Based on the Milestone One Template, the fact pattern, and the questions in the
assignment, here are the important concepts for your Milestone One paper:
Please remember that having this information will be very helpful. But, you MUST
apply the law to the facts of the case for every section of your paper!
• Subject matter jurisdiction
• Personal jurisdiction
• Long arm statute
• Minimum contacts
• Stream of commerce
• Concurrent jurisdiction
• Federal jurisdiction – diversity of citizenship
• How do these jurisdiction concepts apply to the facts of the case?
Subject matter jurisdiction:
Subject matter jurisdiction deals with the limitations on the types of cases a particular court can hear. In the federal and state court systems, there are courts of general (unlimited) jurisdiction and courts of limited jurisdiction. For instance, a court of general jurisdiction is a state trial court or a federal district court (the federal version of a trial court). The courts can hear cases involving many different issues. On the other hand, a court of limited jurisdiction can hear specific types of cases. For example, state probate courts and federal bankruptcy courts handle specific types of cases.
Personal jurisdiction/long arm statute/minimum contacts/stream of commerce:
One jurisdiction requirement is that a particular court must have jurisdiction over the person (or company) against whom the suit is brought (the defendant). This is known as in personam jurisdiction or personal jurisdiction. A corporation is normally subject to personal jurisdiction in the state in which it is incorporated, has its principal office, and/or is doing business.
Under the authority of the state’s long arm statute, a court can have personal jurisdiction over out-of-state defendants based on activities that took place within the state. It must be shown that the defendant had sufficient contacts, or minimum contacts, with the state to justify jurisdiction.
A court will apply the “minimum-contacts” test to determine if it can exercise jurisdiction over out-of-state corporations. This requirement is usually met if the corporation advertises or sells its products within the state, or places its goods into the “stream of commerce” with the intent that the goods will be sold in the state.
When both federal and state courts have the power to hear the same case, concurrent jurisdiction exists. For instance, a lawsuit involving diversity of citizenship is considered a case with concurrent jurisdiction. On the other hand, when a case can be brought only in state courts or only in federal courts, exclusive jurisdiction exists.
Where there is concurrent jurisdiction, there may be several factors that a party may consider when deciding to go to state or federal court. For instance, there may be an availability of different remedies, a difference in distance to the respective courthouses, or the experience or reputation of a particular judge.
Federal jurisdiction – diversity of citizenship:
Federal courts have jurisdiction if (1) a federal question is involved, such as a person’s
rights under the U.S. Constitution, a treaty, or a federal law, or (2) if there is diversity of
citizenship between the parties.
To bring a case to federal court under the diversity of citizenship theory, both of the
following are required: (1) the plaintiff and defendant must be residents of different
states, and (2) the dollar amount in controversy must exceed $75,000.
A corporation is a citizen of both the state in which it is incorporated and the state in
which its principal place of business is located.
• Definition of ADR
• How ADR applies to the case
Definition of ADR:
The term ADR refers to the resolution of legal disputes through methods other than litigation. The primary methods of ADR include: (1) Negotiation—an informal bargaining process, with or without lawyers, to try to solve a dispute; (2) Mediation—disputing parties select a neutral party to help facilitate communication and suggest ways for the parties to solve their dispute; and (3) Arbitration—an ADR method in which a neutral third party, known as an arbitrator, hears both parties’ cases and renders a binding decision.
ADR in general relieves the parties from the stress and trepidation of going through the court process to obtain a decision.
One advantage of ADR is it alleviates the courtroom dockets. A second advantage is
ADR’s ability to work internationally. Finally, Congress also supports ADR. One
disadvantage, however, is each side usually must give up something they desire to reach
the agreement through ADR.
C. Arbitration and Mediation
• Pros and cons of arbitration and how they apply to the parties in the case
• Arbitration agreement – did they consent to signing – did they sign?
• Mediation and how it could apply to the case
Pros and Cons of Arbitration:
Arbitration is a more formal method of Alternative Dispute Resolution (ADR). The arbitrator is either a neutral third party or a panel of experts that hears a dispute and imposes a resolution on the parties involved. The characteristic that makes arbitration different from other forms of ADR is that the third-party hearing the dispute makes a decision for the parties! The decision can be either binding or nonbinding depending on the agreement between the parties.
• Parties to arbitration choose an arbitrator. The Federal Mediation and Conciliation Services (government agency) or American Arbitration Association (private nonprofit organization) are available to help.
• Arbitration hearings are similar to trials, except arbitrators are more active than judges, there is no official written record of the hearing, rules of evidence are relaxed, and arbitrators are not as constrained by precedent as are judges.
• An arbitrator’s decision is legally binding, and is rarely set aside.
• A binding arbitration clause is a provision in a contract that mandates that all disputes arising under the contract must be settled by arbitration.
• A submission agreement is a contract providing that a specific dispute will be resolved through arbitration.
Advantages of arbitration are: it is more efficient than litigation, parties have some control over the process, parties can choose an arbitrator with particular expertise, arbitrators can be flexible. Critics of arbitration say it is not always efficient, injustices can occur, some people give up their right to litigate and this can be a mistake, it is becoming more like litigation, privacy might allow some companies to hide.
Mediation—disputing parties select a neutral party to help facilitate communication and suggest ways for the parties to solve their dispute. A big advantage to mediation is that it is less adversarial than litigation.
• Agreements are put into the form of a contract, which is enforceable.
• Mediation is confidential.
• Mediation is good for parties that must maintain a working relationship. It also allows for creative solutions. Parties have a high level of autonomy.
• Mediation is not good when one party is more powerful than the other. Sometimes, parties enter into mediation in bad faith. They may want to drag out the dispute, e.g., mediate, knowing they will then go to court.
• Mediation is often used in employment and environmental disputes.
D., E., and F. Corporate criminal liability
• Definition of Fraud
• Who may be responsible for fraud and why?
• Fraudulent concealment??
• Responsible corporate officer doctrine
• Other possible defendants and/or crimes in the case with elaboration/explanation
• Other possible crimes besides fraud?
Definition of Fraud:
Fraud—encompasses a variety of means by which an individual intentionally uses some sort of misrepresentation to gain advantage over another person.
Criminal fraud encompasses a variety of means by which an individual intentionally
uses misrepresentation to gain an advantage over another. Fraud generally requires the
following three elements: (1) a material false representation made with intent to deceive
(scienter), (2) a victim’s reasonable reliance on the false representation, and (3)
damages. Under both federal and state statutes, schemes to defraud include credit card
fraud, insurance fraud, and securities fraud.
False pretenses: A designed misrepresentation of existing facts or conditions by which
a person obtains another’s money or goods, such as the writing of a worthless check.
Fraudulent concealment: The suppression of a material fact that a person is legally
bound to disclose.
Mail fraud: The use of mail to defraud the public.
Telemarketing fraud: Any scheme, including cramming and slamming, that uses the
telephone to commit a fraudulent act.
Responsible corporate officer doctrine
Corporate executives may also be personally liable for a business crime, regardless of
whether it was committed for their personal benefit or that of the corporation. Under the
“responsible corporate officer” doctrine, a court may assess criminal liability even on a
corporate executive or officer who did not engage in, direct, or know about a specific
As a general rule, when a lower-level employee commits a crime, she or he will be
individually liable for the crime, and under the responsible corporate officer doctrine, the
employee’s manager, and any other corporate official who could have prevented the
crime, can also be held vicariously liable for the crime.
Under the responsible corporate officer doctrine, a court may impose criminal liability on
a corporate officer who merely knew about a given criminal violation.
Corporate directors and officers are personally liable for the crimes they commit, regardless of whether the crimes were committed for their private benefit or on the corporation’s behalf. In addition, corporate directors and officers may be held liable for the actions of employees under their supervision. Under the responsible corporate officer doctrine, a court may impose criminal liability on a corporate officer who participated in, directed, or merely knew about a given criminal violation!
When a crime is committed to benefit a corporation, who can be liable for the crime?
• Corporations as legal entities can be held liable for crimes committed on behalf of the corporation.
• Corporate officers and managers can be held liable for crimes committed on behalf of the corporation.
Directors and officers are exposed to liability on many fronts! They can be held liable for
negligence in certain circumstances and they may also be held liable for crimes and
torts committed by themselves or by corporate employees under their supervision (as
we have seen). They may also be held personally liable for violating certain statutes,
such as environmental and consumer protection laws. Certainly, they have a lot of
responsibility to act in an ethical manner!
Mail and Wire Fraud:
There are federal laws that prohibit mail fraud and wire fraud. Under these laws, it is a
federal crime to devise any scheme that uses U.S. mail, commercial carriers, or wire
(telegraph, telephone, television, the Internet, email) with the intent to defraud the
public. These laws often come into play when persons send out advertisements or
emails with the intent to fraudulently obtain case or property by false pretenses.
•Three key elements of ethical decision-making
•How each element of ethical decision-making applies to some of the case facts
Classical ethical guidelines such as the golden rule, public disclosure test, and
universalization test always provides some sort of guidance for a course of action if you
are dealing with an ethical dilemma. Meanwhile, the WPH approach provides a practical
set of rules for thinkers to follow as they sort out how to respond to an ethical dilemma.
The WPH framework provides practical steps for responding to an ethical dilemma.
• W: Whom would the decision affect? o stakeholders: assorted groups of people affected by the firm’s decisions, e.g.,
owners or shareholders, employees, customers, management, general community, future generations.
• P: Purpose—What are the ultimate purposes of the decision? o Which values are being upheld by the decision? o Values are positive abstractions that capture our sense of what is good or
desirable. o Four important values often influence business decisions: freedom (to act
without restriction from rules imposed by others), security (to be safe from those wishing to interfere with your interests), justice (to receive the products of your labor), and efficiency (to get the most from a particular output).
• H: How do we make ethical decisions? o We use classical ethical guidelines, such as these: o The Golden Rule—“Do unto others as you would have done to you.” o Public Disclosure Test—Suppose your decision would be published in the
newspaper. o Universalization Test—If I take action X, were others to follow my example,
would the world be a better place?