may be imputed to another defendant for the purposes of determining jurisdiction. a) To employer Contacts by a nonresident employer’s agents or employees are generally imputed to the employer when the agent or employee is acting within the scope of the agency or employment. An out-of-state corporation, though, is generally not subject to personal jurisdiction solely because of contacts in the state by an independent contractor. b) To partnership Each partner is generally an agent of the partnership for the purpose of its business. Accordingly, a partner’s activities on behalf of the partnership can confer personal jurisdiction over the partnership entity. Such contacts, though, may not necessarily establish personal jurisdiction over that partner or the other partners of the partnership in their individual capacities. c) To parent corporation An out-of-state corporation’s contacts with the forum state will not automatically establish jurisdiction over a wholly owned subsidiary of the corporation, and contacts by a wholly owned subsidiary will not automatically confer jurisdiction over a corporate parent. Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333 (1925). If, however, the subsidiary is the corporate parent’s alter ego or is speci cally acting as the corporate parent’s agent, then its contacts may be imputed to the corporate parent. Id. b. Fair play and substantial justice Once minimum contacts are established, a court must still examine the facts to determine if maintenance of the action would “o end traditional notions of fair play and substantial justice.” International Shoe, supra. Courts consider a variety of factors when making this determination, including: i) The interest of the forum state in adjudicating the matter; ii) The burden on the defendant of appearing in the case; iii) The interest of the judicial system in the e cient resolution of controversies; and iv) The shared interests of the states in promoting common social policies. 4. In Personam Jurisdiction Over Corporations a. Resident corporations For the purposes of in personam jurisdiction, a corporation is a resident corporation only if it is incorporated in the forum state. Any action may be brought against a corporation that is incorporated in the forum state. If the corporation is not incorporated in the state, then, for the purposes of in personam jurisdiction, it will constitute a foreign corporation. b. Foreign corporations The rules of minimum contacts and substantial fairness apply to a foreign corporation. To determine whether the corporation is subject to a state’s general jurisdiction, the proper inquiry is whether a corporation’s a liations with the forum state are so “continuous and systematic” as to render the corporation essentially “at home” in the forum state. Daimler AG v. Bauman, 571 U.S. 117 (2014). A corporate defendant is always at home in the state of the corporation’s place of incorporation and the state of its principal place of business. In exceptional cases, a corporate defendant’s operations in another forum may be so substantial and of such a nature as to render the corporation at home in that state as well. Compare BNSF Ry. v. Tyrrell, 137 S. 19 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... Ct. 1549 (2017) (foreign railroad company’s ownership of over 2,000 miles of track and employment of over 2,000 persons in a state not su cient to render corporation at home when about 94% of the track it owned and more than 95% of its workforce were out-of-state) with Perkins v. Benguet Consol. Mining Co., 342 U.S. 437 (1952) (a foreign mining company that relocated its management activities (e.g., directors' meetings, business correspondence, banking, stock transfers, payment of salaries, purchasing of machinery) during World War II to a state was at home in that state). 5. Internet Websites It is generally accepted that merely having a website does not subject a defendant to process everywhere that the site can be viewed. Most courts have followed the approach of Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997), which bases jurisdiction over a nonresident’s website on the degree of interactivity between the website and the forum. The court set forth a sliding scale approach with regard to the interactivity of websites, ranging from passive sites to those that are integral to the defendant’s business. Merely making a website accessible to the public and posting information is generally considered passive on the sliding scale and should not result in personal jurisdiction. Websites that are integral to a defendant’s business, however, are on the other end of the sliding scale. When a website’s purpose is to assist in conducting direct business transactions, courts are more likely to nd minimum contacts with a state and assert personal jurisdiction. Example: In the Zippo case, the defendant was a nonresident corporation that operated an integral website that had commercial contacts with more than 3,000 Pennsylvania residents and Internet service providers. The court found a high level of interactivity with Pennsylvania and determined that there was personal jurisdiction over the defendant in Pennsylvania. Courts are struggling with how to draw the lines for sites that are interactive but that do not involve signi cant commercial activity. The law in this area continues to evolve. 6. Suits Based on a Contract a. The contract can be relevant to establishing minimum contacts Although the fact that one party to a contract is a resident of the forum state will not, by itself, confer personal jurisdiction over the nonresident party to the contract, the existence of the contract can be a signi cant factor in determining that minimum contacts exist, such that the exercise of personal jurisdiction over the nonresident is appropriate. Burger King v. Rudzewicz, 471 U.S. 462 (1985). b. Choice-of-law provision If the contract contains a choice-of-law provision indicating that the forum state’s law is to be used in any action with regard to the contract, then this will be a signi cant factor in nding jurisdiction, as it establishes that the nonresident purposefully availed herself of the bene ts of the forum’s laws. c. Contracts of adhesion or procured by fraud If the contract is adhesive or was procured through fraud, then personal jurisdiction based on the contract is not appropriate. C. Jurisdiction Over Things Historically, jurisdiction over property has been divided into in rem jurisdiction and quasi-in-rem jurisdiction. 1. In Rem Jurisdiction a. De ned In rem jurisdiction is the authority of a court to determine issues concerning rights in property, either real or personal. The court generally determines title to the property, and such determination is conclusive as against all potential claimants. Often, no parties are named, and the case is known by the name of the property at issue. Examples of in rem proceedings include forfeiture and eminent domain actions initiated by the government as well as quiet-title actions, usually initiated by a private party. In an in rem action, the court can extinguish interests in the property of persons who are outside of the forum or who are unknown. b. Due process 20 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... While in rem proceedings are commenced against property, they must still satisfy due process requirements for personal jurisdiction because they a ect the rights of individuals in the property. In general, for in rem jurisdiction to exist, the property at issue must be present within the forum state. Sha er v. Heitner, 433 U.S. 186 (1977). In rem jurisdiction can be challenged if the property is fraudulently brought into the state. Due process is met if the notice is “reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and a ord them an opportunity to present their objections.” Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950). It is not su cient to simply post the notice on the property or publish the notice in a newspaper as to persons who are known to have an interest in the property and whose whereabouts are reasonably ascertainable. Walker v. City of Hutchison, 352 U.S. 112 (1956). In addition, any absent defendant who does not personally receive notice may set aside the judgment at any time within one year of the nal judgment. 28 U.S.C. § 1655. 2. Quasi-In-Rem Jurisdiction a. De ned While a judgment in rem determines the interests of all persons in particular property, a quasi-in-rem judgment determines only the interests of the parties to the action regarding property located in the forum state. Traditionally, the judgment was not personally binding on the defendant, could not be sued upon in any other court, and could not be enforced by seizing any of the defendant’s property other than the property at issue in the quasi-in- rem action. b. Due process In a quasi-in-rem action, as with in rem and in personam actions, the defendant whose property is subject to the judgment generally must have su cient minimum contacts with the forum state to justify the exercise of personal jurisdiction over the matter. Sha er v. Heitner, 433 U.S. 186 (1977). As a consequence, a quasi-in-rem action either can be pursued as an in personam action due to satisfaction of the minimum contacts test or cannot be brought due to lack of personal jurisdiction over the defendant. When the action directly relates to property rights, such as the foreclosure of a mortgage or other lien, the minimum contacts requirement is satis ed because of the relationship between the claim and the property. Provided the owner of the property is given proper notice and an opportunity to be heard, the judgment is personally binding on the defendant. If the defendant chooses not to appear, the judgment of a federal district court is con ned to the property that is the subject of the action. 28 U.S.C. § 1655. When the underlying action does not relate to property rights, but the property instead serves only as the relief sought, such as in a breach of contract action in which the contract does not involve the in-state property, the minimum contacts requirement likely is not satis ed, and the court lacks personal jurisdiction to adjudicate the matter. c. Federal court’s jurisdiction In an action to determine ownership of real or personal property (e.g., removal of a cloud on the title to the property) or to enforce a lien against real or personal property when the property is located within the district, the federal district court has personal jurisdiction over the claimants to the property. 28 U.S.C. § 1655; Rule 4(n)(1). In other in rem or quasi-in-rem actions, jurisdiction can be obtained by a federal district court under the circumstances and in the manner provided by the law of the state in which the federal district court is located, but only if the federal district court, despite the existence of su cient minimum contacts, cannot acquire personal jurisdiction over the defendant by service of process under the federal rule (Rule 4). As a consequence, quasi-in-rem jurisdiction is generally limited to exigent circumstances, such as when the defendant is a fugitive or the property is in imminent danger of disappearing. Rule 4(n)(2). D. Notice and Opportunity to Be Heard Due process requires that deprivation of property by adjudication be preceded by notice and an opportunity for a hearing appropriate to the nature of the case. Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950). 1. Notice a. Due process Due process is met if the notice is “reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and a ord them an opportunity to present their objections.” Mullane, supra. 21 of 85 7/1/2024, 07:09 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... b. Form If the identity and address of an interested party are known or obtainable through reasonable e orts, then notice through in-person delivery, registered mail, return receipt requested, or some other means likely to notify the particular individual is required. Mennonite Bd. of Missions v. Adams, 462 U.S. 791 (1983). If the plainti knows that the defendant did not receive notice, then the plainti cannot proceed unless there are no other reasonable methods to notify the defendant. Jones v. Flowers, 547 U.S. 220 (2006). If the identity or address of an interested party is not obtainable through reasonable e orts, then other means, such as publication of notice in newspapers, may be satisfactory. The constitutional test is, generally, what is reasonable under the circumstances. The standards are less strict for in rem and quasi-in-rem cases than for in personam cases. When there are multiple defendants, each defendant must be served, but the manner of service will depend on whether their identities and addresses are known or unknown. In situations in which an agent is appointed, either by contract or by statute, the defendant will not be subject to personal jurisdiction if the agent did not advise the defendant of service of process. This rule does not apply when the defendant selects his own agent. c. Court rules Satisfying due process is not the only standard for the su ciency of notice. Both state and federal courts have procedural rules that dictate the form and service of process. While a particular form of notice may meet due process standards, it must also meet the speci c procedural requirements that govern in the court where the action is to be heard. Certi ed mail, for example, meets due process standards, but not every court system permits it to be used. 2. Opportunity to Be Heard In addition to requiring notice of the claim be