CHAPTER 2:
COURTS AND ALTERNATIVE
DISPUTE RESOLUTIONS
Chapter 2 Objectives
Explain the function and jurisdiction of
the courts.
Explain the relationships of the various
courts in our society.
Introduce the alternative dispute
resolutions.
The Court System
Functions of the court system
ØTo interpret the law
ØTo apply the law
ØJudicial review: deciding whether the laws or
actions of the other two branches are
constitutional
The Judiciary’s Role In American
Government
Judicial Review was established by the U.S.
Supreme Court in Marbury v. Madison
(1803) where Chief Justice Marshall wrote:
◦ “It is emphatically the province and duty of
the judiciary to say what the law is….”
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Basic Judicial Requirements
Jurisdiction: “Juris” (law) “diction” (to speak) is
the power of a court to hear a dispute and to
“speak the law” into a controversy and render
a verdict that is legally binding on the parties to
the dispute.
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Jurisdiction of Courts
The power or authority of a court to hear
cases is called its jurisdiction.
Courts must have jurisdiction over the
subject matter of the case and jurisdiction
over the persons involved.
Jurisdiction of Courts
Personal jurisdiction:(in personam jurisdiction)
ØA court has jurisdiction over any person or
business resides in a certain geographical area.
• In Rem jurisdiction (jurisdiction over property)
Ø A court can also exercise jurisdiction over
property that is located within its boundaries.
Jurisdiction of Courts
Personal Jurisdiction
Ø Long arm statutes: a court can exercise
personal jurisdiction over certain non-resident
defendants based on activities that took place
within the state.
Ø Requirement: the defendant must have
minimum contacts with the state to justify the
jurisdiction
Jurisdiction of Courts
Personal jurisdiction
Corporate contacts:
ØA corporate’s residence: the place where it is
incorporated, has its principal office, and/or
doing business
Ø Minimum contacts: the normal requirement: it
advertises or sells its products within the state
or places its goods into the “stream of
commerce” with the intent that the goods be
sold in the state.
Jurisdiction Over Property
In Rem: power to decide issues relating to
property, whether the property is real,
personal, tangible, or intangible.
◦ A court generally has in rem jurisdiction over any
property situated within its geographical borders.
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Jurisdiction of Courts
Jurisdiction over subject matter
Ø Courts of general jurisdiction & Courts of
limited jurisdiction
Ø Courts of original jurisdiction (courts of the
first instance) & appellate court (reviewing
court)
Ø Jurisdiction of federal court: federal questions &
diversity of citizenship
Ø Exclusive jurisdiction & concurrent jurisdiction
Jurisdiction of Courts
Jurisdiction over subject matter
Ø Jurisdiction in cyberspace: (1) substantial
business conducted over the internet; (2) some
interactivity through a web site; and (3) passive
advertising
Ø International jurisdiction
Subject Matter Jurisdiction
General and Limited Jurisdiction
◦ Limitation on the types of cases a court can hear,
usually determined by federal or state statutes.
Example: probate, bankruptcy, criminal.
◦ Usually defined by statute. Can also be limited to
amount in controversy (amount of monetary
damages).
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Original and Appellate Jurisdiction
Courts of original jurisdiction is where the
case started (trial).
Courts of appellate jurisdiction have the
power to hear an appeal from another
court.
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Federal Court Jurisdiction
“Federal Question” cases:
◦ Rights or obligations of a party are created or defined
by some federal law.
“Diversity of Citizenship” cases:
◦ Parties are not from the same state, and
◦ The amount in controversy is greater than $75,000.
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Exclusive vs. Concurrent Jurisdiction
Exclusive: only one court (state or federal)
has the power (jurisdiction) to hear the
case.
Concurrent: more than one court can hear
the case.
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Jurisdiction in Cyberspace
Courts use a “Sliding Scale” Standard to
determine whether to exercise jurisdiction.
Some
Interaction Substantial
Passive No Yes Business
Website
Interaction
International Jurisdiction Issues.
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Venue
Venue is the proper location where a case is
to be tried.
Proper venue requires choosing the proper
court.
The right to a particular venue can be
surrendered.
◦ In criminal cases venue is frequently changed by
the court to try to give the defendant a fairer
trial.
Standing to Sue
A party must have suffered a legal injury and
have a sufficient “stake” in the controversy.
CASE 2.2 Oregon v. Legal Services Corp.
(2009). Was there a “concrete” injury to the
state?
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Federal Court System
U. S. Supreme Court
Decisions are binding to all other courts.
U. S. Court of Appeals
Special Federal Courts Federal District Courts
State Court System
State Supreme Court
State Courts of Appeals
State Courts of Original Jurisdiction
Inferior Courts Small Claims
Trial Courts
“Courts of record”-court reporters.
◦ Small Claims Courts are informal, inferior
courts with limited amounts in controversy
(usually $5,000).
Opening and closing arguments.
Juries are selected.
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Trial Courts
Evidence presented (witness testimony,
physical objects, documents, and pictures.)
Witnesses are examined and cross-
examined.
Verdicts and Judgments are rendered.
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Appellate Courts
Review trial courts proceedings to
determine whether the trial was according
to the procedural and substantive rules of
law.
Generally, appellate courts will consider
questions of law, but not questions of fact.
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Supreme Courts
The two most fundamental ways to have your
case heard in a supreme court are:
◦ Appeals of Right.
◦ By Writ of Certiorari. à
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Alternative Dispute Resolution
Trials are very expensive and sometimes
take many months to resolve.
Alternative dispute resolution (ADR)
methods are inexpensive, relatively quick
and leave more control with the parties
involved.
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ADR
Unless court-ordered, there is no record
which is an important factor in commercial
litigation due to trade secrets.
Most common: negotiation, mediation,
arbitration.
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Negotiation
Informal, sometimes without attorneys,
where differences are discussed with the
goal of “meeting of the minds” in resolving
the case.
Successful negotiation involves thorough
preparation, from a position of strength.
è The parties voluntarily settle the dispute
by themselves
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Mediation
Involves neutral 3rd party ‘mediator’.
Mediator talks face-to-face with parties (in different
rooms) to determine “common ground.”
◦ Advantages: few rules, customize process, parties control
results (win-win).
◦ Disadvantages: mediator fees, no sanctions or deadlines.
èMediation: a neutral third party acts as a mediator and
works with both sides in the dispute to facilitate a resolution.
The neutral party may only propose a solution not make
decision resolving the dispute.
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Arbitration
Neutral 3rd party renders a legally-binding decision;
usually an expert or well-respected government
official.
èAn arbitrator or a panel of arbitrators hears a
dispute and impose a resolution on it.
Ø An arbitration decision (award) is binding and final.
Ø Arbitration clause: specifying that any dispute
arising under the contract will be resolved through
arbitration.
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Arbitration Disadvantages
Results may be unpredictable because
arbitrators do not have to follow precedent
or rules of procedure or evidence.
Arbitrators do not have to issue written
opinions.
Generally, no discovery available.
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Arbitration Process
Case begins with a submission to an
arbitrator. Next comes the hearing
where parties present evidence and
arguments. Finally, the arbitrator
renders an award.
Courts are not involved in arbitration
unless an arbitration clause in a
contract needs enforcement.
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