Examination Number ________________





Professor Carl H. Esbeck Fall Semester 2010





Civil Procedure I, 5010L, Section 1



Directions to Part I - Essay

(1 hour and 15 minutes)


Place your examination number in the upper right-hand corner of this examination.

When finished, return these essay examination questions and submit your essay answers.


Answer only the question asked. Do not raise or answer questions not asked.


Arrange your answers in sequential order. That is, put your answer to Question 1 first, then your answer to Question 2, and etc. If you want to skip over a question and come back to it later, leave a page or two blank and begin the next question.


You are encouraged to use your laptop to complete Part I.


If you do not use your laptop, write your answer in the bluebook provided.  Use a pen with blue or black ink. Write on only one side of each page.  Do not write in the left-hand margin. Do not tear pages out of the bluebook. 


You may bring with you into the examination room your casebook, downloaded class handouts, your 2010 federal rules supplement, and your own classroom notes (not borrowed notes). You may also bring a course outline provided it is entirely your own work product. It is an Honor Code violation to have any other materials with you during the examination.


Your outlines will be collected at the end of the examination. This is to ensure the outline you use is entirely your own work product.


* * * Part I begins on the Next Page * * *



PART I (1 hour and 15 minutes)


Question One (45 minutes): Sunny Days Insurance Co. ("SDI") is incorporated in Delaware and has its principal place of business in Columbia, Missouri. It issued an insurance policy to Sludge, Inc. to insure Sludge against liability arising out of Sludge's incineration business. Sludge is incorporated in Missouri, but has its principal place of business in Evansville, Indiana on the Ohio River. Sludge is accused by the federal Environmental Protection Agency of violating federal air and water quality laws. If the EPA substantiates its claims at an administrative hearing to start in June 2011, Sludge will be subject to fines of up to $10,000,000. The money from the fines would go into the U.S. Treasury. Sludge denies the EPA charges.


Sunny Days Insurance Co. files a claim in Missouri state court (Boone County) seeking a declaration that the insurance policy issued to Sludge only covers liability to pay the cost of repairing harm to the environment, not liability for fines payable to the U.S. Government. The complaint references 33 U.S.C. § 1986 stating that it is against public policy to issue an insurance policy that covers a regulated industry assessed administrative fines. The complaint is served on Sludge at its headquarters on October 1, 2010. Sludge files its answer on October 14, 2010, denying that the policy does not cover its potential liability to the EPA. On November 1, 2010, Sludge removes the lawsuit to the U.S. District Court for the Western District of Missouri. On November 2, 2010, Sludge files a first amended answer adding a defense that the court lacks specific jurisdiction over Sludge. Another few weeks go by and it is now November 28, 2010.


(A) Does the federal court have personal jurisdiction over Sludge? Explain.


(B) If Sunny Days Insurance Co. immediately moves to remand the case to state court, how should the federal court rule? Explain.


Question Two (30 minutes): Pauline Arneze, a citizen of New Mexico, was employed with the Wells Fargo Bank ("WF"), in the Bank's branch office in Las Cruces, New Mexico. Wells Fargo Bank is a corporate citizen of California with its principal place of business in San Francisco. Alleging that the Bank discriminated against her on the basis of sex, Pauline files suit in New Mexico state court alleging violations of Title VII of the federal Civil Rights Act of 1964, and a substantially similar provision of the New Mexico Human Rights Act. Wells Fargo Bank timely removes the lawsuit to federal district court. Two months later Wells Fargo files with the court and serves Pauline with a settlement proposal in accord with New Mexico statute §44.667. The settlement amount proposed is $25,000. The New Mexico statute provides:


In any civil action for damages, if a defendant files an offer of settlement with the court which is not accepted by the plaintiff within 30 days, the defendant shall be entitled to recover reasonable attorney's fees incurred by defendant from the date of the filing of the offer, provided that the final judgment is one that is less than the settlement offer.


Pauline declines the offer of $25,000 in settlement of the lawsuit.


Six months later Wells Fargo Bank files a motion for summary judgment with respect to both claims. A month thereafter the court grants the motion. Wells Fargo then files a timely request with the court for an order requiring Pauline to pay $19,880 in attorney's fees that Wells Fargo accrued defending the two claims since service of its proposed settlement offer. Pauline responds that she should not be held liable for the Bank's attorney's fees because of the case of Christiansburg Garment Co. v. EEOC, 343 U.S. 412 (1978). In that case, the U.S. Supreme Court set the standard by which a prevailing defendant in a Title VII lawsuit can recover attorney's fees from a plaintiff. The Christiansburg Court reaffirmed the "American Rule" whereby a defendant must pay its own attorney's fees unless a plaintiff has proceeded on a frivolous or totally groundless claim. Wells Fargo does not argue that Pauline's claims were either frivolous or totally groundless.


How should the federal district court rule on the Bank's motion for attorney's fees? Explain.



* * * END OF PART I * * *


Turn in both these examination Questions and your Answers.


After a 10 minute break, all students will begin Part II together.