CHAPTER 3
QUESTIONS
1. On June 15, a newspaper columnist predicted that the coast of State X would be flooded on the following September 1. Relying on this pronouncement, Gullible quit his job and sold his property at a loss so as not to be financially ruined. When the flooding did not occur, Gullible sued the columnist in a State X court for damages. The court dismissed the case for failure to state a cause of action under applicable State law. On appeal, the State X Supreme Court upheld the lower court. Three months after this ruling, the State Y Supreme Court heard an appeal in which a lower court had ruled that a reader could sue a columnist for falsely predicting flooding.
a. Must the State Y Supreme Court follow the ruling of the State X Supreme Court as a matter of stare decisis?
b. Should the State Y lower court have followed the ruling of the State X Supreme Court until the State Y
Supreme Court issued a ruling on the issue?
c. Once the State X Supreme Court issued its ruling, could the U.S. Supreme Court overrule the State X Supreme Court?
d. If the State Y Supreme Court and the State X Supreme Court rule in exactly opposite ways, must the U.S. Supreme Court resolve the conflict between the two courts?
2. State Senator Bowdler convinced the legislature of State Z to pass a law requiring all professors to submit their class notes and transparencies to a board of censors to be sure that no “lewd” materials were presented to students at State universities. Professor Rabelais would like to challenge this law as violating his First Amendment rights under the U.S. Constitution.
a. May Professor Rabelais challenge this law in the State Z courts?
b. May Professor Rabelais challenge this law in a Federal district court?
3. While driving his car in Virginia, Carpe Diem, a resident of North Carolina, struck Butt, a resident of Alaska. As a result of the accident, Butt suffered more than $80,000 in medical expenses. Butt would like to know, if he personally serves the proper papers to Diem, whether he can obtain jurisdiction against Diem for damages in the following courts:
a. Alaska State trial court
b. U.S. Court of Appeals for the Ninth Circuit (includes Alaska)
c. Virginia State trial court
d. Virginia Federal district court
e. U.S. Court of Appeals for the Fourth Circuit (includes Virginia and North Carolina)
f. Virginia equity court
g. North Carolina State trial court
4. Sam Simpleton, a resident of Kansas, and Nellie Naive, a resident of Missouri, each bought $85,000 in stock at local offices in their home States from Evil Stockbrokers,
Inc. (“Evil”), a business incorporated in Delaware, with its principal place of business in Kansas. Both Simpleton and Naive believe that they were cheated by Evil Stock- brokers and would like to sue Evil for fraud. Assuming that no Federal question is at issue, assess the accuracy of the following statements:
a. Simpleton can sue Evil in a Kansas State trial court.
b. Simpleton can sue Evil in a Federal district court in Kansas.
c. Naive can sue Evil in a Missouri State trial court.
d. Naive can sue Evil in a Federal district court in Missouri.
5. The Supreme Court of State A ruled that under the law of State A, pit bull owners must either keep their dogs fenced or pay damages to anyone bitten by the dogs. Assess the accuracy of the following statements:
a. It is likely that the U.S. Supreme Court would issue a writ of certiorari in the “pit bull” case.
b. If a case similar to the “pit bull” case were to come before the Supreme Court of State B in the future, the doctrine of stare decisis would leave the court no choice but to rule the same way as the “pit bull” case.
6. The Supreme Court of State G decided that the U.S. Constitution requires professors to warn students of their right to remain silent before questioning the students about cheating. This ruling directly conflicts with a decision of the U.S. Court of Appeals for the circuit that includes State G.
a. Must the U.S. Circuit Court of Appeals withdraw its ruling?
b. Must the Supreme Court of State G withdraw its ruling?
C A S E P R O B L E M S
7. Thomas Clements brought an action to recover damages for breach of warranty against defendant Signa Corporation. (A warranty is an obligation that the seller of goods assumes with respect to the quality of the goods sold.)
Clements had purchased a motorboat from Barney’s Sporting Goods, an Illinois corporation. The boat was manufactured by Signa Corporation, an Indiana corporation with its principal place of business in Decatur, Indiana. Signa has no office in Illinois and no agent authorized to do business on its behalf within Illinois.
Clements saw Signa’s boats on display at the Chicago Boat Show. In addition, literature on Signa’s boats was distributed at the Chicago Boat Show. Several boating magazines, delivered to Clements in Illinois, contained advertisements for Signa’s boats. Clements also had seen Signa’s boats on display at Barney’s Sporting Goods Store in Palatine, Illinois, where he eventually purchased the boat. A written warranty issued by Signa was delivered to Clements in Illinois. Although Signa was served with a summons, it failed to enter an appearance in this case. The court entered a default order and, subsequently, a judgment of $6,220 against Signa. Signa appealed. Decision?
8. Mariana Deutsch worked as a knitwear mender and attended a school for beauticians. The sink in her apartment collapsed on her foot, fracturing her big toe and making it painful for her to stand. She claims that as a consequence of the injury she was compelled to abandon her plans to become a beautician because that job requires long periods of standing. She also asserts that she was unable to work at her current job for a month.
She filed a tort claim against Hewes Street Realty for negligence in failing to maintain the sink properly.
She brought the suit in Federal district court, claiming damages of $25,000. Her medical expenses and actual loss of salary were less than $1,500; the rest of her alleged damages were for loss of future earnings as a beautician. Hewes Street moved to dismiss the suit on the basis that Deutsch’s claim fell short of the jurisdictional requirement, which then was $10,000, and that the Federal court therefore lacked subject matter jurisdiction over her claim. Decision?
9. Vette sued Aetna under a fire insurance policy. Aetna moved for summary judgment on the basis that the pleadings and discovered evidence showed a lack of an insurable interest in Vette. (An “insurable interest” exists where the insured derives a monetary benefit or advantage from the preservation or continued existence of the property or would sustain an economic loss from its destruction.) Aetna provided ample evidence to infer that Vette had no insurable interest in the contents of the burned building. Vette also provided sufficient evidence to put in dispute this factual issue. The trial court granted the motion for summary judgment. Vette appealed. Decision?
10. Mark Womer and Brian Perry were members of the U.S. Navy and were stationed in Newport, Rhode Island. On April 10, Womer allowed Perry to borrow his automo- bile so that Perry could visit his family in New Hamp- shire. Later that day, while operating Womer’s vehicle, Perry was involved in an accident in Manchester, New Hampshire. As a result of the accident, Tzannetos Tavoularis was injured. Tavoularis brought action against Womer in a New Hampshire superior court, contending that Womer was negligent in lending the
automobile to Perry when he knew or should have known that Perry did not have a valid driver’s license.
Womer sought to dismiss the action on the ground that the New Hampshire courts lacked jurisdiction over him, citing the following facts: (a) he lived and worked in Georgia, (b) he had no relatives in New Hampshire, (c) he neither owned property nor possessed investments in New Hampshire, and (d) he had never conducted business in New Hampshire. Did the New Hampshire courts have jurisdiction?
11. Kenneth Thomas brought suit against his former employer, Kidder, Peabody & Company, and two of its
employees, Barclay Perry and James Johnston, in a dispute over commissions on sales of securities. When he applied to work at Kidder, Peabody & Company, Thomas had filled out a form, which contained an arbitration agreement clause. Thomas had also registered with the New York Stock Exchange (NYSE). Rule 347 of the NYSE provides that any controversy between a registered representative and a member company shall be settled by arbitration. Kidder, Peabody & Company is a member of the NYSE. Thomas refused to arbitrate, relying on Section 229 of the California Labor Code, which provides that actions for the collection of wages may be maintained “without regard to the existence of any private agreement to arbitrate.” Perry and Johnston filed a petition in a California State court to compel arbitration under Section 2 of the Federal Arbitration Act. Should the petition of Perry and Johnston be granted?
12. Steven Gwin bought a lifetime Termite Protection Plan for his home from the local office of Allied-Bruce, a franchisee of Terminix International Company. The plan provided that Allied-Bruce would “protect” Gwin’s house against termite infestation, reinspect periodically, provide additional treatment if necessary, and repair damage caused by new termite infestations. Terminix International guaranteed the fulfillment of these contractual provisions. The plan also provided that all disputes arising out of the contract would be settled exclusively by arbitration. Four years later Gwin had Allied-Bruce reinspect the house in anticipation of selling it. Allied-Bruce gave the house a “clean bill of health.” Gwin then sold the house and transferred the Termite Protection Plan to Dobson. Shortly thereafter, Dobson found the house to be infested with termites. Allied-Bruce attempted to treat and repair the house, using materials from out of state, but these efforts failed to satisfy Dobson. Dobson then sued Gwin, Allied- Bruce, and Terminix International in an Alabama state court. Allied-Bruce and Terminix International asked for a stay of these proceedings until arbitration could be carried out as stipulated in the contract. The trial court refused to grant the stay. The Alabama Supreme Court upheld that ruling, citing a state statute that makes pre-dispute arbitration agreements unenforceable. The court found that the Federal Arbitration Act, which preempts conflicting state law, did not apply to this contract because its connection to interstate commerce was too slight. Was the Alabama Supreme Court correct? Explain.
13. Eddie Lee Howard and Shane D. Schneider worked for Nitro-Lift Technologies LLC. As a condition of employment, they entered into confidentiality and non-competition agreements that contained a clause requiring any dispute between Nitro-Lift and its employees to be settled in arbitration. After working for Nitro-Lift on wells in Oklahoma, Texas, and Arkansas, the plaintiffs quit and began working for one of Nitro-Lift’s competitors. Claiming that the plaintiffs had breached their noncompetition agreements, Nitro-Lift served them with a demand for arbitration. The plaintiffs then filed suit in the District Court of Johnston County, Oklahoma, asking the court to declare the noncompetition agreements null and void and to enjoin their enforcement. The court dismissed the complaint,finding that the contracts contained valid arbitration clauses under which an arbitrator, and not the court, must settle the parties’ disagreement. On appeal, the Oklahoma Supreme Court reversed, holding that despite the “[U.S.] Supreme Court cases on which the employers rely,” the “existence of an arbitration agreement in an employment contract does not prohibit judicial review of the underlying agreement.” Finding that the arbitration clauses were no obstacle to its review, the Oklahoma Supreme Court held that the noncompetition agreements were “void and unenforceable as against Oklahoma’s public policy,” expressed in an Oklahoma statute. Did the Oklahoma Supreme Court err in preventing the arbitration of the noncom- petition agreement?
14. Llexcyiss Omega and D. Dale York, both residents of Indiana, jointly listed a Porsche automobile for sale on eBay, a popular auction Website. The listing stated that the vehicle was located in Indiana and that the winning bidder would be responsible for arranging and paying for delivery of the vehicle. The Attaways, residents of Idaho, entered a bid of $5,000 plus delivery costs.
After being notified that they had won the auction, the Attaways submitted payment to Omega and York through PayPal (an online payment service owned by eBay), which charged the amount to the Attaways’ MasterCard account. The Attaways arranged for Car-Hop USA, a Washington-based auto transporter, to pick up the Porsche in Indiana and deliver it to their Idaho residence. After taking delivery of the Porsche, the Attaways filed a claim with PayPal, asking for a refund of its payment to Omega and York because the Porsche was “significantly not-as-described” in its eBay listing. PayPal informed the Attaways via email that their claim was denied. The Attaways convinced MasterCard to rescind the payment that had been made to Omega and York. Omega and York filed suit against the Attaways in small claims court in Indiana, demanding $5,900 in damages. Explain whether the Indiana courts have jurisdiction over the Attaways.
TAKINGSIDES
John Connelly suffered personal injuries when a tire manufactured by Uniroyal failed while his 1969 Opel Kadett was being operated on a highway in Colorado. Connelly’s father had purchased the automobile from a Buick dealer in Evan-ston, Illinois. The tire bore the name “Uniroyal” and the legend “made in Belgium” and was manufactured by Uni- royal, sold in Belgium to General Motors, and subsequently installed on the Opel when it was assembled at a General Motors plant in Belgium. The automobile was shipped to the United States for distribution by General Motors. It appears that between 1968 and 1971, more than four thousand Opels imported into the United States from Antwerp, Belgium, were delivered to dealers in Illinois each year; that in each of those years, between 600 and 1,320 of the Opels delivered to Illinois dealers were equipped with tires manufactured by Uniroyal; and that the estimated number of Uniroyal tires mounted on Opels delivered in Illinois within each of those years ranged from 3,235 to 6,630. Connelly brought suit in Illinois against Uniroyal to recover damages for personal injuries. Uniroyal asserted that it was not subject to the jurisdiction of the Illinois courts because it is not registered to do business and has never had an agent, an employee, a representative, or a salesperson in Illinois; that it has never possessed or controlled any land or maintained any office or telephone listing in Illinois; that it has never sold or shipped any products into Illinois, either directly or indirectly; and that it has never advertised in Illinois.
a. What arguments could Connelly make in support of its claim that Illinois courts have jurisdiction over Uniroyal?
b. What arguments could Uniroyal make in support of its claim that Illinois courts do not have jurisdiction over it?
c. Who should prevail? Explain.
