Chapter 2Traditional and Online

Dispute Resolution

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§1: Judiciary’s Role

Judiciary interprets and applies law to resolve disputes.Judicial Review is not mentioned in the Constitution but established in Marbury v. Madison (1803).Power of the court to “decide what the law is.” Process by which a court decides upon

constitutionality of legislative enactments and executive actions.

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§2: Basic Judicial Requirements

Jurisdiction—power of a court to decide a case.Personal Jurisdiction over people within a court’s geographical area.Long-Arm statutes give jurisdiction over non-

residents with “minimum contacts” with court’s geographical area.

Corporations: minimum contact if business is transaction within the area.

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Basic Judicial Requirements

In Rem Jurisdiction over property located within the court’s geographical area.Subject Matter Jurisdiction over particular types of cases.Defined by statute: Probate, bankruptcy,

divorce, etc.

Original and Appellate Jurisdiction.

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Basic Judicial Requirements

Federal Courts can exercise jurisdiction over cases involving: Federal QuestionsDiversity of Citizenship

• Parties from different states involving at least $75,000

Bankruptcy, patents and suits between states.

Concurrent jurisdiction with state courts.

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Jurisdiction in Cyberspace

Internet transcends geographical and political borders.Courts use the “sliding-scale” approach to determine jurisdiction.

Passive AdsE-Commerce Some Business

Yes NoDepends

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Basic Judicial Requirements

Venue—most appropriate location for a trial.Court balances parties interests.

Standing to Sue—plaintiff must have a legally protected and tangible interest which has been injured.

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§3: State and Federal Court Systems

State Supreme Court

State Appellate Courts

State Trial Courts

Municipal Courts

U.S. Supreme Court

U.S. Courts of Appeal

U.S. District Courts

U.S. SpecializedFederal Admin.

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§4: Alternative Dispute Resolution

Trials are a means of dispute resolution that are very expensive and sometimes take many months to resolve.There are “alternative dispute resolution” (ADR) methods to resolve disputes that are inexpensive, relatively quick and leave more control with the parties involved.

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ADRADR describes any procedure or device (including such internet sites as www.squaretrade.com ) for resolving disputes other than the traditional judicial process. Unless court-ordered, there is no record which is an important factor in commercial litigation due to trade secrets. Most common: negotiation, mediation, arbitration.

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Negotiation

Less than 10% of cases reach trial.Negotiation is informal discussion of the parties, sometimes without attorneys, where differences are aired with the goal of coming to a “meeting of the minds” in resolving the case.Successful negotiation involves thorough preparation, from a position of strength.

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Assisted Negotiation

Mini-Trial: Attorneys for each side informally present their case before a mutually agreed-upon neutral 3rd party (e.g., a retired judge) who renders a non-binding “verdict.” This facilitates further discussion and settlement.Expert evaluations.Conciliation: 3rd party assists in reconciling differences.

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Mediation

Involves a neutral 3rd party (mediator).Mediator talks face-to-face with parties (who typically are in different adjoining rooms) to determine “common ground.”Advantages: few rules, customize process,

parties control results (win-win).Disadvantages: mediator fees, no sanctions or

deadlines.

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ArbitrationMany labor contracts have binding arbitration clauses. Settling of a dispute by a neutral 3rd party (arbitrator) who renders a legally-binding decision; usually an expert or well-respected government official.

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Arbitration Disadvantages

Results may be unpredictable because arbitrators do not have to follow precedent or rules of procedure or evidence.Arbitrators do not have to issue written opinions.Generally, no discovery available.

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Arbitration Process

Case begins with a submission to an arbitrator. Next comes the hearing where parties present evidence and arguments. Finally, the arbitrator renders an award.Courts are not involved in arbitration unless arbitration clause in contract needs enforcement.

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ADR and Courts [2]

Court-related mediation.Summary jury trials.ADR and mass torts.

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§5: Online Dispute Resolution

ODR refers to the proces of resolving disputes using web-based technology.Squaretrade.com

ODR is being used more often by companies like Ebay.com to resolve disputes.Negotiation and mediation services.Cybersettle.com and Clicknsettle.com

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Case 2.1: Cole v. MiletiFACTS:Mileti, a California resident, produced a movie

“Streamers.”Mileti organized Streamers International

Distributors, Inc., (SIDI) to distribute the film.Cole, an Ohio resident, bought two hundred

shares of Streamers stock.Cole also lent SIDI $475,000, borrowed from

Equitable Bank of Baltimore. Streamers was unsuccessful.

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FACTS (cont’d)Mileti agreed to re pay Cole’s loan in a

contract arranged through phone calls and correspondence between California and Ohio. Mileti did not repay the loan.

Bank sued Cole, who in turn sued Mileti in a federal district court in Ohio.

The court entered a judgment against Mileti. Mileti appealed, arguing that the court had

no jurisdiction.

Case 2.1: Cole v. Mileti

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HELD: JUDGMENT AGAINST MILETI AFFIRMED. COURT HAD JURISDICTION.Sixth Circuit used a three-part test to determine whether a court has jurisdiction over a nonresident defendant:A defendant must conduct activities in the state in

which the suit is filed, The cause of action must arise from those

activities,, and Those activities or their consequences must have

a substantial connection to the state.

Case 2.1: Cole v. Mileti

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Case 2.2: International League Against Racism vs. Yahoo!, Inc.FACTS:Yahoo!, Inc., had items for sale that

included Nazi memorabilia which was against the law in France.

Plaintiff sued Yahoo in French court seeking injunctive relief and damages.

The court ordered Yahoo to block access by persons in France or French territory to the Nazi items.

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FACTS (cont’d): Yahoo argued the court did not have jurisdiction

and that even if it did, Yahoo could not technically do the blocking.

HELD: AFFIRMED. Jurisdiction is based on Yahoo’s awareness “that

it is addressing French parties because upon making a connection to its auctions site from a terminal located in France it responds by transmitting advertising banners written in the French language.”

Case 2.2: International League Against Racism vs. Yahoo!, Inc.

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Case 2.3: Circuit City v. AdamsFACTS:Adams applied for a job at Circuit Ciy.She signed an employment application containing

a clause requiring the arbitration of any federal or state employment-related disputes.

Adams was hired as a sales counselor in a Circuit City store in Santa Rosa, California.

Later, Adams sued Circuit City filed a suit in a California alleging employment discrimination in violation of state law.

Circuit City then sued Adams in a federal court, asking the court to compel arbitration of Adams’s claim.

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FACTS (cont’d)Adams defended the suit by arguing that

Section 1 of the Federal Arbitration Act (FAA) excluded all em ployment contracts.

The court entered an order in favor of Circuit City.

Adams appealed to the Ninth Circuit, which reversed the trial court, excluding employment contracts from the FAA. Circuit City appeal to the U.S. Supreme Court.

Case 2.3: Circuit City v. Adams

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HELD: REVERSED. FAA applies to most employment contracts.The Supreme Court found that the federal

appellate court’s decision to exclude all employment contracts was inconsistent with the Court’s previous decisions. The Court also reasoned that “[c]onstruing [interpreting] the residual phrase to exclude all employment contracts fails to give independent effect to the statute’s enumeration of the specific categories of workers which precedes it….”

Case 2.3: Circuit City v. Adams