Defendant Darue Engineering & Manufacturing purchased property seized from plaintiff Grable & Sons Metal Products, Inc. by the IRS to satisfy tax delinquency. Five years later, plaintiff sued for title in state court alleging that the notice provided by the IRS did not satisfy federal law. Defendant removed to federal court to address the federal question, and SCOTUS granted certiorari on the jurisdictional issue.
Questions of law
When no federal cause of action exists for a claim which nonetheless turns on a disputed issue of federal law, may the case be removed to federal court?
The question asked by the court is whether the state-law claim necessarily raises a stated federal issue which is both disputed and substantial and which a federal court may entertain without disturbing congressional boundaries placed on it. The court held that the notice required by federal statute was an essential element of its claim and the meaning of the federal statute was actually in dispute, and therefore it was appropriate to grant jurisdiction. The court also found that the government had an interest in determining uniform answers to such questions, particularly when they could impact government action.
Plaintiff brought suit for negligence against Dr. Pence, a neurosurgeon who had performed a laminectomy. Because of inflammation, the laminectomy was unsuccessful and the patient was paralyzed after a fall at the hospital. Defendant did not disclose risk of paralysis and estimated it to be “only 1%” in testimony. Plaintiff only brought adverse witnesses and personal testimony and the trial court granted defendant motions for directed verdict.
Questions of law
What obligation does a physician have to disclose risks of therapy to a patient? Does a physician have discretion to withhold disclosure of risks? On what basis should causality be evaluated?
The court reversed, finding that the trial court had erred in granting directed verdicts, as there was sufficient testimony to put the question of negligence before the jury. A physician has the privilege to withhold information from a patient but not to avoid the disclosure rule; rather, such a decision is a medical decision and is subject to the same standard of malpractice. Causality is based on whether the disclosure of risk would have changed the choice and thereby the outcome. Holding it to be too difficult to make a subjective determination of what a patient would have done, the court rather called for a test based on whether adequate disclosure could reasonably be expected to have caused a prudent person in the patient’s position to decline the treatment.
A railroad had given Mr. and Mrs. Mottley lifetime rail passes to settle a prior claim, but after a federal law made lifetime rail passes illegal, they stopped honoring them. The Mottleys sued in federal court for breach of contract.
Questions of law
What level of relatedness to a federal law is required for subject matter jurisdiction?
Although the Mottleys anticipated that the federal law would be brought as a defense, this anticipation did not satisfy subject matter jurisdiction in their claim, and it was remanded for state courts to handle.
Plaintiff Mary DeFontes and a class sued Dell in Rhode Island for alleged violations of the Deceptive Trade Practices Act, and Dell moved to compel arbitration under an alleged contract accepted when the parties accepted delivery of Dell products. The trial court denied, stating that the plaintiffs did not have reasonable notice of the contract and that the contract was illusory because it included the language “these terms and conditions are subject to change without prior written notice, at any time, in Dell’s sole discretion”, and Dell appealed to the Supreme Court of Rhode Island.
Rules of law
The matter was subject to the UCC. Under the UCC, a sale contract can be created when the goods are shipped, and any subsequent terms are “additional terms in acceptance or confirmation” under section 2-207. Alternately, the contract can be created at acceptance, because the buyer retains the power to accept or return the product.
Under ProCD, Inc. v. Zeidenberg, the practicality of sales is such that a consumer who receives a product and is expressly provided the right to accept or return the product for a refund subject to new terms and conditions may be bound by that contract. However, they must be temporally bound to acceptance.
Under the “layered contract” theory of formation, a seller must prove that a buyer has accepted a seller’s terms after delivery. A buyer who receives a product with additional terms is tendering acceptance by keeping it if the buyer understands that he has the option to reject it.
The court held that although it would have been possible for Dell to give the plaintiffs notice, Dell had failed to do so sufficiently and they could not have reasonably concluded that they had the ability to send the products back and thereby change the agreement. “Although Dell does provide a ‘total satisfaction policy’ whereby a customer may return the computer, this return policy does not mention the customer’s ability to return based on their unwillingness to comply with the terms.”
The court found that too many inferential steps were required of the plaintiffs and too many relevant provisions were left ambiguous.
After using the Uber app, plaintiff Meyer sued in federal district court for illegal price-fixing. Uber moved for enforced arbitration pursuant to a digital TOS agreement, and the trial court denied on grounds that Meyer did not have “reasonably conspicuous notice” of the TOS and did not “unambiguously manifest assent” to them. Uber appealed to the Second Circuit.
Rules of law
The appellate court found no questions of fact and reviewed the trial court’s dismissal of the motion to compel arbitration de novo. Under federal law, there is a liberal policy in favor of arbitration agreements and contracts. However, the court must first determine whether an agreement exists to know whether the arbitration element can be enforced. They also must determine whether the dispute falls within the scope of the agreement.
Under California law, an offeree is not bound by “inconspicuous contraction provisions” he doesn’t become aware of, contained in a document “whose contractual nature” is not readily apparent. However, an offeree will still be bound by an agreement if a “reasonably prudent user” would be on notice of the terms at inquiry. An electronic contract is binding if “the layout and language of the site give the user reasonable notice that a click will manifest assent” to the contract.
The court held that from the standpoint of a reasonably prudent smartphone user, the design of the screen and language used “render the notice provided reasonable as a matter of California law.” There was also temporal and spatial coupling of the notice with the “register” function. Having those terms of service available only by hyperlink did not preclude the determination that notice was reasonable. Appeals court remanded.
A minority shareholder in Greyhound attempted to sue Greyhound in Delaware by sequestration of stocks which were situated in Delaware under statute. The sequestrator “seized” these stocks by placing a stop transfer order on them and the suit proceeded. 21 defendants, none of whom were in Delaware, entered special appearance to quash jurisdiction. Trial court rejected the motion and the Delaware Supreme Court affirmed. Defendants appealed to SCOTUS.
Questions of law
Where does the line fall for quasi in rem jurisdiction and the attachment of property for the purposes of recognizing jurisdiction?
SCOTUS reasoned to abandon the in rem policy from Pennoyer, choosing instead to move toward the test of “fair play and substantial justice” from International Shoe. This is not a total abandonment of in rem because, as they say, “when claims to the property itself are the source of the underlying controversy…it would be unusual for the State where the property is located to not have jurisdiction.” They found that pulling someone into a jurisdiction merely because of property, without a controversy touching that property, presented a fairness problem. “We therefore conclude that all assertions of state-court jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny.”
Foreign plaintiffs, Argentinian nationals, attempted to sue foreign defendant Daimler, as owner of its Argentinian subsidiary, for war crime participation by that subsidiary. They brought suit in California by service on the US subsidiary, which was incorporated in Delaware but had substantial business contacts and properties in California. The trial court dismissed for lack of jurisdiction, but the Ninth Circuit reversed on grounds substantially similar to a purposeful availment theory. Appealed to SCOTUS.
Questions of law
When does a corporation’s contacts with a forum rise to a level granting personal jurisdiction over matters unrelated to those contacts?
Ginsburg, writing for the majority, argued that the Ninth Circuit had erred both in permitting to allow the US subsidiary to stand as agent for defendant and in extending general jurisdiction over events and plaintiffs not only outside the forum state, but on an entirely different continent. The subsidiary’s contacts with the forum would have been sufficient to establish specific jurisdiction, but were not enough to show that it was “at home” in the state.
Defendants agreed to purchase a food truck business, with equipment, from plaintiff. They reached a verbal agreement and defendants paid $10,000 cash while waiting on a bank loan for the remaining $140,000. They took possession and operated the food truck for a season while the title remained in the plaintiff’s name. Thereafter, they attempted to return it and claimed no contract existed. They said the $10,000 was a fee to operate while they explored purchasing, but the bank did in fact grant them the loan. The trial court found for defendants; plaintiff appealed.
Rules of law
Under the UCC, a goods contract may be made in any way that shows agreement, including the conduct of the parties. A contract may issue even if the moment of its making is undetermined. Even if terms are left uncertain, intent and reasonable certainty of remedy govern.
The defendants argued that the business was not a “good” under the UCC and argued that the supposed oral contract was too vague to be enforceable. The plaintiff argued that the essential terms were agreed upon and the only remaining elements were performance, and did not timely return the business.
The court found that there was a contract, that there was more than just an agreement to agree, and that the defendants breached. Reversed.
Plaintiff Dohrmann sued the defendant Swaney, executor of the estate of his neighbor Mrs. Rogers, for damages under a purported contract. Mrs. Rogers had, in the contract, agreed to give him her apartment and $4 million for “past and future services” and in exchange for “incorporating” her last name into the names of his children. The trial court granted summary judgment against plaintiff, who appealed.
Rules of law
A contract requires consideration, and the question of whether consideration is sufficient is a matter of law. Where the amount of consideration is so grossly inadequate as to shock the conscience of the court, the contract will fail. When there is a gross inadequacy of consideration, the relative fairness of the contract and circumstances of unequal bargaining power may be considered in determining whether to set aside the contract.
Plaintiff asserted that perpetuating Mrs. Rogers’ name by adding it to those of his children was bargained-for and sought consideration. He also said that the court did not have grounds to examine the relative value of consideration, only to determine whether it exists. The Estate argued that the contract was entered into fraudulently and that because the name was not added as a surname, it did not meet the goal of perpetuating her name.
The court affirmed, finding that not only was the consideration grossly inadequate, but it was in a sense nonexistent, since the only supposed benefit, changing the children’s names, was not enforceable against them since they could freely change their names in the future. There was also substantial unfairness associated with the formation of the contract and had to be set aside.
Defendants engaged in the construction of a reservoir employed contractors who failed to use proper care and skill, and accordingly water broke out of the reservoir and damaged plaintiff’s property.
Question of law
Does a lack of knowledge or intent indemnify a defendant from liability for harm done by their actions? What if the fault lies with their agents? “What is the obligation which the law casts on a person who lawfully brings on his land something which, harmless whilst it remain there, will naturally do mischief if it escape out of his hand?”
The court held that as the plaintiff’s rights had been infringed as a result of actions which would have been unlawful if they had been done intentionally, the defendants ought to be held liable. They knew the mine workings could extend in any direction and therefore they acted at their own peril.
“We think that the true rule of law is, that the person who for his own purposes brings on his lands and collects and keeps there anything likely to do mischief if it escapes, must keep it in at his peril, and, if he does not do so, is prima facie answerable for all the damage which is the natural consequence of its escape.”