This Document Contains Chapters 1 to 4 Chapter 1 Critical Thinking and Legal Reasoning Introduction Chapter One is the most important chapter in the text. This chapter is important because it presents the framework for studying the legal environment of business that not only increases students’ understanding of significant legal ideas, but also promotes critical thinking. This chapter addresses these questions: • Why is critical thinking important? • What is the critical thinking model the text asks instructors to apply throughout the book? • What are the various steps involved in the critical thinking process? • How does critical thinking invigorate legal reasoning? • How should the critical thinking approach be used while dealing with cases? Achieving Teaching Excellence Understanding the Importance of Evaluation Kubasek, Brennan & Browne begin their book by defining critical thinking. They tell instructors that critical thinking means the ability to recognize the structure of an argument and apply a set of evaluative criteria to assess the merits of the argument. This section of the Instructor’s Manual explains how critical thinking relates to Bloom’s Taxonomy of Educational Objectives. This explanation will emphasize the skill of evaluation. Bloom developed a hierarchy of six cognitive operations. The operation at the higher level subsumes all those levels below. Here is a presentation of Bloom’s Taxonomy, from the lowest level to the highest level: • Knowledge: This is the lowest level of learning and is a prerequisite for all operations to follow. This level relies primarily on the intellectual processes of recall and memory. • Comprehension: The learner must go beyond knowledge and show understanding. Students can paraphrase or explain something they have heard or read. • Application: The learner can apply what he or she has comprehended. Students can use information or principles in a specific situation. • Analysis: The learner can break down into parts the knowledge applied and comprehended. Students can show the ability to take apart information to discover the underlying structure and hidden meanings and assumptions. • Synthesis: The learner must be able to creatively combine knowledge analyzed from several domains. Students can reassemble component parts into a new structure not previously apparent. • Evaluation: This is the highest level. The learner must be able to critically appraise the knowledge she has analyzed and synthesized. Students can make critical judgments. The first three levels are often called lower-order thinking skills. Here are some questions that would encourage students to develop lower-order thinking skills. The questions are related to United States of America v. Martha Stewart and Peter Bacanovic [hereinafter Martha Stewart], the case Chapter One studies. 1. Was the Martha Stewart case a state or a federal case? [Knowledge] 2. What did the court decide in Martha Stewart? [Comprehension] 3. Given the court’s decision in the Martha Stewart case, what would happen if a witness’s perjured testimony had been a key factor in the conviction of a defendant? [Application] The last three levels are often called higher-order thinking skills. Here are some questions that encourage students to develop higher-order thinking skills. 1. Explain why the court discounted Lawrence F. Stewart’s [hereinafter Lawrence] testimony. [Analysis] 2. Explain how Lawrence’s testimony about the “$60” notation relates to the broader case against the defendants. [Synthesis] 3. Point out inadequacies in the court’s reasoning in the Martha Stewart case. [Evaluation] How does the critical thinking model Kubasek, Brennan & Browne present in Chapter One relate to Bloom’s taxonomy? Let’s look at the two: Steps 1 through 4 of the critical thinking model correspond to the skills of knowledge, comprehension, application, analysis, and synthesis. Steps 5 through 8 correspond to the highest thinking skill—Evaluation. That means that when instructors ask students to evaluate legal arguments, they are pursuing the highest thinking skill. Critical thinking asks students to evaluate. If students can engage in critical thinking and succeed, they have shown that they have mastered all the skill levels below evaluation in the hierarchy—knowledge, comprehension, application, analysis, and synthesis. Working with students on the highest level of thinking is rewarding. Teaching using a critical thinking approach is also helpful to our students. The Critical Thinking Model The first four help us understand how the court’s argument fits together. 1. What are the facts? 2. What is the issue 3. What are the reasons and conclusion? 4. What are the relevant rules of law? Bloom’s Taxonomy The first three are lower-order thinking skills. 1. Knowledge 2. Comprehension 3. Application The second three are higher-order thinking skills. 4. Analysis 5. Synthesis The last four steps help us evaluate legal arguments. 5. Does the legal argument contain significant ambiguity? 6. What ethical norms are fundamental to the Court’s reasoning? 7. How appropriate are the legal analogies? 8. Is there relevant missing information? 6. Evaluation References • Thomas R. McDaniel, “Designing Essay Questions for Different Levels of Learning,” 27 IMPROVING COLLEGE AND UNIVERSITY TEACHING 120 (Summer 1979). • Robert J. Kloss, “Toward Asking the Right Questions,” 61 THE CLEARING HOUSE 245 (1988). • Benjamin S. Bloom, ed., TAXONOMY OF EDUCATIONAL OBJECTIVES (1956). Chapter Overview, Case Summary and Topic Outline Chapter Overview This chapter begins by defining critical thinking, then explains the critical thinking model used throughout the book. The final section of the chapter parallels the second section, but presents the material in more depth. To prepare well, instructors should make sure to read this last section of the chapter more than once. Encourage students to read it several times. Understanding this material will help instructors use the textbook. It will be worth the time to study Chapter One more than instructors might have originally planned. Instructors might want to choose an additional case and work on the case in class the way the text authors worked with the critical thinking model using the Cook case. Topic Outline I. The Importance of Critical Thinking II. A Critical Thinking Model United States of America v. Martha Stewart and Peter Bacanovic III. The Critical Thinking Model: A Quick Reference A. Facts B. Issue C. Reasons and Conclusion D. Rules of Law E. Ambiguity F. Ethical Norms G. Analogies H. Missing Information III. Using Critical Thinking to Make Legal Reasoning Come Alive A. Legal Reasoning IV. Applying the Critical Thinking Approach Summary To extend the critical thinking model to essays, instructors would ask: • What Is the Issue? • What Are the Reasons and Conclusion? • Does the Argument Contain Significant Ambiguity? • What Ethical Norms Are Fundamental to the Author’s Reasoning? • How Appropriate Are the Analogies? (This step will not always be relevant.) • Is There Relevant Missing Information? Remember: An instructor’s goal will be to first understand an argument, then decide whether it can accept the author’s conclusion given the evidence and reasoning the author provides. Case Summary—United States of America v. Martha Stewart and Peter Bacanovic In this case Martha Stewart and Peter Bacanovic were convicted of conspiracy, making false statements, and obstruction of an agency proceeding after they sold over 3,928 shares of ImClone stock on December 27, 2001. Stewart sold all her stock before Bacanovic, who was Stewart informed her that Samuel Waksal had attempted to sell his stocks when the news that the FDA had not approved their drug, Erbitux. Following this an investigation was conducted by the United States Attorney’s Office for the Southern District of New York and the Securities and Exchanges Commission. The court found in favor of the United States of America based on the facts presented in this case. Chapter 2 Introduction to Law and the Legal Environment of Business Introduction To promote an environment in which instructors and the students have a question-asking attitude, instructors should present each chapter as one that address several questions. Chapter Two addresses these questions: • How can legal environment of business be defined? • How can law and jurisprudence be defined? Do alternative definitions of law exist? • Where does law come from? • What are the classifications of law? • What are the global dimensions of the legal environment of business? Chapter Two is significant because it provides background information that influences the way students think about cases and legal ideas. When instructors teach this chapter, they should emphasize on the significance of considering alternative perspectives. Achieving Teaching Excellence Creating a Student-Centered Classroom That Promotes Students’ Intellectual Development Instructors can probably choose this textbook over others in part because they wanted to encourage their students to engage in critical thinking about the law. This goal is important. To achieve this goal, instructors will want students and their intellectual development to be the focus of what happens in class. First, this section explains alternative perspectives on how to conduct class. Second, this section will explain why a specific type of student-centered classroom is likely to help instructors achieve their goal of encouraging their students to engage in critical thinking. In The University Teacher as Artist, Joseph Axelrod describes different teaching styles. Axelrod classifies these teaching styles. One major category includes didactic styles. Didactic teaching styles do not encourage inquiry by the student. The other category includes evocative styles. These styles require student inquiry when completing the tasks the instructor has assigned. Axelrod explains that didactic teaching styles stress either knowledge acquired by memorization, or skill mastery through repetition and practice. Evocative modes stress student inquiry and discovery. A teaching style that encourages critical thinking is an evocative style. Within the category of evocative styles, different teaching styles emphasize different components. Some styles focus on the teacher, some on the learner, and some on the subject matter. A teaching style that stresses critical thinking is an evocative style that focuses on the learner and his or her understanding of course material. Axelrod would call this style a student-centered style rather than an instructor-centered style. A critical thinking approach assumes the teacher will create a classroom environment in which the students’ intellectual development is the focus of classroom attention. A teacher who uses this approach would be likely to say what a professor in Axelrod’s book says, “I train minds.” Promoting critical thinking is one way to train students’ minds. Now the question arises as to how instructors will know whether they have created a student-centered classroom that emphasizes intellectual development. First, they will be talking less and listening to their students more. Second, they will be emphasizing on higher-order thinking skills rather than asking their students to recite principles and facts. Third, instructors will be observing how students are doing at grasping the critical thinking model. They should not be watching instructors to see what a good critical thinker they are. Fourth, class time will be spent working with the material, rather than making sure they have “covered” everything. Reference: • Joseph Axelrod, The University Teacher as Artist (Jossey-Bass, Inc., Publishers 1973). Chapter Overview, Topic Outline, and Discussion Questions Chapter Overview This book is about the legal environment in which the business community operates today. Although the book concentrates on law and the legal variables that help shape business decisions, it has not overlooked the ethical, political, and economic questions that often arise in business decision making. This chapter is especially concerned with legal variables in the context of critical thinking. In addition, it examines the international dimensions of several areas of law. Instructors who want to encourage students to work with the material in class sometimes realize they cannot always “cover” all the material in the book. After several years of not covering everything, instructors should be comfortable knowing that the material encourages students to work on in class and is understood by most of them. Instructors can choose parts of each chapter that are especially challenging or confusing. This is the material that deserves the most attention in class. Some chapter material is easy, and students pick it up well on their own. In Chapter Two, the material that is the most challenging or confusing falls into these subsections: • Definition of Law and Jurisprudence • Classifications of Law After presenting a topic outline for Chapter Two, this section provides discussion questions that help students increase their understanding of the material presented in the two sections listed above. Topic Outline I. Definition of the Legal Environment of Business II. Definition of Law and Jurisprudence A. Natural Law School B. Positivist School C. Sociological School D. American Realist School E. Critical Legal Studies School F. Feminist School G. Law and Economics School III. Sources of Law A. The Legislature as a Source of Statutory Law B. The Judicial Branch as a Source of Case Law Case Law Precedents and the Internet C. The Executive Branch as a Source of Law Treaty Making Executive Orders D. Administrative Agencies as a Source of Law IV. Classifications of Law A. Criminal Law and Civil Law B. Public and Private Law C. Substantive and Procedural Law Substantive Law Procedural Law D. Cyberlaw V. Global Dimensions of the Legal Environment of Business VI. Summary Discussion Questions for Chapter Two 1. In answering the question “What is Law?”, why is it appropriate to answer, “It depends?” The question “What is Law?” is not as straightforward as it appears. Most people would give an answer that shows their understanding and acceptance of the positivist school of jurisprudence. However, a person’s answer to the question “What is Law?” depends on which school of jurisprudence the person prefers. For instance, a positivist thinker might say that law is a set of rules created by the legislature that people must follow or they will be punished or fined. A critical legal studies scholar might say law is an institution that protects those in power. Students should notice the difference in those two answers. Given the wide range of beliefs about the definition of law, it is wise to say the answer to the question depends on the school of jurisprudence a person prefers. 2. How would an individual decide which school of jurisprudence a particular judge prefers? This question triggers many reminders. First, a judge, legal scholar, or thinker might agree with more than one school of jurisprudence, or with some elements of more than one school of jurisprudence. For instance, feminist legal scholars and critical legal scholars share some beliefs. It could be possible to agree with both of those theories to some extent. Second, judges, legal scholars, and thinkers rarely announce their preferred school of jurisprudence. (Some might even be confused about the schools of jurisprudence.) To figure out the view a judge prefers, an individual would need to read their legal decisions and scholarly writings carefully. An individual can infer their views from their writings or what they say in public about a particular decision. 3. Which schools of jurisprudence probably have the fewest followers within the legal community? Probably, critical legal studies and feminist views of jurisprudence have the fewest followers. Both evaluate the legal system in a structural way; they question the very structure of law as a societal institution. Most followers of these schools are legal scholars rather than judges or practicing attorneys. People engaged in the daily practice of law might want some kind of incremental legal reform, but they are unlikely to question law in a structural way or advocate major changes. 4. Create a fact situation that could end as both a civil and a criminal lawsuit. Instructors should encourage students to be creative with this one. For instance, a bank robber was injured while committing a bank robbery. After collecting the money, it exploded in his pockets because a device attached to the money was poorly designed. The robber would be prosecuted for the crime of bank robbery, and could sue the manufacturer of the exploding device under civil law. (This was a real case. The robber sued the manufacturer from jail, and lost.) A more realistic and common example would be one in which someone engaged in driving while under the influence of alcohol, caused a car accident, and injured someone. The driver would be prosecuted under criminal law, and the injured parties could sue the driver civilly. 5. Explain how a court’s decision (case law) might lead to changes in legislation (statutory law). Are there any situations in which this has happened? A legislature (either state or federal) might be so concerned about a judge’s decision that it will pass a law that in effect reverses the judge’s decision. One example is the Civil Rights Act of 1991, which changed several decisions the U.S. Supreme Court had rendered. Congress was changing the Supreme Court’s decisions by changing statutory law. Answers to Critical Thinking about the Law Questions, Review Questions, Review Problems, and Case Problems Suggested Answers to Critical Thinking about the Law Questions 1. Learning about relevant laws regarding business helps one understand what the law is, but does not help one evaluate legal arguments. The critical thinking questions that help one evaluate legal arguments are: • Does the legal argument contain significant ambiguity? • What ethical norms are fundamental to the Court’s reasoning? • How appropriate are the legal analogies? • Is there relevant missing information? The question about ethical norms most clearly addresses the ethical component of the legal environment of business. Knowing the ethical norms that are fundamental to a court’s reasoning helps one decide whether to accept or reject the court’s conclusion. 2. Knowing the school of thought the judge prefers helps one critically evaluate a judge’s reasoning because one can determine the assumptions the judge makes. For instance, if one knows the judge prefers the critical legal studies view of jurisprudence, one knows the judge would favor structural change in the legal system—he or she does not have to tell them. One would also know the judge is likely to prefer a definition of justice defined as to treat all humans identically, regardless of class, race, gender, age, and so on. The critical legal studies movement strives to point out how the legal system perpetuates inequality. 3. One might want to ask the lawyer whether their mutual respect for a particular school of jurisprudence will bring about the action they want. For instance, mutual respect for natural law might yield interesting discussions between people and their attorney, but it will do little to help them pursue the landlord. One would also want to ask the lawyer basic questions about competence, the lawyer’s area of expertise, whether the lawyer has time to take on a case of this nature, and the lawyer’s fee. Answers to Review Questions 2-1. The source of law is different in the sociological school’s definition of law and that of the feminist school. The source of law for the sociological school of law is contemporary community opinion and customs. In contrast the feminist school is based on jurisprudence that reflects a male-dominated executive, legislative, and judicial system in which women’s perspectives are ignored and women are victimized. 2-2. The critical legal theorist school and the feminist school of jurisprudence are similar because both evaluate the legal system. Both find major inadequacies in the legal system. Critical legal theorists think the legal system protects economically privileged individuals; feminist scholars think the legal system protects the rights of men. 2-3. The legislative branch (Article I) is the maker or creator of laws and for this reason it is a source of law. In addition to that statutory laws are made by the legislative branch. 2-4. Statutory law is made by legislatures. Case law is made by judges. 2-5. If the President vetoes a bill passed by the House and the Senate, the bill can become a law if two-thirds of the Senate and House membership vote to override the veto. 2-6. a. Public law is a classification of law that deals with the relationship of government to individual citizens. Private law is generally concerned with the enforcement of private duties. b. In criminal law, a prosecutor aims to prove beyond a reasonable doubt that the defendant committed a crime and should be punished. In civil law, a private individual or business tries to show by the preponderance of the evidence that another private individual or business is liable and should have to compensate the plaintiff. c. Felonies are punishable by incarceration in a state penitentiary. Misdemeanors are usually punishable by shorter periods of imprisonment in a county or city jail. Answers to Review Problems 2-7. Justice A belongs to the positivist school of jurisprudence. One knows that because this justice is unwilling to look beyond statutes and case precedents in interpreting the law. 2-8. Justice B is a natural law thinker. One knows that because this justice is willing to ignore man-made law and rule based upon something higher—the laws of nature. 2-9. Justice C is a sociological thinker. This justice bases her decision on contemporary community customs or thought. 2-10. A judge who follows the natural law school of thought would hear out the case and based on the evidence presented would make his or her decision. These value judgments would remain unchanged as there is an absolute source of law. Therefore, the decision made in this case would be dependent on the merits of the case. 2-11. Precedent refers to case law courts follow. Judges interpret legislation on a case-by-case basis. These cases establish a line of authoritative cases on a particular subject that must be followed by lower courts. Here, the precedent tells Marshall his legal rights. The attorney can predict that Marshall will win a lawsuit to collect the reasonable value of his work. 2-12. No, the California court does not have to follow decisions from North Dakota and Ohio. The California appellate court must listen to higher courts in California, but not higher courts in other states. The California court might consider the North Dakota and Ohio case law, but it is not required to do so. Answers to Case Problems 2-13. Students should note that ethical issues such as the one raised in this case do not get resolved necessarily by exploring the legal issue that brought the case before the court in the first place. Rather than focusing on whether the practices of Myspace qualify as copyright infringement, the court concentrated on whether Myspace’s counsel should be disqualified because of its past association with Universal Music Group. The court ruled that Myspace’s counsel should not be disqualified as long as it met several conditions. In this case, the court focused on which should hold more weight, the current client of the law firm, Myspace’s, right to counsel of its choice or the former client, Universal Music Group’s, right to maintain its confidentiality. Using a sociological approach, the court used California Rules of Professional Conduct Rule 3-310 and decided it was most important to preserve the public’s trust in the integrity of California attorneys and the bar. The goal of this court was to uphold community customs and assume that the law firm would act ethically. If another school of thought had been used, such as the natural or positivist approach, the verdict may have been different. A judge using natural philosophy might focus on how it is unreasonable or unnatural for a law firm to represent opposing clients, whereas a judge using positivist philosophy might concentrate solely on the words within the law and not on its affects on the public. 2-14. Yes, Vermont’s marriage license law violates same-sex couples’ rights under the Vermont Constitution. The court ruled that the State had failed to provide a reasonable and just basis for excluding same-sex couples from benefits incident to Vermont’s civil marriage license. The court indicated that a parallel “domestic partnership” system would meet Vermont’s constitutional guarantee of “the common benefit, protection, and security of the law.” 2-15. No. The court ruled that Margaret was allowed to sue her husband for damages in the case. In making this ruling, the court overruled the judicially created doctrine that prevented one spouse from suing another. The court did so as an act of fairness. They did not want the family to suffer the financial consequences of the accident simply because of the husband’s negligence. 2-16. The Supreme Court ruled in favor of the individual workers. Now, employees have the burden of proof and can therefore argue that there is no “reasonable” factor than age involved in their termination. 2-17. A & M Records won. The works at issue in the case were copyrighted, the plaintiffs would be likely to prove vicarious infringement, and the “safe harbor” provision of the Digital Millennium Copyright Act protects A & M. 2-18. The court ruled that Roommate.com was immune from the Fair Housing Act charges, because of Section 230 of the Communications Decency Act. Section 230 states that “interactive computer services” acting as “service providers” are not responsible for information that has been provided by another “information content provider.” In this case, Roommate.com was seen as both a service provider and an information content provider, but the court emphasized that in close cases, the ruling should be in favor of Section 230 immunity. The court could have focused on Roommate.com being a service provider or an information content provider and based on its interpretation, the verdict would differ. In this case, the court focused on Roommate.com as a service provider and used a broad interpretation of Section 230 immunity. Not all judges would view such a ruling as prudent. Thinking Critically about Relevant Legal Issues 1. The issue here is framed in a very optimistic, naturalistic way. In an essay, one would focus on the benefits of this type of thinking and the best way to ensure complete objectivity. The conclusion would contain an account of how many problems and squabbles over objectivity would cease if the naturalistic approach was taken. 2. The author here seems to value justice, defined as moral absolutes that make clear what is good. The author may also value tradition, as what the author assumes is that what is “good” is what is conventionally right. 3. Good here means what is conventionally right. Evil means what is wrong. Both of these terms are ambiguous and take away from the argument. Again, the author assumes that all people are thinking the same way and live in the same environment. 4. Students would probably make a more realistic argument, citing differences in areas across the country in culture, religion, and so on. Sometimes absolute, conventional good is not synonymous with right. Chapter 3 The American Legal System Introduction Chapter Three addresses these questions: • How do people know whether a particular court has jurisdiction over a case, or the power to hear the case? • How do people know which trial court will hear the case? • Who are the major actors in the legal system, what do they do, and how does each actor relate to the business community? • What does it mean to say people have an adversary system in the United States? • What are the steps in the civil litigation process? What role do businesspeople play in this process? • What global considerations are relevant when the structure of the American legal system is considered? Chapter Three is important because it explains basic principles about the American legal system that students will refer to throughout the course. For instance, it is important for them to understand the nature of an adversary process. If they understand the principles that underlie the adversary system, they will understand why lawyers argue zealously for their clients. This chapter also provides important practical information, such as the steps in civil litigation. Business managers need to recognize these so they will know what is happening when they become involved in litigation. Achieving Teaching Excellence Recitation and Discussion Most instructors who encourage students to talk in class believe they are promoting class discussion. An article by J.D. Dillon is a reminder that it is difficult to engage in class discussion, and that many instructors are not promoting discussion. Instead, they might be encouraging recitation. This section explains the difference, and shows how instructors know whether they are promoting discussion. This distinction is important because it relates to higher-and lower-order thinking skills. Dillon explains that recitation means that students “recite” what they know or are coming to know through questioning. Instructors review, drill, and quiz. Dillon writes that discussion means that teachers and students “discuss” what they don’t know. He writes that discussion “involves longer exchanges, exchanges among students and also between teacher and student, and questions soliciting students’ thoughts, not just the right answers.” Dillon’s distinction between recitation and discussion relates to Bloom’s Taxonomy and critical thinking. If instructors encourage recitation, they are encouraging lower-order thinking skills. When instructors ask, “Did the court rule for or against the plaintiff in the Napster case?” they are asking students to recite, not discuss. Instructors are encouraging students to work on their lower-order thinking skills. When instructors engage in longer exchanges with students to work on what they do not know, they are engaging in discussion. If instructors ask, “Nancy, do you agree with Bart’s evaluation of the court’s use of an analogy in the Harris case?” they are engaging in discussion that asks for evaluation. Instructors are working on higher-order thinking skills (including evaluation), which is the primary purpose of critical thinking. Think about what instructors do in their own classes and see whether they are discussing material with their students. How will instructors know? Dillon writes that when an instructor engages in discussion, the teacher plans, but students account for 40 percent of the talk. That’s a good place to start. Figure out how much talking instructors are doing compared to the students. Next, instructors need to look at the kinds of questions they are asking in class. If instructors would like to read Dillon’s article in full, the cite is J.T. Dillon, “Research on Questioning and Discussion”, 42 EDUCATIONAL LEADERSHIP 50 (November, 1984). Chapter Overview, Topic Outline, and Discussion Questions Chapter Overview All people are subject to both state and federal laws. Under the United States’ dual court system, all lawsuits must be brought in either the federal or the state court system. In some cases, an action may be brought in either. Thus, it is important that those in the business community understand how the decisions are made as to which court system can resolve their grievances. This chapter first considers the principles that determine which court system has the power to hear various types of cases and then examines in greater detail the structure of the two basic divisions of our dual court system. Next, it focuses on the primary actors who play major roles in our litigation process. Finally, it examines the philosophy behind our American legal system and traces the procedures that must be followed when using one of our courts. This chapter is a break in terms of its length and level of difficulty compared to Chapters Three and Four. It is a good chapter to work on right before a test because most students comprehend most of the material in Chapter Three, so they can spend extra time going back and reviewing some more difficult ideas in Chapters Three and Four. Students find the material on the adversary system especially interesting. They also seem interested in learning more about how juries work, and how lawyers fulfill their obligations in the legal system. After presenting the topic outline, the discussion questions give students a chance to work with some more difficult ideas presented throughout the chapter. Topic Outline I. Jurisdiction A. Original vs. Appellate Jurisdiction B. Jurisdiction over Persons and Property World-Wide Volkswagen Corp. v. Woodson In Rem Jurisdiction C. Subject Matter Jurisdiction State Jurisdiction Exclusive Federal Jurisdiction Concurrent Federal Jurisdiction Hertz Corporation v. Friend II. Venue III. The Structure of the Court System A. The Federal Court System Federal Trial Courts Intermediate Courts of Appeal Court of Last Resort B. State Court Systems State Trial Courts Intermediate Courts of Appeal Courts of Last Resort IV. The Actors in the Legal System and Their Relationship to the Business Community A. The Attorney Attorney–Client Privilege Additional Functions of the Attorney The Judge The Power of Judicial Review B. The Jury Petit Juries Grand Juries V. The Adversary Process A. Criticisms of the Adversary System VI. Steps in Civil Litigation and the Role of Businesspersons A. The Pretrial Stage Informal negotiations Initiation of a legal action Service of process Defendant’s response Pretrial motions Discovery Pretrial conference B. The Trial Jury selection Opening statements Plaintiff’s case Defendant’s case Conference on jury instructions Closing arguments Posttrial motions J.E.B. v. Alabama, ex rel. T.B. C. Appellate Procedure Appeal to the U.S. Supreme Court D. Class Actions VII. Global Dimensions of the American Legal System VIII. Summary Discussion Questions for Chapter Three 1. Explain relationships between original and appellate jurisdiction. One relationship between the two is that courts with original jurisdiction do their work before courts of appellate jurisdiction. Another relationship is that courts with appellate jurisdiction review the decisions made by judges who do their work in courts of original jurisdiction. Another relationship is that trials take place in courts of original jurisdiction. Appellate courts do not hold trials. Instead, appellate courts consider matters of law. A court of original jurisdiction, usually referred to as a trial court, has the power to initially hear and decide a case. A court with appellate jurisdiction has the power to review a previously made decision to determine whether the trial court erred in making its initial decision. 2. Explain relationships between in personam jurisdiction and subject matter jurisdiction. A court must have both kinds of jurisdiction before it has the power to decide a case. Before the court can render a decision affecting a person, the court must have in personam jurisdiction (jurisdiction over the person). In personam jurisdiction is the power to render a decision affecting the specific persons before the court. Usually, a court gets in personam jurisdiction by serving the defendant with a copy of the complaint and summons. Subject matter jurisdiction is the power of the court to hear certain kinds of cases. This type of jurisdiction refers to whether the case will be heard in state or federal court, or whether either court could hear the case. 3. Explain why someone might think this statement is true: Given the subject matter of state and federal courts, it is not surprising that more cases are heard by state courts than federal courts. The state court system has subject matter jurisdiction over all cases not within the exclusive jurisdiction of the federal court system. Only a very limited number of cases fall within the exclusive jurisdiction of the federal courts. The cases heard under exclusive federal jurisdiction include admiralty cases, bankruptcy cases, copyrights, trademark and patent cases, claims against the United States, claims arising under statutes providing for exclusive federal jurisdiction, and federal criminal prosecutions. Consequently, almost all cases fall within the state court jurisdiction. Suits for breach of contract, product liability actions, and divorces are just a few of the types of cases falling within the state court system’s jurisdiction. The federal courts are reserved for a limited number of cases. State courts thus have a much broader jurisdiction, so they hear more cases. 4. Explain why someone might think this statement is true: The attorney–client privilege is an important feature of the adversary system. The attorney can provide effective representation only when he or she knows all the pertinent facts of the case. The businessperson who withholds information from his or her attorney may cause irreparable harm if the hidden facts are revealed by the opposing side in court. To encourage client honesty, the attorney–client privilege was established. This privilege provides that information furnished in confidence to an attorney, in conjunction with a legal matter, may not be revealed by that attorney without permission from the client. 5. Evaluate this statement: Trial court judges and appellate court judges have very similar job descriptions. Trial court and appellate judges do not have similar job descriptions. A trial court judge presides over the trial, making sure the case is heard with reasonable speed; rules on all motions made in the case; and decides all questions of law. One of the most crucial functions of the trial court judge is ruling on whether evidence is admissible. Appellate judges review the work of trial court judges to determine whether errors of law were committed by the trail court judges. Appellate judges write judicial opinions that present the law, and new interpretations of the law. 6. Why is the jury an important part of our adversary system? The jury is the means by which citizens participate in the judicial system. It is often seen as the hallmark of democracy. Juries are groups of individuals, selected randomly from the geographic area in which the court is located, who will determine questions of fact. For instance, they get to decide whether they think a particular witness is telling the truth. 7. Evaluate this statement: The adversary system is flawless. Many people criticize the adversary system and point out its flaws. They argue that because each side is searching only for evidence that supports its position, a proponent who discovers evidence helpful to the other side will not bring such evidence to the attention of the court. This tendency to ignore contrary evidence prevents a fair decision—one based on all the available evidence—from being rendered. Another flaw is that the adversary process is extremely time-consuming and costly. Two groups of “investigators” are seeking the same evidence. Thus, there is a duplication of effort that lengthens the process and unnecessarily increases the cost. Others argue that the adversary system, as it functions in this country, is unfair. Each party in the adversarial process is represented by an attorney. Having the most skillful attorney is a tremendous advantage. The wealthier a party is, the better the attorney she or he can afford to hire; hence, the system unjustifiably favors the wealthy. 8. Review the steps in civil litigation. Why is the discovery stage especially important? Discovery is important because it allows each party to gain knowledge of most of the facts in the case. Once both sides know the facts, it is likely that the parties will be more willing to discuss possible settlement of the case. Answers to Critical Thinking about the Law Questions, Case Summaries, Answers to Review Questions, Review Problems, and Case Problems Suggested Answers to Critical Thinking about the Law Questions 1. One person might be talking about in personam jurisdiction (jurisdiction over the person), whereas the other person might be talking about subject matter jurisdiction (the power of the court to hear different kinds of cases). 2. Numerous procedural requirements further the value of security. Procedural requirements ensure that no one will interfere with people’s rights. Also, these requirements protect justice, if it defines justice as procedural fairness. 3. Individualism is furthered by the adversary system. Individualism is the idea that people have what they have based upon desert. No one can take away what people have because they deserve what they have. In the legal system, people are allowed to use whatever resources they have to further their legal causes. People are allowed to spend as much money as they have, even though doing so gives some of them a distinct advantage over others. For instance, people rarely question the litigant who pays large sums of money to hire consultants to help select a jury. People think, “It’s your money. You may spend it as you wish.” Case Summary—World-Wide Volkswagen Corp. V. Woodson This case is in the book to show how long-arm statutes are used to gain in personam jurisdiction when an out of state defendant committed a tort within a state. The case is famous for focusing on the phrase “minimum contacts.” The issue before the Supreme Court of the United States was whether, consistently with the Due Process Clause of the Fourteenth Amendment, an Oklahoma court may exercise in personam jurisdiction over a nonresident automobile retailer and its wholesale distributor in a products-liability action, when the defendants’ only connection with Oklahoma was the fact that an automobile sold in New York to New York residents became involved in an accident in Oklahoma. The Court stated the relevant rule of law, which says that a state court may exercise personal jurisdiction over a nonresident defendant only so long as there exist “minimum contacts” between the defendant and the forum State. The court stressed that “foreseeability” alone has never been a sufficient benchmark for personal jurisdiction under the Due Process Clause; that it was foreseeable that the automobile would cause injury is not enough. Here, the Court ruled that the mere “unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State.” Case Summary—Hertz Corporation v. Friend This case is in the book to show how corporate citizenship can be determined by applying the “nerve center test.” It established that a corporation is the citizen of the state where its decision making hub is situated. Plaintiffs, California citizens, sued Hertz Corporation for state law violations in a California State Court. Defendant Hertz filed a motion to remove the case to federal court on diversity of citizenship grounds, claiming that it was not a resident of California, the residence of all the plaintiffs. Plaintiffs argued that Hertz was a California citizen, like themselves, and that, hence, diversity jurisdiction was lacking under § 1332(c)(1), which provides that “a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business.” The District Court concluded that it lacked diversity jurisdiction because Hertz was a California citizen under Ninth Circuit precedent, which asks, inter alia, whether the amount of the corporation’s business activity is “significantly larger” or “substantially predominates” in one State. Finding that California was Hertz’s “principal place of business” under that test because a plurality of the relevant business activity occurred there, the District Court remanded the case to state court. The Ninth Circuit affirmed. Hertz appealed to the United States Supreme Court. The Court said, “Petitioner’s unchallenged declaration suggests that Hertz’s center of direction, control, and coordination, its “nerve center,” and its corporate headquarters are one and the same, and they are located in New Jersey, not in California. Because respondents should have a fair opportunity to litigate their case in light of our holding, however, we vacate the Ninth Circuit’s judgment and remand the case for further proceedings consistent with this opinion.” Suggested Answers to Critical Thinking about the Law Questions 1. In addition to fairness, Justice Brayer recognized the fact that a perfect test that would satisfy and meet the administrative criteria would be very complex. For this reason, he remanded the case for further proceedings. Therefore, approaching a Federal court would be fair and bias toward the defendant could be ruled out. 2. There are three aspects that highlight the ambiguity of the nerve center test. It would be difficult to ascertain the portion of business activity in the region as it comprises of a number of factors. Next, the location of the company’s headquarters and its central leadership has to be considered. Additionally, the location from which the discharge of executive and administrative functions takes place is important as well. However, it would be a challenge to identify these factors when there are multiple states and factors involved, which would make it more complex and the room for errors would increase. 3. The reasoning that the light in which a corporate would be seen depends on where the case would be tried. For instance, if the case were to be tried in the city, people would be sympathetic toward the corporate, but it could elicit a different response from people residing in a rural resident. This reasoning can be related to Justice Breyer’s reasons for the nerve center test. Here the fundamental decision of trying this case in a Federal court or a State court based on this reasoning can be raised. Case Summary—J.E.B. v. Alabama, ex rel. T.B. This case is in the book to present some interesting issues that arise while selecting juries. The specific issue the Court addressed was whether the Equal Protection Clause prohibits gender-based peremptory challenges. The issue arose in a paternity suit when the state used its peremptory challenges to remove male jurors. The defendant removed a male juror, and then an all-female jury found J.E.B. to be the father of T.B.’s baby. Suggested Answers to the Critical Thinking about the Law Questions 1. Justice Blackmun expands the application of Batson (which prohibited race-based peremptory challenges) to gender-based peremptory challenges. He makes the decision because with respect to jury service, African Americans and women share a history of total exclusion. He probably would have been less likely to make this decision in 1950 because then many states still excluded women from jury service, so the issue of exclusion was taken for granted. 2. Respondent suggests that gender discrimination in this country has never reached the level of discrimination against African Americans, so gender discrimination is tolerable in the courtroom. To compare levels of discrimination, students could start with the number of people affected (women account for more than half the population in the United States), the probability of harm (this is hard to decide), and the extent of the harm. They could also compare the poverty levels, comparing groups based upon both race and gender. They could look at the number of employment discrimination claims filed by these groups, and the outcomes of those cases. They could also look at the employment rates of various groups. They could look at the number of women and minorities who hold positions of power in the government and corporations. 3. Justice Scalia might have agreed with the majority if the facts had been such that the case focused on excluding women from the jury. Here, men were excluded, so he can’t figure out why there’s such a long discussion of discrimination against women, when it was men who were discriminated against in this case. He also points out the Court’s inconsistent view on whether women are like men, or not. In the present case, the majority assumes women and men are the same. In other cases, the Court has stressed that women bring their own perspectives and values to the jury room. Scalia points out the Court’s confusion on whether women are the same or different. Answers to Review Questions 3-1. Jurisdiction is the power of the courts to hear a case and render a decision that is binding on the parties. The following are the different types of jurisdictions: • Original jurisdiction—a court of original jurisdiction, usually referred to as a trial court, has the power to initially hear and decide a case. It is in the court of original jurisdiction that a case originates. • Appellate jurisdiction—a court with appellate jurisdiction has the power to review a previously made decision to determine whether the trial court erred in making its initial decision. • In personam jurisdiction—this is the power to render a decision affecting the specific persons before the court. • In rem jurisdiction—this is the power of a court to render a decision that affects property directly rather than the owner of the property. Such proceedings are often used when the owner of the property cannot be located for personal service. • Subject matter jurisdiction—this is the power of a court to hear certain kinds of cases. Subject matter jurisdiction is extremely important because if a judge renders a decision in a case over which the court does not have subject matter jurisdiction, the decision is void or meaningless. o State jurisdiction—this applies to cases that may be heard only in the state system. Suits for breach of contract, product liability actions, and divorces are just a few of the types of cases falling within the state court system’s jurisdiction. o Exclusive federal jurisdiction—this applies to cases that may be heard only in the federal court system. Cases that fall within the exclusive jurisdiction of the federal courts include such matters as admiralty, bankruptcy, federal criminal prosecutions, claims against the United States, and claims arising under those federal statutes that include a provision for exclusive federal jurisdiction. o Concurrent federal jurisdiction—this applies to cases that may be heard in either the federal or the state court system. 3-2. Concurrent jurisdiction applies to cases that may be heard in either the federal or the state court system. The two situations that cause the state and federal courts to have concurrent jurisdiction are: • Federal questions cases—if a case requires an interpretation of the U.S. Constitution, a federal statute, or a federal treaty, it is said to involve a federal question and may be heard in either state or federal court. • Diversity of citizenship—if the opponents in a case are from different states, there is said to be diversity of citizenship. The diversity must be complete. When the basis for federal jurisdiction is diversity of citizenship, an amount in excess of $75,000 must be in controversy. 3-3. Once it is determined which court system has the power to hear the case, venue determines which of the many trial courts in that system is appropriate. Venue, clearly prescribed by statute in each state, is a matter of geographic location. 3-4. Both federal district courts and courts of common pleas are trial courts, or courts of original jurisdiction. The first is in the federal court system, whereas the second is in the state system. 3-5. The attorney–client privilege provides that information furnished by a client to an attorney in confidence, in conjunction with a legal matter, may not be revealed by the attorney without the client’s permission. The rationale for its existence is that the privilege encourages clients to be honest with their attorneys. Then the attorneys are able to develop the best possible defense. 3-6. The work-product doctrine provides that formal and informal documents prepared by an attorney in conjunction with a client’s case are privileged and may not be revealed by the attorney without the client’s permission. This doctrine is important because it protects information attorneys gather from employees and makes corporate employees more likely to be honest with their attorneys. Answers to Review Problems 3-7. Hasbro can remove the case if it is one of concurrent jurisdiction. The issue is whether diversity of citizenship can be established. The amount in controversy is more than $75,000. If Hasbro can show it is from a different state, it will meet the other requirement. Hasbro’s principal place of business is Illinois. It is also incorporated in Illinois. Although Hasbro has a small plant in Michigan, this will not be enough to preclude Hasbro’s diversity claim. 3-8. In the J.E.B. v. Alabama case, the United States Supreme Court held that intentional discrimination on the basis of gender by state actions violates the Equal Protection Clause. Here, Bill’s attorney used preemptory challenges in a discriminatory manner. 3-9. The issue here is whether Marx Corporation has sufficient minimum contacts with the state of Delaware so the state can use a long-arm statute to gain in personam jurisdiction. Marx Corporation will lose. Minimum contacts exist when a corporation takes a state up on the opportunity to incorporate in that state. 3-10. This question is a venue question. The statutory laws in Nevada would need to be looked into to know what rules govern the issue of venue. Stevens should petition the Clark County Court and ask them to apply Nevada’s venue rules to his claim. 3-11. If the lawyer knows that the client is about to commit a crime, the lawyer may reveal confidential information in order to prevent the commission of that crime. Here, Fox knows Davis plans to commit the crime of driving drunk. Fox may call the state highway patrol. 3-12. No, Watson cannot appeal to the U.S. Supreme Court. This case focuses on tort law, which is completely up to each state. The United States Supreme Court will not rule on matters that are up to the states. Answers to Case Problems 3-13. No, the father’s appeal was not successful. The court determined that they did not have jurisdiction over the case because his motion did not qualify under Rule 60(b). 3-14. In this case, the plaintiff’s appeal was reconsidered and the case was taken forward. The court ruling was made as it affected personal jurisdiction as 25 Missouri residents who were in the dog breeding business viewed the negative information about the plaintiff’s kennel posted on the website. Also, minimum contact was established. 3-15. The Credit Management Corporation’s appeal was successful and the first court’s ruling was reversed. The bankruptcy court lacked jurisdiction over collection costs and post-petition interest because it lacked the authority to discharge the collection cost and post-petition interest parts of the loan debt. 3-16. The court found that the home county of Porter was incorrect because that is where the injured party lived, not where the accident occurred. The damages were done to property from Porter County, but the accident happened in Dearborn. Therefore, Dearborn County has jurisdiction because it is the sight of the accident and that county would affect any claims. 3-17. The court dismissed all the constitutional claims made by EJS. The U.S. 6th Circuit Court upheld the decision made by the district court. Summary judgments were granted to all the defendants. 3-18. The federal court decided that the case should be heard at the state level because the federal statutes could not be tied with the case. The case needs to be heard at the state level to remain consistent with 28 U.S.C. § § 1331, 1441(b). 3-19. Different answers are possible as long as the student justifies their answers with reasons. The Supreme Court ruled that the federal court still had jurisdiction over the case. Just because there is a registration requirement for filing a claim, that does not prevent a federal court’s subject-matter jurisdiction. 3-20. The Texas Supreme Court’s verdict was overturned by the U.S. Supreme Court. The case was remanded and was taken up by Texas state courts for any further proceedings as this matter was not in the purview of Federal laws. Thinking Critically about Relevant Legal Issues 1. The issue would have to be framed in order to determine if in fact elections keep judges who do not care about their constituents off the bench. Also, one would have to determine is “like-ability” really relevant when judges need to be fair and impartial. 2. The author assumes that judges are not looking for personal gain, and that those who are will automatically be thrown off the bench. He is removing the possibility of manipulation. The author appreciates change—the author likes the opposite of tradition, perhaps innovation. 3. The author gives no other ideas to fix the system and creates the dichotomy—face the people or lose the bench. There is no middle ground. 4. The opposition here would be that an election takes away from objectivity and makes a judge make popular decisions, which at times may not be the right one. This essay would explore the idea of catering to the majority and the fact that a popular decision is not always the right decision. Chapter 4 Alternative Tools of Dispute Resolution Introduction Chapter Four addresses these questions: • What are negotiation and settlement? • What is mediation? • What is arbitration? • What are minitrials? • What is early neutral case evaluation? • What are private trials? • What are summary jury trials? • What are the uses of court-annexed alternative dispute resolution? • What is the future of alternative dispute resolution? • What are the global dimensions of alternative dispute resolution? Chapter Four is significant because it presents information managers need to know so that they can manage dispute resolution within their own companies effectively. This chapter shows managers alternatives to spending time and money involved in civil litigation. Achieving Teaching Excellence Asking Better Questions in Class In prior chapters, this Teaching Excellence section has presented information that stresses the importance of asking students questions in class. In this chapter, information will be presented about how instructors can ask better questions in class. Two articles are particularly helpful in addressing the question of how to ask better questions in class. In an article by M. Neil Browne (coauthor of this LEB text) and Stuart M. Keeley, the authors teach an important lesson about how to ask better questions in class—an instructor should ask only those questions that inform him or her what the student is learning. Browne & Keeley remind instructors that the questions they ask in class should require students to apply their assignments or make reasoned judgments about the worth of a particular argument. Instructors should ask questions that advance students’ understanding of the course material. According to Browne and Keeley the following is a list of inadequate questions: • Does everyone understand? • Have I made myself clear? • Are there any questions? Usually, students do not answer these questions. If they do, their answers rarely show instructors what they are learning. Some questions are not inadequate, but they are still weak. Thomas R. Daniel, in an article on asking better questions, lists questions that are “faulty” or ineffective. The following is Daniel’s list: • The double question “Why did we go to war and what were the consequences?” • The guessing question “Do you think that Hitler lived to be older than Stalin?” • The fill-in-the blank question “The common name for the Strategic Arms Limitation Treaty is __________?” • The vague question “What is war all about?” • The whip-lash question “The author of Mein Kampf is who?” These questions are faulty because they ask lower-order rather than higher-order questions, ask questions that have just one right answer, or ask questions that students cannot answer based on what they’ve learned. Instructors should strive to find out what their students don’t know. Instructors should find out what material confuses students so that they can work on this material in class. Browne and Keeley suggest instructors ask questions that require lengthier, more complex answers. These questions will focus on higher-order thinking skills. They allow instructors to see what their students have and have not learned. Browne and Keeley suggest these questions: • What is your understanding of …? • How would you evaluate …? • Why was x included in the text, lecture, or argument? The critical thinking questions in the Kubasek, Brennan & Browne textbook and the discussion questions in this Instructor’s Manual are the kinds of questions instructors should ask if they want to ask better questions in class. Instructors will be on their way to achieving teaching excellence. References • M. Neil Browne & Stuart M. Keeley, “Achieving Excellence: Advice to New Teachers”, 33 COLLEGE TEACHING 78 (1985). • Thomas R. McDaniel, “A Question of Questions: Can We Ask Better Ones?” THE SOCIAL STUDIES TEACHER 243 (Nov./Dec. 1979). Chapter Overview, Topic Outline, and Discussion Questions Chapter Overview This chapter is presents some good cases that give students a chance to work on their critical thinking skills. The cases are also excellent for helping students understand some of the complex situations that have developed from increased use of arbitration. Chapter Four also gives students many chances to practice the skill of synthesis. Instructors will have fun getting students to think of relationships between and among alternative tools of dispute resolution. After presenting the topic outline for Chapter Four, the discussion questions encourage higher-order thinking skills development on material from throughout the chapter. Topic Outline I. Negotiation and Settlement II. Mediation A. Selection of a Mediator B. Common Uses of Mediation C. Advantages of Mediation D. Criticisms of Mediation III. Arbitration Hall Street Associates, L.L.C. v. Mattel, Inc. A. Methods of Securing Arbitration Ignazio v. Clear Channel Broadcasting, Inc., et al. AT&T Mobility LLC v. Concepcion et ux B. Selection of an Arbitrator C. Common Uses of Arbitration D. Problems with Arbitration IV. Minitrials V. Early Neutral Case Evaluation VI. Private Trials VII. Summary Jury Trials VIII. Court-Annexed Alternative Dispute Resolution A. Use of Court Annexed ADR in the State and Federal Systems B. Differences between Court-Annexed and Voluntary ADR Arbitration Mediation IX. The Future of Alternative Dispute Resolution X. Global Dimensions of Alternative Dispute Resolution Mitsubishi Motor Corp. v. Soler Chrysler-Plymouth XI. Summary Discussion Questions for Chapter Four 1. Explain the differences between negotiation and arbitration. One difference between negotiation and arbitration is that negotiation is simpler and more informal than arbitration. Negotiation (leading to settlement) is the process by which the parties to a dispute come together informally, with or without their lawyers, to attempt to resolve the dispute. No independent or neutral third party is involved. Arbitration is much more formal. Attorneys are sure to attend, the dispute is more likely to end with a winner or loser, and a neutral third party decides the case. 2. What are the seven canons of the Arbitrator’s Code of Ethics? The seven canons of the Arbitrator’s Code of Ethics are: • Canon 1—an arbitrator will uphold the integrity and fairness of the arbitration process. • Canon 2—if the arbitrator has an interest or relationship that is likely to affect his or her impartiality or that might create an appearance of partiality or bias, it must be disclosed. • Canon 3—an arbitrator, in communicating with the parties, should avoid impropriety or the appearance of it. • Canon 4—the arbitrator should conduct the proceedings fairly and diligently. • Canon 5—the arbitrator should make decisions in a just, independent, and deliberate manner. • Canon 6—the arbitrator should be faithful to the relationship of trust and confidentiality inherent in that office. • Canon 7—in a case where there is a board of arbitrators, each party may select an arbitrator. That arbitrator must ensure that he or she follows all the ethical considerations in this type of situation. 3. Explain the differences between arbitration and mediation. One difference between mediation and arbitration is that in arbitration the arbitrator makes the final decision, whereas a mediator facilitates communication between disputing parties. Mediation is more creative and collaborative than arbitration, and parties to a mediation are much more likely to maintain a good relationship after the dispute because there will be no clear winners and losers as under arbitration. 4. Explain the relationships between minitrials and summary jury trials. One relationship between the two is that minitrials are older. Minitrials began in 1977, summary jury trials in 1983. Both are ways to resolve disputes more quickly and inexpensively than going to court. Minitrials are unique because although the trial is presided over by a neutral advisor, the people who decide the dispute are the senior executives of the disputing companies. They do that after lawyers for each side present the strengths and weaknesses of their respective positions. Summary jury trials are short. So are minitrials. In summary jury trials, a real judge is involved. Small juries render advisory verdicts. Both minitrials and summary jury trials render nonbinding decisions. 5. Explain why someone might say this statement is true: The use of alternative dispute resolution methods is problematic. The following are some of the reasons why someone may say that the use of alternative dispute resolution methods is problematic: • Some legal scholars are concerned about whether a dispute resolution firm can be truly unbiased when one of the parties to the dispute is a major client of the dispute resolution provider. • Another issue raised by some critics is whether it is fair for consumers to be coerced into an ADR forum and thereby forced to give up their right to a trial, especially when: o They may be much more likely to get a higher award from a jury than from an arbitrator o They may find themselves having “agreed” to arbitration not really voluntarily but because of a clause stuck in a purchase agreement that they failed to read Furthermore, some think ADR benefits repeat players. They know the arbitrators because they use them frequently. Also, some people question whether we should encourage people to give up their right to a fair trial. Another problem comes from confidentiality. Some question whether it is a good idea to use ADR to hide disputes from the public. Answers to Critical Thinking about the Law, Case Summaries, and Answers to Review Questions, Review Problems, and Case Problems Suggested Answer to Critical Thinking about the Law 1. Litigation is unwieldy, time consuming, expensive, generates adverse publicity, reduces confidentiality, and damages relationships between parties. ADR responds to all these problems. ADR is simpler, less time consuming, cheaper, private, and preserves relationships. 2. The best answer is efficiency. ADR minimizes both costs and time spent resolving disputes. Instruct students to add to the list of ethical norms. Case Summary—Hall Street Associates, L.L.C. v. Mattel, Inc. This case is in the book to show the extent of an arbitrator’s decision-making power. The case arose when an arbitrator ruled in favor of Hall Street. However, the court dismissed the arbitration award on the ground that the decision was based on errors of law. Subsequently, the arbitrator decided in favor of Mattel. A second court reversed the decision as the earlier court did not have the power to dismiss or modify the arbitration award. Suggested Answers to Critical Thinking Questions 1. Students’ answers may vary. Many of them may say that the parties in an arbitration case would not take the arbitrator’s decision seriously if they both knew that courts are eager to vacate or modify an arbitration decision. In case the arbitrator’s decision is contrary to law or there was some defect in the arbitration process then the court would be able to vacate or modify an arbitration award. For this reason the Federal Arbitration Act, which is a federal law has been enacted to encourage the use of arbitration. Additionally, it has set forth the four grounds on which the arbitrator’s award may be set aside. 2. The main aim of creating the FAA was to replace judicial indisposition to arbitration with a national policy favoring and placing arbitration agreements on equal footing with all other contracts. Moreover, the following advantages of arbitration encourage the FAA to limit a court’s power over an arbitration award: • The stringent rules of evidence applicable in a trial are generally relaxed. • Each side presents its witnesses and evidence and has the opportunity to cross-examine its opponent’s witnesses. • The settlement rates are higher in arbitration. • The parties to arbitration have a greater chance of being satisfied with the outcome and manner in which the dispute is resolved. • The time taken to resolve a dispute through arbitration is less than that of a court trial. Case Summary—Ignazio v. Clear Channel Broadcasting, Inc., et al. This case considers whether a clause vacating the right to sue when entering into an employment arbitration agreement is legal. The contract, under section 10B allowed for any disputes to be settled in arbitration. Ignazio sued Clear Channel when she was fired claiming age and sex discrimination, retaliation, and wrongful termination of employment in violation of public policy. The Ohio Supreme Court reversed the decision of the court of appeals, ruling that the dispute did fall under the arbitration agreement, and section 10B did not violate Ohio arbitration laws. Suggested Answers to Critical Thinking about the Law Questions 1. It is clear that the court is in favor of arbitration. In fact, the court cites the strong public policy in favor of arbitration. This general view makes it easy for the court to decide that one offending provision in an agreement does not alter an otherwise valid agreement. 2. If the one provision is severed, the rest of the agreement is intact, making arbitration mandatory. Here, the court prefers efficiency, for example, arbitration as a dispute resolution tool saves Clear Channel time and money. Case Summary–AT&T Mobility LLC v. Concepcion et ux Under California law, courts may refuse to enforce any contract found “to have been unconscionable at the time it was made,” or may “limit the application of any unconscionable clause.” …. A finding of unconscionability requires “a ‘procedural’ and a ‘substantive’ element, the former focusing on ‘oppression’ or ‘surprise’ due to unequal bargaining power, the latter on ‘overly harsh’ or ‘one-sided’ results.” Initially, the District Court denied AT&T’s motion to compel arbitration under the Concepcions’ contract, finding the arbitration provision unconscionable because it disallowed classwide arbitration proceedings. The Ninth Circuit agreed that the provision was unconscionable under California law and held that the Federal Arbitration Act (FAA), which makes arbitration agreements “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract,” did not preempt the lower court’s ruling. AT&T appealed. The United Sates Supreme Court found that the California rule is an obstacle to the accomplishment and execution of the full purposes and objectives of Congress. Hence, the judgment of the Ninth Circuit was reversed and case was remanded.” Suggested Answers to Critical Thinking about the Law Questions 1. Scalia said that class arbitration greatly increased risks to defendants. It is important to understand and grasp what has been stated as it interferes with fundamentals of arbitration and thus it is inconsistent with the norms stipulated by the FAA. In addition to this the risks would increase with the number of number of plaintiffs as it would make the entire process more complex and time consuming. 2. Scalia could have reasonably justified agreeing with the Ninth Circuit by stating that allowing class-based arbitration would have more negatives than positives as it would work against the numerous advantages presented by the arbitration process. For one, class arbitration would further complicate this process by making it more time consuming and expensive. Since the number of people involved in the process is considerably higher, structure has to be added to the process, which would replace the otherwise informal proceedings. Also, this process would put the defendants at risk as well. Case Summary—Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth This case considers whether an American court can enforce an agreement to resolve antitrust claims by arbitration when that agreement arises from international transaction. The Court ruled in favor of enforcing the agreement to arbitrate. The Court stated that “[W]e conclude that concerns of international comity, respect for the capacities of foreign and transnational tribunals, and sensitivity to the need of the international commercial system for predictability in the resolution of disputes require that we enforce the parties’ agreement, even assuming that a contrary result would be forthcoming in a domestic context.” Answers to Review Questions 4-1. The use of ADR is increasing because alternative methods are less expensive, less time-consuming, and the formal hearing times and places can be set to accommodate the parties. Additionally, the use of ADR can prevent adverse publicity, preserve confidentiality, and is less adversarial, which means it is easier to preserve relationships between parties. 4-2. A judge will overturn an arbitrator’s decision only when there is a clear showing that the arbitrator’s decision is contrary to law or there was some defect in the arbitration process. 4-3. Arbitration may be secured voluntarily or it may be imposed upon the parties. Voluntary arbitration means it is through a binding arbitration clause in a contract. This kind of clause provides that all or certain disputes arising under the contract are to be settled by arbitration. The parties can also secure arbitration by entering into a submission agreement. In addition to these two voluntary means of acquiring arbitration, some states mandate arbitration for certain types of conflicts. For instance, in some states, public employees must submit collective bargaining disputes to binding arbitration. 4-4. Some people believe arbitration is problematic because arbitrators lack subject matter expertise in certain areas, especially discrimination. Also, compulsory arbitration in some situations erodes workers’ rights to a public trial, to get an injunction, or to bring a class action suit. Another concern is that many arbitrators are not lawyers. Some people have also pointed out that arbitration is becoming more like litigation. Over time, it might become increasingly expensive and time-consuming. 4-5. According to the Arbitrator’s Code of Ethics, the basic obligations of an arbitrator are as follows: • The arbitrator will uphold the integrity and fairness of the arbitration process. • If the arbitrator has an interest or relationship that is likely to affect his or her impartiality or that might create an appearance of partiality or bias, the arbitrator will disclose it. • The arbitrator will avoid impropriety or the appearance of it while communicating with the parties. • The arbitrator will conduct the proceedings fairly and diligently. • The arbitrator will make decisions in a just, independent, and deliberate manner. • The arbitrator will be faithful to the relationship of trust and confidentiality inherent in that office. • That arbitrator will ensure that he or she follows all the ethical considerations. 4-6. Mediators make no final decision. They act as facilitators of communication between disputing parties. It is a collaborative and creative process. A disputant would favor mediation if he or she wanted: • To preserve a relationship with the other party or parties • A creative solution • To save time and money Answers to Review Problems 4-7. No, a court would not uphold the award. This question focuses on the authority of the arbitrator. The arbitrator cannot ignore the plain language of the contract. The arbitrator is not allowed to disregard or modify unambiguous contract provisions, such as the provision that outlines the maximum amount of damages. 4-8. The parties can secure arbitration voluntarily by entering into a submission agreement that outlines how the dispute will be resolved. 4-9. Yes. Hannah can argue that the arbitrator has violated the Arbitrator’s Code of Ethics by failing to disclose a relationship that is likely to affect his impartiality or that might create an appearance of partiality or bias. 4-10. Eloise will be forced to arbitrate her claims. This is because she signed the employment agreement that has a provision that clearly stated that arbitration was required for any employment related dispute. Therefore, filing a claim of discrimination in a court of law would not be valid. 4-11. Eberly can probably have the award overturned. The award may be set aside only if one of these four conditions is met: • The award was the result of corruption, fraud, or other “undue means.” • The arbitrator exhibited bias or corruption. • The arbitrator refused to postpone the hearing due to sufficient cause, refused to hear evidence pertinent and material to the dispute, or otherwise acted to substantially prejudice the rights of one of the parties. • The arbitrator exceeded his or her authority or failed to use such authority to make a mutual, final, and definite award. If Eberly can show that the evidence was pertinent and material to the dispute, he can probably have the award overturned. 4-12. The court will grant S.A. & E.’s motion to dismiss. Marshall will lose because arbitrators are allowed to hear cases involving fraud. If the behavior was egregious enough to constitute a crime, the federal government could bring criminal charges in a different forum. Answers to Case Problems 4-13. The California Supreme Court vacated the judgment that and thus invalidated the arbitration process in Sonic-Calabasas v. Moreno. This is because it perceived this ruling to be procedurally and substantively unconscionable. It also mentioned that waiving the Berman hearing was a violation of public policy as it infringed the employee’s statutory rights to this hearing. 4-14. The outcome of the appeal was that the appellate court’s decision was reversed. The Court of Appeals held that AGF’s arbitration agreement was lawful. The court considers the arbitration agreement a contract that is applicable to state law, in this case Tennessee. Tennessee contract law does not conflict with the arbitration agreement. 4-15. The Second Circuit’s decision was vacated by the Supreme Court based on the court’s decision in Stolt-Nielson S.A. v. AnimalFeeds International Corp and remanded the case for further proceedings. In that case the absence of a contractual agreement was not regarded as a reasonable ground for submitting class arbitration. Additionally, the Second Circuit Court arrived at the same judgment that a class-action lawsuit could be ordered but not class-action arbitration. 4-16. The Court of Appeals ruled in favor of Atlantic Video because the company announced that it planned to waive its enforcement of certain provisions within the arbitration agreement. These waived provisions relate to the three clauses Ragone argued were unconscionable so the court concluded that the modified agreement was lawful. However, had Ragone brought the entire arbitration agreement forward, rather than just three clauses, the court may have ruled differently. 4-17. The appellate court ruled that the arbitration did not stand because both parties had originally waived it. Because the arbitration had already been lawfully waived, the case had to be litigated. Therefore, the arbitration ruling in favor of Wein was ignored and the lawsuit was reinstated. 4-18. The Court decided that the parties did not have to settle through arbitration. The arbitration agreement was not binding under Kentucky law because the arbitration provision failed to meet Kentucky Revised Statutes when it failed to state that the arbitration had to occur in Kentucky. Because the Court ruled that arbitration was not required, the parties could settle their case in court. 4-19. The Court found that even though the plaintiffs signed the contract that laid out the procedure for arbitration, the contract was unconscionable. This was because the clause was in very small print in the welcome packet, not on the service agreement. It was both unreadable and in an unreasonable place. Lastly, the class-action waiver was invalid in California, as per the Discover Bank case from the California Supreme Court. Therefore the contracts could not be enforced in that state because it was permeated in an unlawful purpose. 4-20. The Court did agree to hear this case because contracts and agreements can have no-appeal clauses as long as the intent is clear and unequivocal within the contract. This means that a contract can include a section that makes any initial award in arbitration or trial final: the losing party cannot appeal. The Court found that in this case, as first glance, the clause was valid (fulfilling the above requirements) and the case was dismissed. Thinking Critically about Relevant Legal Issues 1. The issue at hand is whether patient care is analogous to employee–employer relationships. Students would be advised to look up statistics regarding malpractice insurance and the reasons for its rise. A good conclusion would assess the ethical implications of treating patients like employees. 2. The issue at hand is whether treating patients as employees from a legal standpoint is ethical. What happens when a patient declines to sign the agreement? Can the doctor refuse care? Is there then a lawsuit? Here, the author seems to prefer efficiency, which is often an ethical norm raised regarding alternative dispute resolution. Doctors would save time and money if they required arbitration of disputes. 3. Students may take the stand that this is not an apt analogy. The instructor should ask students why not. It seems that patients have much more at stake than employees. Medical malpractice suits can greatly help a patient who has been greatly harmed. Arbitration may not get them enough money to live with a condition negligence caused. 4. An essay following an opposition to the author would address the questions above. One ethical norm an opposing essay should highlight is justice, defined as fundamental fairness. Injured patients deserve procedural due process, which means they should be able to have their “day in court” in an effort to hold negligent doctors accountable. Solution Manual for The Legal Environment of Business: A Critical Thinking Approach Nancy K. Kubasek, Bartley A. Brennan, M. Neil Browne 9780133546422, 9780134074030
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