Class 8 - Answer to Question # 2 1-09-07 - question-2

Answer to Question #2

CHTs First Motion 12b2–No IPJ

Substantive due process under the 5th and 14th Amendments must be analyzed under Shoe and its progeny. In determining if a non-resident may be amendable to suit in a distant forum you must look at two factors: 1) Is there an applicable long-arm that grants the state power to bring in a non-resident defendant, and 2) would it comport with constitutional notions of due process?

Nothing under these facts suggests the existence of a long-arm. States generally need statutory authority to make non-resident defendants amenable to suit. Assuming that there is an applicable long arm: either a 2 step that is statutorily on point or a 1 arm that allows service out to due process limits, then the next issue is due process.

Since the 1945 Shoe decision, courts have required that minimum contacts between the non-resident defendant and forum state be present. A subsequent line of case has added additional elements courts will balance in determining whether bringing the non-resident defendant into the forum would conform with traditional notions of fair play and substantial justice.

The factors that courts look at are:

1. Minimum contacts (Shoe)

2. Purposeful availment (Denckla)

3. Reasonable anticipation (WWVW)

Under a minimum contacts analysis, courts examined the quantity and quality of contacts with the forum state and the connection of the contacts with the cause of action. Here, the facts don't allude to many minimum contacts. The corporation is incorporated in NY. Nothing about offices or branches in Florida. However, it is not a very far stretch to assume that many retired customers live in Florida. Moreover, the fact that Pam and Donna live in Florida and that the case of action is related to the Florida contact (distribution of money to Donna) makes a fairly strong case for at least some minimum contacts.

The courts will also examine whether CHT purposefully availed itself to the forum state's laws, services or other benefits. Not a lot of facts here, but again, it is no great stretch to assume that CHT benefits from the forum state's laws with respect to any customers in Florida (there are at least two). CHT will no doubt argue that the purposeful availment argument is weak in that Pam and Donna moved, on their own volition, to the forum state. Thus, hardly evidencing any purposeful availment on the part of the CHT. A court will have to balance both sides of the argument. However, assuming that CHT was more than just Donna and Pam as customers, a court will likely find that CHT had, at some level, purposefully availed itself to benefits of Florida.

A third factor courts examine is whether CHT could reasonably anticipate being hailed into the distant forum. Since Pam and Donna are customers, and have kept in touch with CHT while in Florida, CHT had at least some notice that Florida may be a forum state. Moreover, assuming existence of many retired customers in Florida, perhaps this argument becomes stronger.

Obviously CHT will argue strongly against the reasonable anticipation factor. The fact that Pam and Donna reside (not clear if they are) in Florida does not make CHT amenable to suit there! This argument carries even greater weight when one considers the fact that the original contact/executorship was executed in NY!

This issue of constitutional fairness and substantial justice is a close call. However, given a totality of the factor, a court would likely conclude that CHT is amenable to suit in Florida. That is, requiring CHT to defend in Florida wold not violate contemporary constitutional notions of due process, fair play and substantial justice under international Shoe and its progeny.

CHTs 12(b3) Motion

Under 28 USC Section 1391, a corporation may be amenable to suit in any venue where in personam jurisdiction is acquired. That is, venue is proper if IPJ can be established over the defendant corporation. (Different if an individual. Under Section 1391, a venue is proper where: 1) all defendants reside (not domicile), and 2) substantial part of cause of action arose.

If CHT lawyer is attacking on grounds that Pam's choice of venue under Florida statute is inconsistent with Federal Procedural Law, then this is an Erie doctrine choice of law issue.

Under Erie, Federal courts will apply the state's substantive law, that is, the forum state's sub-statute law will govern (actually state's conflict of law under Klaxxon).

In issues of procedural law, the first step is to see if there is a FRCP that is on point. That is, one that does not meet any extrapolation to fit circumstance (Hanna). Here, FRCP does not establish any venue requirements.

The next step is to determine if the choice of state/Federal procedural law would be outcome determinative (York). Here the choice is between Section 1391 and Florida statute. Section 1391 would allow venue with respect to a corporation (but not with an individual). Florida statute would also allow venue. Thus, there does not appear to be an outcome determinative type of difference. However, a court might conclude otherwise.

Assuming that the competing procedural laws are outcome determinative that the Federal court will balance the competing state and Federal interests with respect to the procedural laws (Byrd).

Under a Byrd balancing test, the Florida statute would be given some weight since Florida has at least some interest in how venue is applied within the state borders. However, it appears that since Congress has enacted a statute under title 28 of the code (Section 1391), the Federal interest is overwhelming and likely to crush any competing state interest.

While it is not clear whether the 12(b3) motion will succeed, since Section 1391 allows this venue with respect to a corporation (CHT is a NY corporation), it is apparent that if a choice of law problem is balanced by the court (via York, Byrd) the strong Federal interest in the applicable procedural law will prevail.

CHT's 12b7 Motion to Dismiss–Failure to Join Necessary Party

CHT's 12b7 motion will compel the court to examine whether Donna is a necessary party under FRCP 19(a). Under FRCP 19(a) a court will require Pam to join Donna if she is necessary for complete adjudication or if Donna's rights would be prejudiced in her absence.

Donna's presence is probably required to completely adjudicate the claim. She has evidence as to whether her case was actually one of hardship. Moreover, she probably has some interest as a beneficiary of the will, such that she should be present if feasible.

The next step is to determine if Donna's joinder is feasible. The first thing to look at is whether Donna's joinder would destroy diversity (this is a state claim, so I assume that Pam's case is predicated on Section 1332). If Pam is domiciled in Florida (must be if court has SMJ), diversity would be destroyed if Donna's domicile was NY (same as CHT). The facts suggest that Donna was domiciled in NY. That domicile controls unless Donna shows simultaneous presence and intent to move to another state.

Under the current facts, Donna was retired in Florida, thus implying that she was the simultaneous presence and intent to make Florida her domicile. Thus, Donna's joinder under FRCP 19(a) appears feasible. Since Donna's joinder is feasible, a court will not allow the case to go forward until/unless Pam amends her complaint (under FRCP 15) to include Donna.

If a court found that Donna's joinder was not feasible, then the next step would be to determine whether the case could go forward without her presence.

The courts apply the equity and good conscience test to determine if Pam's suit may proceed (in the face of a 12b7 attack) without Donna. Under FRCP 19(b), the court will examine whether:

1) Can relief be shaped so as to adjudicate the matter at least partially? Here, a court could probably determine CHT's liability for failing to properly substantiate Donna's claimed hardship without Donna's presence. The court could look at outside evidence and just adjudicate the matter on the evidence it has in its possession.

2) Will adjudication prejudice Donna? Under the current facts, a court could probably adjudicate the matter without impacting Donna's rights to the will, trust or other liability. The court could adjudicate the matter in such a way to allow Pam to litigate her case without Donna's presence.

3) Would Pam have adequate relief if Donna was deemed indispensable? Pam would likely have adequate relief otherwise, either through a state action or perhaps by suing Donna directly for (but note that none of these factors are , it is a balancing-"minimum contacts"-type of totality test).

4) Equity and Good Conscience: A court could in equity and good conscience allow the case to go forward without Donna, since she likely would not be prejudiced or severely impacted by the outcome. And relief can be shaped in her absence to adjudicate the matter, at least partially.

In conclusion, a court would likely rule that CHT's 12(b2) motion should be dismissed since minimum contacts under Shoe and its progeny may be established.

CHT's 12(b3) motion should be denied since under the Section 1391 general venue statute, the chosen venue is proper with respect to a corporate defendant (so long as IPJ is established).

CHT's 12(b7) motion to dismiss should be granted with leave to amend. That is, if Pam amends the complaint under FRCP (15a) to include Donna, then case may go forward.