February 2014 Second Example Ten-point Answers to Virginia Essay Questions
FEBRUARY 2014 - QUESTION 9 – VIRGINIA BAR EXAMINATION
On January 2, 2013, Golden Beverage, Inc. ("Golden"), a California corporation with its principal place of business in Colorado, and Jefferson Orchards, Inc. ("Jefferson"), a Delaware corporation with its principal place of business in Albemarle County, Virginia, entered into a written contract requiring Jefferson to deliver large quantities of fresh apples from its orchards in Virginia to Golden in Colorado. The contract was negotiated and signed during a meeting of the companies' executives at the Boar's Head Resort in Charlottesville, Virginia. The contract provided that Jefferson would deliver the apples to Golden's warehouse in Colorado throughout the 2013 apple harvest season.
After a dispute arose over the delivery of apples under the contract, in October 2013, Golden sued Jefferson in the Circuit Court for the City of Charlottesville, alleging breach of the contract and claiming damages in the amount of $50,000. Jefferson promptly filed a notice of removal and other appropriate papers to remove the case to the United States District Court for the Western District of Virginia in Charlottesville. The following week, Jefferson filed an Answer and Counterclaim against Golden, alleging that Golden had breached the contract by refusing to accept certain deliveries and seeking $30,000 in damages for Golden's alleged breaches.
In pretrial proceedings, Jefferson argued that the breach of contract claims should be governed by Virginia law. Golden argued for application of Colorado law. The District Court agreed with Jefferson and at trial instructed the jury in accordance with Virginia law.
The jury returned a verdict in favor of Jefferson on Golden's claim and found in favor of Jefferson on its Counterclaim, awarding Jefferson damages in the amount of $30,000. On December 15, 2013, the Court entered final judgment in conformity with the jury's verdict.
On January 15, 2014 Golden filed a motion for relief from the judgment, alleging that the judgment was void because the court lacked jurisdiction over the controversy.
(a) Was the Court correct in applying Virginia law? Explain fully.
(b) On what two grounds could Golden have moved before trial to have the case remanded
to state court for lack of diversity jurisdiction, and what would have been the likely
outcome on each ground of such a motion? Explain fully.
(c) Should the Court grant Golden's motion for relief from the judgment, and, if so, what
should the relief be? Explain fully.
FEBRUARY 2014 - QUESTION 9 – EXAMPLE ANSWER #1
(a) No, the Court was not correct when it applied Virginia Law.
A federal court who has subject matter jurisdiction over a lawsuit based on diversity of citizenship applies the choice of law rules of the state in which it sits.
Here, the defendant removed the case to the United States District Court for the Western District of Virginia. Consequently, the federal court will apply Virginia's choice of law rules to the dispute between Golden and Jefferson.
Virginia follows the Traditional Approach from the First Restatements of Conflicts (the "Vested Rights" approach). Under the vested rights approach, in breach of contract actions, the forum state applies the law of the state where the contract was executed - unless it is a contract for performance. In that case, the forum court will apply the law of the state where the contract was performed.
Here, Virginia is the place where the contract was "accepted" and executed (during the meeting of the companies' executives in Charlottesville). However, the contract required that Jefferson would deliver the appples to Golden's warehouse in Colorado. Therefore, Colorado is the place of performance and the Court erred when it applied Virginia law to the breach of contract action.
(b) Golden could have filed a motion to remand to have the case remanded back to Virginia state court because (1) the amount in controversy did not exceed $75,000; and (2) the Jefferson is a citizen of Virginia.
Subject matter jurisdiction based on diversity of citizenship requires that there be complete diversity between all plaintiffs and defendants, and that the amount of controversy exceeds $75,000.
Here, there is complete diversity between Golden and Jefferson. A corporation is a citizen of the state in which it is incorporated and its principal place of business. Here, plaintiff Golden is a citizen of both California and Colorado and defendant Jefferson is a citizen of both Delaware and Virginia.
However, the amount of controversy at issue does not exceed $75,000. Subject matter jurisdiction is determined by the face of the complaint. Golden filed a lawsuit claiming damages of $50,000 - which is less than $75,000. The fact that Jefferson counterclaimed for an additional $30,000 is not taken into account because the jurisdictional amount must be met by looking at the complaint.
Subject matter jurisdiction based on diversity of citizenship is improper when a defendant is a citizen of the original state court where the lawsuit was brought. As discussed above, defendant Jefferson is a citizen of Virginia. Since the lawsuit was initally brought in a Virginia state court, subject matter jurisdiction based upon diversity of citizenship was not proper.
The federal court threfore would have granted Golden's motions for remand on both grounds.
(c) The Court should grant Golden's motion for relief from judgment.
Subject matter jurisdiction cannot be waived. The court did not have subject matter jurisdiction over the case because the standards for diversity jurisdiction were not met. Threfore, the Court should grant Golden's motion and vacte the judgment.
FEBRUARY 2014 - QUESTION 6 – EXAMPLE ANSWER #2
(a) No, the court was incorrect in applying Virginia law.
A federal court sitting in diversity must apply the choice of law rules of the state in which the court sits. In this case, the federal court that entered the ruling was the United States District Court for the Western District of Virginia. Thus, Virginia's choice of law rules govern.
Virginia follows the vested rights approach when it comes to choice of law rules. Under the vested rights approach, absent a provision in the contract specifying the governing law, matters of contract formation are governed by the place of the making of the contract. The place of the making of the contract is the location where the last act took place to render the contract enforceable.
In this case, the contract was signed in Boar's Head Resort in Charlottesville, Virginia. Thus, because the contract became effective upon execution in Virginia, Virginia law governs matters of contract formation.
However, the claim here revolves around a breach of the contract, not contract formation. Under the vested rights approach, absent a provision in the contract specifying the governing law, matters of contract performance are governed by the place of performance.
In this case, the contract called for Jefferson to deliver apples to Golden in Colorado. Because performance took place in Colorado, Colorado law governs matters of contract performance.
Because performance was to take place in Colorado and Colorado law governs matters of contract performance, the court incorrectly ruled that Virginia law governs.
(b) Lack of amount in controversy: Golden would have been successful on a motion to remand to state court for lack of the amount in controversy to support a finding of federal subject matter jurisdiction.
In order for a federal court to have valid subject matter jurisdiction over a case, the case must (i) arise under federal law, or (ii) the requirements for diversity of citizenship must be satisfied.
Diversity of citizenship requires that no plaintiff be a citizen of the same state as any plaintiff, and that the amount in controversy exceed $75,000, not including attorneys' fees and expenses. An individual is a citizen of the state of domicile (i.e., physical presence and intent to permanently remain). A corporation is a citizen of the state of incorporation and the state where the company has its primary place of business.
On the facts here, the claim is a state-based breach of contract action. Thus, federal question jurisdiction does not apply.
With respect to diversity of citizenship, Golden is a citizen of California (i.e., state of incorporation) and Colorado (i.e., principal place of business). Jefferson is a citizen of Delaware (i.e., state of incorporation) and Virginia (i.e., principal place of business). Because no defendant is a citizen of the same state as any plaintiff, complete diversity exists.
However, the amount in controversy is only $50,000. Because $50,000 is less than $75,000, the amount in controversy requirement is not satisfied.
Therefore, Golden would have been successful in remanding the case to state court.
Defendant is a resident of Virginia: Golden would have been successful on a motion to remand to state court on the grounds that Jefferson is a citizen of Virginia.
Building on the analysis of federal subject matter jurisdiction as presented above, a defendant in a diversity case may not remove a state court action to federal court if any of the defendants are citizens of the state in which the state court action was brought.
On the facts here, the case was initially brought in the United States District Court for the Western District of Virginia. Jefferson, the defendant, is a Virginia citizen. (See above for explanation as to why Jefferson is a Virginia citizen.)
Thus, because the action was brought in Virginia state court and the defendant is a Virginia citizen, removal was improper.
(c) Yes, the court should grant Golden's motion for relief from the judgment on the basis of lack of subject matter jurisdiction. The ruling should be overturned.
A challenge on the basis that a federal court lacks subject matter jurisdiction can be made at any time, including for the first time on appeal. In other words, a party in federal court never waives an objection to subject matter jurisdiction.
As discussed in part (b), the federal court lacked subject matter jurisdiction to hear the case.
Therefore, Golden's January 15, 2014 motion for relief should be granted. The court's verdict should be overturned and the cases can proceed again, if the parties wish, in state court.
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FEBRUARY 2014 - QUESTION 9 – EXAMPLE ANSWER #3
a. The court was incorrect in applying the Virginia law. In a diversity case, Federal court should apply the laws of the state in which it sits, including the state's choice of law provisions. Hence, the Disctrict Court for the Western District of Virginia should apply the choice of law provisions under the Virginia laws.
In contract dispute cases, Virginia courts first look to see whether there was a choice of law clause in the contract. Such choice of law clause would be effective for issues involving contract construction. For issues involving contract performance, the choice of law clause would also need to have sufficient contact with the parties and the contract. Here, the parties did not have a choice of law clause.
In resolving contract interpretation disputes, the court would determine where the contract was formed. The contract is formed where the contract was accepted. Here, the contract was accepted in Charlottesville, Virginia. However, the present issue is of contract performance.
For contract performance issues, the court would see where the performance was to take place. The delivery was to take place in Colorado, and that would be the place of performance. Even though the apples were to be provided from Virginia, the contract was for delivery of apples, and as such the place of performance is a place of delivery.
Because the dispute arose over the delivery of apples under the contract, which is a contract performance issue, the court should apply the laws of Colorado, place of delivery. Accordingly, the Court erred in applying Virginia law in this dispute.
b. Federal court must have personal jurisdiction and a subject matter jurisdiction to hear a particular case. Where any defendant is a resident of Virginia and was sued in Virginia court having proper personal jurisdiction over the defendant, such defendant cannot remove the case to Federal Court.
Accordingly, Colden has two grounds on which to remand the case back to state court: improper removal by a resident defendant and lack of subject matter jurisdiction.
Improper removal; Removal to a federal court is usually done to eliminate any bias that an out of state defendant might encounter in the state court. Here, Jefferson is considered a resident of Virginia because it has its principal place of business in Albemarle County, Virginia. Corporate residence is based on the state of incorporation and its principal place of business. If a defendant is sued in a state court where the defendant is a resident, then that defendant cannot remove an action to federal court. Hence, removal was improper and Golden could move to remand the case back to state court before the trial.
Lack of subject matter jurisdiction: Removal can only be done if the case could have been brought up in a Federal Court. For a case to be heard in a Federal Court, the court must have subject matter jurisdiction. In a diversity case, subject matter jurisdiction exists when there is a complete diversity and the amount in controversy exceeds the $75,000 statutory requirement.
There is a complete diveristy between the parties here. For complete diversity, each plaintiff must be diverse from each defendant. Golden Beverages is a resident of California and Colorado. Jefferson Orchard is a resident of Virginia and Delaware.
The statutory requirement of $75,000 is not satisfied in this case. Plaintiff's claim is only for $50,000. While one plaintiff can aggregate the claims against one defendant, counterclaims cannot be added to the original claim amount. Jefferson's counterclaim cannot be added to Golden's claim to reach the required amount in controversy. Virginia does not follow a compulsory counterclaim rule. Jefferson's counterclaim would be allowed in under the supplement jurisdiction because it arises out of the same transaction/occurence but only if Golden's claim is property before the court. There must be one claim properly before the court before supplemental jurisdiction would come in. Here, Golden's claim does not satisfy the requirement for diversity jurisdiction. Thus, the federal court does not have subject matter jurisdiction to hear the case.
c)The court should grant Golden's motion for relief from the judgment. Unlike objections to personal jurisdiction, process or venue, the parties cannot waive subject matter jurisdiction. The issue of subject matter jurisdiction can be raised at any time, including for the first time on appeal. Golden filed its motion within 30 days of the judgment and it was thus timely.