FederalCivilProcedure

A.BenjaminSpencer
AssociateProfessorofLaw,Washington&LeeUniversitySchoolofLaw

Washington&LeeUniversitySchoolofLawLexington,VA24450

FEDERALCIVILPROCEDURE

Federal Civil Procedure

Prof. A. Benjamin Spencer, Washington & Lee University School of Law

Introduction
These materials are intended to provide you with a general overview of the important elements of federal civil procedure that practitioners in the federal courts should be familiar with, as well as an update on some of the contemporary developments in the federal civil procedure area. Emphasis will be on precedent within Puerto Rico federal courts and the First Circuit, with recent important Supreme Court cases being discussed as well.

Part I: Jurisdiction & Venue

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1.

Personal Jurisdiction

Puerto Ricos Long-Arm StatuteRule 4.7 of the Puerto Rico Rules of Civil Procedure is interpreted as reaching to the constitutional limit. A.H. Thomas Co. v. Superior Court of Puerto Rico, 98 P.R.R. 864, 870 n.5 (1970) (holding that in personam jurisdiction extends to all cases where it is constitutionally permissible); see also Vencedor Mfg. Co. v. Gougler Indus., Inc., 557 F.2d 886, 889 (1st Cir. 1977). Specific Jurisdiction in Federal Courtto exercise specific jurisdiction, there are three requirements: First, the defendant must have purposeful minimum contacts with the state. Second, the exercise of jurisdiction must be reasonable under the circumstances, which is determined by reference to five gestalt factors. And finally, the

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plaintiff's claims must be related to the defendant's contacts in the forum state. Rivera Torres v. Resort World of Orlando, 359 F. Supp. 2d 31, 34 (D.P.R. 2005). 3. General Jurisdiction in Federal CourtThe assertion of general jurisdiction comports with due process when two criteria are met. First, there must be continuous and systematic general business contacts between the foreign defendant and the forum. Second, the plaintiff must show that the exercise of jurisdiction would be reasonable. U.S. v. Swiss American Bank, Ltd., 274 F.3d 610, 619 (1st Cir. 2001). Jurisdiction based on Internet ContactsThe mere existence of a website that is visible in a forum and that gives information about a company and its products is not enough, by itself, to subject a defendant to personal jurisdiction in that forum. Something more is necessary, such as interactive features that allow the successful online ordering of the defendants products. McBee v. Delica Co., Ltd., 417 F.3d 107 (1st Cir. 2005).

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B. 1.

Subject Matter Jurisdiction

Diversity Jurisdiction: 28 U.S.C. 1332 a. The Diversity of Citizenship Requirementordinary diversity jurisdiction requires that all adversaries be from different states (the complete diversity requirement). State citizenship is determined at the time of filing. As used in the diversity statute, the term state includes Puerto Rico. 1332(e). i. Determining Citizenship for Individuals Domicile. For purposes of diversity, a person is a citizen of the state in which he is domiciled. A persons domicile is the place where he has his true, fixed home and principal establishment, and to which, whenever he is absent, he has the intention of returning. Padilla-Mangual v. Pavia Hosp., 516 F.3d 29, 31 (1st Cir. 2008); Rodrguez-Daz v. Sierra-Martnez, 853 F.2d 1027, 1029 (1st Cir. 1988). Evidence of Intent. Factors relevant to determining a party's intent include: the place where civil and political rights are exercised, taxes paid, real and personal property (such as furniture and automobiles) located, driver's and other licenses obtained, bank accounts maintained, location of club and church membership and places of business or employment. Padilla-Mangual v. Pavia Hosp., 516 F.3d 29, 3132 (1st Cir. 2008).

ii. Determining Citizenship for CorporationsCorporate citizenship is based on their state of incorporation and their principal place of business. 28 U.S.C. 1332(c). A corporation can only have one PPB. The key question here is what is a corporations principal place of business? First Circuit Approach: Courts in the First Circuit must use either the nerve center test (headquarters) or the locus of operations test, depending on the characteristics of the corporation. The principal place of business should be the place where the corporation conducts the most activity that is visible and

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impacts the public, so that it is least likely to suffer from prejudice. DiazRodriguez v. Pep Boys Corp., 410 F.3d 56 (1st Cir. 2005). Nerve Center Test. The nerve center is described as the center of gravity . . . the place where most of the higher officers maintained offices, where the policy decisions were made, where the administrative departments were located, and where the last income tax return had been filed. The nerve center test applies only to far-flung corporations or corporations without physical operations. Topp v. CompAir Inc., 814 F.2d 830 (1st Cir. 1987). It should be used either where the corporation has no physical operations or where its activities are so diffuse or pervasive that no place readily comes up as distinctively dominant except the nerve center. Zamora Gonzalez v. Caribbean Sun Airlines, Inc., 2007 WL 2464508 (D.P.R. Aug. 8, 2007). Locus of Operations Test. The principal place of business of a corporation that has the bulk of its physical operations in one state is to be determined under the locus of operations test, even if the corporation's executive offices are in another state. The locus of operations test searches for the location of the corporations actual physical operations. Diaz-Rodriguez v. Pep Boys Corp., 410 F.3d 56 (1st Cir. 2005). It is inappropriate to use this test when only a small portion of a partys business operates within any given state. Soto-Velez v. BCBG Max Azria, Inc., 589 F. Supp. 2d 147 (D.P.R. 2008).

Supreme Court Approach: The Supreme Court has not announced the appropriate test for determining a corporations PPB for diversity jurisdiction purposes. However, this Term the Court heard Hertz Corp. v. Friend, 081107 (2009), a case in which this question was presented to the Court. The principal contenders were the nerve center or headquarters test and a multifactor aggregate activities test.

iii. Determining Citizenship for Unincorporated AssociationsThe citizenship of an unincorporated entity, such as a partnership or a limited liability company, is determined by the citizenship of all of its members. Pramco, LLC ex rel. CFSC Consortium, LLC v. San Juan Bay Marina, Inc., 435 F.3d 51 (1st Cir. 2006). iv. Determining Citizenship in Representative Actions: Class actions: The complete diversity requirement does not apply to absentee class members and is satisfied so long as the named plaintiffs are completely diverse from defendants. Supreme Tribe of Ben Hur v. Cauble, 255 U.S. 356, 365-67 (1921). Estates, Infants, and Incompetents: diversity of citizenship is determined based on the citizenship of the represented party, not the representative. 28 U.S.C. 1332(c)(2).

b. The Amount in Controversy Requirement. The diversity statute requires that the amount in controversy exceed $75,000 dollars between adversaries. Co-parties may not aggregate their claims to satisfy the jurisdictional amount nor may claims against

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multiple defendants be aggregated for that purpose. However, the supplemental jurisdiction statute will allow jurisdictionally insufficient claims gain jurisdiction on the basis of jurisdictionally sufficient claims asserted by co-parties joined under Rule 20 or Rule 23. c. The Class Action Fairness Act. CAFA requires only minimal diversity and the total amount in controversy must exceed $5,000,000 (claims may be aggregated). 28 U.S.C. 1332(d)(2), (6). There must be at least 100 members of the class to be eligible for CAFA jurisdiction. 28 U.S.C. 1332(d)(5)(B). 2. Federal Question Jurisdiction: 28 U.S.C. 1331. a. The Creation Test. Section 1331 extends federal jurisdiction to those [cases] in which federal law creates the cause of action, Merrell Dow Pharms. Inc. v. Thompson, 478 U.S. 804, 809 (1986). Alberto San, Inc. v. Consejo De Titulares Del Condominio San Alberto, 522 F.3d 1, 5 & n.5 (1st Cir. 2008). b. Substantial Federal Question (SFQ) Exception. There is a limited exception extending 1331 coverage to state law claims involving contested and substantial federal issues that implicate serious federal interest[s]. Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 313 (2005). Cambridge Literary Properties, Ltd. v. W. Goebel Porzellanfabrik G.m.b.H. & Co. KG., 510 F.3d 77 (1st Cir. 2007). 3. Removal Jurisdiction: 28 U.S.C. 1441 et seq. a. In General. Any case that would qualify for the original jurisdiction of a federal court may be removed to federal court from state court. The proper venue for removed cases is the federal district and division embracing the geographic area where the state court is located. b. Limitations. Diversity cases may not be removed if any defendant is from the forum state. Further, all defendants must agree to removal or the case is subject to remand. Only defendants may remove a case, and they must do so 30 days after service, or after notice of the case becoming removable. Parties have 30 days to seek a remand after the filing of a notice of appeal. c. Class Action Fairness Act (CAFA) Cases. Special removal provisions apply. Remand orders are immediately appealable at the discretion of the appeals court based on several factors including the unsettled nature of the question presented for review. College Of Dental Surgeons Of Puerto Rico v. Connecticut General Life Ins. Co., --- F.3d ----, 2009 WL 3384807 (1st Cir. Oct. 22, 2009). Also, defendant unanimity is not required for removal based on CAFA. Finally, the presence of a forum state defendant will not undermine the removability of a case based on CAFA.

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C. 1. Venue in General. 28 U.S.C. 1391.

Venue

a. Defendants Residence. Venue is proper in any district where any defendant resides, provided all defendants reside in the same state. b. Situs of Events or Property. Venue is also proper in any venue where a substantial part of the events or omissions giving rise to the action occurred, or where a substantial part of the property at issue in the action is located. c. Fallback Provision. If venue is unavailable under any of these methods, venue is proper in any district where any defendant is subject to personal jurisdiction. d. Aliens. Aliens may be sued in any judicial district. 28 U.S.C. 1391(d). 2. Change of Venue. 28 U.S.C. 1404, 1406. A case may be transferred to any judicial district where it might have been brought, if in the interest of justice (1404 & 1406) and for the convenience of the parties and witnesses (1404 only). Rivera-Carmona v. American Airlines, 639 F. Supp. 2d 194 (D.P.R. 2009) (agreeing with transfer from Puerto Rico to Southern District of Florida because events transpired there and witnesses and evidence were there). Enforcement of Forum Selection Clauses: Both federal and Puerto Rico law favor the enforcement of valid, freely negotiated forum-selection clauses. Rivera v. Centro Medico de Turabo, Inc., 575 F.3d 10 (1st Cir. 2009): a. Seeking Dismissal Based on a Forum Selection Clausethe First Circuit treats a motion to dismiss based on a forum selection clause as a motion alleging the failure to state a claim for which relief can be granted under Rule 12(b)(6). b. No Erie Issuesthe First Circuit has not resolved the unsettled issue of whether forum selection clauses are to be treated as substantive or procedural for Erie purposes because there is no conflict between federal common law and Puerto Rico law regarding the enforceability of forum-selection clauses. c. Permissive v. Mandatory Forum Selection ClausesUnder federal law, the threshold question in interpreting a forum selection clause is whether the clause at issue is permissive or mandatory. i. Permissive Clauses. Permissive forum selection clauses, often described as consent to jurisdiction clauses, authorize jurisdiction and venue in a designated forum, but do not prohibit litigation elsewhere. Rivera, 575 F.3d at 17.

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ii. Mandatory Clauses. Mandatory forum selection clauses contain clear language indicating that jurisdiction and venue are appropriate exclusively in the designated forum. A listing of causes of action prior to an expression of consent to litigation in a particular forum can be interpreted as creating a mandatory forum selection clause. Rivera, 575 F.3d at 1718.

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A mandatory forum selection clause carries a strong presumption of enforceability. Federal courts will enforce such clauses unless the resisting party can show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching ... [or that] enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision. Marrero v. Aragunde, 2009 WL 2621544 (1st Cir. 2009) (quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972)).

d. Scope. A matter must be within the scope of the forum selection clause for the clause to control. However, courts will not limit the scope of the clauses coverage to contract claims if the other claims are connected with or arise out of the contractual relationship. See, e.g., Banco Popular De Puerto Rico v. Airborne Group PLC, 882 F. Supp. 1212 (D.P.R. 1995) (If forum selection clauses are to be enforced as a matter of public policy, that same public policy requires that they not be defeated by artful pleading of claims such as negligent design, breach of implied warranty, or misrepresentation.... [W]here the relationship between the parties is contractual, the pleading of alternative noncontractual theories of liability should not prevent enforcement of such a bargain.).

Part II: Pleading & Joinder

A. Pleading 1. Supreme Court Precedent a. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Stating a sufficient claim for relief under Rule 8(a) requires the pleading of facts showing a plausible entitlement to relief. Conley v. Gibsons no set of facts standard, which indicated that a complaint may not be dismissed unless there are no set of facts that would entitle the pleader to relief was disapproved and retired. b. Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009). The tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. A claim must have facial plausibility, meaning the plaintiff pleads factual content that allows a court to draw a reasonable inference of liability. Where a complaint pleads facts that are merely consistent with a defendants liability, it stops short of the line between possibility and plausibility of entitlement to relief. 2. D. Puerto Rico. Rodriguez-Ramos v. Hernandez-Gregorat, No. 09-1603 (GAG), 2009 WL 3193229, at *3 (D. P.R. Oct. 2, 2009) ("In sum, when passing on a motion to dismiss the court must follow two principles: (1) legal conclusions masquerading as factual allegations are not entitled to the presumption of truth; and (2) plausibility analysis is a context-specific task that requires courts to use their judicial experience and common sense. In applying these principles, courts may first separate out merely conclusory pleadings, and then focus upon the remaining well-pleaded factual allegations to

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determine if they plausibly give rise to an entitlement to relief. Iqbal, 129 S. Ct. at 1950."). B. Joinder and Supplemental Jurisdiction 1. CounterclaimsRule 13(a) & (b) a. Compulsorya defending party must assert any claims that arise out of the same transaction or occurrence as an opposing partys claim. b. Permissivea defending party may assert any claim, related or unrelated, against parties asserting claims against them. 2. CrossclaimsRule 13(g): A party may assert claims against co-parties only if they arise out of the same transaction or occurrence as the original claim or a counterclaim, or if the crossclaim asserts derivative liability. Third-Party PracticeRule 14 a. Third-Party Claims. Defending parties may implead non-parties to assert derivative liability claims against them, meaning the nonparty is liable for all or part of the claim being asserted against the defending party. b. Claims by Third Parties. The ordinary counterclaim rules apply to third-party defendants. They also may assert related claims against the plaintiff. 4. Compulsory Party JoinderRule 19 a. Necessary Parties. A nonparty must be joined if their absence would prevent a court from granting complete relief, if the absent partys interest would otherwise be impaired, or if the absence of the nonparty would subject an existing party to a substantial risk of incurring multiple or inconsistent obligations. b. Indispensable Parties. A necessary party is indispensable if they cannot be joined due to personal jurisdiction or subject matter jurisdiction problems and the action cannot proceed in their absence. To determine whether the action can proceed, courts consider possible prejudice to existing parties or the nonparty, the ability to lessen the prejudice by shaping the relief in some way, the adequacy of the judgment in the nonpartys absence, and whether the plaintiff would have the ability to obtain an adequate remedy elsewhere in the event of a dismissal. 5. InterventionRule 24 a. Intervention of Right. A party has a right to intervene if they claim an interest in the action that would be impaired in their absence, unless they are adequately represented by existing parties. b. Permissive Intervention. A party may intervene, with the permission of the court, if they have a claim or defense that shares a common question of law or fact with the main action.

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6. Class ActionsRule 23 a. Types of Classes i. Incompatible StandardsRule 23(b)(1)(A): prosecuting separate actions by or against individual class members would create a risk of inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class.

ii. Limited FundRule 23(b)(1)(B): prosecuting separate actions by or against individual class members would create a risk of adjudications with respect to individual class members that, as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests. iii. Injunctive ReliefRule 23(b)(2): the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole. iv. Damages ClassRule 23(b)(3): the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, provided a class action is superior method of fairly and efficiently adjudicating the controversy. b. Certification Requirements: an group may sue or be sued as a class if the requirements of numerosity, commonality, typicality, and adequacy of representation are satisfied. 7. Supplemental Jurisdiction28 U.S.C. 1367. Federal courts may exercise jurisdiction over state law claims lacking their own basis for jurisdiction under the following circumstances: a. The supplemental claims derive from a common nucleus of operative fact as a claim that qualifies for federal jurisdiction, and b. If the qualifying claim is based on diversity jurisdiction only, claims by Rule 19 or Rule 24 plaintiffs may not be granted supplemental jurisdiction, nor may claims by plaintiffs against parties joined under Rules 14, 19, 20, or 24.

Part III: Discovery & Privilege

A. New Federal Rule of Evidence 502 1. Introduction. FRE 502 is a new rule designed to address the problem of inadvertent disclosure of privileged material during discovery by limiting the consequences of such a disclosure.

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2. Inadvertent Disclosure. Inadvertent disclosures in state or federal proceedings will not constitute a waiver of the privilege in other state or federal proceedings if the holder of the privilege took reasonable steps to prevent disclosure and the holder promptly took reasonable steps to rectify the error. Scope of Waiver. A subject matter waiver will result only if the disclosure was intentional and the disclosed and undisclosed material ought in fairness to be considered together. Court-Ordered Protection. If a court enters an order declaring that a disclosure does not constitute a waiver of the privilege, then it is not a waiver in any other federal or state proceeding. Agreements to this effect among the parties bind them only unless incorporated into a court order. B. Rule 26 Amendments In 2010, Rule 26 will be amended to change some aspects of expert discovery. Four principal changes are made: 1. Expert Disclosures a. Subject Matter Disclosure. First, for experts that are not subject to the formal report requirement, it requires disclosures stating the subject matter on which the witness is expected to present expert evidence and a summary of the facts and opinions to which the expert is expected to testify. b. Scope of Report Disclosures. it amends the text of Rule 26(a)(2)(B) to link the disclosures in the expert report to the facts or data considered by the expert instead of the data or other information considered by the expert. 2. Expanded Work-Product Protection a. Drafts. The amendments extend Rule 26(b)(3) work-product protection to draft reports. b. Communications. The amendments extend Rule 26(b)(3) work-product protection to some attorney-expert communications.

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