US Law for Civil Lawyers: A Practitioner’s Guide 9781509936625, 9781509936618

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Dedication “Travel Teaches Tolerance” read the sign on the side of the tourist bus in India. We dedicate this book to those wishing to travel—physically, mentally or both—to engage a new legal culture on its own terms as they translate it to their own.

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Acknowledgements The areas of U.S. law presented in this book have been selected because of their applicability to U.S. legal practice but also because in the experience of the editor and many of the authors, working as U.S. lawyers outside the U.S., these areas of law present practices that a civil law practitioner might find to be most different from his or her own substantive and procedural law. In contemplating all the authors, translators, proofreaders and editors needed to bring about this book, I am reminded of always having been struck by the peculiar subtitle of the work by classicists Hermann Diels and Walther Kranz, translated into English as The Older Sophists: A Complete Translation by Several Hands of the Fragments in Die Fragmente Der Vorsokratiker. Many hands indeed were needed to bring our volume to the reader. To help the civil law practitioner and scholar, we have taken the effort to translate the most important terms of art, based upon the inspired pattern established by interpreter and translator, Howard D. Fisher in his The German Legal System and legal Language, 4th Ed. (Routledge, 2009), and based upon concepts of translation as method suggested by Bernhard Großfeld. I would also like to thank legal comparativists Professors Guido Alpa and Robert Barker for their thoughts and ideas on law and the translation process. To best make connections to the civil law culture, a team of translators worked the significant terms that were identified by the authors themselves, into German, French, Spanish and Italian. The translation alone required considerable cultural understanding of law on the part of the translators as well as their linguistic skill and plasticity. My long-time collaborators P. Matthew Roy and Alessandro Galli not only translated the English to Spanish and Italian, respectively, but as professional legal translators, their comments on the German and English were very insightful and welcome. Laurène Salmon of Université Paris 1 Panthéon-Sorbonne provided a sound foundation for the French, to which thereafter Marie Pflüger managed the translation with assistance from Moritz Röhrs, and Claude Ngatchou through their trilingual abilities in French, German and English, especially as chapters were expanded, replaced or edited by various authors. Ryan Kraski of the University of Cologne organized much of the copy-editing and Michelle Quindeau, also of the University of Cologne, ably coordinated authors, deadlines, and contracts. Dr. Jennifer Hülsberg patiently and skillfully worked through the long task of reading the chapters and commenting on them as they arrived. Saskia Militz provided a fresh and thorough review of the work. Luka Vihuto, Emma Shensher, and Fabian Steinmetz provided that one last, essential proofreading. I especially appreciate all the efforts of the author contributions from several countries on two continents as well as the patience of Dr. Matthias Knopik of Nomos as the book was being completed during the time of the worldwide COVID-19 pandemic. Cologne, November, 2020

Kirk W. Junker

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Foreword In U.S. Law for Civil Lawyers: A Practical Reference Guide, Kirk W. Junker is not only guiding us through the norms and practice of U.S. law: he is developing an original concept and method of comparative law. The book, as a result, is not only a useful reference for foreign legal practitioners, but also includes an extremely interesting theory of comparison. The book revisits the notion of “foreign law” and elaborates a method to allow foreign lawyers to understand and overcome the gaps between legal cultures. The method of comparison in U.S. Law for Civil Lawyers: A Practical Reference Guide consists in identifying U.S. law notions that need and deserve translation, and proposing, in footnotes (that is, without making the reading of the text too difficult), translations in four of the languages in which civil law is practiced (German, French, Spanish and Italian). In this bold and very demanding enterprise, translation is taken seriously: it is thought about as a genuine comparative exercise, with the inevitable problems of bridging the gaps between legal cultures, even when translation seems impossible. The resources of cultural gaps are made visible, and accessible. As Kirk W. Junker explains, the “translation method” that is explored in the book, is “a cluster of related concepts that one must engage in order to study any foreign law system,” that includes “language translation, cultural translation, the science of comparative law and the substance and procedure of a foreign legal system.” The exercise of translation, in this conception, will seem out of reach for many. But the idea is only to warn us that “understanding foreign law is possible as a science, but it does not enable one to see other systems as a native of those systems would see his or her own system.” With this in mind, there is no doubt foreign lawyers will learn a great deal from all the fifteen chapters of the book, from civil procedure to white collar crimes, from arbitration law to contracts, including maritime law and immigration law. In addition to synthetic but extremely comprehensive presentations by specialists, each chapter includes very useful “practice tips,” which undoubtedly serve the aim of guiding non-U.S. lawyers in their first steps into practicing U.S. law. In summary, this is a book that succeeds in bringing together the theory of comparative law and the practice of U.S. law, as foreign law. It is worth reading for those interested in U.S. law, who will be taken way beyond general ideas about the U.S. legal system, and for comparatists, who will find in this book a source of theoretical reflection on translation and comparison in law.

Sophie Robin-Olivier Professor of Law, Université Paris 1 Panthéon-Sorbonne

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Preface We welcome all lawyers and students of law to read our book. The audience whom we had in mind as we wrote the book is the audience of lawyers and students from civil law and mixed civil law jurisdictions of the world. Although this Handbook is intended for audiences of lawyers or law students from civil law jurisdictions, common law lawyers and students, and even U.S. lawyers and students should also profit from reading it. According to one of the basic tenets of comparative law, even a U.S. lawyer who is reading U.S. law explained as foreign law, benefits from thinking reflectively about why the practices are explained the way they are to a reader from outside the system.

Translationalism and Comparative Law Although the authors wrote the book in English, our desire to make it accessible, helpful and scholarly for the civil law practitioner meant that we had to pay attention to language in other ways. To do so, we enlisted the help of professional legal translators to translate the key terms, as identified by the authors into German, French, Spanish and Italian footnotes. If the term is idiomatic, we have translated it literally and marked it as [lit.]. In addition, the terms in all five languages are indexed, so that if a civil lawyer who is at home with one of those languages wishes, he or she can consult terms in the index in a native language to find where the cluster of concepts are discussed that translate into that term. But translation is not a mechanical process of exchanging a noun from a source language for a noun in the target (also known as the “receptor”) language. When the translator is translating from a foreign source language into his or her native target language, the translator is also a cultural midwife, delivering the author to the world known to the translator. In the case of legal translation, that is not just the world that speaks that language, but the world of lawyers who practice law in that language, and whose practices are known to the translator. The task of knowing the language, comparing the concepts, comparing the words and making interpretive choices to benefit the understanding of the target audience is a creative and constructive mix of art and science. A civil lawyer might ask, why bother with all of this work for the translation? The answer is important for understanding foreign law. To understand foreign law, one must make a cultural translation to the culture in which he or she first learned that concept of law, not as a professional lawyer, but as a citizen. Those concepts became naturalized and normalized so that without critical reflection on the process, a practicing lawyer in need of understanding U.S. law might well unconsciously default to popular culture notions of U.S. legal culture from television or film. Thus, we bring the act of translation to the fore as a method of comparative law. According to our method of translationalism in comparative law, the acts of cultural and linguistic translations hold the keys to understanding a foreign legal culture. Therefore, I will only explain a bit of the book here, and leave it to the talents of translators to explain further thereafter. Translationalism also means that the translator is not attempting some mathematical balance, but is regarding the target audience as the audience of focus, so comparative choices are made for translation that might not be the choices a common law lawyer would make, but are a more helpful key to a civil law lawyer. Translationalism as a method of comparative law requires the translator and the reader to compare foreign words and concepts in the context of the system from which they originate. The common law has its own sense and spirit, and the U.S. expression of common law is, within the common law world, also a particular cultural product. More can XI

Preface be said about translation, but is in fact better said by the translators, as presented in the Translators’ Notes, the Introduction to the book, and Chapter 1: “U.S. Law as Foreign Law.”

The Structure of the Book The book is arranged in three parts. The Introduction regarding translation is foundational to the entire book. Then, each part begins with its own foundational chapter and ends in a growth area of law in the United States. Part I “Basics of Private Law,” presents broader concepts and practices for U.S. law that are foundational for other chapters. After Chapter 1 explains the comparative law method that is implemented throughout the book, Chapter 2, “Federal Civil Litigation” and Chapter 3, “Civil Procedure Brief Drafting Strategy” could be read together as a theory and practice pair for U.S. civil litigation. And given the prominence of arbitration in the U.S., including for foreign lawyers’ practice, Chapter 4 “U.S. International Arbitration Law and Practice,” presents the frequent alternative to much of civil litigation, especially commercial civil litigation. Chapters 5, 6 and 7, “Contracts—Drafting and Content,” “Confidential Information and Restrictive Covenants in Employment,” and “The Back-to-back Contract: The Birth of a New Contract Type,” respectively, when read together, present the theory and practice of contracts, as well as two noteworthy examples of contract practice areas. The first example of employment contracts is especially applicable for foreign lawyers, and the second example of the back-to-back contract ends Part I with a relatively new and forward-thinking development in contract law. Part II, “Selected Topics of Private and Commercial Law,” turns to areas of practice with which a non-U.S. lawyer may well be confronted, and we have selected topics on that basis. With frequency of practice as the organizing concept, Part II begins with the chapter that is the most foundational, given that more intellectual property than real property or moveable property is traded in the world each day: Chapter 8 “Intellectual Property Protection and Enforcement in the U.S.” Part II then moves to the select practice areas of “Income Taxation and Audits” in Chapter 9 and “Application of International Maritime Law: Issues Unique to the U.S.” in Chapter 10. Part II, like Part I, closes with a growth area of U.S. law, Chapter 11: “The Charitable Sector in the U.S.: Nonprofit Organizations.” Many fine treatises and articles are written to introduce a lawyer to U.S. business organizations in general, but this rapidly-expanding and growing area of nonprofit organizations merits a closer look. In Part III, “Selected Topics of Public Law,” we begin with an area of the law that has undergone considerable change in this century, especially in the most recent years, “Issues of United States Immigration Law–A View from the Inside,” as Chapter 12. Chapter 13, “White Collar Crime” focuses on one of the only areas of criminal law prosecuted by the U.S. federal government, rather than individual state governments. Recent cases like the Volkswagen diesel prosecution that put two German citizens in U.S. prisons are reminders of the relevance to criminal law and procedure to all persons. Well-known comparativists Konrad Zweigert and Hein Kötz have observed that, “U.S. federalism is perhaps the most complicated legal structure that has ever been devised and made effective in man’s effort to govern himself.” In Chapter 14, “U.S. Environmental Law Practice as Foreign Law,” the complications of “cooperative federalism” are concretely illustrated in the U.S. legal efforts to improve the environment. Some might say that environmental law in fact is not just one area of law, but combines private and public law, property law, torts and other areas under a loose set of practices. If that might be true for environmen-

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Preface tal law, it is certainly true fort the newest area of legal practice presented in this book: food law. Thus, Part III ends just as Parts I and II did, with an expanding and relatively new area of the law. In most chapters of the book, the law is presented to a civil lawyer audience as the description of an area of practice. But given the nascent nature of the field, Chapter 15, “Food Law: Implementing Food Sovereignty in Sustainable Food Systems,” outlines opportunities for the lawyer’s role as advocate in addition to its description of the field. The Handbook is indexed in all five languages used in the book—English, German, French, Spanish and Italian, as well as Latin terms used in U.S. law. We felt that as a handbook, indexing multiple languages makes the book much more user-friendly and is an essential tool to enable our comparative law method of translationalism. The English is indexed according to common practice, in the alphabetical order of nouns, with modifiers as suborders. The German, French, Spanish and Italian (and Latin) are however uniformly indexed alphabetically by the full term as it was translated, which sometimes places the modified before the noun, and sometimes the noun before the modifier, since in fact these target languages differ in that practice in natural usage. Citations and footnotes follow the most commonly-used form in the U.S., The Bluebook: A Uniform System of Citation. Finally, perhaps a “lawyerly” disclaimer. Although this book functions as a reference book or a handbook, it is not a substitute for legal advice from a practicing lawyer in the relevant field. Our goal was to provide an interested reader with enough perspective and information for the civil law lawyer to intelligently engage with a U.S. practitioner, should one be necessary, not to replace the U.S. practitioner. Cologne, November, 2020

Kirk W. Junker

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Author Biographies Steven Baicker-McKee, B.A., J.D., is the Joseph A. Katarincic Chair of Legal Process and Civil Procedure at the Duquesne University School of Law. Mr. Baicker-McKee previously was a trial lawyer for 32 years, practicing in the areas of environmental litigation, energy litigation, toxic tort litigation, and general commercial litigation. Mr. Baicker-McKee is “AV”-rated by Martindale-Hubbell, named a “Key Author” by West Publishing Company, regularly selected as a Pennsylvania “Super Lawyer,” elected to the Academy of Trial Lawyers, and recognized in The Best Lawyers of America. Mr. Baicker-McKee is co-author of the Federal Civil Rules Handbook, a leading work for lawyers in federal court, and A Student’s Guide to the Federal Rules of Civil Procedure, used in U.S. law schools across the country. He is also co-author of Learning Civil Procedure, a law school text book, and Mastering Multiple Choice—Federal Civil Procedure, a study aid for the bar examination and for law students, and is a co-author/editor of the Federal Litigator, a monthly publication summarizing developments in federal practice. Mr. Baicker-McKee obtained his law degree from William and Mary, where he served on the Board of Editors for the Law Review, and obtained his undergraduate degree from Yale University. He is admitted to the practice of law in Pennsylvania. Heidi K. Brown, B.A., J.D., is a graduate of The University of Virginia School of Law, a law professor at Brooklyn Law School in New York City, and a former litigator in the construction industry. Professor Brown is the author of Untangling Fear in Lawyering: A Four-Step Journey Toward Powerful Advocacy (A.B.A. 2019), The Introverted Lawyer: A Seven-Step Journey Toward Authentically Empowered Advocacy (A.B.A. 2017), and a two-volume legal writing book series entitled The Mindful Legal Writer. Professor Brown champions the importance of openly discussing stressors, anxieties, and fears in lawyering, and helping quiet and anxious law students and lawyers become profoundly effective advocates, in their authentic voices. She is admitted to the practice of law in the states of Virginia and New York and the District of Columbia. Phillip A. Bühler, B.A., J.D., LL.M., has practiced maritime law in the southeast United States for more than thirty years. He is currently in residence at Dalhousie University working on a Ph.D. dealing with regulation of commercial vessels under the Polar Code. In 2017–18 he was a lecturer in U.S. civil procedure and intermodal transportation law at the University of Cologne, and in 2018–19 was a lecturer in maritime law at the University of Hamburg. He is a partner with Moseley, Prichard, Parrish, Knight & Jones and is licensed in Florida, Louisiana and the District of Columbia, as well as in the U.S. Supreme Court and many federal district and circuit courts. Mr. Bühler has extensive federal court litigation experience and his practice includes both casualty and commercial aspects of the maritime industry, as well as environmental law, intermodal transportation, insurance and international trade. He holds degrees from The College of William & Mary, the University of Miami School of Law and Tulane University School of Law. He has published a number of articles and a book on issues of maritime law, federal practice, commercial trade and international law. He is board certified in Florida in admiralty and international law.

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Author Biographies Barbara M. Carlin, B.A., M.A., J.D., is an Adjunct Professor of Law at Duquesne University School of Law where she teaches international criminal law and from where she leads research and study visits to Bosnia and Slovenia for lawyers and students. As a federal prosecutor in the Western District of Pennsylvania for twenty-seven years, she worked in both the civil and criminal divisions, prosecuting white collar crimes, tax evasion, and fraud against the elderly. She was the Resident Legal Advisor to the U.S. Embassies in Skopje, Macedonia and Sarajevo, Bosnia and Herzegovina under the auspices of the U.S. Office of Prosecutorial Development Assistance and Training (O.P.D.A.T.), a division of the U.S. Department of Justice. During that time she presented seminars, workshops and conferences for police, prosecutors, and judges in trial advocacy to assist in the transformation from a civil legal system to a hybrid legal system. In addition, she presented extensive training courses to counter human trafficking and war crimes, including organizing programs with the International Criminal Tribunal for the former Yugoslavia. Mrs. Carlin also presented programs in prosecuting human trafficking for the U.S. Department of State in Turkey, Cyprus, Greece and Croatia. In Dubai and Bahrain she presented programs for prosecutors and judges on the rights of the accused under the auspices of American Bar Association Rule of Law Initiative (A.B.A.-R.O.L.I.). She is admitted to the practice of law in Pennsylvania. Alessandro Galli, B.A., Dr. Giur., M.A., graduated in Translation and Interpreting Studies in Bologna, earned a Master’s degree in Law at the University of Ferrara and a Master’s degree in European Legal Linguistics from the University of Cologne. He is currently an LL.M. candidate in German and comparative law at the University of Heidelberg, Faculty of Law, with a focus on comparative constitutional law and legal language history. A former research assistant at Professor K.W. Junker’s Chair of U.S. American law, University of Cologne, he has been working as a legal and sworn translator for almost twenty years to date, and collaborated with various GermanItalian and international law firms across Europe. Since 2014 he has been lecturing in German and English legal terminology in various Italian Universities, including Rome ‘La Sapienza’, Genoa, Padua, Padua/Treviso, Modena and Bari ‘Aldo Moro’. He is the translator of Kirk W. Junker’s Legal Culture in the United States: An Introduction into Italian. Since 2016 he has been working as a teacher of English for the Italian Ministry of Defence/Language School of the Italian Army, where he has also qualified as an official examiner for English according to N.A.T.O. standards of language proficiency (J.F.L.T., S.T.A.N.A.G. 6001). Michael J. Heilman, B.S., M.E., J.D. P.E., is an Assistant Regional Counsel in the Pennsylvania Department of Environmental Protection (D.E.P.), Southwest Regional Office, Office of Chief Counsel, where, since 1987, he has primarily practiced in the areas of mining, air quality and oil and gas. He is also licensed as a Professional Engineer in Pennsylvania. Previously, Mr. Heilman was a legal research clerk at the Pennsylvania Supreme Court and worked for the Westinghouse Electric Corporation in the U.S. and Belgium. Mr. Heilman has received the Governor’s Award for Excellence, the D.E.P. Secretary’s Award for Excellence, and the D.E.P. Secretary’s Award for Dedication. He has taught Environmental Law at Duquesne University School of Law and lectured at the University of Pittsburgh and Chatham University. He frequently provides legal education at the Pennsylvania Bar Institute and provides legal training to the U.S. Office of Surface Mining. He is admitted to the practice of law in Pennsylvania.

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Author Biographies Kirk W. Junker, B.A., J.D., Ph.D., is a University Professor of Law and holds the Chair of U.S. American Law at the University of Cologne, as well as being Director of the Environmental Law Center and Chair of the International Master of Environmental Sciences program at the University of Cologne. Before joining the University of Cologne, Prof. Junker was Associate Prof. of Law and Director of International Programs at the Duquesne University School of Law in Pittsburgh, Pennsylvania. Earlier, Prof. Junker held the first cross-border academic position in Ireland by being, at the same time, a full-time faculty member at both Queen’s University of Belfast in Northern Ireland and Dublin City University in Ireland. Before moving to Ireland, he was a Lecturer on the Faculty of Natural Sciences of the Open University in the United Kingdom. Prof. Junker is an Adjunct Professor of Comparative and International Environmental Law on the Law Faculty at St. Cyril and Methodius University, Skopje, North Macedonia and Bharati Vidyapeeth Institute of Environment Education and Research, Bharati Vidyapeeth University, Pune, India. For nine years he was litigation counsel to the Pennsylvania Department of Environmental Resources. His fields of research include Comparative Law, Comparative Environmental Law, International Environmental Law, Law of the European Union, Law and Science, Law and Rhetoric. His book Legal Culture in the United States: An Introduction (Routledge, 2016) has been translated into Italian and German. He is admitted to the practice of law in Pennsylvania and before U.S. Federal Courts. Ryan Kraski, B.A., J.D., is an attorney from the Commonwealth of Pennsylvania focusing on intellectual property law, nonprofit governance and tort law. Mr. Kraski has worked for a number of entities including Oppenhoff & Partner, the Allegheny County District Attorney’s Office, Appeals Division, United States District Court for the Western District of Pennsylvania, and Duquesne University School of Law, as well at the Chair of U.S. Law at the University of Cologne in Germany. As a research fellow, Mr. Kraski lectured hundreds of students in Tort Law and other legal subjects while researching nonprofit universities extensively. Along with receiving high academic honors, Mr. Kraski has also published a number of book chapters and articles regarding constitutional provisions, fake news, and torts as well as intellectual property issues. Furthermore, Mr. Kraski has volunteered his time and services to assist families who are unable to afford legal representation. He is admitted to the practice of law in Pennsylvania. Antonio Lordi, Dr. Giur., Ph.D, F.A.P., is a contract professional working for Siemens Mobility, with areas of expertise and interest including international business transactions, international trade law, European Union law (private and public), comparative law, civil law, and Roman law. He teaches international business transactions and international trade law as adjunct professor at Duquesne University School of Law, Pittsburgh, PA. He is the author of two law books and several legal articles. A list of books and articles is available on https://works.bepress.com/antonio_lordi/. Dr. Lordi's research interests are especially in the area of global contract law. His goal is to research and select general, global principle of contract law that are known, valid and enforceable worldwide and build a theory of global contract law. He is admitted to the practice of law as an Avvocato in Italy.

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Author Biographies Jacob H. Rooksby, A.B., J.D., M.Ed., Ph.D., is Dean and Professor of Law at Gonzaga University School of Law in Spokane, Washington. An expert in I.P. law and higher education law, Rooksby is the author of The Branding of the American Mind: How Universities Capture, Manage, and Monetize Intellectual Property and Why It Matters (Johns Hopkins University Press, 2016). He is co-author of the 6th edition of The Law of Higher Education and edited The Research Handbook on Intellectual Property and Technology Transfer (Edward Elgar, 2020). Dean Rooksby holds J.D., M.Ed., and Ph.D. degrees from the University of Virginia and earned his undergraduate degree, summa cum laude, from the College of William & Mary, where he was inducted into Phi Beta Kappa. He is admitted to the practice of law in the states of Virginia, Pennsylvania, and Washington. P. Matthew Roy, B.A., J.D. is a published translator of German and Spanish-language legal texts, as well as a practicing lawyer in New York, Connecticut, and before the United States Tax Court. His practice of law focuses primarily on discovery in the areas of large-scale international litigation and federal taxation. A former research and teaching assistant at the Chair for U.S. Law at the University of Cologne, Mr. Roy more recently was a visiting scholar at Brooklyn Law School. He is currently a doctoral candidate at the University of Cologne. He is admitted to the practice of law in New York and Connecticut. Katherine M. Simpson, B.A., M.A., M.E.S., J.D., LL.M., Dr. iur., is an Arbitrator with Simpson Dispute Resolution (U.S.) and 33 Bedford Row Chambers (U.K.). She is an Adjunct Clinical Assistant Professor of Law at the University of Michigan Law School, where she regularly lectures on international dispute resolution and teaches legal writing. Dr. Simpson is a Fellow of the Chartered Institute of Arbitrators and regularly serves as arbitrator in complex international disputes. She is admitted to the practice of law in Maryland and New Jersey. Patrick Sorek, B.A., J.D., LL.M., is Special Adviser for the Grefenstette Center for Ethics in Science, Technology, and Law at Duquesne University, where he is also an Adjunct Professor and Senior Adviser for International Programs. He graduated from Princeton University, the University of Pittsburgh School of Law, and received an LL.M. in International and Comparative Law from Vrije Universiteit Brussel in Brussels, Belgium. He worked in the Civil Division of the U.S. Department of Justice, being selected through the Attorney General's Honor Program, where he represented cabinet and other agencies such as the White House, F.B.I., C.I.A., N.A.S.A., the State Department, and the Treasury Department in district court litigation around the country. He also worked at the State Department as a member of the Legal Adviser's office, handling matters before the Iran-U.S. Claims Tribunal. In private practice Mr. Sorek has concentrated his representation in the areas of commercial litigation, employment law, restrictive covenants, and civil rights. He provides services ranging from in-house training on employment principles, to advocacy before all levels of state and federal trial and appellate courts. He authored an amicus brief on employment issues filed with the U.S. Supreme Court in 2016. He is admitted to the practice of law in Pennsylvania.

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Author Biographies Gabriela Steier, B.A., J.D. LL.M., Dr. iur., is a food law scholar in Boston. She teaches various food regulatory courses at Northeastern University and publishes extensively in her field. Among her areas of interest are international regulation of food trade, G.M.O.s, sustainable food production, animal welfare, food safety and security policy in the U.S. and the E.U. She is an Adjunct Professor of Law at the Duquesne University School of Law and a Visiting Professor at the University of Perugia, Italy. She holds an LL.M. in Food and Agriculture Law from the Vermont Law School, a Doctorate in Comparative Law from the University of Cologne, Germany, a J.D. from the Duquesne Law School in Pittsburgh, PA, and a B.A. from Tufts University in Boston, MA. Dr. Steier is admitted to the practice of law in Maryland and Massachusetts. Keith E. Wilder, B.S., M.Sc., J.D., LL.M., Ph.D., is a Lecturer in law on the Faculty of Law at the University of Cologne, Germany and founder of the AA Legal Academy, which provides online legal English training for German law firms. He previously was a Lecturer in law at the University of Bonn. He received his law degree from the University of Colorado, and went on to receive an LL.M., M.Sc. and a Ph.D. from the University of Edinburgh, Scotland in Law and Intellectual History. He worked in private practice as well as for the American Civil Liberties Union in Colorado, and served as a judicial clerk in the Superior Courts of Connecticut. Dr. Wilder is admitted to the practice of law in Colorado and Connecticut.

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Translators’ Notes The English-Spanish Pair The translation into Spanish of English words and phrases highlighted in bold throughout this book often required some careful consideration. This was the case, in particular, when it came to common law terminology. Sometimes terms were translated literally; often, translations were more explanatory if this was not already done in the body of the text. And on other occasions, the most appropriate translation found was from a source published in the United States. According to 2010 official United States census statistics, nearly 40 million people speak Spanish at home in the United States–and this number continues to rise. This makes the United States one of the largest Spanish-speaking countries in the world. It is for this reason that government agencies often publish translations in Spanish of official documents in the United States, or publish guides in Spanish intended to aid Spanish speakers in their interactions with government. The United States also has the distinction of having two predominately civil law jurisdictions, Louisiana and Puerto Rico. While Louisiana's legal materials are in English, statutes, regulations, case law and other legal commentary in Puerto Rico are published primarily in Spanish. Puerto Rico is generally considered a mixed common law and civil law jurisdiction, and much of the legal language used in its legal materials is that of the common law. Therefore, for this book, translations of many terms typical to the law of the United States–the law surrounding discovery, for example, were taken from Puerto Rican sources since Puerto Rico also uses these uniquely U.S. legal institutes and features these terms in its Spanish-language Code of Civil Procedure. While a Mexican or Spanish lawyer may not immediately be familiar with the specific U.S. law procedures such as descubrimiento de prueba or a deposición, the editors found it reasonable to use these terms in Spanish taken from Puerto Rican sources to reflect how the legal concepts are expressed in the United States, but in Spanish. After all, Spanish speaking lawyers in Puerto Rico and the rest of the United States use these terms among themselves and when communicating with their Spanish-speaking clients. Moreover, English-speaking lawyers would confront the same lack of familiarity when reading English-language Civil Law materials. A common law lawyer would not be readily familiar, for example, with a usufruct or emphyteusis; and prescription has a wholly different meaning in Quebec or Louisiana than it does in Connecticut or Virginia. It goes without saying, therefore, that it is sometimes necessary to further inquire into the meaning of a legal concept translated from one legal order to that of another in order to fully understand it. We felt that burden was not too onerous on the reader. With respect to other terminology, words or phrases not specifically legal in nature, a Spanish translation was selected that appeared to enjoy the broadest usage possible in the Spanish speaking world, or is a Spanish term that is widely used in the United States to express a concept or event typical to the United States or U.S. culture. In the latter case, such term may be a Spanish word or phrase essentially created in the United States, or a word or phrase from a country, such as Mexico, that has been a significant source of Spanish-speaking immigrants to the United States. Brooklyn, November, 2020

Philippe Matthew Roy, Esq.

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Translators’ Notes

The English-German and English-French Pairs Translating an entire text is a very complex task, but it is equally challenging to choose which few single terms should be translated for a non-native reader. Especially because translating English terms bears the risk of assuming the reader should know certain terms, for English is the most commonly spoken business and academic language worldwide. Many legal terms describe functions, legal institutions or roles that do not exist in German or French civil law culture. The question often is whether a literal translation of them (if possible) would be helpful at all or confusing instead. Specific terms would require an explanation rather than a translation, which would exceed the scope of introductory chapters to a wide range of different legal fields in U.S. law, such as those provided by the authors in this book. It can be misleading if an English legal term is translated with the German or French corresponding technical equivalent in the German or French legal system. But it might also seem to be most helpful to make the reader understand which of his home state’s institutions comes closest to the function of the body that is indicated by the English term in the U.S. legal system. Most difficult to translate or even explain are terms that are essential to the basic political system or state structure of a certain country and its legal culture. For example, the term “U.S. Attorney General” is often elsewhere mistranslated in German as “Generalbundesanwalt” or “Justizminister” because they appear to be the equivalent German terms; however, they are not. There is none because there is no such function as an Attorney General in the German system. The best German example is the term “Land” for the several states of the Federal Republic of Germany. Literally translated it would just mean “country” and yet it also cannot be compared to one of the federal States of the United States of America, because German federalism is different from U.S. federalism. The same applies to the English term “appeal” which one finds sometimes translated in German as “Berufung” and sometimes as “Revision.” This choice is discussed further in the Introduction to this book. Here it only remains to be said that “appeal” is translated in this book as “Berufung” and not “Revision” so as to enable the German reader to understand the appeal as the second (or third) instance review and not only referring to third and last instance review, as “Revision” would mean within the German legal system. In conclusion it should be mentioned that all translations attempt to help the reader put a certain key term into context with his familiar legal culture or make it a functional equivalent for the technical understanding of it. But these are not to be taken as absolute translations, since this would require achieving the impossible. Cologne, November, 2020

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Abbreviations A.T.&T. A.A.O. A.B.A.J. A.D.R. A.G.I. A.I.A. A.I.L.A. A.I.P.L.A. A.L.I. A.L.J. A.P.A. A.T.G. Ala. Code Am. J. Comp. L. Am. Rev. Int’l Arb. Arb. Int’l B.I.A. C.A.A. C.A.F.C. C.B.P. C.E.O. C.E.R.C.L.A. C.F.R. C.L.C. C.O.G.S.A. C.P.A. C.R.E.A.C. C.R.M. C.R.S. C.S.A. C.W.A. Cal. Bus. & Prof. Code Cir. Colum. L. Rev. D.C. D.E.A. D.H.S. D.M.R. D.O.H.S.A. D.O.L. D.T.S.A. E.E.Z. E.I.A. E.I.S. E.O.I.R.

American Telephone and Telegraph Administrative Appeals Office American Bar Association Journal Alternative Dispute Resolution adjusted gross income America Invents Act American Immigration Lawyers Association American Intellectual Property Law Association American Law Institute administrative law judge Administrative Procedures Act Audit Technique Guidelines Alabama Code American Journal of Comparative Law American Review of International Arbitration Arbitration International Board of Immigration Appeals Clean Air Act United States Court of Appeals for the Federal Circuit Bureau of Customs and Border Protection Chief Executive Officer Comprehensive Environmental Response, Compensation, and Liability Act Code of Federal Regulations International Convention on Civil Liability for Oil Pollution Damage Carriage of Goods by Sea Act certified public accountant Conclusion, Rule, Explanation, Application, Conclusion Criminal Resource Manual Congressional Research Service Community Supported Agriculture Clean Water Act California Business and Professions Code Circuit Columbia Law Review District of Columbia Drug Enforcement Administration Department of Homeland Security Discharge Monitoring Reports Death on the High Seas Act Department of Labor Defend Trade Secrets Act Economic Enterprise Zone environmental impact assessment environmental impact statement Executive Office for Immigration Review

XXXV

Abbreviations E.P.A. Environmental Protection Agency E.P.C.R.A. Superfund and Emergency Planning and Community Right-to-Know Act E.R.S. Economic Research Service E.S.A. Endangered Species Act E.S.I. Electronically Stored Information E.U. European Union ed. editor F.B.I. Federal Bureau of Investigation F.D.A. Food and Drug Administration F.F.A. Federal Arbitration Act F.F.D.C.A. Federal Food, Drug and Cosmetics Act F.I.F.R.A. Federal Insecticide, Fungicide, and Rodenticide Act F.O.I.A. Freedom of Information Act F.R.C.P. Federal Rules of Civil Procedure F.S.M.A. Food Safety Modernization Act F.T.B. Franchise Tax Board (State of California) F.W.P.C.A. Federal Water Pollution Prevention and Control Act Fed. Cir. Federal Circuit Fed. R. App. P. Federal Rules of Appellate Procedure Fed. R. Civ. P. Federal Rules of Civil Procedure Fed. R. Crim. P. Federal Rules of Criminal Procedure Fed. R. Evid. Federal Rules of Evidence G.A.A.P. generally accepted accounting principles G.I. geographical indication G.M.L. General Maritime Law G.M.O. genetically modified organism H.H.S. Department of Health and Human Services Hague Conf. on Priv. Int’l Law Hague Conference on Private International Law Harv. Int’l L. J. Harvard International Law Journal I.C.C. International Chamber of Commerce I.C.D.R. International Centre for Dispute Resolution I.C.E. Bureau of Immigration and Customs Enforcement I.E.C.L. International Encyclopedia of Comparative Law I.N.A. Immigration and Nationality Act I.N.S. Immigration and Naturalization Service I.O.P.C. International Oil Pollution Compensation I.P. Intellectual Property I.P.R. inter partes review I.R.B. Internal Revenue Bulletin I.R.C. Internal Revenue Code I.R.E.A.C. Issue, Rule, Explanation, Application, Conclusion I.R.S. Internal Revenue Service Int. L. Rev. International Law Review Int’l & Comp. L. Q. International and Comparative Law Quarterly J. Env. L. & Litig. Journal of Environmental Law and Litigation J.M.O.L. Judgement as a matter of law L.D. Liquidated damages L.H.W.C.A. Longshore and Harbor Workers’ Compensation Act L.L.C. Limited Liability Company XXXVI

Abbreviations La. Ct. App. Louisiana Court of Appeals La. Rev. Stat. Louisiana Revised Statutes M.A.R.P.O.L. International Convention for Prevention of Pollution from Ships M.F.T. Maine Farmland Trust M.G.L. Massachusetts General Laws M.L.A.T. mutual legal assistance treaty M.R.S.A. Maine Revised Statutes Annotated Mich. J. Int’l L. Michigan Journal of International Law Mich. J. Race & L. Michigan Journal of Race and Law N.C.A.T. National Center for Appropriate Technology N.E.P.A. National Environmental Policy Act N.O.D.A. Notice of the decision of the Internal Revenue Service Office of Appeals N.O.V. notice of violation N.P.D.E.S. National Pollutant Discharge Elimination System N.P.O. non-profit organization N.R.C.S. Natural Resources Conservation Service N.R.D.A. Natural Resource Damage Assessment N.Y. Rules of Prof ’l Conduct New York Rules of Professional Conduct N.Y.C. New York Convention O.C.I.J. Office of the Chief Immigration Judge O.I.A. Office of International Affairs O.P.A. Oil Pollution Act O.R.R. Office of Refugee Resettlement O.R.S. Oregon Revised Statutes P.G.R. Post-grant review P.H.O.S.I.T.A. Person having ordinary skill in the art P.R.P. potentially responsible parties P.S.R.P.A. Park System Resource Protection Act P.T.A.B. Patent Trial and Appeal Board Pa. Cons. Stat. Ann. Pennsylvania Consolidated Statutes Annotated Pa. Stat. Pennsylvania Statute Pa. Super. R. Pennsylvania Superior Court Reports R.C.R.A. Resource Conservation and Recovery Act R.I.C.O. Racketeer Influence and Corrupt Organizations Act Rev. Rul. Revenue Ruling S.I.P. state implementation plans S.L.A.P.P. Strategic Lawsuits against Public Participation T.E.S.S. Trademark Electronic Search System T.F.E.U. Treaty on the Functioning of the European Union T.R.O. Temporary Restraining Order T.S.C.A. Toxic Substances Control Act T.T.A.B. Trademark Trial and Appeal Board T.T.I.P. Trans-Atlantic Trade Partnership trans. translator Tulsa L. J. Tulsa Law Journal U. Miami Inter-Am. L. Rev. University of Miami Inter-American Law Review U. Pa. L. Rev. University of Pennsylvania Law Review U.B.I.T. Unrelated Business Income Tax XXXVII

Abbreviations U.C.C. Uniform Commercial Code U.K. United Kingdom U.N.C.I.T.R.A.L. United Nations Commission on International Trade Law U.N.C.L.O.S. United Nations Convention on the Law of the Seas U.N.T.S. United Nations Treaty Series U.S. United States U.S. Const. amend. United States Constitution amendment U.S. Dep’t of Just. United States Department of Justice U.S.C. United States Code U.S.C.A. United States Code Annotated U.S.C.I.S. United States Citizenship and Immigration Service U.S.D.A. United States Department of Agriculture U.S.D.O.J. United States Department of Justice U.S.D.O.S. United States Department of State U.S.P.T.O. United States Patent and Trademark Office U.S.S.C. United States Sentencing Commission Va. Cir. Ct. Virginia Circuit Court W.M.F.H. work made for hire W.T.O. World Trade Organization Wm. & Mary L. Rev. William & Mary Law Review Yale L. J. Yale Law Journal

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Introduction: Legal Translation as Cross-Cultural Communication Understanding legal terminology is the key to grasping the complexities of a legal system. Words, besides being the “lawyer’s tools of trade,”1 are the very medium through which law comes into existence. Legal principles are embodied in words,2 whereas legal rules are, in turn, shaped and framed, as to their scope, purpose and effect, in words. Although the functional relationship between law and language might appear, at first glance, as an obvious and self-evident consideration, it has been, in fact, the subject of extensive scholarly investigation for years, since it involves a number of issues underlying both the social nature and the effectiveness of human communication, which can only be investigated and appreciated on a genuinely interdisciplinary basis. In this connection, instead of looking at law and language as two separate entities, which would inevitably lead us to conclude, in Bernhard Grossfeld’s parlance, that “law certainly uses language, but language is the stronger,”3 one should rather look and go beyond the said dichotomy and embrace the idea that law is, in itself, language,4 insofar as it lends itself to being observed as a conceptual system which can only be described effectively by means of its own terminology. Even more so, it is only by using this terminology that legal actors can effectively engage in a set of discursive practices which both enable and shape the social coexistence amongst free and equal citizens within a given culture at a given time. Both the legal concepts that constitute a given legal system, and the terms that have been coined over time to describe those concepts, are practiced, and therefore inextricably bound up in the language spoken within the boundaries of the legal culture in which they are expressed, explained, interpreted and refined over time. Therefore, to a considerable extent they differ from one legal culture to another, and cannot be reproduced nor automatically be transposed from one language into another. To recall a metaphor by Edward Morgan Forster, one of the greatest British novelists of the twentieth century (and even though Forster was not using it in a strictly legal sense), one might go so far as to say that crossing the boundaries of a legal culture is not dissimilar from venturing “where angels fear to tread,”5 whereby this metaphorical image is particularly appropriate to suggest how careful one must be when setting out to explore a foreign legal system. This is even truer of legal translation and, especially, of any legal terminology-related translation involving English, the linguistic medium of the common law, as a source language, and any of the main languages of the civil law tradition, notably German, French, Italian and Spanish, as target languages, respectively. In this connection, this first consideration that needs to be made is about the relatedness of a language to a legal family, that is, the issue whether any of the above languages falls into the gravitational sphere of influence of either the common law or of the civil law tradition. Denning, The Discipline of Law (London, Butterworths) (1979). See Alison, Riley, “The Meaning of Words in English Legal Texts: Mastering the Vocabulary of the Law: A Legal Task”, in 30:1 The Law Teacher (The International Journal of Legal Education, Association of Law Teachers) Sweet & Maxwell, 68–83 (1996). 3 Bernhard Grossfeld, The Strength and Weaknesses of Comparative Law 99 (trans. T. Weir), (Clarendon Press, 1990). 4 See Rodolfo Sacco, Einführung in die Rechtsvergleichung (Nomos, 2017) and, by the same author, Law and Language, (Barbara Pozzo, ed.), Ordinary Language and Legal Language (Milan, 2005). 5 The expression is found in the title of E.W. Forster’s early short novel Monteriano. Where Angels Fear to Tread, first published in 1905, even though it is derived, originally, from Alexander Pope’s “Essay on Criticism,” where the full quotation reads: “Fools rush where angels fear to tread.” 1 Lord 2

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Introduction: Legal Translation as Cross-Cultural Communication For the purposes of legal translation, this is, in fact, a far more decisive criterion than the mere diachronic relatedness of a language to a linguistic family, that is, in our case, to either the Germanic or the Romance linguistic family. This is demonstrated by the fact that even though English and German are both Germanic languages, while Italian, French, and Spanish are all Romance languages derived from Latin, translating English legal terms from English into German is no easier than translating the same terms into any of the aforesaid Romance languages. By way of illumination, if one were to translate the English term “consideration” into either German or Italian, he or she would eventually need to hoist the white flag by admitting in both cases that it is virtually untranslatable into any of these target languages, simply because there is no such notion as consideration in either the German or the Italian system of contract law, respectively, which makes it necessary for the translator to resort to explanatory notes in order for translation recipients to become aware of the overall, substantial lack of an equivalent term of art (and of an equivalent legal concept) in both of the target legal cultures. 8 A second and equally important point of consideration is the common Latin heritage of modern European legal languages.6 This is equally identifiable in legal English, in spite of English being a West Germanic language. In fact, and in various ways, legal English has been influenced by Latin ever since the Middle Ages, either directly through the use of legal Latin or indirectly, through law French. As a consequence, and up to the present day, a considerable part of English legal terminology is of Latin origin, and a civil lawyer might well be tempted to assume, at first sight, that such terms as “domicile,” “equity,” “magistrate,” or “property,” given their common Latin etymology, are both easily translatable into Italian or French, and more or less equivalent in meaning to either the French “domicile”, “equité,” “magistrate”, or “proprieté,” or the Italian “domicilio,” “equità,” “magistrate,” or “proprietà,” respectively. This assumption, however, couldn’t be further from the truth. 9 Emily Dickinson, one of the greatest American poets, once wrote that 7

A word is dead, When it is said, Some say. I say it just Begins to live That day.7

Born into a family of lawyers, Emily Dickinson was rather well-versed in legal language, legal topics, and legal terminology. The message that can be inferred from her poem is particularly relevant for the legal translator, too: a word, figuratively speaking, can evolve in such a way as to be able to walk through many lives, and in so doing, it gradually expands the range of its possible meanings over time. 11 The study of legal terminology in any language demonstrates how misleading it is to believe that words are simply “names” or “labels” that can be attached to “things” in the world. What if one had to look for the “things” to which such “words” as “equity,” “jurisdiction” or “citizenship” refer? His or her search would turn out to be a fruitless exercise. In fact, these words, used as legal terms, can be observed as being related to abstract concepts, whereby the creation of their meaning(s) requires and implies a link between the term itself (a symbol or linguistic sign), associated with a concept in the human mind (thought), related in turn to a referent (a certain object or matter within a given 10

6 See

7 See

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Heikki E. S. Mattila, Comparative Legal Linguistics 125-58 (Christopher Goddard, trans.) (2006). Thomas H. Johnson (ed.), The Poems of Emily Dickinson, (1955) (poem: 1212).

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Introduction: Legal Translation as Cross-Cultural Communication legal system).8 There is no direct connection between a linguistic sign (word) and a referent (object). Rather, as Wittgenstein claimed (with the above, threefold referential relation in mind), “the meaning of a word is its use in the language.”9 In this connection, if one investigated how the English terms “domicile,” “magistrate,” “equity” and “property” are used in U.S. legal practice, he or she would find out that they do not correspond at all to the use of their French or Italian terminological counterparts, respectively. Recalling Emily Dickinson’s poem, these examples may prompt us to say that the Latin words “domus”/“domicilium”, “aequitas”, “magister”/“magistratus” and “proprietas”, for instance, have walked through as many lives as the languages in which they have given birth to new terms, whether borrowings or derivatives, which have come to be associated to different legal cultural referents depending on the developmental patterns of each single legal system, and therefore with different usage in varying legal cultures. These examples show, among other things, the overall fallacy of a strictly literal approach to legal translation, as well as the need to develop an active and critical approach to mastering legal terminology in all of the languages underlying a given translation process. They also demonstrate the need to focus both on the recipient and on the purpose of the translation, rather than on the author and the source text in itself. A good functional translation is always and already of a twofold nature: it is both an inter-lingual and an inter-cultural process by which a certain amount of information, produced by the members of one culture in one language, is transposed into another language and into another culture by focusing primarily on the cultural background of the recipient (target text user or reader). The traditional, scholarly distinction between civil law and common law as the two main cornerstones of the Western legal tradition has become increasingly blurred in the aftermath of the globalization of economic and financial activities and in the framework of an increasingly multi-layered and multi-faceted interdependence of national legal systems. These factors, among others, have contributed to further strengthening the role of the English language worldwide: in fact, English has long attained, and still retains, the status as a global language,10 virtually unrivalled in practice in several special fields, including law. There are, at least, three fundamental implications to this statement: in the first place, the role of English as the vehicle of the common law tradition; in the second place, the role of English as a lingua franca of international business, trade and institutional relations, oftentimes involving legal actors who are, to a very large extent, nonnative English speakers. And, in the third place is the ongoing and increasing trend towards Anglicization of European lexis, and, to a particularly high degree, of European legal terminologies. At an exquisitely practical level, the use of English as an international, and even global, legal language goes hand in hand with the circulation, the spread, and the reception (even though comparative lawyers would rather speak of “transplants”) of common law (and to a considerable extent, of U.S. law) concepts, principles, models and approaches in the various legal cultures of the civil law tradition. In the wake of this phenomenon, the clearly identifiable trend in recent decades has been for the common law not really to

8 This is illustrated, for instance, by Ogden and Richards in their semiotic Triangle. See C.K. Ogden and I. A. Richards, The Meaning of Meaning: A Study of the Influence of Language upon Thought and of the Science of Symbolism, first published in 1923 and, especially, the 1989 edition with a new introduction by Umberto Eco, Mariner Books, Reissue, 1989. 9 See Ludwig Wittgenstein, Philosophical Investigations I, sec. 43 (Oxford, 1953). 10 See David Crystal, English as a Global Language (2d ed., 2003).

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supplant, but rather to outweigh, in part, the civil law tradition in terms of its worldwide, practical impact and significance. While this makes it even more important for the civil lawyer to become familiar with, and gain some insight into legal English and the common law on the one hand, and especially into U.S. legal practice on the other, it also poses at the same time a daunting task and a major challenge for the legal translator, or rather, the legal translators who are entrusted with the responsibility of transposing U.S. legal terminology into the various languages of the civil law tradition. In fact, the translator’s task in this case is made even more difficult by the fact that, in the framework of international legal practice, the above mentioned Anglicization process goes so far as to the point where a wide variety of English terms of art are oftentimes adopted prima facie and used in the relevant target languages of the civil law without ever even being translated at all. When no official equivalents in the target language are at hand, this does not mean, however, that the source terms of art should be left untranslated. A solution in the target language needs to be provided at any rate, and in spite of the lack of any exact equivalents: this involves, in turn an exercise in comparative law, aimed at elaborating an explanatory translation with a view to bridging any communication gaps between and amongst legal cultures. In fact, throughout the whole Handbook, it has been a constant effort, during the translation work in all language pairs (English-German, English-French, English-Spanish and English-Italian, respectively), to avoid literal translations as far as possible, and in those cases where they were not to be avoided, to provide additional, translation options that appeared to be closer in meaning to the target reader’s understanding of the underlying legal concept or problem, along with relevant explanations. Consistent with the above strategy, a number of entries in the target language versions of this Handbook’s terminology, have turned out occasionally to be more similar to an abridged encyclopedic dictionary than to a single component of a multilingual terminological glossary. In the framework of a wide-ranging presentation of U.S. law, the above approach has been meant to help the reader to gain some understanding of the cultural implications of some of the mechanisms underlying the U.S. legal practice, while, at the same time, to enable the civil lawyer to get the sense, or what Roscoe Pound calls the “spirit”11 of how U.S. law looks like “in action” throughout every single chapter. If law terms and phrases of legal significance are both conceivable within and ascribable to a specific linguistic continuum, to an intrinsically unique “narrative” of the law, which forms part of the legal culture in which they are created, then a good functional translation of those terms and phrases means, (and involves) transposing them into the target language in such a way as to make them fit into the narrative unfolding in the foreign legal culture in which the target language is spoken. In short, they need to be translated in such a way as to make sense for the foreign lawyer who has a different understanding of a legal system. To what extent are, for instance, “injunctive relief,” “diversity jurisdiction” or “discovery motions” actually translatable into the language of lawyers and judges trained in any civil law jurisdiction? And, even assuming that they are, to what extent are they really intelligible to a civil lawyer who might not know the ropes of U.S. American judicial practice and procedure? Why is “a notice of removal to a U.S. federal court” technically different, and therefore not to be confused, with the Italian “rimessione del processo?” And what degree of technical detail is actually needed to

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See Roscoe Pound, The Spirit of the Common Law (Marshall Jones Co., 1921).

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Introduction: Legal Translation as Cross-Cultural Communication enable a civil lawyer to grasp the meaning of “contention interrogatories” or “claw-back provisions” in his or her own target language? There is also an important point to be made regarding the connection of translation 21 to comparativism. Two different methods of comparativism are in play here. The first and more widely received method is that of functionalism. The second and newer one is called “translationalism.” The method that one chooses for comparative law does in fact lead one to different places. A good example from this book is the translation from the English word “appeal” to German, French, Spanish or Italian. With the translation of the word “appeal,” we are confronted with two different func- 22 tions and depending upon the one that we choose, we are led to translate the word differently. So a pure functionalist comparative method here would not determine the translation. A translationalist method of comparison, however, including both cultural translation and linguistic translation, will point to one choice. The first of two functions of comparison for appeal are whether a court called an appellate court has the authority to entertain new facts, even though it is in the second instance or third instance. The second of two functions of comparison for “appeal” is whether a court is a court of last resort. Using German to illustrate the point, one finds that the German system of civil procedure distinguishes between various types of appeal, amongst which “Berufung” indicates an appeal to intermediate appellate court on issues of either law or fact, whereas “Revision” generally refers to appeals, on issues of law only, to the highest federal court of civil jurisdiction, the Bundesgerichtshof. A thorough scrutiny of existing literature reveals, however, that both “Berufung” and “Revision” are equally used, in spite of their technical differences, to translate the English “appeal” into German. The choice for either the former or the latter solution may well be determined by the method of legal comparison that is used to perform the translation process itself. In other words, options and results vary depending on whether one uses a translational or a functional method, and on whether the focus is on definition as a means of identifying, classifying, and comparing inter-lingual and extra-systemic correspondences and discrepancies,12 or on usage as a criterion to ascertain and convey (from the source to the target language) the functional relation that a given legal phenomenon has to and toward the society it serves. By using functionalism, when one asks the function of an appellate court in the sec- 23 ond instance in the U.S., the answer there is threefold. First, no new evidence of fact may be introduced because the theory behind the system is that a jury must be available for hearing any new evidence. Juries are not present on appeal, so if new evidence is needed, an appellate judge must send the case back to the court of first instance. Second, even though in structure there is a third instance, in function, that third instance in the U.S. is not divided into a specialty court of constitutional jurisdiction and a court of general appellate jurisdiction. Both functions are in one Supreme Court. And finally, access to that one Supreme Court is very limited. Because one does not have a right to have an appeal at third level heard by the United States Supreme Court, one must petition the Court to be heard. In actual practice, the United States Supreme Court accepts only 100–150 of more than 7,000 petitions sent to it each year. So, if the rate at which one may have a third instance appeal is, in practice, less than 1.4–2 percent,13 a practicing lawyer will 12 This is true so long as legal comparison may also be conducted by looking at differences, not only similarities, between and amongst legal systems. See Rudolf B. Schlesinger, “The Past and Future of Comparative Law“, 43: 3 Am. J. Comp. L. 447, (1995), and Erik Jayme, Betrachtungen zu einer postmodernen Theorie der Rechtsvergleichung (1997/98). 13 Supreme Court of the United States, “About the Supreme Court,” https://www.supremecourt.gov/abo ut/faq_general.aspx, (last accessed April 9, 2020).

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practically think of second instance as the end of the case. Thus, for these three reasons, the functional method might lead us to translate “appeal” as “Revision,” in German, for example, and not as “Berufung.” However, and with the aforesaid methodological ambivalence in mind, it is to be noted that most German resources, in turn, do not seem to follow a functional method, but rather a translational method in making the translation of “appeal” from English to “Berufung” in German.14 Given that the target audience for this Handbook are civil lawyers, one must therefore anticipate how a German lawyer would receive the translation of “appeal” as “Revision,” regardless of the functions that seem to be determinative for the common law practitioner. The same issue arises when it comes to translating “appeal” into the Romance languages of the civil law tradition. While the English word “appeal” has a clear Latin etymology (it came to be used as an English law term in the late Middle Ages, notably in the Middle English period15 and appears to have been derived from the law French “appeler”), and therefore a high degree of lexical similarity with the Romance languages, it does not lend itself, however, to being considered a full terminological equivalent of the French “appel,” the Italian “appello,” or the Spanish “apelación.” This is because the legal languages of the civil law distinguish between (and have coined different terms of art for) at least two sorts of “appeal.” With some rare exceptions, a civil lawyer will generally understand the court system as being structured in three instances, with a second “appeal” instance (to use the French term of art: the “appel” proper) where review on factual points is allowed, and a third instance (what a French lawyer would refer to as “cassation,”16 an Italian as “cassazione” and a Spanish lawyer as “casación”) where only review on points of law is allowed. The understanding of this judicial hierarchy is closely interwoven with the (very practical) idea, lingering at the back of a civil lawyer’s mind, that the legal process is not over until one has gone through all of the above three judicial instances: once you go to court, if you are not satisfied at first instance, you can still challenge the legal outcome from a lower, first instance court at least twice (“appel” and “cassation,” even though the latter will only adjudicate on points of law). However, “appel” and “cassation” are, of course, neither equivalent nor interchangeable, therefore in the case of French, Italian, and Spanish, translating the English “appeal” will lead to different results depending on whether the translator pursues either a translational or a functional equivalence. If one tries to anticipate how a French, an Italian, or a Spanish speaking lawyer would receive the translation of “appeal,” then, again, the translational method will lead us to translate it as “appel,” “appello,” and “apelación” in the first place, not as “cassation.” Referring back to the German legal system, the most relevant example of a third-instance judicial body performing a “cassation” function in Germany is, of course, the 14 Dieter Blumenwitz, Einführung in das anglo-amerikanische Recht, 45–47 (7th ed., C.H. Beck); Howard D. Fisher, The German Legal System and Legal Language 200-04 (4th ed.) (Routledge-Cavendish, 2008); Ina Vedie, Arthur T. von Mehren und das internationale Zivilverfahrensrecht im transatlantischen Dialog 21, ft.nt. 14 (Mohr Siebeck, 2017); Eric Engle, U.S. Constitutional Law for German Speaking Jurists 260 (2d ed., 2012); Darryl K. Brown, Jenia Iontcheva Turner, Bettina Weisser, The Oxford Handbook of Criminal Process 938 (OUP, 2019); Karin Linhart, Englische Rechtssprache–Ein Studien-und Arbeitsbuch (C.H. Beck 2008); Köbler, Rechtsenglisch XV (München, 2011); and, Bence Bauer, Legal Terms. Die wichtigsten Fachausdrücke des englischen Rechts (10th Edition 2005), Passauer Publikationen Gruppe e. V. (where, for instance, the lexical entry „appellate jurisdiction“ is translated as “Berufungsgerichtsbarkeit“). 15 For a detailed account, among other things, of Latin borrowings into English, see Albert C. Baugh and Thomas Cable, A History of the English Language (5th ed.) (Prentice Hall, 2002). 16 See the lexical entry “cassation” in: Gérard Cornu, Vocabulaire Juridique 151 (Association Henri Capitant, PUF) (9th ed., 2011).

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Introduction: Legal Translation as Cross-Cultural Communication Bundesgerichtshof, also referred to as “Revisionsgericht,” notably, a federal court (Bundesgericht) where a decision from a lower court (generally, an Oberlandesgericht, that is: an “appeal” court of second instance, bearing in mind that, in Germany, second instance “appeal” courts are administered at the subnational State level, notably by the Länder), may be challenged on a point of law and therefore be subject to “Revision,” If we take a closer look at the German system of civil procedure, we will find that the term “Revision” is used in a limited sense that inevitably evokes, at least nine times out of ten, an “appeal” lodged with a third-instance judicial body that, in a very wide variety of disputes, will be the court of last resort. On the other hand, this state of affairs changes, in turn, when it comes to German criminal procedure, where, under certain circumstances, a judgment from a first-instance court may in fact be appealed to a second-instance Oberlandesgericht by way of “Revision” on a point of law (pursuant to § 121 of the German Judiciary Act, the Gerichtsverfassungsgesetz). At any rate, and apart from the technical issue of determining whether a judgment may be appealed on a point of fact or on a point of law, it may sound rather odd and out-of-place to associate the German term “Revision” to foreign, lower judicial bodies, or even intermediate appellate courts, or both, which are definitely far from being thirdinstance courts or courts of last resort. Moreover, it is worth noting that, as is clearly shown throughout this Handbook, the term “appeal” is not uniform even across the U.S., and can be used to refer to sometimes completely different types of “appeal” courts, and occasionally, even “appeal boards” (therefore with varying rank, jurisdiction, and powers), to such an extent as to appear even further from the civil law (and even from the specifically German) understanding of “Revisionsgericht.” So, if we focus on the functional aspects of a judgment being appealed on a point of law only, “Revision” is perfectly fine. On the other hand, though, if we focus, instead, on the judicial function of reviewing a judgment from a lower court per se (regardless whether on a point of fact or of law) at an intermediate, appellate level, on the judicial body or bodies performing that function, and on their rank and status within the overall court hierarchy in a given system, as well as on how that court structure in that system performs compared to other judicial systems, using the German “Revision” and especially the compound word “Revisionsgericht” can be, even for the German lawyer, as misleading as ever. In addition, while it certainly matters for a lawyer to know whether a certain type of review is on a point of law only, it is at least equally and perhaps even more important, both at a technical and at a practical level, for a civil lawyer to know whether a U.S. court or any other foreign court in which he or she lodges an “appeal” is a lower, intermediate or higher court and allowing, as the case may be, to proceed further in the judicial ladder by getting a chance to challenge the legal outcome from that court, or not. Again, from a translationalist perspective, and with the German civil lawyer as target audience and target reading in mind (even though the Book is written in English), using the German “Revision” for “appeal” throughout the Handbook would be more unsuitable and require, as such, thorough explanation in the footnotes. With these and many other questions in mind, and issues of translatability or untranslatability apart, translation of terminology records in the language pair EnglishItalian has been carried out with full awareness of the authors’ outspoken focus on practice, on the one hand, and of the inherently inductive and empirical nature of the common law approach, as opposed to the civil law reliance on rational abstraction, on the other. In this connection, judicial practice and procedural law, especially, are the fields in which another important feature of legal English becomes noticeable: the high degree of Alessandro Galli

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Introduction: Legal Translation as Cross-Cultural Communication elaboration and precision when it comes to the use of performative verbs and constructions, namely, the wide variety of phrases and expressions that can be derived from such verbs as “discover,” “dispose,” “dismiss,” “grant,” “appeal,” “file,” “find,” “amend,” “move,” and many others, which, besides having a standard, general meaning, can be used, in a specific legal sense, to build performative speech acts17 that are utterances directed at changing the existing legal order, by modifying, for instance, the legal nature or quality of someone or something, or a given legal situation or relationship. Indeed, the judicial sphere appears to be precisely the field in which the power of lexical creation inherent in legal English unfolds to a much greater extent than in any of the languages of the civil law tradition. 34 A final point of consideration lies in the outspoken terminological differences identifiable, in spite of their common Latin origin, in the comparative, multilingual framework of the French, Italian and Spanish translations of a number of English source terms and phrases, such as “conspiracy” and “chain of custody” in Chapter 13, or a “failure to pay” in Chapter 9 amongst others. A common linguistic ancestor (Latin) does not necessarily imply a common thread and a uniform path in the developmental stages and features of civil law terminologies, even when it comes to statutory sources. In fact, unlike what has been noted for legal English, statutory law is precisely the field in which the (Romance) languages of the civil law demonstrate, in turn, a considerably high degree of lexical creativity. 35 In conclusion, reading, studying and translating all these features of this Handbook have been an exciting intercultural adventure for the translators and will be for the readers as well.

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See John L. Austin, How to do Things with Words (2d ed.) (Harvard University Press, 1975).

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CHAPTER 1 UNITED STATES’ LAW AS FOREIGN LAW Literature: Guido Alpa, What is Private Law? (Antonio Lordi trans.) (Carolina Academic Press, 2010). Daniel R. Coquillette, The Anglo-American Legal Tradition (2d ed.) (Carolina Academic Press, 2004). Günter Frankenberg, Critical Comparison, Re-Thinking Comparative Law, 26 Harv. Int’l L. J. 411 (1985). Bernhard Grossfeld, Core Questions of Comparative Law (Vivian G. Curran trans.) (Carolina Academic Press, 2005). Pierre Legrand, European Legal Systems Are Not Converging, 45 Int. & Comp. Law Quarterly 52–81 (1996). Eduardo Garcia Máynez, Introducción al estudio del Derecho, in The Juridical Technique: Excerpts from Introduction to the Study of Law, 30 U. Miami Inter-Am. L. Rev. 131 (Robert S. Barker trans.) (33d ed., 1982). Mathias Reimann, The Progress and Failure of Comparative Law in the Second Half of The Twentieth Century, 50 Am. J. Comp. L. 671 (2002). M. Rotundi, Inchiesta di diritto comparato—Scopi e Metodi di Diritto Comparato 735 (M. Rotondi ed., Palermo, 1973). Konrad Zweigert und Hein Kötz, Einführung in die Rechtsvergleichung (3. Auflage) (C.H. Beck, 1996).

I. Foreign Law and Comparative Law Although this book might well be used by the reader without beginning from the first 36 chapter, some ideas need to be expressed here at the beginning concerning the very notion of consulting U.S. law as a non-U.S. lawyer. For a lawyer educated and trained in the civil law tradition, U.S. Law is foreign law.1 That alone is an important point from which to start. A thoughtful lawyer will reflect on what it means to research and practice in a foreign legal environment. Research and practice in foreign law is inherently an exercise in the field of comparative law, because one always has in the back of his or her mind how foreign concepts and practices are similar or dissimilar to ideas and practices in one’s home legal system.

1. Foreign Law Located in its purest category therefore, this book functions as a handbook in foreign 37 law, in which the authors assume the readers are not U.S. lawyers. Too often, the catego1 Throughout this chapter I will refer to the “United States,” and not “America.” In general, “America” is not a term of art for lawyers, but of popular culture and journalism. For lawyers, however, it is inaccurate and may even be subtly misleading. By comparison, the use of the term “states” in the U.S. is in fact quite instructive for foreign lawyers, because each of the fifty maintains quite a bit of legal sovereignty in comparison with the federal divisions of many other countries, as other chapters of this book demonstrate in criminal law, civil procedure, taxes and commercial law. In addition, each of the fifty states keeps its right to maintain an armed militia for its own defense and to maintain order. Moreover, no legal office of any of the states of the U.S. is in any way automatically part of the central federal state or its administration. Instead, the states cooperate with the federation to accomplish the tasks of public law, thereby operating under the term “cooperative federalism.” For exceptions to that rule, see Kirk W. Junker, Conventional Wisdom, De-emption, and Uncooperative Federalism in International Environmental Agreements, 2 Loyola U. Chicago Int. L. Rev., 93 (2004–05). Along the spectrum between unitary states and decentralized states, the United States would therefore be placed further to the end of the spectrum of de-centralized states, possibly closer to the European Union than even, for example, the Federal Republic of Germany, even though both Germany and the United States are called federations.

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Chapter 1 United States’ Law as Foreign Law ry of foreign law is confused with the categories of comparative law or even of international law.2 Comparative law is different from foreign law in that it compares domestic systems and should include concepts of comparison, not just provide a catalogue of foreign law. It is within the concepts of comparison that so much of the meaning is located in the comparative exercise.3 Foreign law can be any domestic legal system that is not one’s own and need not explicitly include concepts of comparison. And, most importantly, neither comparative law nor foreign law is part of the separate category of international law.4 38 Although this is not a book of international law, a word regarding the concept, as understood in the U.S., is in order here. To the civil lawyer, the distinction between private international law and public international law is obvious and always described, taught and practiced in those categories.5 That is not so in the U.S. Both categories would be taught and practiced simply under the same title of “international law.” That does not mean the U.S. legal culture is unfamiliar with the many concepts of each category, however. Given the horizontal federal structure of the U.S., in which the states have primary competencies in many legislative and implementation areas and the central federal government is one of limited powers, the states employ principles of international public law in their relations of one to the other and the practicing lawyer must be fully aware of those “conflicts of law” in order to practice among the states. 39 Anyone who is researching something that he or she would call “foreign” must be doing so while already standing in a different legal system, which is his or her own legal system. When I write that it is his or her “own” legal system, I am not writing of the system in which a professional lawyer has been educated and trained, but rather of the system in which a person has been acculturated, so that the norms and practices of that legal system seem to be normal and natural. 40 While a researcher in foreign law may not explicitly talk of comparison, he or she is of course exercising comparison. We can do no other when studying a foreign legal system but compare it to our own, at least initially. Successful comparative law study must bring one’s comparisons to consciousness and not act as though they are not in play. U.S. comparative law scholar John Henry Merryman noted that the study of foreign law is what “most comparatists do in fact most of the time.” Comparativist Matthias Reimann, who is equally at home in the German and U.S. legal systems, echoes this observation when he writes that: “outside of a small hard core, most of those engaged in comparative work of one sort or another do not even think of themselves (primarily) as comparative lawyers but mainly as Asia specialists, Russian law scholars, constitutional lawyers with comparative interests, etc.”6 I would add that if these lawyers are specializing in legal cultures other than their own, such as that of the U.S., they must be doing so by way of comparison with their own legal culture. I say this because even before one is a law student in his own legal system, he or she is a citizen, and therefore always and already begins from an understanding of the law in his or her own system. In the end, much of 2 Völkerrecht

/ droit international public / derecho internacional / diritto internazionale. Eduardo Garcia Máynez, Introducción al estudio del Derecho, in The Juridical Technique: Excerpts from Introduction to the Study of Law, 30 U. Miami Inter-Am. L. Rev. 131 (Robert S. Barker trans.) (33d ed., 1982). 4 The comparison of one’s domestic law with a foreign state’s domestic law is what I refer to as Type I comparison. Of course many studies compare several state’s implementation of an international treaty, which I refer to as Type II comparison, but the common underlying treaty is itself not an element of the comparison. 5 Guido Alpa, What is Private Law? (Antonio Lordi trans.) (Carolina Academic Press, 2010). 6 Mathias Reimann, The Progress and Failure of Comparative Law in the Second Half of The Twentieth Century, 50 Am. J. Comp. L. 671, 687 (2002). 3

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I. Foreign Law and Comparative Law what is presented as comparative law is in fact foreign law with little or no element of comparativism introduced. In those cases, if one’s own system is explicitly mentioned at all, it is most often by simple juxtaposition, not through a conceptualized comparison. Therefore, in the end, an underlying goal of foreign law research should be to bring comparative thoughts and processes to consciousness and incorporate them into any explanation or practice of foreign law. a) What Makes Law “Foreign?” Culture, Not Rules Comparativist Bernhard Grossfeld argues that we cannot understand a foreign legal 41 system from only reading its written legislation. He writes: “[t]he reading of a foreign legal text often gives us a false picture. Misunderstanding is programmed. In order to avoid this, we need to recognize the context of the text.”7 By using one’s own legal system as a basis from which to consider other legal systems, one might unreflectively allow himself or herself to believe that another system has the same underlying cultural concerns, but just expresses those concerns in different rules. However, it is in fact the underlying cultural concerns that make foreign law “foreign,” not just the different rules. When it comes to representing a foreign culture, one might equally allow himself or herself to believe that popular cultural representations in film, television and social media are scientifically accurate as a basis for understanding legal culture. The impact of popular culture on the law is significant, especially because it forms many of the beliefs and expectations of the citizen in that culture, but it cannot serve as the basis for a lawyer’s professional practice. Foreign legal culture must be researched as a cultural phenomenon and researched through a scientific study of culture. 42

Examples In the U.S., criminal prosecutors report the phenomenon of juries acquitting criminal defendants because the state failed to produce D.N.A. evidence or other evidence from natural science to prove simple crimes for which no scientific evidence had ever been used in the past. These jurors, when polled, report that they see such evidence made available in criminal prosecutions on television shows and in film. The influence of U.S. popular culture, even in legal matters, is not limited in its impact to the United States. Several years ago a young lawyer in Germany attempted to make an objection during the questioning of a witness at trial. Of course the U.S. trial practice of objecting is not available in Germany, but U.S. television and film is available in Germany. Perhaps more striking than the fact that the lawyer tried to make the objection was that everyone in the courtroom reportedly chuckled at the lawyer’s failed effort. They were not puzzled or confused by this intrusion–they too knew what he was trying to do and why— they too had been watching U.S. television and film.8

Within the realm of culture there is much to be said beyond the mechanics of any of the rules and norms. Whether making law, interpreting law or enforcing law, persons of that culture will feel that they have a cultural “sense” of what is fair or just, and therefore a sense of what will be accepted as an interpretive practice. That sense can be understood in a positive way as being one’s control of local knowledge, or could be understood in a negative way, as unconsciously conforming to an ideology. To what degree that sense versus the operation of the mechanics can predict outcomes is difficult, if not impossible to say. What is worthy of study, however, are the differences in how cultures regard their legal systems beyond the mechanics of the law themselves. Only by knowing

7 Bernhard Grossfeld, Core Questions of Comparative Law 90–91 (Vivian G. Curran trans.) (Carolina Academic Press, 2005). 8 For scholarly treatments of U.S. law in film, see Michael Asimow and Shannon Mader, Law and Popular Culture: A Coursebook (Peter Lang ed., 2007); Paul Bergman and Michael Asimov, Reel Justice: The Courtroom Goes to the Movies (McKeels Publishing, 2006).

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Chapter 1 United States’ Law as Foreign Law something of this cultural reception by the citizens,9 can one claim to be able to predict how a dispute will be resolved. Moreover, the legal perceptions of citizens, regardless of the foundation for those perceptions, drives their acceptance of a legal system and consequently, the legitimacy of the legal system. b) “Foreign” Is a Matter of Perspective 43

Weak comparisons begin with the assumption that what one already does is natural or normal, and if another person or culture does things differently, then that other person or culture is therefore unnatural or abnormal. This seems to be a rather common error among non-comparativists and even among non-comparativist non-lawyers, such as the German television broadcaster who phoned me when Dominique Strauss-Kahn was arrested in New York and demanded to know why “American” criminal law allowed Mr. Strauss-Kahn to be shown on television in handcuffs and why cameras were permitted in the courtroom? (I had to first explain that “American” criminal law does not exist, but that one must speak of state criminal law and then specify the state, or speak of the far less common federal criminal law.) In the broadcaster’s own culture, the handcuffs and cameras would be prohibited, he insisted, which to his thinking made the prohibitions natural, normal or both. I told him that I could explain why the U.S. Constitution permitted them, and asked whether he could explain why German law prohibited them. He could not, but it nevertheless seemed to be normal to him that these things were prohibited, so one need not ask why. Comparative law scholar Günter Frankenberg has noted that in weak comparative exercises, “The similarities that surface in the course of such comparisons are mirror images of the categories of the conception of law in the comparatist’s own culture. Ambiguities are defined away or adjusted to fit the model; thus the ‘home’ law is positioned as natural, normal, standard . . ..“10

44 Example Imagine that you love Indian food and are fortunate enough to go to India to try the real thing. You arrive at the restaurant to find that the first several pages of the menu have no titles for categories, and the last page is entitled “non-veg”. In reverse of a European menu that begins with dishes of meat and fish and treat vegetables as “the other” and therefore list those dishes on a short list at the end called “vegetarian,” the Indian treats eating meat or fish as something out of the ordinary and therefore not only places it at the end, but entitles it “non-veg”, revealing that a vegetable diet is considered to be normal. Metaphorically speaking, which is the vegetable and which is the meat in the German, French, Italian or Spanish legal system? Is it reversed in the U.S. legal system? When it comes to remedies for breach of contract, it is. The first remedy for breach of contract in the U.S. is damages, and performance is only for exceptional circumstances, while in many civil law countries performance is standard and damages are the second choice, as would be the non-veg in the Indian restaurant.

2. Comparative Law 45

When a lawyer from outside the U.S. looks at U.S. legal culture, he or she will be drawn to compare U.S. legal culture with his or her own legal culture, even if unconsciously. That is the nature of our sense of encountering something new and foreign. But 9 In addition to how the citizens accept law and its procedures, one must consider how lawyers will use law and its procedures, if one is to predict the outcome of disputes. In a related study on delay in the courts, I have found that practicing lawyers can, for example, create delay for use in their favor, even when the courts take measures to eliminate the backlog of cases filed waiting to be heard, by adding judges or panels, shortening the time for pre-trial motions and discovery, and other practices. See Jerome Frank, Courts on Trial: Myth and Reality in American Justice (Princeton University Press, 1949) (providing a classic work in legal realism). 10 Günter Frankenberg, Critical Comparison, Re-Thinking Comparative Law, 26 Harv. Int’l L. J. 411, 423 (1985).

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I. Foreign Law and Comparative Law whereas we might just allow our senses to make unconscious comparisons and assimilations to that which is known in our non-scientific life, it is important to give serious consideration to method in comparative law practices. Günter Frankenberg explains comparative law as a process of cognitive transformation in the following way: Basic prerequisites for a cognitive transformation are that one (1) become aware of her assumptions, (2) no longer project characteristics of her own way onto the objects of her scholarly attention, and (3) decenter the personal point of view so that through the vantage the new allows her she can consider not only the new, but the truthfulness of her own assumptions. In other words, it is crucial how we select the information we are exposed to and how we relate new knowledge to settled knowledge. Unless we assimilate what we get to know to what we know already and accommodate what we know to what we get to know, we merely accumulate information. The new information has to be processed, that is, to be integrated and contextualized with the known to make sense to us. And what we already know has to be connected with what we get to know in order for the latter to make a difference.11

An important point to be made is that a lawyer outside the U.S. cannot research or 46 practice U.S. law from the same cultural perspective that a U.S. native would research or practice U.S. law at home. Even a person raised in the U.S. began his or her understanding of the law through living in the culture long before ever studying or practicing the law. Equally important is the fact that a lawyer should not research U.S. law as though it is just another area of practice among the other domestic areas of his or her non-U.S. legal practice. By researching U.S. legal practice from outside the cultural context of the U.S., a lawyer must therefore investigate U.S. law as part anthropologist and part lawyer. One might make the error that because of the stereotype of U.S. Americans not being 47 well-travelled or conversant in multiple languages that they would be poor comparativists. But even the simplest private law case in the U.S. might involve property or persons located in another U.S. state, with its own laws of substance and procedure. Therefore, U.S. lawyers are always and already comparativists among the states while working at home. U.S. lawyers would refer to the body of law that dictates how the law of another state is to be regarded as “conflicts of law.”12 This is not due to the common law foundation of U.S. legal culture, but to the unique nature of U.S. federalism. Disputes of law is even a subject area on the bar examination in many U.S. states. Conflicts of law principles are often exactly the same as those of international private law13 and would be recognized by lawyers from other legal cultures as such. The similarity between what U.S. lawyers call disputes of law principles applied between U.S. states and what lawyers from other legal cultures call international private law principles is strong evidence of the legal independence and sovereignty of the individual U.S. states. Regardless of the reason why one compares parts or whole legal systems, one must 48 proceed methodically in order to compare intelligently. Texts alone, especially statutes, are not sufficiently representative of how legal systems resolve disputes. [European] Court of Justice Judge David Edwards has noted that: [c]odes and treatises on the law of evidence are, at best, unreliable guides. Superficially, the rules of two systems may appear very similar. For example, some aspects of Dutch procedures bear a striking resemblance to recent proposals for new procedures in the Scottish courts. Yet we can be certain that if the Scottish proposals were to be implemented, the Scottish courts would still work very differently from the Dutch courts.14

Frankenberg, supra note 10 at 413. / conflits de lois / conflicto de leyes / conflitto di leggi. 13 Internationales Privatrecht / droit international privé / derecho internacional privado / diritto internazionale privato. 14 David Edwards, Fact-Finding: A British Perspective, in The Option of Litigating in Europe 43 (D.L. Carey Miller and Paul R. Beaumont eds.) (United Kingdom Committee of Comparative Law, 1993) 11

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Chapter 1 United States’ Law as Foreign Law Some areas of the law are less culturally-connected than others, such as commercial law.15 These areas of the law therefore tend to be more easily transferred from legal system to legal system and may be understood by lawyers in multiple cultures with relatively little need for translation or immersion in another culture. But other areas of the law are more attached to a culture—constitutional law,16 family law, or criminal law17 for example. These more culturally-dependent areas cannot so easily be understood without translation or immersion in the foreign culture. In short, research into any foreign legal system is not the same process as research in one’s own system. Differences include history, language, social structures, politics and philosophy; things that a person learns in his own culture—formally or informally—before even beginning to research law or its underlying legal culture. These differences require that one adopt a scientific method for fruitful comparison. a) Functionalism 49

The discipline of comparative law has been formally recognized for a little over a century. In that century the discipline has moved through phases of focus, from formalism to functionalism to critical legal theory. Each focus managed to correct problems from another focus, but at the same time created some of its own problems. Formalism thought it appropriate only to compare things with the same legal form, such as statutes with statutes and constitutional courts with constitutional courts. “Formalism proposes a narrow conception of law that, in a comparative perspective, is informed by the domestic legal culture and then projected onto what in other historical or social contexts is, looks like or may be taken as law.”18

50 Example The U.S. does not have separate constitutional courts. By this simple fact, if comparative law was still practiced by looking for similar forms, one would be constrained to stop a constitutional law comparison before it even began, and that would not help anyone. Consequently, if one wanted to make a comparison with U.S. judicial interpretation of the constitutions, an alternative method would be needed. Functionalism accommodates that need.

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A standard work in the field of comparative law today is that of Konrad Zweigert and Hein Kötz, and is simply entitled Introduction to Comparative Law.19 The book has received such a wide readership that it would not be an exaggeration to refer to it as the orthodoxy of comparative law. In Part I, the authors lay out what they call Generalia, which include a discussion of the concept of comparative law, the aims of comparative (quoted in Jeremy Lever, Why Procedure is More Important than Substantive Law, 48 Int'l & Comp. L. Q. 285, 301 (April 1999)). 15 Guido Alpa, Markets and Comparative Law (British Institute of International and Comparative Law, 2010); James Gordley et al., An Introduction to the Comparative Study of Private Law, (Cambridge University Press) (2006). 16 See e.g., Norman Dorsen et al., Comparative Constitutionalism (2d ed.) (West, 2010); Vicki Jackson and Mark Tushnet, Comparative Constitutional Law (2d ed.) (Foundation Press, 2006). 17 Discussions with practicing professional German lawyers who have obtained their master’s degrees in law (usually the LL.M. degree) have indicated that they chose their curricula based upon cultural interest —hence family law and criminal law—and not just practical, commercial interest. After all, legal education is not intended to be a complete education, not just formal training, or in German concepts of educational reformer, Alexander von Humboldt: Should legal education be Bildung and not just Ausbildung? See e.g., Thomas Nipperdey, Deutsche Geschichte 1800–1866: Bürgerwelt und starker Staat. Vol. 1. 58 (C.H. Beck, 1994). 18 Frankenberg, supra note 10 at 422. 19 Konrad Zweigert und Hein Kötz, Einführung in die Rechtsvergleichung (3d ed.) (C.H. Beck, 1996); Introduction to Comparative Law (Tony Weir, trans.) (Oxford University Press, 1998).

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I. Foreign Law and Comparative Law law and the history of comparative law. The orthodox approach established by Zweigert and Kötz provides a replicable method of functionalism, which one might employ as a social scientific tool to achieve respectable comparisons. Instead of comparing like forms, functionalism begins by presuming a similarity is 52 possible, and then works by having the researcher generalize the function of sources of law, institutions or other phenomena just to the point that one can make a comparison. In making a simple comparison of sources of law, for example, one might look for the code20 of the statutes21 for the law of the obligations in the U.S. Finding none, one might conclude there is no recorded body of law for obligations and this would be clearly an error. But while functionalism appears to have corrected some problems with formalism, 53 functionalism also has its own problems. For example, functionalism focuses far too often only upon sources of law as its objects of study, and not upon institutions or the reception of the citizens who are subject to the law. As a consequence, were one to ask a functionalist what to compare, the answer would most often relate to the function of different sources of law. Private practitioners, who wish to represent the interests of their clients, are likely to use the functionality approach. “Functionality becomes the pivotal methodological principle determining the choice of laws to compare, the scope of the undertaking, the creation of a system of comparative law, and the evaluation of findings.”22 A more general criticism of functionalism is that it favors the comparativist’s own sys- 54 tem. Returning to what Zweigert and Kötz explicitly present, it is precisely in the functionality principle that one sees a “hometown bias” in the Zweigert and Kötz approach. Part II of the Einführung is divided into Vertrag,23 Ungerechtfertigte Bereicherung,24 and Delikt.25 Most German readers will readily recognize these divisions as being borrowed directly from the Bürgerliches Gesetzbuch.26 Why, for example, is property law or a newer area of the law, such as environmental law not included?27 Thus in attempting to provide a science and a method for comparative law that is above or beyond any one system, even the powerful work of Zweigert and Kötz demonstrates that it is impossible to compare without having a point of perspective from which one compares. One cannot step out of the hermeneutic circle, but rather can at best become conscious that one is in the circle, that one sees the world from his place in the circle, and that one tries to make observations of other things in the circle knowing that his is only one perspective.28 Frankenberg concludes that despite allusions on the European continent to a universal legal science, “the comparative functionalist should not be mistaken for a philosopher; her ideal is rather practical: to devise the most efficient legal system to order the reasonable expectations. In the end the neutral observer reveals herself as a lawyer in defense of the status quo.”29I Gesetzbuch / code / código / codice. Gesetze / lois écrites / estatutos / leggi. 22 Frankenberg, supra note 10 at 436. 23 contract / contrat / contrato / contratto. 24 unjust enrichment / enrichissement sans cause / enriquecimiento injusto / ingiustificato arricchimento. 25 tort / délit / delicto / illecito, atto illecito. 26 German civil legal code / Code civil allemand / código civil alemán / codice civile tedesco. 27 See e.g., Comparative Environmental Law and Regulation, Nicholas Robinson, ed. (Oceana Publications, 2006). 28 See Rainer Hegenbarth, Juristische Hermeneutik und Linguistische Pragmatik (Athenaem, 1982). 29 Frankenberg, supra note 10 at 440 (citing Roscoe Pound, Comparative Law in Space and Time, Am. J. Comp. L. 4 (1), 70–84 (Winter, 1955)). 20

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Chapter 1 United States’ Law as Foreign Law While functionalism may have problems and faults, the fact remains that if we want to compare legal traditions, there must be something we are comparing, and for the comparison to be worthwhile, the things compared should in some way be justifiably comparable. But as Reimann points out, whereas one scholar like James Gordley would compare black letter law and say civil and common law cultures are converging,30 another scholar like Pierre Legrand would compare the mentalities of the lawyers in those systems and say there is no convergence.31 56 A weak point in the functionalist method, including that of Zweigert and Kötz, is that it begins from a praesumptio similitudinis, which asserts that if one has inserted oneself into the foreign surroundings, one will recognize that people share a human nature with one another, and have a common core of experience and cognition.32 “The proposition [of functionalism] rests on what every comparatist learns, namely that the legal system of every society faces essentially the same problems and solves these problems by quite different means though very often with similar results.”33 As a result of this presumption, Zweigert and Kötz go so far as to say that at the end of research, if one “finds that there are great differences or indeed diametrically opposite results, he should be put on notice to go back to check again whether the terms in which he posed his original question were indeed purely functional, and whether he has spread the net of his researches quite wide enough.”34 With this in mind, analyses can only be conducted if the questions used are capable of yielding similarities, regardless of how well those similarities represent the practices of lawyers in those systems. It would be equally as logical to begin from the presumption that legal systems are dissimilar enough that no similarities can be found. 57 If Zweigert and Kötz’s Introduction is a milestone in the scholarship of comparative law, the International Encyclopedia of Comparative Law (I.E.C.L.) is a mountain. Encyclopedism is another recognized method of comparative law. The Encyclopedia, a project in which Zweigert was involved as one of the editors and authors, is a massive undertaking in both its attempt to corral a world of factual knowledge about the law, but also in its necessary attempt to operationalize a particular method of comparative law in order to carry out the project of organizing and recording the world of factual legal knowledge. For the lawyer who peruses the I.E.C.L., two things ought to jump out immediately— why is it written in English and why is it arranged and divided as it is? The point is not to argue that the I.E.C.L. should be written in another language, but to recognize that a choice has been made to present comparative law in a particular language, just as all presentations of comparative law are made from a particular conceptual perspective. Once one has laid out the basics and compared the functions, it remains a necessary and important task to give meaning to the functions that one has compared. Giving meaning to the different ways of accomplishing functions calls on many different disciplines, including sociology, anthropology, psychology, theology, literature and linguistics.35 55

Reimann, supra note 6 at 690, fn. 109. Pierre Legrand, European Legal Systems Are Not Converging, 45 Int. & Comp. Law Quarterly 52–81 (1996). 32 Konrad Zweigert, Die praesumptio similitudinis als Grundsatzvermutung rechtsvergleichender Methode, in M. Rotundi, Inchiesta di diritto comparato—Scopi e Metodi di Diritto Comparato 735 (M. Rotondi ed.) (1973). 33 Zweigert & Kötz, supra note 19 at 25, 735. Critiques of this presumption of similarity are found in L. Constantinesco, Rechtsvergleichung 54–68 (1971); Vivian Curran, Comparative Law: An Introduction (Carolina Academic Press, 2002). 34 Zweigert & Kötz, supra note 19 at 31. 35 The creation of meaning from a text is discussed extensively in Kirk W. Junker, US Legal Culture: An Introduction (Routledge, 2016). 30

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I. Foreign Law and Comparative Law The second thing that ought to jump out to the reader of the I.E.C.L. is the choice and 58 arrangement of topics in the volumes. Why discuss these topics, and not some other topics? Here too, choices have been made as to the topics that can or ought to be presented. This set of topics is not the “normal” or “natural” one, but rather, a set of topics chosen to serve the needs and uses of a particular view about comparative law. What is that set of common topics? Recalling the point made earlier that commercial law is easier to compare than family law due to global similarities in western commercial culture, it is too often assumed in secular systems that economics is the commonality or praesumptio similitudinus which unites a legal system. Thus in practice, even when one might be doing something as seemingly distant as using custom as a source of law under Article 38 of the jurisdiction statute for the International Court of Justice, the first criterion often offered to justify that two states are sufficiently “similar” is whether the subject states are economically “developed” or “developing”. Something very different could be used, such as sufficiently similar human rights standards. The “Copenhagen criteria” for a state to enter the European Union requires not only measurable economic stability, but also European human rights standards. There are other non-economic bases for similarity as well, such as whether abstractions such as the sense of justice differs, or whether sanctions are based upon retribution or rehabilitation. 59

Example I had the personal experience of helping to produce the index of the National Reports in I.E.C.L. I worked through the text in the alphabetical order of the world’s countries, and as I did, the categories used to represent legal features of all countries all seemed to make reasonable sense until, late in the exercise, I came to the letter U and the entry for the United States. When I saw the Procrustean process of fitting U.S. law as I understood it from the perspective of a native practitioner, into the uniform categories, I realized that the foreign-looking result was likely to be felt by practitioners in other cultures regarding the descriptions of their own systems as well.

b) Translation This book has a reverse relationship from most foreign law books between the au- 60 thors and the readers. The authors in this book are not reporting to their own culture on a foreign legal system, but rather are reporting to a foreign culture on the authors’ own legal culture. Thus, it will be the reader, not the authors, who will necessarily be practicing comparative law in learning the legal culture of the U.S. And insofar as the reader is doing that, he or she should be aware not only of the functionalism orthodoxy in comparative law, but also be aware of at least one alternative comparative law method. The most helpful and thought-provoking of the alternative methods is the translation method. It is the privilege of the authors of this book to present the opportunity for comparative work through translationalism, enabled by a talented team of legal translators who recognize that translation is both linguistic and cultural.36 This point was made most clear in the Introduction to the book, as well as in the Notes provided by the translators. There is a cluster of related concepts that one must engage in order to study any for- 61 eign law system, the foremost of which is the translation cluster. The cluster includes language translation, cultural translation, the science of comparative law and the substance and procedure of a foreign legal system. The science of comparative law, as well as some of its inherent challenges have been introduced here. It would be naïve for a lawyer in any legal system to believe that one can just jump to the rules of substantive law of 36 See Michael Cronin, Across the Lines: Travel, Language, Translation (Cork University Press, 2000).

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Chapter 1 United States’ Law as Foreign Law another legal system, run them through a software translation program, and believe he or she can then understand the law. So the concepts of substance and procedure in the U.S. system are introduced in subsequent chapters. What remains to discuss here are notions of linguistic and cultural translation. 62 Two very vexing problems of foreign legal system work are related to translation. The first problem comes directly from the translation of the spoken and written language itself. In all cultures, law is a specialized language that may use ancient languages such as Latin or Greek in ways that are unorthodox. In addition, law may use archaic forms of its own language, such as Victorian or even Elizabethan words and phrases in English. In addition, English still has leftover words and phrases from law French, which was a form of French used in England from around 1330 until the Pleading in English Act of 1362. Today the U.S. still uses some French syntax, such as with an “attorney general” or vocabulary, such as “voir dire” in jury selection. And finally, a problem in translating contemporary languages is the idiom. We all know about unique words that cannot be translated into other languages, but one can go much further and say that it would be “utopian to believe that two words which belong to two different languages have exactly the same meaning.”37 Not every word of every language has a one-to-one cognate in another language. When it does not, what does one do? This brings us to the second problem of translation. 63 The second problem of translation is not the language but the concept. Like idioms in natural language, concepts are also not always readily translatable. That is to say, different cultures, including different legal cultures, have formed different concepts, and it is entirely possible that those concepts are non-existent in another culture and therefore very unlikely to find suitable expression in that culture. The great legal historian Friedrich Carl von Savigny reminded us that “In the earliest times to which authentic history extends, the law will be found to have already attained a fixed character, peculiar to the people, like their language, manners and constitution.”38 64 Examples Here are two examples of conceptual translation problems from my own experience in the law. In the first example, I was asked to provide oral expert testimony in Germany regarding a U.S. tax case. In the U.S., the problem is clearly covered by the tax code and therefore thought to be a tax issue for U.S. lawyers. In Germany, the problem would be answered by statutes of trade and business organizations. I provided my advice to answer the problem as it would be addressed by the U.S. Federal Tax Code. The German colleague insisted that they needed an answer from U.S. law of trade and business organizations. “But the question is answered in the U.S. through the tax code,” I explained. “Yes, but if it were answered under U.S. law of trade and business organizations, what would the answer be?” insisted the colleagues. I said that question was unanswerable, because it would not be answered by those sources. It was a difficult impasse. A second example that I can offer occurred when I wrote an expert report39 on a U.S. legal problem for a German court. The style of the expert opinion in the U.S. legal system is to offer probabilities of the likely outcome at trial. Were I an engineer, my expert opinion would offer the probability that the bridge would stand assuming certain materials, stresses and other actors on the design and materials. As a lawyer, my expert opinion offers probabilities on what the court is likely to conclude given the facts and law at issue in the case. “But we want you to tell us the answer,” insisted the German judge. Again, we found ourselves at a

José Ortega y Gasset, (cited in Ross and Walter, Im Haus der Sprache 205 (Freiburg, 1983). Friedrich Carl von Savigny, Of the Vocation of Our Age for Legislation and Jurisprudence 24 (A. Hayward trans., 1975) (as quoted in Jack A. Hiller and Bernhard Grossfeld, Comparative Legal Semiotics and the Divided Brain: Are We Producing Half-Brained Lawyers?, 50 Am J. Comp. L. 175, 178–79 (2002)). 39 Gutachten / avis / dictamen jurídico / consulenza tecnica (in questa sede: vertente sul diritto statunitense). 37

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I. Foreign Law and Comparative Law conceptual impasse that was not solved by translating words. Instead, one would need to translate legal cultures.

Law professors in the U.S. do not provide the answers to legal disputes—judges pro- 65 vide the answers to legal disputes. And the forum in which judges provide the answers is their judicial opinions, not commentary on statutes or judicial opinions. By contrast, in Germany, for example, the accepted interpretation of statutory law40 is found in the commentary41 by experts such as law professors (or judges) writing in the practice area of law. In civil law of course the judicial decision alone is not binding on subsequent disputes. Furthermore, statutes in the U.S. are interpreted by courts in a binding system of stare decisis. Therefore, the guiding interpretation of the law is the opinion written by the judge as he or she decided the case. To be more precise, even the court’s opinion must be divided into those elements necessary to decide the dispute before the court, called the ratio decidendi, and those elements that are not essential, called obiter dicta, that are added by the court as commentary in general. Only the ratio decidendi elements are binding on subsequent courts. The distinction between the two invites the advocates to disagree because if an element is ratio decidendi, it might control the outcome of a subsequent case, but if it is characterized as mere obiter dicta, then it may be ignored by subsequent courts. There is no subsequent controlling commentary. Thus, the opinion of an outside expert, such as that of a law professor, does not hold the elevated status that it would in a German commentary. Consequently, when I am asked as a law professor in U.S. law to provide an expert opinion on U.S. law, I do so by stating the probability of what the judge would say were the facts that have been presented to me thereafter presented to a judge. I base my opinion largely on prior judicial decisions. I would not propose that my authority as a scholar can be substituted or control that of an elected or appointed judge, who is an organ of the state. Law professors in the U.S., even in public universities, are not organs of the state. All of this is to say that in addition to one needing to translate languages when consulting foreign law, one needs to translate legal cultures and concepts, including (as in the above examples) the division of concepts among categories and the role of institutions. If one does not make the cultural translation as well, one risks the wrong concept to answer a research question or the wrong institution to provide one with a legal service. If one recalls the process of learning a second language in school, it usually consisted 66 of learning the mechanical structure of the grammar and the rules of syntax and then inserting as much vocabulary as one can memorize. In addition, when learning a second language, we do so by extending comparisons to our own first language, especially with the meaning of vocabulary. But that is not how we learn our native language. We learn our native language from hearing it used and repeating during an age when our brain’s language facility was first developing. The same difference between native and foreign language learning is true for native and foreign legal culture learning. We learn our own legal system first by living in it as a part of the whole culture, not by studying it as a specialist. Then when we learn a foreign legal culture, we do so by comparison to our own, especially with the meaning of vocabulary. We learn the foreign culture mechanically through a grammar and syntax that is very likely established by our own legal culture. When learning a legal system after learning our own, we do so by comparison to our 67 own, and as with learning a second language, we often discover revelations about our own first language in the process. Furthermore, we accomplish this practice of comparison by creating—not finding—relationships that we say are equal. For the same reason 40 41

Auslegung der Gesetze / interprétation de la loi / interpretación de la ley / interpretazione della legge. Kommentare / annotations / comentarios / commentari.

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Chapter 1 United States’ Law as Foreign Law that we cannot learn a second language in the way that we learned our mother tongue, we must at least become conscious of these realities of learning by translation, and not fool ourselves into believing that we can learn another culture, including a legal culture, simply by reading the same sources of law read by a native. So when we learn a second legal system, it is through the non-native practice of establishing something like a grammar and syntax and adding vocabulary to it. And although we may generally say that grammars operate as rules of language structure, the particular rules themselves differ. 68 Like speaking natural languages, we all begin our lives doing everyday things within our own legal system. We typically spend years in our own legal system, accumulating knowledge of it in the same way as other laypersons. Only later do we ever begin to study it scientifically or practice it professionally. This is not a problematic state of affairs, so long as we remain conscious of it. But if we assume that our legal system is in some way the legal system, with some sort of natural or objective connection to the world, then we have made the same error as if we had assumed the same about our spoken language. Linguist Edward Sapir has noted that “In reality it is truly that the real world is produced largely unconscious of the language habits of the group. There are no two languages that could be sufficiently similar to each other for them to represent the same social reality. The worlds which different societies inhabit are different worlds, not merely one and the same world with different labels.”42 Extended to comparative law, that would mean that there are no two legal systems that are sufficiently similar to each other for them to represent the same social reality. That realization should not stop our projects in comparative law, but should remind us that much of comparative law must be created by the comparativist just to enable foreign systems to be compared at all. c) Conclusions from Foreign and Comparative Law According to U.S. legal historian Frederick G. Kempin, “[a] realistic point in time to begin a discussion of Anglo-American legal history . . . is with the common law as it stood when it first became the object of study by a distinct legal profession . . ..”43 Civil law explains itself beginning with the establishment of a code, whether one uses the code of Rome or Napoleon or another. After explaining its establishment, common law developed by treating the facts of individual disputes as important and in so doing, emphasizing the power of judges. Common law focuses on process, and only after the independence of lawyers and legal process does it come to focusing upon texts. Thus we are immediately presented with a problem when comparing common law to civil law because the starting point of each system is different. Thus a civil lawyer would need to recognize that researching common law begins with social practices, not texts, just as common law lawyers would be advised to begin research in civil law by researching texts, not practices. The risk potential of misunderstanding is very high in comparative law. Thus, simply in choosing whether one begins a comparative law study by comparing textual sources of law, one has already demonstrated a bias. 70 Understanding foreign law is possible as a science, but it does not enable one to see other systems as a native of those systems would see his own system. Rather, a scientific practice of comparative law allows one to do what is possible from the most intelligent foreign perspective. Bernard Grossfeld begins the final chapter of his insightful work on comparative law by infusing the notions of spirit and attitude into the method of comparative law. He warns us that “[a] technical-functional comparison without a study of 69

George Steiner, Nach Babel 102 (Frankfurt, 1983), citing Edward Sapir (1929). Frederick G. Kempin, Historical Introduction to Anglo-American Law in a Nutshell 3 (3d ed.) (West, 1990). 42

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II. Features of United States’ Law—Typical or Stereotypical? national customs, without cultural-research and without loving empathy . . . remains a study of words, letters and numbers, touches only the superficial level and leads into error.”44

II. Features of United States’ Law—Typical or Stereotypical? After the comparativist considers the cultural basis for U.S. law, including the social 71 practices in the system, he or she is ready to apply U.S. constitutions, statutes, regulations and cases to the facts of individual cases in an effort to understand the U.S. legal culture and resolve disputes in service of a client. This is the rather common subsumption technique of lawyers looking at the social phenomenon of dispute through only the lens of the law itself. In short, it is law looking at law, or what one might call the “mechanistic” view of legal practice. It is law explaining itself at the level where understanding of a legal system is treated as a matter of knowing the sources of law and institutions of law and it is the way of seeing law through a sense that law is mechanical—law is the application of facts to rules. When this is the case, a practicing lawyer would do well to consider the elements of U.S. legal practice from the bottom-up—that is, from the perspective of dispute resolution as encountered by the practicing lawyer rather than from constitutional authorizations to legislate which lead to norms through which dispute is resolved in the courtroom. To do so, rather than attempt to offer a full smorgasbord of substantive law that sur- 72 vey books attempt to offer, this book offers chapters that are both significant to the legal practitioner and that lend themselves to better conceptual understanding of law in the U.S. There are some additional themes that are either found in all the chapters, such as U.S. federalism, or are important common threads, but not made explicit in any chapter, such as the role of the advocacy45 in distinction from inquisition at trial. The remainder of this chapter presents a selection of themes, beginning with sources of law, then proceeding to the doctrine of precedent,46 the role of juries, federalism, attorneys’ fees,47 the trial48 and the role of advocacy, all as features that make U.S. law foreign for the lawyer from the civil tradition.

1. Sources of Law As with common law generally, the character of U.S. law is frequently overgeneralized 73 as being limited to judge-made law, while the character of civil law is overgeneralized as being limited to statutory law. While it is true that each of the two systems respectively features one of these two basic sources, they are not the exclusive sources of either system. Moreover, there are other differences between the two systems that are important because they too reveal the ways that a lawyer from the other system might be thinking in a collaborative project or in resolving a dispute.49 One should only consider sources of law in proper contact among other features of a 74 legal system. Legal historian Frederick G. Kempin introduces Anglo-American law not by talking about sources of law, but by first saying that the history of Anglo-American law “tells a continued story of development of its institutions: courts, juries, judges and Grossfeld, supra note 7 at 245. Verhandlungsgrundsatz / plaidoirie / defensa y promoción legal / principio del contraddittorio. 46 Präzedenzfall / règle du précédent / predecente jurídico / dottrina del precedente giudiziario. 47 Anwaltsgebühren / honoraires d’avocats / honorarios de abogado / onorari dell’avvocato. 48 Prozess / procès / juicio / processo, giudizio. 49 Chase et al., Civil Litigation in Comparative Context (West, 2007). 44

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Chapter 1 United States’ Law as Foreign Law lawyers . . ..”50 Only after discussing institutions does he discuss sources of law, and even then, statutory legislation comes third among sources, after customs and cases. In the same way that these features may tip us off that the comparativist whom we are reading comes from the common law tradition, a comparativist from the civil law tradition shows his historical base when his work features sources of law first, and among the sources, begins with statutes. Kempin writes: “for a technical body of law to exist, some distinct group of persons, a legal profession, must develop it. Such a profession emerges slowly; and in the beginning of any legal system, law is nothing more or less than the customary rules of the community.”51 Thus, although in some theoretical contexts one might take a “top-down“ approach to describing a legal system, and do so through sources of law, starting with a constitution and continuing with the legislation and administrative regulations that cascade from it, to focus on legal practice, one might better take a “bottom-up” approach and begin instead with everyday disputes and the persons and institutions that resolve the disputes. The latter approach would be consistent with the common law’s inductive patterns of reasoning, whereas the former would be more consistent with the civil law’s deductive patterns of reasoning. 75 It would seem that there is at least one additional answer to the question of why one would study sources of law for comparison. The additional answer is that we tend to think chronologically, so we assume there can be no discussion of the law until we have “made law.” There are however two questionable presumptions necessary before one can advance that proposition and they are based in the distinction between inductive reasoning and deductive reasoning. The first presumption is that when one proceeds chronologically, one begins with law making. A bit of reflection on social history would show the weakness in that idea. First, disputes had to be resolved through whatever means were available, including force and violence, before one could say that law was made. And only then might one consider the point in legal history when humans began changing their behavior due to having observed dispute resolution among others and anticipating the same treatment for themselves. That is the point at which a system of law can be said to have begun—as a predictable pattern of dispute resolution. Harold Berman makes the observation that: The English common law is usually traced back to the Assize of Clarendon and other twelfth-century royal enactments; these constitute enacted law, which is the opposite of customary law. What is meant, no doubt, is that the royal enactments established procedures in the royal courts for the enforcement of rules and principles and standards and concepts that took their meaning from custom and usage. The rules and principles and standards and concepts to be enforced—the definitions of felonies, the concepts of seisin and disseisin—were derived from informal, unwritten, unenacted norms and patterns of behaviour. These norms and patterns of behaviour existed in the minds of people, in the consciousness of the community.52

Only after the moment when patterns of dispute resolution could be observed, can the notion of legislation be introduced as a secondary act. A civil law practitioner may disagree and say that one’s rationality is sufficient to anticipate dispute and legislate norms of dispute resolution before any dispute has occurred or its resolution has been observed. 77 Nowadays both common law and civil law make use of cases and statutes, as well as constitutions and regulations. Most common law jurisdictions rely heavily upon statutory law as the primary source of law in most areas of legal practice, leaving what one 76

Frederik G. Kempin, Legal History: Law and Social Change (Prentice-Hall, 1963). supra note 43 at 95. 52 Harold J. Berman, Law and Revolution: The Formation of the Western Legal Tradition 480–81 (Harvard University Press, 1985). 50

51 Kempin,

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II. Features of United States’ Law—Typical or Stereotypical? might call “pure common law” (that is, judges deciding disputes for which there is no statutory authority) to almost only one area of private law in the United States—obligations.53 In public law, given the fact that the U.S. Constitution is a remarkably short text, constitutional law relies heavily upon court decisions in cases of dispute of course,54 but nevertheless the courts are mostly basing their decisions upon some reading of the Constitution itself. The focus upon the written lawmaker’s text as being the distinction between the two 78 legal families may be more simply-defined and easy to see, and therefore often cited,55 but it does not provide the insight for understanding the differences in legal practice between common law and civil law. The insightful differences are more subtle and lesssharply defined, but once these are grasped, they provide far more insight to the soul and spirit of legal cultures, and therefore provide more insight into the practice of law in those cultures. Gunther Frankenberg points out that “[i]t becomes clearer then that any vision of the 79 foreign laws is derived from and shaped by domestic assumptions and bias.56 Civil law lawyers like to proceed in comparative law by comparing statutes. Equally on the other side, we have common law lawyers expecting comparative law to have something akin to common law method, and they will find it quite natural to compare legal systems through a study of court decisions. Ideally, that would mean comparing practices rather than sources of law, but even when it does mean comparing sources of law, common law lawyers like to think comparison is better done through their own domestic method. For example, Basil Markesinis, Professor of Comparative Law at Queen Mary and Westfield College, University of London wrote in the Modern Law Review in 1990 that “[m]any years of teaching foreign and comparative law mainly—but not exclusively—to common law lawyers have convinced me of the value of presenting a foreign legal system to an unfamiliar audience primarily through its case law rather than by means of an exegesis of codal provisions.”57 Common law systems, including that of the U.S., are perhaps best understood as 80 species of the genus customary law. In civil law countries, law making means statutemaking by the state. But the state can only legislate. The state cannot create ‘custom,’ it can only create [statutory] laws. It cannot rule “custom” nor can it rule society.58 Consistent with English and U.S. cultural claims to values of self-determination and individual accountability, the values of the common law are expressed in a legal system that begins with the resolution of individual disputes, not the state’s legislation.

53 Schuldrecht / droit des obligations / derecho de obligaciones / diritto delle obbligazioni; Daniel R. Coquillette, The Anglo-American Legal Tradition 597 (2d ed.) (Carolina Academic Press, 2004). 54 As has been true for much of the history of the common law, U.S. courts generally do not provide advisory opinions, which the European Court of Justice through Article 267 of the Treaty on the Functioning of the European Union does. 55 See e.g., Buckland & McNair, Roman Law and Common Law (2d ed.) (Cambridge University Press, 2008). 56 Frankenberg, supra note 10 at 443. 57 Basil Markesinis, Comparative Law—A Subject in Search of an Audience, 53 Modern Law Review 1 (1990). 58 Peter G. Sack, Law & Custom: Reflections on the Relations between English Law and the English Language, 18 Rechtstheorie 421, 432 (1987) (citing Alan McFarlane, The Origins of English Individualism 170, 206 (Oxford University Press, 1978)).

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Chapter 1 United States’ Law as Foreign Law a) The Use of the Word “Code” When it comes to codes59 and cases,60 there are two issues that need to be discussed– one is caused by civil law practitioners’ assumptions about common law, and one is caused by common law practitioners’ assumptions about civil law. First of all, the stereotype of common law would have one believe that the U.S. has only general common law as a source of law. Second, U.S. lawyers often tend to conflate the notions of statutory law and codified law, even in the way that they refer to U.S. federal statutes as the “U.S. Code,” when in fact U.S. statutory law61 is for the most part not codified. And as if that were not enough to confuse the matter, in the U.S. the word “code” is sometimes used to refer to bodies of administrative regulations, and not to refer to statutes. And here we see an issue of cultural translation in practice. There are at least two different ways in which language creates meaning; the first is usage and the second is definition. If one just looks to a language translation, one is likely to be told that “codes” in English are, for example, “Gesetzbücher,” “codes,” “códigos,” or “codici” in German, French, Spanish or Italian, respectively. But in usage, rather than definition, one finds that U.S. lawyers use the word “code” to mean statutory law generally or even books of administrative regulations. By comparison, the civil lawyer treats a set of unintegrated statutes that cover related subject matter as an incomplete project. He or she wants a topic area of law to be integrated and wants that integrated code to anticipate all possible disputes that could arise in that area. This expectation of completeness causes considerable amounts of civil law scholarship to be undertaken dedicated to pointing out “gaps” in the law. Moreover, one would therefore find that if an area of law is not codified, there is perceived to be a problem, as is discussed in this book in Chapter 14, “U.S. Environmental Law Practice as Foreign Law.” For example, all German textbooks and books of commentary on German environmental law begin by apologizing to their German reader that in this area of the law there is still not a unified code. Of course there are statutes that protect against air pollution and water pollution, and statutes that organize and order waste disposal and so on, but under the umbrella topic known as “environmental law” they exist all rather independently, just as U.S. statutes do, and have not been integrated into one, unified Umweltgesetzbuch, code de l’environnement, código del medio ambiente, codice dell’ambiente, or codice di diritto ambientale. b) Stare Decisis and the Doctrine of Precedent 81

U.S. lawyers usually use stare decisis to mean something like “let the decision stand”. Stare decisis is based upon the inductive process of solving problems individually in order to arrive at some generalization. It should first be emphasized that stare decisis is only a doctrine. Once a series of words has been written and undergone a culture’s process of calling those words “the law,” it is still necessary when adjudicating a dispute in the courts or enforcing the law “as written” through the executive to say what the law means. Legislative bodies attempt to control interpretation of their words through further legislative acts, called rules of statutory construction.62 In addition to the legislated rules of statutory construction, the courts impose upon themselves their own prior case Gesetzbücher / codes / códigos / codici. Rechtsprechung / jurisprudence / jurisprudencia / giurisprudenza. 61 Gesetzesrecht / droit écrit / estatuto / diritto di fonte legislativa, diritto legislativo [lit.]. 62 See e.g., 1 U.S.C.A sections 1 et seq. (setting forth the Rules of Construction for U.S. statutes); for a state example, 1 Pa. Cons. Stat. Ann. Section 1902 (setting forth the Rules of Construction for Pennsylvania legislation); 1 Pa. Cons. Stat. Ann. Section 1922 (stating the presumptions for ascertaining legislative intent). 59

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II. Features of United States’ Law—Typical or Stereotypical? decisions. The full statement of the doctrine is “Stare decisis et non quieta movere,” which in English means “to stand by decisions and not disturb the undisturbed”.63 Because stare decisis is however only a doctrine, courts can and do legally ignore their self-imposed precedent, especially (but not exclusively) when interpreting the U.S. Constitution. In a rather famous dissenting opinion in Burnet v. Coronado Oil & Gas Co., U.S. Supreme Court Justice Louis Brandeis emphasized that “in cases involving the Federal Constitution, where correction through legislative action is practically impossible, this Court has often overruled its earlier decisions . . .. This is strikingly true of cases under the due process clause.”64 Indeed, in the years 1946–1992, the U.S. Supreme Court reversed itself in about 130 cases. The U.S. Supreme Court has further explained its behavior as follows: “when convinced of former error, this Court has never felt constrained to follow precedent. In constitutional questions, where correction depends upon amendment, and not upon legislative action, this Court throughout its history has freely exercised its power to reexamine the basis of its constitutional decisions.“65 And in the famous case of Erie v. Tompkins, Justice Brandeis wrote “the doctrine of Swift v. Tyson is, as Justice Holmes said, ‘an unconstitutional assumption of powers by courts of the United States which no lapse of time or respectable array of opinion should make us hesitate to correct.’”66 This sort of self-reversal makes it difficult for an outsider, including a practicing civil lawyer, to predict the outcome of constitutional cases before the U.S. Supreme Court, based upon the mechanics of law alone. One might study prior case opinions, including the dissents written by the Justices. One could also look to see what these Justices had written prior to joining the Supreme Court. One might even look to see how these Justices answered questions during their U.S. Senate confirmation hearings to become Supreme Court members. But even with all of this research, one would need to have a cultural feeling for when it might be plausible to ask a court to reverse its own line of precedent. Many legal scholars have long held that judges respond “not only to legal stimuli but also to a wide range of political . . . stimuli.”67 One study concluded that “Supreme Court justices are not influenced by landmark precedents with which they disagree.’”68 Another study claimed an 85 % success rate in prediction of future case decisions based upon a study of the judge’s “values”.69 What the empirical data tends to show is that a standard didactic model based upon precedent does not predict the way actual judges will decide cases very well. This is especially troublesome if one accepts the ideas that the main test of the lawyer (and the “law” itself, according to Justice Holmes) is to be able to predict how a court will resolve a dispute brought before it. In practice, the problem is not as large as it may seem in theory. While studying the law, U.S. lawyers often read the opinions of the U.S. Supreme Court, but the fact of the matter is that one rarely, if ever, practices before the 63 Cf. stare dictis, which means “to stand by or keep to what was said” and stare rationibus decidendi meaning “to keep to the rationes decidendi of past cases”. All of these formulations have been used in some legal system at one time or another. 64 Burnett v. Coronado Oil and Gas, 285 U.S. 393, 406–07, 410 (1932). 65 Smith v. Allwright, 321 U.S. 649, 665 (1944). 66 Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938) (quoting Justice Holmes). 67 Sheldon Goldman, The Effect of Past Judicial Behavior on Subsequent Decision-Making, 19 Jurimetrics J. 208 (1978–79). 68 Jeffrey Segal & Harold Spaeth, The Influence of Stare Decisis on the Votes of Supreme Court Justices, 40 American Journal of Political Science 971 (1996). 69 Legal Pragmatism, Internet Encyclopedia of Philosophy: A Peer-Reviewed Academic Resource, http://www.iep.utm.edu/leglprag/; see also Jerome Frank, Courts on Trial: Myth and Reality in American Justice (Princeton University Press, 1949).

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Chapter 1 United States’ Law as Foreign Law U.S. Supreme Court—it is a court of almost exclusively appellate jurisdiction, and only accepts cases for appeal when it wishes to do so, most often based upon a formal, legal request, known as a “writ of certiorari”. Consequently, the U.S. Supreme Court hears lawyers’ oral arguments in only about one hundred cases per year, and writes only about eighty to ninety opinions to decide those cases. 86 Lower federal courts cannot operate nearly so freely to change precedent because on appeal70 from District Court to a Circuit Court, or on appeal from the Circuit Court to the Supreme Court, the law’s tendency to conserve, articulated as stare decisis et non quieta movere, would easily allow the higher court to “conserve” past precedent and overrule the new, independent thought of a lower court. The trial court or appeals court, if it were to refuse to follow precedent, may well still have its judicial decision reversed on appeal. Notwithstanding this practical limitation, the practice of ignoring precedent is not limited to U.S. Supreme Court behavior. In addressing a dispute in Washington State, the Washington State Supreme Court noted that: An exception to a rule will be declared by courts when the case is not an isolated instance, but general in its character, and the existing rule does not square with justice. Under such circumstances a court will, if free from the restraint of some statute, declare a rule that will meet the full intendment of the law.71

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In addition to the doctrinal demand for conservation of precedent, there are also disciplinary and cultural rules. Judges, like lawyers, must follow a code of judicial conduct in order to keep their position as judges, and Rule 2.2 of the Model Code of Judicial Conduct72 requires that “[a] judge shall uphold and apply the law, and shall perform all duties of judicial office fairly and impartially.“73 A judge who fails to apply case law therefore fails to uphold the law and could face disciplinary actions as a judge, just the same as if he or she had failed to apply statutory law.74 Perhaps of greater interest, however, is the fact that judges, lawyers, students and administrators are all acculturated to accept the doctrine of stare decisis.75 One could perhaps psychologize that phenomenon 70 Berufung / appel / apelación / appello (di sentenza pronunciata dal giudice di primo grado), impugnazione per revocazione (di sentenza pronunciata al grado di appello). The reader is encouraged to consult the Introduction chapter to this book on the translation of the seemingly uncontroversial English word “appeal.” As is aptly outlined by Alessandro Galli, depending upon whether one presumes similarities or differences when translating, and depending upon whether one uses functionalist comparativist method or translational comparativist method, one would go in two very different directions in translating this term alone. Such considerations are true for most of translation and comparison. 71 Mazetti v. Armour & Co., 135 P. 633, 636 (Wa. 1913). 72 Musterrichtlinie für Richter / code de déontologie judiciaire / código modelo de conducta judicial / codice di condotta giudiziaria. 73 The Model Code of Judicial Conduct was adopted by the House of Delegates of the American Bar Association in 1990, and amended several times, most recently in 2010. American Bar Association, The Model Code of Judicial Conduct (2011). 74 See e.g., In the Matter of Hague, 315 N.W. 2d. 524 (Mich. 1982). In Hague, a trial court judge in Michigan had refused on several occasions to apply the law as interpreted by the Court of Appeals of that state. The Supreme Court of Michigan, in a judicial discipline proceeding, found that the judge “violated his oath of office, engendered disrespect for the law and improperly interfered with the proper administration of justice.” It then upheld the judge’s suspension without pay for 60 days. Id.at 554. The Code of Judicial Conduct, Canons 2 and 3, according to the court, provided that a judge is not free to willfully refuse to enforce the law. The Court wrote at page 552 that “[w]here, as here, a judge's decision striking down a law as unconstitutional is directly contrary to appellate precedent of which he is aware and obviously based upon his widely publicized personal belief about what the law should be rather than what it is, the public perception of impartiality of the justice system is seriously harmed. Code of Judicial Conduct, Canon 2(B).” 75 Anastasoff v. U.S., 223 F.3d 898 (8th Cir. 2000). In the full opinion, the court discusses the obligation of judges to abide by precedent.

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II. Features of United States’ Law—Typical or Stereotypical? and say that we want predictability so we are complicit in supporting predictability measures that go beyond the statutory rule of law. However, were one to ask a U.S. law student whether a court is legally bound to follow precedent, chances are very high that he or she would answer “yes.” In order to use stare decisis accurately and effectively, one must be able to distinguish 88 questions of law from questions of fact during the trial process and, as mentioned earlier, to distinguish those facts and law essential to deciding the case, known as the ratio decidendi from those facts and law that are discussed by the judge in his or her role as commentator, which are known as the obiter dicta. If the doctrine of precedent applies at all to the case, it applies only to the ratio decidendi. This is one of the first lessons when learning common law method. Although the professors find it to be very clear from their perspective, the students, new to this distinction in the way common law study invents it, often have difficulty. Perhaps the difficulty is that students new to the law would regard their abilities to distinguish law from facts to require only close reading and common sense. But “[w]hether a particular question is to be treated as a question of law or fact is not itself a question of fact, but a highly artificial question of law.”76 Perhaps the difficulty is in part due to the artificiality of the distinction itself. Anyone who has researched the famous Erie Railroad case and the subsequent cases that cite it (and are therefore called the Erie “progeny,”) will recognize a similar artificiality in distinguishing issues of substantive law from questions of legal procedure. That same researcher will recognize that the substance or procedure distinction is likewise not one of common sense or fact, but a legal distinction that one can only know by studying the reasoning of the prior case decisions. From his experience as an English judge, Sir Konrad Schiemann has commented that: Modern information technology makes it easy to search for precedents. You can usually find something which will point in the direction you want to go. Citing this will not only help to persuade your fellow judges but will also give the world at large the impression that you are applying the law rather than making it . . . In England . . . particularly the higher courts are much more accustomed to use precedents as broad inspiration rather than as suits of armour into which a judgment can be squeezed.77

U.S. legal historian Frederick Kempin asserts that “[l]egal history can dispel many 89 commonly held misconceptions. One is that the common law is held in the iron bands of tradition through the doctrine of precedent. But precedent is little more than comparing present cases with past cases.”78 Here then we see an effective and necessary practice of comparative law that is not commonly included in discussions of comparative law— comparison across time, rather than space. While the simple comparatist might believe that the common law practice of building 90 rules of law from judicial decisions is exclusive to the common law, the subtler comparatist would recognize similarities with the civil law doctrine of jurisprudence constante, which is even practiced in a few parts of North America. With the exception of Quebec, all Canadian provinces are Anglophone and practice common law. Quebec is Francophone and unsurprisingly practices civil law in part. So too in the United States—the state of Louisiana was originally a French colony, part of the population retains influences from the French language, and unsurprisingly, it is the only U.S. state to use civil law in part. Despite the similarities between the doctrines of stare decisis and jurispru76 Nathan Isaacs, The Law and the Facts, 22 Colum. L. Rev. 1, 11–12 (1922) (cited in Kenneth Vinson, Artificial World of Law and Fact, 11 Legal Stud. F. 311, 313 (1987)). 77 Sir Konrad Schiemann, From Common Law Judge to European Judge, 4 Europäisches Privatrecht (ZEuP) 741–49, 745 (2005). 78 Kempin, supra note 43 at III.

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Chapter 1 United States’ Law as Foreign Law dence constante, there are differences, too. The Louisiana Supreme Court took it upon itself in the case of Willis-Knighton Med. Ctr. v. Caddo-Shreveport Sales & Use Tax Comm'n to note that although one case from a higher court would be sufficient to create a rule of law under the doctrine of stare decisis, one would require “a series of adjudicated cases, all in accord, [to] form the basis for jurisprudence constante.”79 Another Louisiana Court—this time the Louisiana Court of Appeals80—reminds comparatists of a further refinement. In the case of Royal v. Cook, the Court pointed out that jurisprudence constante is a secondary source of law and therefore does not have the same legal power as stare decisis.81 Even so, this distinction between stare decisis and jurisprudence constante is a far more subtle distinction than the simple and false dichotomy of saying the common law uses only case decisions to develop rules of law and civil law never uses case decisions when developing rules of law. 91 When researching common law, it would be fair to ask how far back one must go in history to find precedent. The legal system that emerged during the 18th century in the United States is not only distinguishable from civil legal systems, but is also distinguishable from its English common law cousin. U.S. precedent need not be searched all the way back to include English law. An early example comes from the law of private property. In the U.S. case of Van Ness v. Pacard, 2 Pet. 137, 7 L. Ed. 374 (1829), Pacard had constructed a building on the land of his landlords, Mr. and Mrs. Van Ness. At the end of his lease, Pacard tore the building down and removed it. Mr. and Mrs. Van Ness took a legal action against Pacard based upon the common law tortious cause of action known as “waste”.82 In support of their action, the plaintiffs cited English law that distinguished removing buildings built for agriculture from removing buildings used to house a trade. Justice Joseph Story of the U.S. Supreme Court rejected the plaintiffs’ argument that U.S. common law must follow English common law and famously wrote “The common law of England is not to be taken in all respects to be that of America.”83

2. Legal Institutions: Juries 92

A commonly-discussed feature of U.S. legal culture is the jury trial. A television or film viewer would believe there is a lay jury84 in every trial. This is not so in the U.S., and even less so in the U.K. The lay jury is the aspect of the U.S. legal culture that enables the public to play an active role in the legal system, and one which is far more direct than the political role of voting for lawmakers and hoping those lawmakers follow a promised platform or predictable ideology. Installing the laity in the legal process is not so strange. Compare the fact that in many countries, a person is not required to be a lawyer to be a lawmaker. Only about one third of the German Bundestag, five percent of the French representatives and senators,85 thirteen percent of Italian representatives and

Willis-Knighton Med. Ctr. v. Caddo-Shreveport Sales & Use Tax Comm'n., 903 So. 2d 1071 (2005). Berufungsgericht / cour d’appel / corte de apelación / corte d’appello. 81 Royal v. Cook, 984 So. 2d 156 (La. Ct. App. 2008). 82 Wertminderung oder Wertverlust eines Grundstücks / dépréciation de la propriété / destrucción de la propiedad, disminución del valor de la propiedad / deterioramento di un immobile, tale da diminuirne il valore. William B. Stoebuck, Reception of English Common Law in the American Colonies, 10 Wm. & Mary L. Rev. 393 (1968); see David Brion Davis, Antebellum American Culture: An Interpretive Anthology (D. C. Heath and Company, 1979). 83 Van Ness v. Pacard, 27 U.S. 145 (1829). 84 aus Laien besetztes Schwurgericht / jury populaire / jurados legos / giuria composta da laici, giuria popolare. 85 Observatoire des Mutinationales: Social, Ecologique, Politique, https://multinationales.org /?lang=fr. 79

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II. Features of United States’ Law—Typical or Stereotypical? senators,86 forty-four percent of the Spanish Congreso dellos diputados87 are lawyers and less than half of the U.S. House of Representatives, are lawyers. One is also not required to be a lawyer to be a law enforcement officer, all the way from the top (a state governor or the federal president, for example, in the U.S.) to the police officer in the street. And the very origin of the lay jury in the U.S. was in fact the French idea of a jury that William brought with him to England as part of Norman administration in 1066. The lay jury in the U.S. has a decisive function in dispute resolution, somewhat akin to the judicial function of Schöffen88 in Germany and Austria. What is especially impressive about the importance assigned to the jury in this dis- 93 cussion is that it comes at a time when the role of the jury, especially in England, is at an all-time low. The use of a lay jury in a private (civil) lawsuit has become a subject of much criticism, and had already been nearly abandoned in England by the middle of the 20th century. Australia and New Zealand have followed a similar path. This trend in civil cases would suggest that “the jury is a phantom limb which, though no longer present, profoundly affects the behavior of the body of which it used to be a part.”89 One of the effects of this phantom limb are, as Judge David Edwards concludes, that the “the inherent characteristics of the jury system explain why common lawyers are so ‘fact-oriented,’”90 even when a jury is not present. Given the fact that most U.S. litigation does not end with a jury decision, there are 94 nevertheless many important legal ideas about which one must be clear in order to understand the use of the jury, or at least the threat of the use of a jury. First one needs to be clear about the path of a case. Criminal cases and civil cases (private law) have different paths, although both might eventually be put before a jury. While the number of juries in civil cases in the U.S. has notably declined, the U.S. continues to make juries available in civil as well as criminal cases.91 Second, one must keep in mind the federal structure of the United States and the dominant presence of the state judicial systems. The U.S. Constitutional guarantee to a trial by jury is only in Amendments VI and VII. Amendment VI provides as follows: In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the assistance of counsel for his defense.

Amendment VII continues the original English practice of distinguishing cases in 95 civil matters that must be heard by a jury from those that can be heard by a judge alone. It applies only to federal courts, not state courts: In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any court of the United States, than according to the rules of the common law.

XVII Legislatura, Camera dei deputati, https://www.camera.it/leg17/28. Id. 88 lay jurors / assesseurs non-professionnels / jurados no profesionales / giurati privi di qualificazione professionale. 89 Jeremy Lever, Why Procedure is More Important than Substantive Law, 48 Int. & Comp. L.Q. 285, 296 (1999). 90 Edwards, supra note 14 at 54. 91 The U.S. Department of Justice reports that the number of civil cases going to trial is declining rapidly. Surveys reveal that in 1962, 11.5 percent of all civil cases in federal court went to trial. The survey revealed that by 2002, that number dropped to 1.8 percent. From 1985 to 2003, the number of tort trials in U.S. district courts dropped nearly 80 %, from 3,600 trials to fewer than 800 trials. See U.S. Department of Justice’s Bureau of Statistics, 4 National Center for State Courts (2000). 86

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Chapter 1 United States’ Law as Foreign Law 96

Amendment VII does not apply in state court even when a litigant is enforcing a right created by federal law. However, the state constitutions may, and usually do, provide the right to trial by jury in civil cases. These provisions raise many issues: What does the Amendment VI right to a trial by jury in criminal cases mean? What is “a jury”? Must a jury have twelve members, or is six or fewer sufficient? Must juries be unanimous in their decisions to convict a criminal defendant? All of these matters required court interpretation, because the Constitution itself does not explicitly answer them. The U.S. Supreme Court has in fact answered most of these questions for U.S. federal courts, but when it comes to state courts, the federal constitutional guarantees do not always apply. Some of the U.S. Constitutional jury guarantees are granted to persons in state court through Amendment XIV, which states in paragraph 1: All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

This paragraph has been used by the U.S. Courts to “incorporate” the rights of Amendment VI to the persons appearing before state courts. In summary, when considering juries, given that the U.S. Constitution only makes minimal provisions for a jury, the one federal and fifty state court systems, if divided into civil and criminal divisions, produce 102 different possible interpretations of how and when juries are provided.92 98 In addition to the rules of law, the empirical facts of jury practices are worth observing. A jury can only be empaneled if there is a trial,93 and trial will only occur if a case is filed but not settled, not withdrawn or not otherwise terminated on pre-trial motions. From the statistics, researchers are often first surprised to learn how few cases for which litigation is begun ever reach the stage of a trial. Most cases are settled and withdrawn or dismissed on preliminary motions. Second, among the relatively few number of cases filed that are concluded by trial, the small number of trials that use juries is also a surprise to researchers. And third, juries are used far more often in criminal cases than civil cases. Keeping useful statistics is itself a challenge however, because only after the first pleading (usually a complaint) is filed is it is possible to begin keeping litigation statistics. In addition, a case must make it to trial in order for a jury to be needed. Within civil litigation, the type of case that is most likely to end with a final trial decision is a tort. The U.S. Department of Justice has however found that even within torts: 97

[t]he number of tort trials concluded in state courts in the nation’s 75 most populous counties declined by about a third from 10,278 trials in 1996 to 7,038 trials in 2005.94 Within that timeframe, data from the two most recent Bureau of Justice Statistics civil trial surveys revealed stabilization in the number of tort trials. From 2001 to 2005, the number of tort trials concluded in the nation’s 75 most populous counties declined by only 12 %, which Cohen regards as “a decrease that was not statistically significant.”95

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A recent U.S. Department of Justice report shows that in state trial courts (where most civil trials happen) only about four percent of all tort cases begun were concluded in trials. If, however, a tort case did make it to trial, ninety percent were heard by juries. 92 The jury requirements do not include admiralty and maritime cases, as Chapter 10, “U.S. Application of International Maritime Law” explains. 93 Prozess / procès / juicio / processo, giudizio. 94 Thomas H. Cohen, Tort Bench and Jury Trials in State Courts 2005, in U.S. Department of Justice, Bureau of Justice Statistics Bulletin 12 (2009). 95 Kempin, supra note 43 at 12.

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II. Features of United States’ Law—Typical or Stereotypical? Still, that means legal disputes are most often disposed of without juries (97.4 percent of the time, to be precise).96 Also of interest from this Department of Justice study are such statistics as: nearly sixty percent of tort trials were automobile cases, plaintiffs won only about half of all tort trials, half of plaintiff winners in tort trials were awarded $24,000 or less in damages (contrary to the conservative talk show favorite theme of “runaway juries”97 and the need therefore of tort reform), and the unique U.S. concept of punitive damages, which were sought (and not necessarily awarded) in just nine percent of tort trials. The median punitive damage98 award was $55,000.99 Based upon its own survey, the National Center for State Courts Center for Jury Stud- 100 ies100 revealed some important additional facts. State courts conduct an estimated 46,200 civil trials annually and federal courts conduct an additional 2,100 civil jury trials. Combined, these comprise slightly less than one-third (31 %) of all jury trials in the U.S. courts each year. That means the other 69 % are criminal. The statistics alone generally do not tell one why there is such a difference in use between civil and criminal litigation, however, although “[o]verall, the civil and criminal jury trial rates are strongly correlated, which suggests that state court rules, local practices, and the prevailing legal culture in each state do not disproportionately encourage or discourage civil trials relative to criminal trials in most states.”101 Furthermore, among the various state cultures, one finds civil jury trials are used with great variation. Hawaii, for example, has only 24 trials per 100,000 persons but Alabama has 59.2 trials per 100,000 persons. Additionally, in federal courts, tort trials between 1970 and 2003 steadily declined from a total number of 2,526 to 768, and as a percentage from ten percent in 1970 to just two percent by 2003. Yet during that same time, the total number of state tort cases increased, with the total number of combined federal and state tort cases increasing from a total number of 25,451 to 49,166.102 Before leaving this brief discussion of juries, a few final notes are in order. The simple 101 fact that a jury might be available in a given case does not mean it must be used—the parties will decide, and those decisions, as well as local nuances of court administration, mean that even if two states had the same jury system, the actual use of juries might differ considerably in those two states due to the differences in attitudes and behavior of local legal culture. A defendant in a criminal case may waive the right to a jury trial and rely upon the judge as the finder of fact—a practice that is more common in England than in the United States.103 Despite the decreasing use of the jury in the U.S., “trial by jury continues to play a critical role in the civil justice system in resolving intractable disputes and in promoting public trust and confidence in the courts.”104 These cultural functions of instilling public trust and confidence, even if the jury is not often utilized, cannot be overstated.

Cohen, supra note 94. “unkontrollierbare” Jury / jury dit “hors de contrôle”/ jurados irresponsables / “giuria fuori controllo”. 98 Entschädigung mit Strafcharakter / dommages et intérêts punitifs / daños punitivos / danni punitivi [lit.]. 99 Cohen, supra note 94 at 1. 100 State-of-the-States Survey of Jury Improvement Efforts, Center for Jury Studies, http://www.ncsc-j urystudies.org/State-of-States-Survey.aspx. 101 National Center for State Courts, Civil Action, 6:1, 1 (Summer 2007). 102 Key Facts at a Glance, Federal Tort Trials and Verdicts, NCJ 208713 Bureau of Justice Statistics (2003). 103 Edwards, supra note 14 at 52. 104 National Center for State Courts, supra note 90 at 1. 96

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Chapter 1 United States’ Law as Foreign Law 3. Federalism 102

Legal historian Harold J. Berman writes that “[p]erhaps the most distinctive characteristic of the Western legal tradition is the coexistence and competition within the same community of diverse jurisdictions and diverse legal systems. It is this plurality of jurisdictions and legal systems that makes the supremacy of law both necessary and possible.”105 a) Horizontal Federalism

From history, one could understand why each of the U.S.’ fifty states is a sovereign of considerable independence. Thus, the U.S. is certainly not a unitary state like France, nor is it a “vertical” federation like Germany, in which there is a constitutional role for the several Länder106 governments in the federal government.107 Rather, the U.S. is a “horizontal” federation that sets the federal government horizontally beside, rather than vertically above, the state governments. The way in which horizontal federalism applies to choices of jurisdiction among the states is also discussed in Chapter 2, “Federal Civil Litigation”. If one understands the public law of the European Union, in order to best understand the American notion of a federation, one should make an analogy between the U.S. and the European Union, rather than between the U.S. and any one European state, even a federal one, such as Germany. To emphasize that point, consider the landmark European Court of Justice case in which it was concluded that E.U. law was superior to member state law, Flaminio Costa v E.N.E.L., Case 6/64 (1964) E.C.R. 585. Although the case does establish a general rule just like the U.S., the rule only applies if otherwise it has been determined that the E.U. has legislative competency. The fact alone of being a “central“ government does not make it a higher government, just as the federation of the U.S., as a centralized government, does not make it a higher government. Former Canadian Supreme Court Justice Claire L’Heureux-Dubé, has aptly noted that U.S. federalism is the part of U.S. constitutional law that has made “the smallest impression elsewhere”.108 104 Within the U.S. federal or state governments, one finds Montesquieu‘s now-familiar tripartite division of legislative, judicial and executive branches. But in the U.S., that basic division of powers leaves many questions for the legal practitioner unanswered, such as: (1) What is the law-making competence of the federal legislature compared to the fifty state legislatures? (2) What is the law-interpreting competence of the federal judiciary compared to the fifty state judiciaries? (3) Given each state‘s sovereign powers, what is the legal relationship of each state’s law to another state’s law and each state’s judiciary to another state’s judiciary? The U.S. Constitution itself goes some way to an103

supra note 52 at 10. states (of the Federal Republic of Germany) / états fédérés (de la République fédérale d’Allemagne) / estados federales (de la República Federal de Alemania) / stati federati (della Repubblica Federale di Germania). 107 A short clarification on the use of the word “government” in American English might be helpful here. Because the U.S. has a Presidential, not a Parliamentary system, the word “government” extends to all persons and institutions, legislative and executive, as well as the administrative bodies that support them. It is not used to refer to the party or coalition of parties in control of the law-making branch of the state. This American use of “government” is most like how other cultures use the word “state.” In the U.S., one cannot use the word “state” in its usual sense, however, because that would create confusion as to whether the speaker meant one of the fifty sovereigns known as the “states” or the general notion of the geo-political body that is empowered. 108 Claire L’Heureux-Dubé, The Importance of Dialogue: Globalization and the Impact of the Rehnquist Court, 34 Tulsa L. J. 15, 35 (1998). 105 Berman,

106 federal

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II. Features of United States’ Law—Typical or Stereotypical? swering these questions. Article VI of the U.S. Constitution contains a passage known as the “supremacy clause”:109 This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.

To the lawyer uninitiated in the limited legislative powers of the U.S. notion of a fed- 105 eration, Article VI might appear to construct a clear and familiar top-down hierarchy of power, just as would be the case in the United Kingdom, where the Parliament is supreme, or as would be the case of Article 31 of the German Basic Law, which states clearly that “Bundesrecht bricht Landesrecht.”110 There is a difference however. In the U.S. Constitution, the strong pronouncement of Article VI only applies to those areas of competence delegated to the federation in the event one of the several states create a conflicting norm, and that catalogue of competencies is not nearly as encompassing as elsewhere. The fact that the several states, through their delegates, formed the U.S. federation—and not the federation that divided and delegated duties to the states—should not be forgotten. Amendment X to the U.S. Constitution reminds lawyers that only a limited, explicit number of powers are given to the Federation by the member states, and that any powers not explicitly given to the Federation remain with the states. Amendment X states: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Having read Article VI and Amendment X, one is guided to identify the powers that were in fact delegated to the federation by the member states. Checklist U.S. Constitution Article I, Section 8 provides a limited list of “enumerated” legislative competencies that are exclusive to the U.S. Congress: • • • • • • • • • • • • • •

the power to lay and collect taxes pay debts provide for common defense borrow money regulate commerce with foreign powers and among the states establish rules of naturalization coin money establish post offices promote progress in science and the arts constitute tribunals inferior to the Supreme Court declare war punish piracy raise and support armies and navies, and to make all laws necessary and proper for executing the foregoing.

This final phrase in the catalogue, referred to as the “necessary and proper111 clause,” 106 is of course an invitation and opportunity to for the federal Congress to legislate further, and it does. Any powers not in this catalogue remain competencies of the states, unless 109 Vorrangs-Vorschrift

/ clause de suprématie / cláusula de supremacía / clausola di supremazia [lit.]. law supercedes the law of the federal states / le droit fédéral prime sur le droit des états fédérés / la ley federal sustituye a la ley de los estados federales / il diritto federale prevale sul diritto dei stati federati. 111 zweckdienlich / nécessaire et approprié / conveniente y adecuado / necessario e adatto. 110 federal

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Chapter 1 United States’ Law as Foreign Law the U.S. federal courts find competencies “implied” in other parts of the constitution. In summary, the U.S. Constitution divides powers of the state among the legislative, judicial and executive branches and at the same time divides the powers in those branches between the states and the federation. Compared to many other states of the world, the U.S. federal structure is remarkable for the number and type of competencies reserved for the states (such as the competency over making, enforcing and adjudicating most crimes), while at the same time dividing the functions of the state along the tripartite lines of Montesquieu’s model. Unlike municipal subdivisions in many other countries of the world, the fifty U.S. states are emphatically not just administrative units of the federation. The name alone belies this: They are called “states,”112 just as an independent sovereign of the world would be called a “state.” There are many other examples of state independence in the following paragraphs. A further example of state independence that is particularly relevant for a lawyer is the fact that upon passing the licensing examination for lawyers, known as the “bar examination,”113 a lawyer is licensed to practice the law of only the state in which he or she was examined, but not the other forty-nine states. b) Choice of Law 107

To understand U.S. federalism as a practicing lawyer, one must go further than lawmaking and attempt to understand that when it comes to resolving disputes, one has a choice of forums among those fifty-one jurisdictions; a process popularly called “forum shopping”. The choice of forum is limited by the courts’ jurisdiction over the subject matter jurisdiction and the persons before it, both of which are discussed by Chapter 2, “Federal Civil Litigation”. To understand those jurisdictional choices, one must study not only at the U.S. Constitution itself, but statutory law and the binding case law that interprets the U.S. Constitution and the statutes. Consistent with the above points regarding the strength of the several states and their legislative competency, the states also have jurisdiction over the subject matter and persons within their boundaries. As a consequence of this dual jurisdiction system, two preliminary questions face the lawyer when presented with a dispute: Should the dispute be submitted to federal court or state court, and if state court, which state court?

108 Practice Tip Unsurprisingly, statistics show that dispute resolution is carried out almost 98 % of the time in state court, not federal court.114 There are however no dedicated constitutional courts in the U.S. Therefore, while the state courts apply their own constitutions, legislation, regulations and binding case decisions, they must also apply the U.S. Constitution.

109

Sometimes, the answer is relatively easy, because one is mandated to go to federal court or restricted to state court. For example, if the law that covers a dispute is made by the U.S. Congress through its catalogue of competencies set forth in Article I Section 8, the case is called a “federal question’” and one must go to a U.S. federal court for resolution of the dispute. By comparison to the number of disputes that are resolved in state courts, these federal question cases in federal court are far fewer. Furthermore, if the subject of a dispute and the parties to the dispute are wholly within one state, then they

112 Staaten

/ états / estados / Stati. Staatsexamen / barreau / examen estatal en materia jurídica (examen de accesso a la abogacía) / esame di abilitazione alla professione forense. 114 See Brian J. Ostrom, Shauna M. Strickland & Paula L. Hannaford-Agor, Examining Trial Trends in the State Courts, 1 J. Empirical Legal Stud. 755 (2004). 113 juristisches

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II. Features of United States’ Law—Typical or Stereotypical? are restricted to submitting that dispute to state court and have no option to go to federal court. But beyond mandatory federal court jurisdiction and restrictions to state court, there 110 is still one other category of cases in which one may (not must) present one’s dispute to a federal court. This third category is not to be confused with law-making competency. Here we are speaking of jurisdiction over dispute, not competency to make law. The third category is available when the citizens of more than one state (or another country) and is called “diversity of citizenship”115 jurisdiction. Article III, Section 2 of the U.S. Constitution permits the federal courts in such cases to hear the claim and resolve the dispute. Again here, one has evidence of the relative strength and independence of the states insofar as it was originally feared that a state court’s judge or jury may be biased in favor of a litigant from its own state against a citizen from another U.S. state or even a foreign country. It was thought that the federal court, even though physically located in state, is staffed by judges appointed by the U.S. president, rather than locally elected or appointed, and therefore not as likely to practice local prejudices against “outsiders”. One must keep in mind that with diversity of citizenship jurisdiction, however, it is a 111 choice, not a requirement, for a plaintiff to bring an action before a federal court. That same injured party may also bring the action in a state court where the injury occurred or before the state court where the defendant resides or has sufficient business or personal contacts within a state such that one could claim that the defendant has volunteered to appear before courts of that state. Given this choice, how does an injured person (or the lawyer for an injured person) choose—federal or state, and if state, which state? The answer may be determined by the applicable substantive law among the states themselves. States have competency to make legislation in many areas and in so doing, are also free to vary and even disagree with other states’ norms and procedures, so long as they do not violate their own constitution or that of the United States. This fact that the several states do in fact make and enforce different substantive and procedural law makes it advantageous to “shop” among the available jurisdictions that have authority over a dispute and choose the one that best suits the party who brings the legal action, due to its substantive law, procedural law or even the convenience of its location.116 When a plaintiff chooses a forum state based upon advantageous substantive law that 112 can be made by the legislature or, as is often true with torts,117 made by judges through their precedent-setting case decisions, he is said to be forum shopping for an advantageous forum. After the plaintiff has shopped for a forum and made a choice of state rather than federal court, the defendant is however not without his own strategic maneuver. The defendant in those situations may “remove”118 the case to the federal court in the state where the plaintiff filed the action, for the same reason (avoiding bias) that allows a plaintiff to file in federal court when there is diversity of citizenship.119

115 Vielfaltsgerichtsbarkeit / diversité de nationalité ou citoyenneté / jurisdicción federal sobre casos entre cuidadanos de diferentes estados / diversità di cittadinanza [lit.] (causa di attribuzione della giurisdizione alle corti federali per le controversie che coinvolgano parti provenienti da Stati diversi della Federazione ovvero che coinvolgano stranieri). 116 The convenience of the location, known as the "venue" is beyond the scope of this presentation of jurisdiction. 117 Deliktsfälle / matière de responsabilité civile délictuelle / derecho delictivo / azioni giudiziarie originate da illeciti civili. 118 verweisen lassen / renvoyer / remitir el caso a un tribunal federal / rinviare la causa (a un tribunale federale). 119 It is worth noting however that while diversity of citizenship jurisdiction is enabled by the United States Constitution, removal is enabled only by legislation, specifically 28 U.S.C. § 1441 et seq.

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Chapter 1 United States’ Law as Foreign Law After a federal forum has been selected by the plaintiff, or a case has been removed to federal jurisdiction by the defendant, the federal judge is must determine the substantive law that he or she should apply. If a dispute comes before a federal judge because of federal question jurisdiction, there is no choice—federal substantive law is applied. But if the case is brought before a federal judge based upon diversity of citizenship, the goal of eliminating bias is theoretically achieved simply by the fact that the judge is a federal judge, not a state judge from one of the states whose parties are involved. Thus having established a lack of bias or allegiance to one state or another, a federal judge does not apply federal law, but rather the state law of the state in which he or she is sitting. 114 To further complicate matters, it is possible that a case could be brought before a U.S. federal court, sitting in diversity jurisdiction, for which there is neither state legislation nor a binding state court decision of precedent to decide the case. By the twenty-first century, there are relatively few areas of the law remaining in any state for which neither the legislature nor the courts have made a rule. In theory however, it is still possible. If it does happen, what rule of law should a federal court use? In one of those rare situations, one would really begin to see the reasoning process of the federal judge in his or her common law culture. In the famous 1938 decision of Erie Railroad Co. v. Tompkins, the U.S. Supreme Court held that regardless of past doctrine or precedent, there is no general federal common law, separate from general state common law. If no state statute can be applied by a federal court in a case, then state case law must be applied, if it exists. The Erie court made it clear that no matter what, a federal court is not to assume there can be an independent set of federal norms to fill in the “gaps” where states have not legislated. 113

c) Federalism and State Relations to Other States 115

Historically, as between two sovereign states, if a court were to exercise jurisdiction over a defendant from another sovereign state, and find him or her to be liable for damages, the defendant could avoid payment on the claim if he or she moved to, or remained outside the adjudicating state’s jurisdiction. Given the respect dedicated to the sovereignty of states, this presents a real problem, unless the two states have come to an explicit agreement on how each state will respect the judgments of other states and aid in their enforcement. The same situation would obtain between and among the U.S. states because each state can and does make its own substantive and procedural law, as discussed above, and each state constitutes its own jurisdiction over that law. However, rather than rely upon a treaty to make foreign judgments enforceable between these demonstrably-independent states, the United States Constitution provides the rules. Article IV, Section 2, Clause 1 of the U.S. Constitution states “[t]he Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States.” This constitutional provision has been generally understood to prevent any one of the states from treating a citizen of another state differently than its own citizens, just as discrimination against other member states and its citizens is prohibited in the European Union. Furthermore, Article IV, Section 1 of the U.S. Constitution provides “[f]ull faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state. And the Congress may by general laws prescribe the manner in which such acts, records, and proceedings shall be proved, and the effect thereof.” Thus, after a court in one state completes a judgment in the case, the executive branch of another state is required to honor that judgment.

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II. Features of United States’ Law—Typical or Stereotypical? 116

Example If a private civil dispute in State A is adjudicated in favor of the plaintiff and the property of the defendant is in State B, State B would be required to honor the judgment of the court of State A and facilitate the collection of the debt in State B. This may seem overly burdensome, and in a unitary state it would be unnecessary, but in a federation of truly powerful individual states such as that of the United States, it is necessary to make the binding nature of this legal relationship explicit, if citizens are to move freely and easily from one state to another, confident of some common level of legal protection. Again, this is quite similar to the goal of a borderless European Union, sought through the guarantees of free movements of persons, capital and goods within the E.U.

4. Attorneys’ Fees There are two significant issues regarding lawyers’ fees in the U.S. that differ from 117 lawyers’ fees in most other countries, especially civil law countries. The first issue concerns who is paying the legal fees to the lawyers. The standard rule is that each party pays his or her own lawyers, regardless of whether the case is settled or tried, and regardless of who wins the trial. Some statutes, including environmental prosecutions by the state120 and those enabling civil rights actions or unfair employment dismissal actions, work as an exception to the usual rule, and do allow for a winning party to claim attorney’s fees from the loser according to the terms of the statute. The second issue concerns the nature of the fee structure. Like most lawyers, the U.S. 118 lawyer may establish an hourly fee rate or a set fee rate with a client by contract. In addition, however, plaintiff ’s lawyers in the U.S. may make use of the contingency fee structure in which the winning lawyer takes a percentage of the damages won by the client. Contingency fees are not permitted in criminal or family law matters because damages are not the relief sought. In part, because even a winning party must pay his or her own lawyer’s fees, the contingency fee structure is allowed in other private matters where the relief requested is damages. The advantage of the contingency fee system is that a plaintiff needs only to pay for his or her lawyer’s fees if damages are awarded. This enables plaintiffs with legitimate claims but insufficient money to nevertheless have adequate services from lawyers.

5. Litigation Despite what seems to be the widespread popular presence of the common law trial 119 in film and television, the notion of what U.S. lawyers mean by the term “trial” does not seem to be fully understood outside the U.S., even by fellow lawyers. Judge David Edwards states it well when he writes that: [t]he technique of the civil law systems is archetypally ‘judicial’ in that it involves a professional lawyer applying the rules, the methods and the outlook of the law as a science to a problem submitted by the parties to the judge, as a lawyer, for a solution. This, of course, is quite unlike the technique of a jury trial which relies on the capacity of the common man to ‘detect falsehood or receive an assurance of truth’ and treats the process of fact-finding as a necessary and logical precursor of applying the law. It is pointless to look in the civil procedure of France, Germany or Italy for anything corresponding to a ‘trial’ in the common law sense, since there is no place and no need for such an event.121

This description by Judge Edwards is much more than saying that the civil law relies 120 upon statutes as sources of law and the common law relies upon judicial decisions as sources of law. Judge Edwards notes that the common law process relies much more on 120 See e.g., the federal Clean Water Act, § 505(d), 33 U.S.C. § 1365 or Section 601(c) of the Pennsylvania Clean Streams Law, 35 Pa. Stat. § 691.601(c). 121 Edwards, supra note 14 at 54.

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Chapter 1 United States’ Law as Foreign Law the “common” person’s determination of facts than it does on the legal professional’s interpretation of the facts. Much of the common law trial is for the purpose of determining the facts that happened in a different place in the past, and then assessing what the facts of that narrative mean in the present. Rather than being founded upon rationalism, it is founded upon empiricism, as is the case with much of Anglo-American thought.122 An additional point made by Judge Edwards is his emphasis on the word “trial”.123 a) The Trial When a civil lawyer translates a term from his culture into “trial” or “litigation,” he has brought a very different concept into the conversation from what a common law lawyer means by the words “trial“ or “litigation“. The mechanics of Federal Civil Litigation are discussed in Chapter 2. The sense of the word “trial” in English today still carries historical resonances. In the medieval period, and dating back before the Conquest, a common method of fact-finding in civil cases was called the “wager of law.”124 Trial by battle was imported by the Normans. It was used in two types of cases: private accusations of felony, and disputes involving ownership of land.125 Ultimately the jury was developed in both criminal and civil cases.126 It is this sense of trial that defines what U.S. lawyers mean when speaking of “litigation”. It has the sense of an adversarial contest with a winner and loser, and those winners and losers are championed by their lawyers, using not physical weapons, but substantive law, rules of procedure and all the senses of persuasion they know, limited only by the bar association’s own rules of professional conduct. Metaphors from war and sports abound, too often relegating the word “justice” to a background theory that was left behind when the student left the classroom, passed the bar examination and begin practicing law. 122 For a better understanding of the English use of “trial,” one is again reminded of the cultural significance of the jury. Stephen Goldstein has gone so far as to say that in his view, the explanation for the extraordinary nature of the common law trial is the use—or at least the historic use—of the jury in the common law procedure. The connection between the jury and the common law trial has been recognized by a number of different scholars. However, the literature as a whole has not given sufficient emphasis to the fact that the common law trial, as we know it, is a direct result of the use of the jury. Without the common law jury, there would be no common law trial.127 123 Do people in the U.S. go to trial more often than people in civil law countries go to trial? Are people in the U.S. generally more litigious128 than they are in civil law countries? To answer this question, there is unfortunately far more opinion and weak reasoning than there is research, insight or information.129 Simply counting the number of judges or lawyers per capita (as do so some studies and far too many blogs and social media outlets) does not mean a culture resorts to litigation more often. Rather than a number, litigiousness is an attitude, and it is difficult, if not impossible to measure an 121

122 Mark C. Suchman & Elizabeth Mertz, A New Legal Empiricism? Assessing ELS and NLR, 6 Ann. Rev. of Law and Social Science 561 (2010). 123 Prozess / procès / juicio / processo, giudizio. 124 Kempin, supra note 43 at 49. 125 Id. at 51. 126 Id. at 49. 127 Stephen Goldstein (quoted by Jeremy Lever, Why Procedure is More Important than Substantive Law, 48 Int'l & Comp. L. Q. 285, 295 (1999)). 128 prozessfreudig / litigieux / más propensos a demandar a otros / litigiosi [lit.], propensi a ricorrere allo scontro giudiziario. 129 See J. Mark Ramsmeyer & Eric B. Rasmusen, Comparative Litigation Rates, Harvard Discussion Paper 681 (2011).

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II. Features of United States’ Law—Typical or Stereotypical? attitude. The attitude can be observed, for instance when a citizen is unhappy with another citizen’s behavior. In those situations, how often the unhappy citizen immediately exclaims “I’ll sue you!” tells us more about a tendency toward litigation in the culture. What one is apparently alleging with the criticism that a culture is too “litigious” is that a culture calls upon the official legal power of the state too often. But what is too often? If we can answer this question, we might have insight. The commonplace public complaint “there are too many lawyers” is neither new nor insightful. In his ancient play “The Wasps,” Aristophanes already chided the Athenians for using the courts too often and treating litigation as a pastime. And during the Renaissance, the people of Nottingham were already complaining that there were too many lawyers in England. In the common law, where a culture’s laissez-faire tendency is not to use planning, administration and insurance, but rather to wait and see if there is dispute, one might expect that disputes arise more often, and also that when disputes do arise, more of them will call upon the courts for resolution. When a culture begins from that attitude toward the legal system, can it be usefully compared to another culture that does not? Moreover, even if one attempts to use statistics to support a position regarding a cul- 124 ture’s tendency toward litigation, the nature of the statistic is a problem. If my lawyer phones your lawyer and says there is a problem, does that count as being litigious? Does filing a complaint count as a litigation? Must a case go to trial? If the dispute is settled by agreement of the parties after a complaint is filed but before the trial begins does it count as litigation? This is an extremely difficult set of data to code in such a way to obtain insight into “litigiousness.” b) The Advocate To get a feel for the common law trial in practice, especially as compared to civil law 125 in practice, one must remember that the common law lawyer is foremost an advocate,130 although he or she also remains an officer of the court. One can see the very practical demands and limitations of the role of advocate in Chapter 3, “Civil Procedure Brief Drafting Strategy,” where acceptable modes of communication between the advocate and the judge are outlined. Even students of law are taught from the perspective of advocacy for the position of the parties, not the position of the court. Students are taught that there are at least two perspectives to any dispute that has made its way to court, and that they must be prepared to argue from either of those, plus from the perspectives of additional interested parties. The idea behind this advocacy format is that the court is most likely to see the best possible evidence and interpretations of the law, if the parties themselves, with the aid of their lawyers, are researching and presenting the evidence and law in the way that is most advantageous to them within the rules of evidence, procedure and professional responsibility, without being directed by an individual judge to do so.131 The advocate is an extremely important institution to the culture of the common law. 126 The fact that a common law lawyer is educated and trained to be an advocate makes him or her a different kind of lawyer than the lawyer who is largely or exclusively an officer of the court or of the state, such as the German “Organ der Rechtspflege,” the French “auxiliaire de justice” the Italian “ausiliario di giustizia” or the Spanish “órgano de la administración de justiciar”. To be an advocate does not mean the wild theatrics that one might see on television or in film. It does mean however, according to the Rules of Pro-

130 Verteidiger

/ défenseur / abogado defensor / patrocinatore. L. Fuller & John D. Randall, Professional Responsibility: Report of the Joint Conference, Joint Report to the American Bar Association, 44 A.B.A.J. 1159 (1958). 131 Lon

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Chapter 1 United States’ Law as Foreign Law fessional Responsibility132 that govern the practitioner’s license, one must accept the client’s decision to litigate, so long as it is a legally defensible position, and take the client’s position even if the lawyer disagrees with it. Advocacy also requires a lawyer to argue for a position using one’s full energy and skills as a lawyer. In an adversarial system,133 even those lawyers who do not regularly litigate before the court, and who might instead convey property, draft wills and draft contracts will always be guided by how their conveying, drafting and transacting will work against an opponent in court, if ultimately necessary. Advocacy training includes drafting documents as an advocate, not a neutral scientist, courses in trial advocacy and appellate advocacy, moot court competitions and the case method of substantive law instruction. The perspective of the advocate in drafting documents is also presented in Chapter 3. The cultural attitude of advocacy is inculcated in the lawyer during U.S. legal education. Historically, the daily routine for the U.S. law student, in the classroom, was to have read dozens of reported judicial opinions each day in preparation for a question-and-answer classroom “lecture”. Excathedra lecturing was frowned upon by U.S. legal academic community and the standard-setting American Bar Association134 through its education division. “Reading the law” means reading the cases and recognizing the merits and errors of the various adversarial positions. It is not an exercise in finding the one right answer, a position that would infer that one of the parties is necessarily wrong, rather than leaving the possibility that perspective or interpretation simply differed. 127 In 1919, Justice Oliver Wendell Holmes wrote a dissent in the case of Abrams v. United States, in which he says “[t]he ultimate good desired is better reached by free trade of ideas . . . the best test of truth is the power of the thought to get itself accepted in the competition of the market.”135 This free trade of ideas has woven into its fabric a position regarding legal issues—justice does not lead to one answer only, and needs to be determined on a fact-dependent, case-by-case basis within predictable limits. A generation later, legal philosopher Lon Fuller expanded on Holmes’ position when he wrote that in an advocacy format the court is most likely to see and hear the best possible evidence and interpretations of the law, if the parties themselves, with the aid of their lawyers, are researching and presenting the evidence and law in the way that is most advantageous to them within the rules of evidence and procedure, without being directed by the judge to do so.136 128 It is the development and presentation of evidence by an advocate that leads us to the next major area of distinction between the advocate and the officer of the court. The advocacy discussed above is practiced within a jurisprudential culture that revolves around evidentiary matters. Even if the distinction between “judge-made” common law and “statutory” civil law has become a little blurred over time, the dramatic disparity between the two systems handling of evidentiary matters is still very clear. Therefore, anyone wishing to gain a true understanding of the U.S. legal system must acquire an appreciation of the gathering, presentation and weighing of evidence within it. From the initial decision to take on a client, to the final resolution of the dispute before a judge and jury, the U.S. legal system would be seen, at least in the eyes of many civil jurists, as be132 Rechtsanwaltsordnung / règles de déontologie / reglas de responsabilidad professional / codice deontologico forense. 133 kontradiktorisches System / système accusatoire / sistema acusatorio / sistema accusatorio [lit.], modello processuale accusatorio. 134 amerikanische Rechtsanwaltskammer / association du barreau américaine / colegio estadoudunidense de abogados / associazione forense americana [lit.], associazione nazionale degli ordini forensi statunitensi, albo forense americano. 135 Abrams v. United States, 250 U.S. 616, 630 (1919). 136 Fuller & Randall, supra note 130 at 127.

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II. Features of United States’ Law—Typical or Stereotypical? ing obsessed with the issue of evidence.137 The law of evidence is inextricably a part of U.S. federal and state law, wound respectively in the federation and the state, through constitutional provisions, statutes and substantive rules, binding case precedent, and administrative regulations. Evidence is an area of substantive law that tests the advocate on the bar examination. The law of evidence develops and limits legal methods of knowing and the limits of what might be considered fact or knowledge. Legal knowing in the U.S. may share some concepts with philosophical methods of knowing or natural science ways of knowing, but it remains its own way of knowing. Evidence can be presented at trial only through fact witnesses, expert witnesses and character witnesses, but not through the lawyer directly and not through the inquisition by the judge. Another function of advocacy that is worth mentioning brings one to another institu- 129 tion: the judge. Sir Konrad Schiemann makes very helpful observations on the matter. German born, Schiemann was both barrister and judge in the U.K., and represented the U.K. on the European Court of Justice. He writes: In contrast to most continental systems, the English judge’s jurisdiction is very wide. He will try civil, administrative, and criminal cases. Because of this breadth of jurisdiction, it is accepted by everyone that the judge may well not have a detailed knowledge of the law which he is supposed to be applying in a particular case. This he will openly acknowledge in court–to the astonishment of any German litigant who happens to be there! It is seen as the function of advocates to explain the law to the judge and to draw to his attention any relevant statute or case law even if this may well to [sic] lead to a decision against his client.138 The trial process is founded on the belief, in general justified, that each side will competently say all that is honestly to be said on their side of the argument. The judge is expected to have a quick mind which can understand and perhaps develop positions which are new to him.139

130

The influence of the notion of advocate does not stop on that side of the courtroom 131 bar. In the U.K. and U.S., judges are selected from practicing lawyers, usually with some years’ experience as litigators. Thus, the woman or man sitting on the bench as a judge was first an advocate, and given the emphasis placed upon litigation experience in selecting someone to be a judge, that same person may well have been an advocate for much longer than she or he has had the current role of impartial adjudicator. Judge Schiemann goes on to write: The approach to the judicial task which prevails in the United Kingdom appeal courts has been greatly influenced by the fact that traditionally all appellate judges have practices as advocates for many years, were appointed as one of the seventy odd judges of the High Court, usually after a successful career and aged about 50. The style of judgments tends to be influenced by this. They will have sat alone as first instance judges for a number of years before they were asked to join the Court of Appeal . . .. Traditionally, each judge states in his own words, often instinctively employing the style of advocate, his reasons for coming to his decision.140

Further ramifications of advocacy are fact-based trials and appeals. One of the max- 132 ims from common law equity is “ubi jus, ibi remedium” meaning there is no wrong without a remedy.141 To that maxim, the common law has added that it does not provide a remedy until the wrong has actually occurred. This condition means, among other 137 All

federal and state cases, criminal and civil, are governed by their own rules of evidence. the United States, the Model Rules of Professional Conduct, Rule 3.3, Candor toward the Tribunal, in fact requires that one disclose to the court those sources of law contrary to one’s position. 139 Schiemann, supra note 76 at 741–49 (adding: “[t]here is no denying that the UK court process demands and receives a lot from advocates and, partly because of this, costs a lot of money to the litigant.”). 140 Schiemann, supra note 76 at 743. 141 See James Williams, Latin maxims in English law, in Law Magazine and Law Review 283–95 (4th ed.) (1895) (cited by Donald F. Bond, English Legal Maxims, 921 PMLA (51) 4 (1936)). According to Bond, Williams points out that some of these maxims are traced to Roman law, but that others, such as Ubi jus 138 In

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Chapter 1 United States’ Law as Foreign Law things, that common law judges cannot offer advisory opinions on hypothetical wrongs. The U.S. Constitution formalizes that position in Article III, Section 2, Clause 1, which has been interpreted to limit U.S. federal courts to adjudicating only actual cases or controversies. In the spirit of the common law, with its great dependence on the facts of the case, it would not be possible for a judge ever to have sufficient facts from a hypothetical problem from which to write a concrete adjudication, particularly not one that could be useful as case precedent. 133 An advocacy system demands that the courts strictly enforce the rules of evidence and procedure142 to ensure fairness to both sides of the dispute. The driving and guiding force in U.S. legal practice is to question what will happen if this issue in dispute proceeds to trial. This sense of hard and formal testing is in the back of the mind of both litigation lawyers and those who do not advocate from inside the courtroom, the transaction lawyers.143 Transaction lawyers know that if their transactions run into problems or dispute, they cannot avoid litigation if the other party pushes to exercise that right. 134 Pretrial processes of discovery,144 pleadings and motions function to encourage one or both parties to settle the litigation because one or both parties have the weaknesses as well as the strengths of their positions made clear. Consequently, although relatively few disputes in the culture are ultimately resolved at trial, settlement is just one alternative. Rather than go down the path of litigation at all, parties may instead choose other alternatives such a mediation or arbitration. Collectively, they are referred to as “alternative dispute resolution,” or simply A.D.R. 135 In private law matters, these alternative processes, especially negotiation, are used far more frequently than litigation. Even disputes among lawyers themselves are more often resolved by negotiation more often than litigation.145 Given the variety of alternatives to trial, some of which might even be informal, it becomes nearly impossible to quantify the frequency with which alternatives to trial are chosen. It is however clear that the advantages of A.D.R. have even been recognized by the courts themselves. When surveyed, A.D.R. was formally offered in some form by more than two-thirds, or 63 of 94, of the federal district courts.146 When surveyed, all thirteen federal districts at the appellate level147 implemented mediation or settlement programs.148 And the process of mediation (sometimes referred to as conference or settlement conference) is explicitly included in Federal Rule of Civil Procedure149 16, as regards pretrial conferences.150

ibi remedium and Mobilia sequunter personam are indigenous to England. Ubi jus ibi remedium is usually paraphrased as: “There is no wrong without a remedy,” according to Bond. 142 A useful project for comparative law would be to examine why the U.S. has separate codes for evidence and procedure, whereas Germany, for example, combines the ideas in one code. 143 Transaktionsjuristen / avocats de transactions / abogado transaccional / avvocati d’affari, avvocati-negoziatori specializzati in transazioni commerciali nazionali e internazionali. 144 Offenlegungsverfahren / procédure de divulgation, voisine éxacerbée de la mesure d’instruction in futurum française / exhibición de pruebas / esibizione probatoria in fase predibattimentale. 145 Stephen J. Ware, Principles of Alternative Dispute Resolution, West Academic Publishing, 2007, § 1.5. 146 Bundesgerichte der ersten Instanz / tribunal fédéral de première instance / tribunal federal de distrito / Tribunali Federali Distrettuali [lit.], tribunali federali di primo grado. 147 Berufungsebene / en appel / nivel de apelación / nel grado di appello. 148 Robert J. Niemic, Mediation & Conference Programs in the Federal Courts of Appeals, Federal Judicial Center, https://www.fjc.gov/sites/default/files/2012/MediCon2.pdf. 149 Bundeszivilprozessordnung / règles fédérales de procédure civile / código de procedimiento federal / norme federali di procedura civile [lit.], codice federale di procedura civile. 150 Vorverfahren / procédures préliminaires / procedimientos preliminares / sessioni preliminari, conferenze preliminari [lit.].

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II. Features of United States’ Law—Typical or Stereotypical? Generally, mediation is a consultation, by the parties, with a neutral mediator, seeking 136 a settlement, thus sparing the time and expense of litigation. Arbitration,151 a process agreed by the parties through contract, can be legally binding; therefore, whatever decision the neutral arbitrator comes to, will likely be enforced by any and all courts. Arbitration is discussed in greater detail in Chapter 2, “Federal Civil Litigation”, and 4, “U.S. International Arbitration Law and Practice,” respectively. A.D.R. is most common in commercial, family, employment, bankruptcy, foreclosure, 137 and elder law cases. Commercial disputes are most frequently put into mediation: in the U.S. Court of Appeals for the Third Circuit for example, nearly all cases are eligible for its mediation program except for cases where parties are not represented, are original proceedings, prisoner petitions, Social Security cases,152 immigration cases, and black lung cases.153 Because family law is handled at the state level, the means can vary from state-to-state, but oftentimes court appointed masters154 and magistrates155 are used to expedite family court cases. A.D.R. also provides the opportunity for parties to state their personal feelings to the neutral mediator or arbitrator; this can be especially useful in resolving oftentimes emotional employment and elder law issues where, going outside of the traditional courtroom, parties may be willing to come to a settlement sooner. While mediation exists in commercial, employment, bankruptcy, foreclosure, and el- 138 der law,156 it also has a limited role in criminal law. The goals, within at least the civil law areas, are to settle cases through facilitated negotiations, help litigation achieve more dynamic outcomes, conserve judicial resources, and improve case management. In the sphere of criminal law, formal A.D.R. exists primarily in the form of “victim-offender mediation”.157 Like the truth and reconciliation process made internationally known from South Africa, these programs, unlike litigation, allow the victim to participate actively in his or her own interest to resolve the dispute, rather than just to act as a witness in support of the state’s interest in prosecution. The mediation allows victims to open a dialogue with offenders, thereby granting a feeling of security to the parties, and assisting the parties in creating a restitution plan. While these programs sometimes offer case facilitation and closure for victims, they are distinguished from other forms of A.D.R. programs because they are used in criminal matters.158

6. The Law of Obligations To the non-lawyer, there would not appear to be much of a difference between one’s 139 private obligations in civil law and a common law country like the U.S. And if one focuses only upon the norms of the behaviors that are proscribed, the differences might even escape the attention of a lawyer. Yet for the practicing lawyer, there are in fact many distinctions between civil law concepts of contract and U.S. contract law, as well as between 151 Schiedsgerichtsverfahren

/ arbitrage / arbitraje / arbitrato. im Sozialversicherungsrecht / contentieux de la Sécurité sociale / casos de seguridad social / contenzioso previdenziale. 153 Mediation & Conference Programs in the Federal Courts of Appeals, https://www.fjc.gov/sites/defau lt/files/2012/MediCon2.pdf. 154 Vorsteher / maîtres / asesor o ayudante del juez designado para conducir audiencias y hacer decisiones de hechos, conclusiones de ley, y de recomendaciones en cuanto a una orden apropriada / assistente del giudice, pubblico ufficiale con limitate funzioni giudiziarie. 155 Richter / magistrats / magistrado / giudice non togato. 156 Rentenrecht / droit dit “des personnes agées” / leyes relativas a personas mayores / norme sulla tutela delle persone anziane, diritto degli anziani [lit.]. 157 Jack Hanna, Mediation in Criminal Matters, 15 Disp. Resol. Mag. 4, 5 (2008). 158 See generally Jennifer Gerarda Brown, The Use of Mediation to Resolve Criminal Cases: A Procedural Critique, 43 Emory L. J. 1247, 1283 (1994). 152 Rechtsstreite

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Chapter 1 United States’ Law as Foreign Law U.S. non-contractual obligations and civil law non-contractual obligations. This section will just highlight some of the bigger underlying themes that differ. a) Distinguishing Contracts from Torts 140

In its simplest expression, what a civil lawyer would know as the law of obligations is an area of private law divided into two areas of law in the U.S.: the law of contracts159 and the law of torts.160 So why does the U.S. divide the two? The answer rests more on historical circumstances than on a rational justification that was later invented. The norms of tort law, including intentional and negligent torts, are essentially norms that are set by society. Whereas civil law focuses upon the remedy requested, the common law focused upon the parties who set the norm—if private parties determine the behavior to be accepted, then it is categorized as private law and that was rather limited to contract. Historically and in that sense, to English legal thinking, tort law was more like criminal law. One can trace that history today to what is known as the “felony merger rule” in which civil recovery was not allowed in felony cases because the tort and felony merged as an offence against the crown. Although the remedies for tort do not include fines and imprisonment, they did originally include the forfeiture of property, and on that point, the U.S. broke from England. The roots of this rule help to explain why common law separates obligations into two distinct fields of torts and contracts. In the famous case of Moragne v. State Marine Lines, Inc., the U.S. Supreme Court wrote that: The historical justification marshaled for the rule in England never existed in this country. In limited instances American law did adopt a version of the felony-merger doctrine, to the effect that a civil action was delayed until after the criminal trial. However, in this country the felony punishment did not include forfeiture of property; therefore, there was nothing, even in those limited instances, to bar a subsequent civil suit.161

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Gradually, the features of tort law such that one could not be imprisoned, executed or pay a fine to the state caused legal thinking to more align torts with private obligations than with public obligations, even though the norms themselves remain set by the public, in distinction to the obligations agreed-upon by parties to a contract. b) Substantive Differences i. Contracts

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The U.S. has, like many other western legal systems, always had a private law of contracts. The freedom to enter into contracts162 is protected by the U.S. Constitution. Some differences do exist however between the U.S. notion of contracts and the civil law notion of contracts. A contract in the U.S. is not a moral obligation. The most obvious ramification of this difference can be seen in the order of remedies for breach of contract. When a contract is a moral obligation, as it often is in civil law, then court-enforced performance of the contract is the obvious first remedy for breach. But in the U.S., where the contract is not a moral obligation, the first remedy is simply money damages that should be sufficient to put the non-breaching party in the same position he or she would have been in, had the breach not occurred. In the U.S., if one insists on per159 Vertragsrecht

/ droit des contrats / derecho contractual / diritto dei contratti. / droit de la responsabilité civile délictuelle / derecho delictivo / diritto della responsabilità civile (concernente, nel diritto italiano, le obbligazioni nascenti da fatto illecito o da atto lecito dannoso, rientranti nella responsabilità extracontrattuale, altrimenti detta responsabilità aquiliana o delittuale). 161 Moragne v. States Marine Lines, Inc., 398 U.S. 375, 384 (1970) (case citations omitted). 162 Vertragsfreiheit / liberté contractuelle / libertad contractual / libertà contrattuale. 160 Deliktsrecht

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II. Features of United States’ Law—Typical or Stereotypical? formance of the contract, one is asking for a relief that was not within the writ power of the English king, and would need to have gone to a court of equity for the chancellor to award. Therefore, in the U.S., if a party insists upon performance, he or she must first demonstrate why money damages are an insufficient remedy in order to be permitted to proceed with extraordinary remedies, such as forced performance of the contract. When we turn to the mechanics of contracts, the U.S. has five elements required to be demonstrated in order to say that a contract exists: offer, acceptance, consideration, legality and capacity. The element of consideration is a difficult concept, designed to distinguish enforceable from gratuitous transactions. Consideration is accomplished in a bilateral contract when a promise is exchanged for a promise, and both parties are bound at the time of the promise exchange. Consideration is accomplished in a unilateral contract when a promise is exchanged for performance. In either case, the consideration is something that must have a value that a court can objectively determine and thus enforce. ii. Torts Punitive damages,163 products liability164 and state-to-state variation among recog- 143 nized norms are among the more pronounced differences between U.S. tort law and the civil law of obligations. As with contract law, courts and legislative bodies of the twentieth century began to recognize that economic disparity in tort law led to the need for new legal tools. The notion of punitive damages recalls the historic connection between torts and criminal law. In select types of torts, not only may an injured party ask for compensatory damages and for pain and suffering damages, but also for punitive damages. Punitive damages, just as the name says, are designed to punish the person who committed the tort, known as a tortfeasor. “Punishment” sounds like a criminal matter. But the punitive damages are not paid to the state, but rather to the injured person, which makes it more like a payment based upon a private obligation. The obvious criticism of punitive damages is that the injured person gets a windfall profit165 without having been injured to the level of the damages, but the social decision in establishing the norm has been that in certain cases, it is more important that a tortfeasor be economically pushed to change his, her or more likely its (when the tortfeasor is a business) behavior. From a European perspective, the aspect of U.S. tort law in the twentieth century that 144 has been most influential was the rule of strict liability166 for defective products, now known simply as “products liability.” The notion began in a California Court as a rejection of the requirement of a contractual warranty relationship for recovery. As with punitive damages, the new California concept was a choice made in favor of levelling the power relationship between consumers and manufacturers.167 Not only did the California notion of products liability spread throughout the U.S., but eventually to European Union law in the Product Liability Directive of 1985168 and then to Australia, Japan, Israel, Brazil, Peru, Switzerland, Argentina, Taiwan, Malaysia, South Korea, Thailand, and South Africa. In fact, what seemed like a strange California idea in the 1960s, now seems 163 Entschädigung

mit Strafcharakter / dommages et intérêts punitif / daños punitivos / danni punitivi [lit.]. / responsabilité du fait des produits / responsabilidad por productos defectuosos / responsabilità da prodotto difettoso, responsabilità da prodotto [lit.]. 165 Zufallsgewinn / bénéfice inattendu / ganancia inesperado / profitti fortuiti. 166 verschuldensunabhängige Haftung / responsabilité stricte ou sans faute / responsabilidad estricta / responsabilità oggettiva (responsabilità civile “in senso stretto”, che prescinde dalla colpa del produttore). 167 The concept was first introduced in California in the case of Greenman v. Yuba Power Products, 59 Cal. 2d 57 (1963). Eventually, it has become a national standard. 168 Product Liability Directive 85/374/EEC. 164 Produkthaftung

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Chapter 1 United States’ Law as Foreign Law to have become such an integral part of an industrialized market economy that Russia adopted a products liability standard in 1992 and China has a version of it for foreignmanufactured products as well. c) Source of Law Differences As an area of the law that has largely not been legislated, the law of contractual and tortious obligations in the U.S. can be difficult to research. As was mentioned above, U.S. legal culture does not accept the authority of law professor commentary in the same way that some civil law cultures do. Instead of authoritative commentaries written by professors of law to explain the law, U.S. legal culture looks to judges for that same sort of authoritative commentary. The problem with that expectation, however, as was also noted above, is that U.S. law does not allow judges to write advisory opinions, so practicing lawyers must wait for an “actual case or controversy” to arise before having an answer to a legal question. The American Law Institute (A.L.I.) goes some ways toward solving this problem. The A.L.I. was established in 1923 as an independent organization that uses the expertise of judges, lawyers and law professors to summarize areas of law that are largely reliant upon common law norms, rather than legislation. One of its most important publications is the Restatement of the Law, which is a compendium of jurisprudence together with commentary in a particular field of practice. Although the Restatements themselves are not binding, given the common-law base of the norms in contracts and torts, two of the most-cited Restatements are those in the fields of torts and contracts. 146 The encyclopedic synthesis that the Restatements offer also helps one to grasp the variety of possible norms that vary among the states. For example, a minority number of states recognize actions for negligent infliction of emotional distress even in the absence of physical injury to the plaintiff, but the majority of states do not. Even when states do recognize the same torts, they may differ from one another on the elements needed to be proven, the types of remedies available to the plaintiff, and the statutes of limitations. 145

147 Practice Tip Because of the fact that the law of obligations (both contracts and torts) remains largely based upon common law norms made by judges in judicial decisions and not upon legislation, and because the states can and do vary on many aspects of the law of obligations, a lawyer should begin his or her research by consulting: • • • • •

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Restatement (Second) of Contracts; Restatement (Second) of Torts; with some sections superseded by Restatement (Third) of Torts as follows: Restatement (Third) of Torts, Apportionment of Liability Restatement of (Third) Torts, Liability for Physical and Emotional Harm Restatement (Third) of Torts, Products Liability

The tort of products liability was initially included in the Restatement of Torts, but that one tort alone was the basis for so much litigation that the A.L.I. published a separate Restatement (Third) of Torts: Products Liability which supersedes the general discussion of the product liability standard found at § 402(a) of the Restatement (Second) of Torts. The American Legislative Exchange Council has now also drafted a Model Uniform Product Liability Act. While the majority of tort liability remains based on common law norms from judicial decisions, products liability has had such an impact that at least twenty states’ legislative bodies have taken it upon themselves to pass legislation in the field of products liability.

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III. Conclusions

III. Conclusions For a civil law lawyer to research the practices of U.S. law, he or she is necessarily 149 delving into foreign law. And, as a civil law lawyer delving into foreign law, the researcher will inherently be making comparisons to his or her own civil law. To do so intelligently, one should employ the science and method of comparative law. The science of comparative law tells us minimally to practice the method of functionalism. But for true insight into a foreign system, we should attempt the method of cultural translation as well. This chapter was designed to apply some ideas from comparativism to practice among some of the notions in the U.S. legal system that will seem most foreign to the civil law practitioner. In the remaining chapters of this book, readers may find it helpful to return to some of the foreign and comparative law ideas from this chapter and apply them to other areas of U.S. substantive and procedural law.

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CHAPTER 2 FEDERAL CIVIL LITIGATION Literature: Richard D. Freer, Introduction to Civil Procedure (1st ed., 2006). J.H Friedenthal, M.K Kane & A.R Miller, Civil Procedure (4th ed., 2005). Roger Haydock & John Sonsteng, Advocacy (1st ed., 1996). Linda S. Mullenix, Leading Cases in Civil Procedure (1st ed., 2010). Haimo Schack, Einführung in das US–amerikanische Zivilprozessrecht (4. Auflage, 2011). Stephen N. Subrin & Margeret Y.K. Woo, Litigating in America (1st ed., 2006).

I. Introduction This chapter provides an overview of civil litigation in the federal court system in the United States. The chapter starts with some general concepts of jurisprudence in the United States. Although the focus of the chapter is the federal court system, a critical component of successfully using the federal courts is understanding how they dovetail with the separate court system that each State operates. Each state establishes and uses its own rules of civil procedure for practice in the respective state courts. Following this comparison, the chapter will explain some of the Constitutional limitations pertaining to the federal courts’ ability to exercise jurisdiction over the disputes presented and the parties named in a lawsuit. 151 The chapter will then proceed along the arc of a typical lawsuit. It will identify and explain the Federal Rules of Civil Procedure1 governing the initiation of a lawsuit through the filing and serving of a complaint. It will cover lawsuits ranging from one plaintiff suing one defendant through class actions2 involving parties too numerous to name individually. It will explain the defendants’ options in responding to a complaint, either by a responsive pleading3 called an answer or a preliminary challenge4 to the sufficiency of the action. 152 After the parties and claims are established, many lawsuits in federal court enter the phase known as discovery.5 The process is called “discovery” because it is meant to enable parties to learn as many facts from their party opponents as possible before trial. This not only helps a party to determine the merit of the opponent’s claims or defenses, but also helps a lawyer to assess the relative strength of his or her own case before going to trial, without relying only upon research and his or her own client’s interpretation of the facts. As Lon Fuller pointed out in Chapter 1, “U.S. Law as Foreign Law,” the adversarial process, even at this pre-trial phase, is intended to allow the parties to put forth the strongest cases they can as adversaries. Doing so may well encourage settlement and save the public resources of the court’s trial time. This chapter will explain the discovery process in the United States, which is a profoundly different pre-trial process compared to the pre-trial processes in civil law countries. 150

1 Bundeszivilprozessordnung / règles fédérales de procédure civile / reglas federales de procedimiento civil / norme federali di procedura civile. 2 Sammelklagen / recours collectifs / demandas colectivas / azioni collettive. 3 Klageerwiderung / réponse / alegaciones por escrito / comparsa di risposta. 4 vorläufige Anfechtung der Klage / requête préliminaire visant à contester l’action / impugnación preliminar / impugnazione preliminare. 5 Offenlegungsphase / procédure de divulgation / exhibición de pruebas / esibizione delle prove.

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II. General Jurisprudential Concepts An important step in the litigation process often occurs following discovery—mo- 153 tions for summary judgment.6 The chapter will explain that the purpose of a trial in the United States is to determine the facts that are in dispute. If no material facts are actually disputed, there is no need for a trial, and instead the judge can decide the outcome as a matter of law and enter summary judgment. More than 98 % of the cases filed in the United States are resolved short of trial, pri- 154 marily either by court ruling on a motion or by settlement.7 The chapter will discuss the process for settling a case, followed by the procedures for those cases that make it all the way to trial, either before a jury or a judge. The chapter will end with three concepts regarding the finality of the results of the 155 trial. It will explain parties’ ability to ask the court to reconsider the outcome and, failing that, parties’ ability to appeal the outcome to a higher court. Finally, the chapter will discuss the way in which a final judgment precludes parties from trying to relitigate the claims or issues decided in the trial.

II. General Jurisprudential Concepts 1. Organization of the Federal Courts Article III of the United States Constitution establishes the federal court system. Sec- 156 tion 1 provides, in relevant part, “The judicial power of the United States, shall be vested in one Supreme Court, and in such inferior courts as the Congress may from time to time ordain and establish.” Congress “ordained and established” the inferior courts in its very first session in the Judiciary Act of 1798.8 It established a three-tiered system, with trial judges operating in “district” courts,9 intermediate appellate courts10 operating in “circuits,” and the Supreme Court11 having the last word. Presently, the U.S. federal court system is comprised of ninety-four districts.12 These 157 districts13 are organized according to the state boundary lines. Smaller states such as Delaware have only one district, the “District of Delaware.” Larger states have up to three districts; California has the U.S. District Court for the Northern, Central, and Southern District of California. For convenience and administration purposes, each district may be further divided into divisions. The intermediate appellate courts are divided into thirteen U.S. Courts of Appeals,14 158 with each court called a “circuit.”15 Twelve of the circuits encompass different regions of 6 Anträge auf ein summarisches Urteil / requêtes en jugement sommaire / fallo sumario / istanze di giudizio sommario. 7 durch Gerichtsentscheidung oder Vergleich / par décision de justice sur requête ou par accord des parties / por decisión judicial o acuerdo / mediante decisione presa dal giudice o mediante transazione. 8 1 Stat. 73. 9 erstinstanzliche Gerichte / tribunaux de première instance / tribunales de primera instancia / Tribunali distrettuali [lit.], tribunali di prima istanza. 10 zweitinstanzliche Berufungsgerichte / cours d’appel / tribunales de apelación / Corti di appello competenti in secondo grado di giudizio. 11 Oberster Gerichtshof / Cour Suprême / Corte Suprema / Corte Suprema. 12 See United States Courts, www.uscourts.gov for a description of the organization and location of the various U.S. federal courts.. 13 Bezirke / districts / distritos / distretti. 14 Bundesberufungsgerichte / cours d’appel fédéraux / tribunales de apelación / Corti d’appello degli Stati Uniti. 15 Kreise / circuit / circuito, que se refiere a un área en la que se encuentra un tribunal federal de apelaciones / circuito territoriale (nel senso che ciascuna Corte d’appello è articolata su un circuito territoriale determinato); Id.

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Chapter 2 Federal Civil Litigation the United States. For example, the U.S. Court of Appeals for the First Circuit hears appeals from the district courts located in the states of Maine, Massachusetts, New Hampshire, Rhode Island, and the territory of Puerto Rico. The thirteenth Court of Appeals is the U.S. Court of Appeals for the District of Columbia Circuit, which handles the important function of hearing appeals of regulations or “rulemaking” by many federal agencies.16 159 The vast majority of cases filed in federal court originate in the district courts, where a single judge presides over the action. As discussed in more detail below, a party unsatisfied with the outcome at the district court may take an appeal as of right17 (without asking for permission) to the appropriate court of appeals, where typically a panel of three judges hears the appeal and rules by majority vote. Parties do not generally have a right, however, to an appeal before the U.S. Supreme Court. Rather, parties only have a right to request that the Supreme Court hear their appeal, and the Supreme Court grants only a small fraction of those requests.18 There are nine justices on the Supreme Court, and they primarily sit en banc, with all nine attending arguments and deciding by majority vote. 160 Practice Tip Judges on the district courts and courts of appeals are referred to as “judge,” but judges on Supreme Court are referred to as “justice.” There is a parallel difference in the capitalization of the word “court.” The highest court in any jurisdiction—the Supreme Court in the U.S. federal court system—is referred to as the “Court,” whereas all lower courts are referred to as the “court.”

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Proceedings in federal courts are governed by rules residing in a number of different locations. There are a variety of rules of procedure governing proceedings in the various federal courts. The Federal Rules of Civil Procedure19 are applied in the federal trial courts,20 the Federal Rules of Appellate Procedure21 are applied in the courts of appeal,22 and the Rules of the Supreme Court of the United States23 are applied by the Supreme Court.24 In addition, many districts enact local rules that supplement, but may not contradict, the federal rules.25 Individual judges may even supply additional detail through standing orders26 or chambers rules.27 16 See Eric M. Fraser, et. al., The Jurisdiction of the D.C. Circuit, 23 Cornell J.L. & Pub. Pol'y 131 (2013). 17 von Rechts wegen / de plein droit / de pleno derecho / di diritto, di pieno diritto. 18 See The Supreme Court of the United States, www.supremecourt.gov (the Supreme Court receives 7,000–8,000 requests each year and hears argument in only about eighty). 19 Bundeszivilprozessordnung / règles fédérales de procédure civile / código de procedimiento federal / norme federali di procedura civile. 20 Federal Rules of Civil Procedure, United States Courts, (Dec. 1, 2018), http://www.uscourts.gov/rul es-policies/current-rules-practice-procedure/federal-rules-civil-procedure. 21 bundesrechtliche Berufungsverfahrensordnung / règles fédérales de procédure d’appel / código de procedimiento en casos de apelación / norme federali di procedura di appello. 22 Federal Rules of Appellate Procedure, Cornell Law School, (Dec. 1, 2019), https://www.law.cornell. edu/rules/frap. 23 Ordnung des obersten Gerichtshofs / règles de la Cour Suprême des Etats-Unis / reglamentos de la Corte Suprema / Norme della Corte Suprema degli Stati Uniti [lit.], regole procedurali della Corte Suprema statunitense. 24 Rules of the Supreme Court of the United States, Supreme Court of the United States, (July 1, 2019), https://www.supremecourt.gov/ctrules/2019RulesoftheCourt.pdf. 25 See Fed. R. Civ. P. 83, governing local rules. Local rules are typically available on the district court’s website. 26 Gerichtsordnung / règles de la cour / reglamentos de la corte / norme procedurali che regolano l’attività della corte. 27 Geschäftsordnung / règles intérieures / normas de orden / regolamenti interni (regole interne di procedura del tribunale, inerente, per esempio, a sezioni o uffici specifici).

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II. General Jurisprudential Concepts In addition to these rules of procedure, many procedural aspects of federal court 162 practice are located in federal statutes.28 Title 28 of the United States Code contains many of the statutes governing the courts’ business, such as the provisions governing the courts’ jurisdiction and venue (discussed below). Furthermore, many federal statutes create causes of action,29 and procedural provisions governing those causes of action are often included in those statutes. 163

Example For example, the Comprehensive Environmental Response, Compensation, and Liability Act (“C.E.R.C.L.A.”), an environmental statute sometimes referred to as the “Superfund” law, creates a right for parties who clean up a contaminated property to seek recovery of some or all of their response costs from parties who caused the contamination, such as prior owners.30 C.E.R.C.L.A. vests the federal district courts with exclusive jurisdiction over actions under the statute, sets venue in the district where the contaminated property is located, establishes a statute of limitations for actions under the statute, determines the parties that may properly be included in the action, and a controls a host of other procedural aspects of actions under the statute. Thus, a lawyer handling a case under C.E.R.C.L.A. must consider the Federal Rules of Civil Procedure, the local rules of the district where the case is pending, any standing orders or chambers rules of the individual judge to whom the case is assigned, the general court provisions in Title 28 of the U.S. Code, and the provisions of C.E.R.C.L.A.

2. Comparison with State Courts The United States has essentially two parallel, and often overlapping, court systems. 164 In addition to the federal court system described above, each state has its own court system. The state court systems each have their own sets of statewide rules of procedure, local rules, and procedural statutes. Although the state court systems all have trial courts and appellate courts, the precise 165 configurations are not identical to the federal system or consistent from state to state. 166

Example For example, some states do not have intermediate courts of appeal, like West Virginia and Nevada. In those states, parties have an automatic right to appeal directly from the trial court to the Supreme Court. Because of the volume of appeals that the Supreme Court in such states must hear, they typically sit in panels of three, rather than en banc. Other states have more than three courts, with specialty courts to hear smaller claims, certain categories of actions, or particular types of appeal. For example, Pennsylvania has a Commonwealth Court, which handles both trial and appeals of specific categories of actions, primarily when the state is a party (as in a challenge to a state regulation).

For some claims, the federal and state courts have concurrent jurisdiction.31 In that 167 circumstance, the plaintiff may choose to file the action in either a federal or state court. For other claims, one court system or the other has exclusive jurisdiction.32

Bundesgesetze / lois fédérales / leyes federales / leggi federali. Anspruchsgrundlagen / prétentions / acción del litigio / fondamenti dell’azione, diritto o diritti sostanziali sottesi all’azione giudiziaria. 30 42 U.S.C.A. § 9601, et seq. 31 parallellaufende Gerichtsbarkeit / compétence juridictionnelle concomitante / jurisdicción concurrente / giurisdizione concorrente. 32 ausschließliche Gerichtsbarkeit / compétence exclusive / competencia exclusiva / giurisdizione esclusiva [lit.], competenza esclusiva. 28

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Chapter 2 Federal Civil Litigation 3. Subject Matter Jurisdiction “Subject matter jurisdiction”33 refers to the limitations on the type of dispute that a court may hear. While most state courts are courts of general jurisdiction34—meaning they can hear any type of case except those explicitly excluded (such as small claims that proceed in a small claims court), federal courts are courts of limited jurisdiction35— meaning they can only hear the categories of case explicitly authorized. 169 The subject matter jurisdiction for federal district courts is established by statute. Although there are a number of grants of federal court subject matter jurisdiction, the two primary categories are federal question jurisdiction36 and diversity jurisdiction37 (discussed immediately below). Without at least one form of subject matter jurisdiction, a federal court may not hear a dispute. This requirement is quite strict and may not be waived or stipulated. Indeed, if an appellate court realizes on appeal following trial that the trial court did not have subject matter jurisdiction, it will vacate the trial court’s judgment and the parties will have to start the process over in state court.38 168

a) Federal Question Jurisdiction Federal courts are authorized to exercise jurisdiction over claims “arising under the Constitution, laws, or treaties of the United States.”39 Federal question jurisdiction is intended to promote a uniform application of federal laws across the United States, so that federal laws do not mean one thing in a federal court in New York and something completely different in a federal court in California. Under a doctrine called the “Well Pleaded Complaint,” the claim arising under federal law must be found in the complaint, not in a defense asserted in the answer.40 171 Thus, for example, the civil rights statute41 creates a cause of action whereby private citizens may sue governmental entities that infringe the citizens’ constitutional rights.42 A plaintiff may file a civil rights action under those federal statutes in federal court, invoking the court’s federal question jurisdiction. 170

b) Diversity Jurisdiction 172

Federal courts are also authorized to exercise jurisdiction over state law claims among citizens of different states.43 Diversity jurisdiction is designed to protect parties from a state other than the one where the case is filed from favoritism by the local judge toward 33 sachliche Zuständigkeit / compétence matérielle, ou d’attribution dite “ratione materiae” / jurisdicción material / competenza per materia. 34 allgemeine Gerichtsbarkeit / compétence générale, ou de principe / competencia general / competenza generale, giurisdizione generale [lit.]. 35 eingeschränkte Gerichtsbarkeit / compétence spéciale / competencia limitada / competenza limitata. 36 bundesrechtliche Gerichtsbarkeit / compétence en matière de “questions fédérales” / juridicción federal / giurisdizione federale. 37 bundesstaatliche Vielfaltsgerichtsbarkeit / compétence en cas de diversité de nationalité ou de citoyenneté / jurisdicción de diversidad federal (entre partes de diferentes estados) / giurisdizione fondata sulla diversità di cittadinanza (come causa di competenza federale), competenza nel caso di controversie tra cittadini appartenenti a Stati diversi della Federazione. 38 See e.g., Hart v. Terminex, 336 F.3d 541, 544 (7th Cir. 2003). 39 28 U.S.C.A. § 1331. 40 See e.g., Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 62 (1987) (citing Louisville & Nashville R. Co. v. Mottley, 211 U.S. 149 (1908)). 41 bundesrechtliches Bürgerrechtegesetz / loi des droits civiques / ley de derechos civiles / legge sui diritti civili [lit.]. 42 See e.g., 42 U.S.C.A. § 1983. 43 28 U.S.C.A. § 1332.

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II. General Jurisprudential Concepts parties from the forum state.44 Diversity jurisdiction is more complex than federal question jurisdiction. There are two primary requirements for diversity jurisdiction: complete diversity of citizenship45 and an amount in controversy46 exceeding $75,000. i. Complete Diversity of Citizenship Complete diversity of citizenship means that no plaintiff is a citizen of the same state 173 as any defendant. Thus, if a complaint contains two plaintiffs, one from Massachusetts and one from Vermont, and two defendants, one from Maine and one from Vermont, the court may not exercise diversity jurisdiction. The overlap in citizenship between the Vermont plaintiff and the Vermont defendant prevents the court from exercising diversity jurisdiction over any aspect of the case, even the claim between the Massachusetts plaintiff and the Maine defendant. Citizenship is determined differently for different types of parties. An individual is a 174 citizen of only the state where the individual is in domicile,47 which is the individual’s place of permanent residence. A corporation is a citizen of the state in which it is incorporated and the state where its principal place of business48—typically its headquarters— is located.49 Unincorporated organizations like partnerships are citizens of each state where their members or partners are citizens. ii. Amount in Controversy For the simplest case—one plaintiff asserting one claim against one defendant—the 175 amount in controversy requirement is fairly straightforward. If the claim is one for money damages, the plaintiff must be seeking more than $75,000 in damages, exclusive of interest and costs. If the claim is for equitable relief,50 such as an injunction,51 the requirement is satisfied if either the potential value to the plaintiff or the potential burden on the defendant exceeds $75,000. When there are multiple claims or parties, however, the question arises as to whether 176 parties may aggregate two or more smaller claims to achieve the $75,000 amount in controversy. Three general rules address this question. First, a single plaintiff may aggregate claims against a single defendant, regardless of whether the claims are related in any way. The rules are not as relaxed, however, when multiple parties are involved. Therefore 177 as a second rule a plaintiff may aggregate claims against multiple defendants only if the

44 Bundesstaat, in dem die Klage erhoben wird / l’Etat du for, où l’action a été initiée / estado en el que se presenta la demanda / Stato del foro [lit.], lo Stato in cui è intentata l’azione giudiziaria. 45 vollständige Vielfalt der Staatsbürgerschaft / entière diversité de nationalité ou de citoyenneté / plena diversidad de ciudadanía / diversità totale (o assoluta) di cittadinanza. 46 Streitwert / montant de la demande / monto en litigio / valore della controversia. 47 ständiger Wohnsitz / résidence habituelle / residencia habitual / residenza (il termine inglese “domicile” non corrisponde al concetto di “domicilio” nell’ordinamento italiano e non è pertanto traducibile letteralmente). 48 Unternehmensschwerpunkt / établissement principal / centro de actividad principal / sede principale (dell’impresa o dell’attività professionale). 49 For a comparison of U.S. location of a corporation with civil law countries, see Dorothee Maria Kaulen, Die Anerkennung von Gesellschaften Artikel XXV Abs. 5 S. 2 des deutsch-U.S.amerikanischen Freundschafts-, Handels- und Schifffahrtsvertrags von 1954 (Peter Lang, 2008). 50 Abhilfe nach Equity-Recht / compensation dite “équitable” / compensación equitativo / compensazione in via equitativa (“equitativo” nel senso specifico di ciò che deriva o è basato su regole dell’” equity”). 51 Unterlassungsanspruch / mesure par voie d’injonction / mandamiento judicial / ordine, provvedimento giudiziale che può assumere, a seconda dei casi, carattere ordinatorio o inibitorio (non traducibile letteralmente con “ingiunzione”, in quanto privo di equivalente esatto nell’ordinamento italiano).

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Chapter 2 Federal Civil Litigation plaintiff is asserting that the defendants are jointly and severally52 liable, meaning that each defendant is potentially liable for the entire amount of the liability. Most tort law creates such joint and several liability.53 Conversely, as a third rule, multiple plaintiffs may not aggregate claims against a single defendant unless the claims arise out of a common interest.54 iii. Excluded Categories 178

There are certain categories of claims over which the federal courts will decline to exercise diversity jurisdiction, even though all of the requirements are satisfied. These are claims where the legal issues are so intensely local in nature that the federal courts have decided that it is preferable to have the state courts adjudicate them. The primary categories of claim where the federal courts will decline to exercise diversity jurisdiction are domestic relations55 cases (such as divorce, spousal support, and child support), probate matters, and certain real property disputes. c) Supplemental Jurisdiction

179

For efficiency purposes, federal courts may exercise supplemental jurisdiction56 over claims that do not qualify for subject matter jurisdiction on their own but are sufficiently related to claims already proceeding in federal court. There are two requirements for the exercise of supplemental jurisdiction: 1) one claim over which the court has original jurisdiction57—such as federal question jurisdiction or diversity jurisdiction; and 2) the claim over which the court will exercise supplemental jurisdiction arises out of the same case or controversy as the claim with original jurisdiction.58 d) Removal

180

When concurrent jurisdiction exists, a plaintiff may choose between state and federal court (simply by choosing in which court to file the complaint). A defendant has more limited rights to affect the choice of federal versus state court. If the plaintiff files the case in federal court, then the defendant is stuck in federal court (assuming subject matter jurisdiction properly existed). If the plaintiff chooses state court, however, the defen-

52 gesamtschuldnerisch und einzelschuldnerisch / conjointement et solidairement / responsabilidad conjunta y solidaria / responsabili in solido e individualmente. 53 For example, suppose a plaintiff is in a car accident with two defendants and asserts negligence claims against both seeking $100,000 in damages. If both are found to have been negligent and the plaintiff is awarded $100,000, the plaintiff may recover any amount up to the judgment total from either defendant. If one defendant pays more than its fair share, it can obtain contribution from the other. Because the total amount sought exceeds $75,000, the amount in controversy requirement is satisfied without the need to apportion the liability among the defendants and find one individual claim exceeding $75,000. 54 For example, if two plaintiffs assert common ownership of a piece of real estate valued at $80,000, and the dispute involves the defendant’s assertion of title to that land, the amount in controversy requirement is satisfied. 55 familienrechtliche Angelegenheiten / contentieux de la famille / asuntos de derecho de familia / contenzioso in materia familiare, contenzioso familiare. 56 ergänzende Gerichtsbarkeit / compétence supplémentaire, similaire à l’exception de connexité française / jurisdicción suplementaria / competenza giurisdizionale sussidiaria o complementare. 57 originäre Zuständigkeit / compétence originale / jurisdicción original / competenza «originaria» [lit.], competenza in primo grado o di prima istanza. 58 28 U.S.C.A. § 1367.

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II. General Jurisprudential Concepts dant may remove59 the case to federal court if there is a basis for original subject matter jurisdiction over at least one claim.60 The removal process is hyper-technical, and requires great care. Removal is accom- 181 plished by filing a Notice of Removal61 in the federal court in the district where the state court is located, and a similar notice in the state court.62 That notice automatically and immediately transfers the case to federal court and divests the state court of jurisdiction. The notice must be filed within 30 days of service of the complaint and summons, and all defendants who have been served must consent to or join in the notice.63 There is one important exception to the right to remove a case. Remember that diver- 182 sity jurisdiction is designed to protect out-of-state parties from favoritism. With that purpose in mind, if a case is removable only on the basis of diversity jurisdiction, a defendant who is a resident of the forum state may not remove the case—the idea being that the out-of-state plaintiff could have filed in federal court but instead chose to file in state court, so the system does not need to protect that plaintiff from favoritism (and the defendant, being from the forum state, also does not need protection from favoritism).64 183

Practice Tip Removal is an extremely technical doctrine, and because removal involves the court’s subject matter jurisdiction—or its power to maintain the case—courts construe the removal requirements strictly. Attorneys representing defendants in cases filed in state courts must make a prompt analysis of their potential option to remove the case, analyze the strategic advantages of state and federal court for the particular claims and defenses involved, coordinate with any other defendants, and, if they decide to remove, make certain to comply with all of the requirements—all in a very short period of time that cannot be extended.

A plaintiff who believes that the defendant has improperly removed a case may seek 184 to remand65 the case back to the state court.66 Unlike removal, which occurs automatically, remand requires a motion and favorable ruling by the federal court. i. After-Acquired Jurisdiction Sometimes, federal court subject matter jurisdiction does not exist for a complaint 185 when filed, but subsequent events create a basis for subject matter jurisdiction. For example, if the only non-diverse67 defendant is removed from the case, such as by dismissal or amendment, diversity jurisdiction would then exist. A defendant may remove a case to federal court within 30 days of such after-acquired jurisdiction. If the after-acquired jurisdiction is federal question jurisdiction (such as when the 186 plaintiff amends the complaint to add a claim under a federal statute), there is no time

59 verweisen lassen / renvoyer / remitir el caso a un tribunal federal / rimettere la causa al tribunale federale. 60 28 U.S.C.A. § 1441. 61 Nachricht / notification de renvoi / aviso de remisión / avviso di rinvio della causa ad un altro tribunale (anche se il termine potrebbe apparire equivalente alla “rimessione del procedimento” nell’ordinamento italiano, in realtà non corrisponde a tale istituto e non si presta, pertanto, ad essere tradotto come tale). 62 28 U.S.C.A. § 1446. 63 28 U.S.C.A. § 1446(b). 64 See 28 U.S.C.A. § 1441(b)(2). 65 zurückverweisen / renvoyer à nouveau / el caso se devuelve a la instancia precedente / rinviare (nuovamente) la causa al giudice precedente. 66 28 U.S.C.A. § 1447. 67 gleiche Nationalität oder Staatsangehörigkeit wie die andere Partei / de même nationalité ou citoyenneté qu’une autre partie / la misma ciudadanía que el otro litigante / avente la medesima cittadinanza della controparte nel processo (nel senso di provenienza dal medesimo Stato della Federazione).

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Chapter 2 Federal Civil Litigation limit on removal. If the only basis of after-acquired jurisdiction is diversity jurisdiction, however, a case may only be removed within one year of its original commencement.68 ii. Fraudulent Joinder Because the choice of federal court versus state court can be extremely strategic and important—with different rules of procedure, different rules of evidence, different kinds of judges (some of whom are elected and some appointed), and dockets that move at different paces—plaintiffs are sometimes heavily motivated to proceed in state court. If the complaint contains a claim under a federal statute, either party may insist on federal court—the plaintiff by filing in federal court and the defendant by removing if the plaintiff chooses state court. 188 If the only basis for federal court subject matter jurisdiction is diversity jurisdiction, the plaintiff may have some control over the forum. If there are multiple potential defendants, some of whom are diverse from the plaintiff and others who are not, the plaintiff can make the federal courts available by naming only the diverse defendants. Conversely, a plaintiff preferring to litigate in state court can guarantee that forum by naming the non-diverse defendants, so long as the plaintiff has legitimate claims against the non-diverse defendants. If a plaintiff seeks to guarantee state court litigation by naming a nondiverse defendant against whom the plaintiff does not have a legitimate claim, however, a defendant may remove the case based on diversity jurisdiction, and the court will ignore the fraudulently joined69 defendant in its diversity jurisdiction analysis. 187

4. Personal Jurisdiction 189

“Personal jurisdiction”70 refers to the protections in the United States Constitution for defendants against being forced to travel to remote jurisdictions to defend legal actions. It is an aspect of the Due Process Clause71 of the Constitution.72 In contrast to subject matter jurisdiction, personal jurisdiction is waivable—if the defendant does not mind traveling to a remote jurisdiction to defend a case, the defendant may waive the objection to personal jurisdiction. The courts have recognized three primary sources of personal jurisdiction over a defendant. a) Consent

190

A defendant may consent to personal jurisdiction. Contracts often include a forum selection clause73 that designates the court for disputes under the contract and provides that the parties consent to personal jurisdiction in that court. Such clauses are generally enforceable.

28 U.S.C.A. § 1446(c). arglistig hinzugefügt / joint par des moyens frauduleux / añadido como demandado de forma fraudulenta / chiamato o intervenuto in causa in modo fraudolento. 70 persönliche Zuständigkeit / compétence personnelle / jurisdicción personal / giurisdizione personale, competenza personale. 71 Klausel zur angemessen Behandlung / clause de garantie de procédure régulière / cláusula del debido proceso / clausola del regolare processo, clausola del “giusto” processo. 72 See U.S. Const. amend. V; U.S. Const. amend. XIV (extending the Due Process right to actions by the States). 73 Gerichtsstandsvereinbarung / clause attributive de juridiction / cláusula de selección de foro / clausola di scelta del foro. 68

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II. General Jurisprudential Concepts b) Presence If a defendant is voluntarily within a jurisdiction when served with the complaint and 191 summons, the court will have constitutionally proper personal jurisdiction over that defendant.74 This exercise of personal jurisdiction is sometimes referred to as “tag” jurisdiction. c) State “Long Arm Statute” Each state has a Long Arm Statute, which determines the out-of-state defendants who 192 will be required to come to the state to defend lawsuits. Federal courts often apply the Long Arm Statute of the state in which they are located. A plaintiff seeking to sue an out of state defendant needs to consult the particular Long Arm Statute of the state where the plaintiff seeks to file the action. In addition to analyzing the specific language of the Long Arm Statute, however, the 193 plaintiff must also consider the Due Process limitations on the exercise of these Long Arm Statutes. The Supreme Court established the “minimum contacts” test75 to evaluate whether the exercise of jurisdiction over the defendant comports with “traditional notions of fair play and substantial justice.”76 Under this test, courts look to see whether the defendant purposefully directed actions or commerce towards the forum state or its consumers, rendering it fair to require the defendant to appear and defend the action.

5. Venue a) Venue Choices Venue77 in the U.S. court systems is a doctrine designed to make sure the forum that 194 the plaintiff chooses has some logical connection to the dispute. While personal jurisdiction applies across an entire state, venue is particular to the individual district in which the court sits. A case may be dismissed or transferred if venue is lacking, even if the court has subject matter jurisdiction and personal jurisdiction. Like personal jurisdiction, though, venue is waivable by the defendants. There are two primary venue provisions in federal court, plus a third “catch-all” that 195 applies if neither of the primary provisions applies. The first primary provision is “residence based”78 venue. If all the defendants reside in the same state, then venue is proper in any district in which any of the defendants resides.79 The second primary provision is “occurrence based”80 venue, which lies in any district in which a substantial part of the events or omissions giving rise to the claim occurred or, if the action involves a piece of property, in any district in which a substantial part of the property is situated.81 In the unusual circumstance where neither primary venue option applies—such as when the defendants reside in different states and the occurrence took place outside the United

Burnham v. Superior Court of California, 495 U.S. 604 (1990). Minimalkontaktprüfung [lit.] / test dit des “contacts minimums” / “prueba de contacto mínimo” [lit.] / verifica/test dei “contatti minimi” [lit.], criterio che conferisce giurisdizione sul convenuto non residente. 76 International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). 77 Gerichtsstand / for, lieu du procès / lugar de jurisdicción / foro, sede giudiziaria. 78 basiert auf dem Wohnort / relatif au domicile / basado en la residencia / basato sulla residenza. 79 28 U.S.C.A. § 1391(b)(1). 80 handlungsbasiert / relatif au lieu d’exécution / basado en el lugar de las ocurrencias / basato sul luogo di occorrenza, sul luogo in cui si verifica l’occorrenza. 81 28 U.S.C.A. § 1391(b)(2). 74

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Chapter 2 Federal Civil Litigation States—then venue is proper in any district in which any defendant is subject to personal jurisdiction.82 b) Venue Residence 196

“Residence”83 has its own particular meaning for purposes of venue. An individual is a resident of the district where the individual is domiciled. A corporation is a resident of every district where it is subject to personal jurisdiction. Partnerships and other unincorporated entities are treated like corporations for purposes of venue (in contrast to the citizenship analysis for diversity jurisdiction).84 c) Venue Transfer or Dismissal

197

The venue statutes and case law85 provide a number of challenges to venue, and define the court’s choices when ruling on such challenges. There are essentially three different forms of venue-based challenge. First, a defendant may contend that venue is improper in the forum the plaintiff has chosen. Second, a defendant may contend that, although venue is proper in the chosen forum, that forum is so inconvenient or illogical that the interest of justice mandates transfer to another forum. Third, where venue was proper and the forum is really inconvenient, but transfer is not possible, a defendant may seek dismissal86 under a doctrine known as forum non conveniens. i. Improper Venue

198

When a plaintiff has filed an action in a district in which venue is improper, the defendant may file a motion to dismiss87 the action.88 In that situation, the court may either dismiss the case or, in the interest of justice, transfer the case to another jurisdiction where it could originally have been brought (i.e., another federal court that has subject matter jurisdiction, personal jurisdiction, and venue).89 ii. Transfer of Venue

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When a plaintiff has filed an action in a district in which venue is proper, the defendant may file a motion to transfer90 the action to another jurisdiction where it could originally have been brought (i.e., another federal court that has subject matter jurisdiction, personal jurisdiction, and venue).91 The court will consider the overall interests of justice in ruling on a motion to transfer, taking into consideration the convenience of the parties and witnesses. Courts generally consider transfer when the majority of the witnesses or evidence is located outside the district where the case is pending.

28 U.S.C.A. § 1391(b)(3). Wohnsitz / domicile / domicilio / residenza. 84 28 U.S.C.A. § 1391(c). 85 Fallrecht / jurisprudence / jurisprudencia / giurisprudenza, diritto giurisprudenziale. 86 Abweisung / rejet / desestimación / rigetto. 87 Antrag auf Abweisung der Klage / demande de rejet / moción de rechazar la denuncia / istanza di rigetto dell’azione giudiziaria. 88 See Fed. R. Civ. P. 12(b)(3). 89 28 U.S.C.A. § 1406(a). 90 Antrag auf Verweisung / demande de renvoi / moción de remisión / istanza di rinvio (con cui si domanda di rimettere la causa ad altro giudice). 91 28 U.S.C.A. § 1404(a). 82

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II. General Jurisprudential Concepts iii. Forum Non Conveniens Sometimes, a plaintiff has filed an action in a district in which venue is proper, but 200 there is another much more logical forum to which transfer is not possible. Federal district courts can generally transfer cases only to other federal district courts. 201

Example If an incident occurs in a foreign country involving a defendant who resides in the United States, venue would be proper in the district where the defendant resides. If all the witnesses and evidence were located in the foreign country, the U.S. federal court might conclude that the interests of justice dictate that the case proceed in that foreign country. The U.S. federal court could not transfer the case into the foreign country’s court system, so has the discretion to dismiss the case under the doctrine of forum non conveniens, allowing the plaintiff to refile the action in the foreign country.

6. Choice of Law When a federal court hears a case under its federal question jurisdiction, it has no 202 difficulty determining which rules and laws apply—it will apply: the Federal Rules of Civil Procedure; federal statutes, treaties, and the Constitution; and any federal case law interpreting the federal statutes, treaties, and the Constitution. When a federal court is adjudicating a state law claim under its diversity or supple- 203 mental jurisdiction, however, choosing the correct law is much more nuanced. The first decision point, sometimes referred to as “vertical choice of law”92 involves the choice as to whether to apply state law or federal law to each issue the court must resolve. In Erie R. Co. v. Tompkins,93 the Supreme Court announced the answer to that question in an analysis that has come to be known as the “Erie Doctrine.” That doctrine holds that federal courts adjudicating state law claims will apply federal procedures and the state substantive law. 204

Example While the doctrine is easy to understand in many examples, it gets more difficult in the gray area. For example, if the claim is a negligence claim, the federal court will apply state law regarding the elements of negligence. Conversely, the federal court will apply federal procedural rules regarding the format for the pleadings. Issues like the time for commencing the action arguably have both substantive and procedural elements, and require situation-specific research.

For the issues in federal court that are controlled by state law, the next question is 205 which state’s laws apply. 206

Example Suppose, for example, a plaintiff files suit in federal court in Virginia regarding an accident that occurred in North Carolina. Does the court apply Virginia or North Carolina substantive law? That question is sometimes referred to as “horizontal choice of law.” Each state has a choice of law statute that contains the rules for choosing which state’s laws to apply in actions filed in the state court systems. Federal courts borrow the choice of law provision from the state in which they are located. Thus, in the above example, the Virginia federal court would apply the state substantive law dictated by Virginia’s choice of law statute.

92 vertikale Rechtswahl / détermination verticale du droit applicable / determinación de la ley aplicable / scelta « verticale » del diritto applicabile [lit.]. 93 304 U.S. 64 (1938).

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Chapter 2 Federal Civil Litigation

III. The Pleadings 207

The pleadings94 are the papers that commence the lawsuit and frame the dispute. The complaint95 is the document that sets forth the plaintiff ’s claims, and the answer96 is the document that responds to those claims and sets forth the defendant’s defenses. Pleading is a term of art that only applies to the limited papers setting forth the claims and defenses, not to motions, briefs, discovery requests, and all the other court papers that the parties file and serve during the course of a typical litigation matter.97 This section will discuss the pleadings and preliminary challenges to the complaint.

1. Commencing a Lawsuit 208

Two steps are required to commence a lawsuit in federal court. First, the plaintiff must draft and file a complaint—the legal document setting forth the parties and the claims. Second, the plaintiff must serve98 the complaint and a summons99—the legal process that brings the defendant into the lawsuit and requires the defendant to appear and defend the claims. a) Complaint

209

The Federal Rules of Civil Procedure establish a number of technical requirements for a federal court complaint. i. Caption

210

The top of the first page contains a caption100—a header that identifies the court, the parties, and the docket number101—a unique identifier for the court’s record keeping system.102 The caption for the complaint must name all parties, but subsequent court papers may use a shortened version that lists the first-named party only, followed by “et al.” to signify the omitted parties. Each pleading must contain a title, which is located directly below the caption. The title of the complaint is typically simply “Complaint,” but may be more elaborate. ii. Body of the Complaint

211

The body of the complaint103 is set forth in numbered paragraphs, with a “single set of circumstances”104 contained in each paragraph.105 The body of the complaint must

94 Schriftsätze / conclusions / los alegatos escritos que se presentan al tribunal / note scritte delle parti (atti introduttivi del giudizio). 95 Klageschrift / demande introductive d’instance / declaración de demanda / atto di citazione. 96 Klageerwiderung / conclusions en réponse / contestación a la demanda / comparsa di risposta. 97 Fed. R. Civ. P. 7. 98 zustellen / notifier / traslado de la demanda / notificare. 99 Vorladung / assignation / emplazamiento / citazione in giudizio. 100 Kopfzeile / en-tête / encabezamiento de un auto / intestazione, titolo. 101 prozessspezifische Identifikationsnummer für die Registerführung / numéro de dossier / número que se refiere a la posición del caso en el calendario de la corte / numero di ruolo della causa. 102 Fed. R. Civ. P. 10(a). 103 Textkörper der Klageschrift / le corps de la demande / cuerpo de la demanda / corpo (del testo) dell’atto di citazione. 104 einzelner Themenkomplex / un ensemble factuel individuel / afirmaciones individuales / serie singola o specifica di circostanze [lit.]. 105 Fed. R. Civ. P. 10(b).

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III. The Pleadings set forth three areas of content: a statement of the court’s jurisdiction, a statement of the claims showing the plaintiff is entitled to relief, and a statement of the relief sought. iii. Statement of Jurisdiction The complaint typically starts with a statement of the basis for the court’s subject 212 matter jurisdiction106—typically some combination of federal question, diversity, and supplemental jurisdiction (as discussed above).107 To support federal question jurisdiction, a complaint will typically reference the federal question jurisdiction statute and identify the federal law under which the plaintiff asserts a claim. To support diversity jurisdiction, a complaint will typically set forth the facts necessary to determine the parties’ citizenship and to establish the requisite amount in controversy. iv. Statement of Claims The primary content of the complaint is the statement of the claims108 entitling the 213 plaintiff to relief.109 Federal courts use notice pleading,110 a standard designed to put the defendant on notice of the claims asserted against it, but not requiring the plaintiff to plead every fact that supports the claims. The Supreme Court has provided some guidance as to the minimum degree of detail necessary to satisfy the notice pleading standard—a complaint must contain sufficient facts such that each element of each claim is “plausible.”111 This plausibility standard112 is not precisely defined, but it lies somewhere between possible and probable. The plausibility standard defines the minimum content required; plaintiffs sometimes make the strategic decision to include more detail than that bare minimum. If a complaint contains more than one claim, the claims are typically organized into counts,113 where the individual claims are listed.114 v. Statement of Relief The body of the complaint typically ends with a statement of the relief115 the plaintiff 214 seeks—money damages,116 injunctive relief,117 etc.118 The request for relief is often found in a “wherefore clause,”—a concluding paragraph that starts, “WHEREFORE, the plaintiff requests . . .” Each count might contain its own wherefore clause, or all of the relief might be requested in one wherefore clause at the end of the complaint. 106 Angabe zur Zuständigkeit des Gerichts / enoncé des chefs de compétence matérielle de la juridiction / declaración de competencia material de la corte / dichiarazione di competenza per materia della corte. 107 Fed. R. Civ. P. 8(a)(1). 108 Angabe der Anspruchsgrundlagen / enoncé des demandes / declaración de las afirmaciones / dichiarazione dell’attore sui fatti e gli elementi di diritto su cui si fonda la domanda giudiziale, nonché sul contenuto della domanda medesima. 109 Fed. R. Civ. P. 8(a)(2). 110 Benachrichtigungsschriftsatz / conclusions notifiantes / la presentación de los alegatos a las partes contrarias / note scritte non circostanziate, introduttive del procedimento e aventi la funzione di avvisare la controparte dell’azione intentata nei suoi confronti. 111 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). 112 Glaubwürdigkeitsstandard / critère de plausibilité / estándar de plausibilidad / standard o criterio di plausibilità. 113 Klagegründe / moyens / cargos / addebiti, motivazioni. 114 Fed. R. Civ. P. 10(b). 115 Rechtsschutz / réparation / remedio legal / compensazione (letteralmente: “riparazione”). 116 Schadenersatz in Geld / dommages et intérêts / indemnización monetaria / risarcimento pecuniario, compensazione pecuniaria del danno. 117 Unterlassungsanspruch / injonction / medida cautelar / provvedimento o rimedio ingiuntivo [lit.]. 118 Fed. R. Civ. P. 8(a)(3).

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Chapter 2 Federal Civil Litigation 215 Practice Tip Plaintiffs often include a catch-all request for “whatever relief the court deems appropriate,” in order to provide the court with leeway to accord some component of relief not specifically requested.

vi. Signature; Rule 11 The complaint ends with a signature block119—a signature line for the attorney of record, which includes the contact information for the attorney. The signature requirement is found in Rule 11,120 which not only requires that each court paper be signed by an attorney (or by the party if the party is proceeding pro se—representing itself), but establishes sanctions for bad faith signatures. 217 Rule 11 provides that a signature on a court filing certifies to the court that the legal positions in the document are supported by existing law or a non-frivolous argument for a change in the law and that the factual contentions and denials are made in good faith after investigation. Rule 11 also establishes procedures for imposing sanctions on the attorney, the party, or both. Opposing parties may seek sanctions by motion. To do so, they first provide a copy of the motion to the lawyer who filed the potentially improper document, and then wait 21 days before filing the motion to provide the other side with an opportunity to correct the violation. Even in the absence of a motion, the court may impose sanctions sua sponte121 (on its own), after providing notice to the party to be sanctioned and providing it with an opportunity to justify its filing. 218 Sanctions under Rule 11 must promote deterrence, not punishment. They can include the costs and fees incurred by opposing parties as a result of the improper filing, educational requirements, and other creative sanctions designed to prevent recurrence of the conduct. 216

b) Claims Included in the Complaint The Rules contain requirements and limitations regarding the types of claims that may be originally included in, or added to, a single lawsuit. Rule 18 is the most important rule regarding the combining of multiple claims in a single action. It provides that once a party has asserted one claim against a defending party, it may assert any other claims it has against that party, even if completely unrelated to the first claim.122 Thus, a plaintiff may include in one complaint a tort claim and an unrelated breach of contract claim against the same defendant. Remember, though, that each claim must satisfy subject matter jurisdiction, personal jurisdiction, and venue, as discussed above. 220 A discussion of all of the various types of claim that a plaintiff may bring in federal court is beyond the scope of this chapter. One category of claims warrants inclusion, though: claims seeking injunctive relief. An injunction123 is an order that a defendant refrain from taking some action or that a defendant take some action (sometimes referred to as a “mandatory injunction.”) Injunctions are potentially available in three durations. 219

119 Signatur

/ bloc de signature / bloque de firma / spazio per l’apposizione della firma. R. Civ. P. 11. 121 aus eigenem Antrieb / de son propre gré / por su propia cuenta / spontaneamente, di sua propria volontà. 122 Fed. R. Civ. P. 18. 123 Unterlassungsanspruch / injonction / medida cautelar / intimazione, ordine, provvedimento cautelare. 120 Fed.

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III. The Pleadings i. Temporary Restraining Orders In cases with extreme time sensitivity regarding the action sought to be enjoined, a 221 plaintiff may seek a very short-term injunction known as a “temporary restraining order” or “T.R.O.” The idea behind a T.R.O. is essentially an emergency order to preserve the status quo until a full hearing can occur. Some of the due process safeguards that apply to most federal court litigation are relaxed in the context of a T.R.O., and for that reason the duration is limited to 14 days.124 Because of the emergency nature of a T.R.O., a court can issue a T.R.O. without pro- 222 viding the defendant with notice and an opportunity to appear, so long as the plaintiff has made a good faith effort to provide notice to the defendant. A court will issue a T.R.O. when the following five elements are satisfied: 1) the injunction is necessary to prevent substantial harm that cannot be remedied by money damages (sometimes referred to as “no adequate remedy at law”125); 2) greater harm would result from denying the injunction than from issuing it; 3) the moving party has a substantive right to the relief (sometimes referred to as “likelihood of success on the merits”126); 4) the injunction is narrowly tailored to the redress the harm; and 5) the injunction will not harm the public. If the plaintiff persuades the court to issue a T.R.O., the court will require the plaintiff 223 to post a bond or other form of security to protect the defendant in the event that the court ultimately rules that injunctive relief was not proper.127 ii. Preliminary Injunctions The more common, and less extreme, form of temporary injunctive relief is known as 224 a “preliminary injunction.”128 Like a T.R.O., a preliminary injunction is designed to preserve the status quo until the final hearing on the request for injunctive relief can occur. A court may not issue a preliminary injunction without ensuring that the defendant has notice and an opportunity to be heard, and accordingly permanent injunctions do not contain a time limits like that for T.R.O.129 The requirements for a preliminary injunction are similar to those for a T.R.O. Like with a T.R.O., if the court issues a preliminary injunction, it will require the 225 plaintiff to post a bond or other form of security to protect the defendant if the court ultimately rules that injunctive relief was not proper. iii. Permanent Injunctions The permanent injunction130 is the court’s final ruling if it grants the request for in- 226 junctive relief. The requirements are similar to those for a T.R.O. or preliminary injunction, except the court does not evaluate the likelihood of ultimate success on the merits,

124 Fed.

R. Civ. P. 65(b). geeigneter Rechtsbehelf / pas de réparation adéquate / no hay un remedio adecuado en la ley / mancanza di un rimedio adeguato (in base al diritto interno). 126 substanzieller Anspruch auf den begehrten Rechtsschutz / en cas de succès au fond probable / probabilidad de éxito en los méritos / (ragionevole) probabilità che la domanda possa essere accolta nel merito. 127 Fed. R. Civ. P. 65(c). 128 vorrläufige Unterlassungsklage / injonction préliminaire / mandamiento preliminar / provvedimento cautelare provvisorio, misura provvisoria. 129 Fed. R. Civ. P. 65(a). 130 dauerhafte Verfügung / injonction permanente / orden permanente / provvedimento cautelare definitivo. 125 kein

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Chapter 2 Federal Civil Litigation it determines the merits. Because the permanent injunction is the end of the litigation process on that claim, the court does not require the plaintiff to post security.131 227 Sometimes it is inefficient to conduct two hearings on the same request for injunctive relief, one in the context of a preliminary injunction and one in the context of the request for a permanent injunction. Accordingly, the court may collapse the two into one hearing conducted at the preliminary injunction stage.132 c) Parties Included in the Complaint 228

229

230

231

232

The Rules are more restrictive about the parties that may be included in a single action than they are about claims that may be included. In order for a plaintiff to name multiple defendants in one complaint, the plaintiff must assert claims against each defendant that arise out of the same “transaction or occurrence, or series of transactions or occurrences” and there must be a question of fact or law common to all defendants.133 Once the plaintiff has asserted a claim against each defendant that meets these requirements, the plaintiff may join other unrelated claims under Rule 18. Parallel limitations apply when multiple plaintiffs want to join together in a single complaint.134 The Federal Rules of Civil Procedure authorize class actions135 where the number of parties (typically plaintiffs) is so large that it is impractical to prosecute each claim individually.136 Often, class actions involve situations where a defendant’s business practices have harmed many consumers, but in an amount so small that renders formal litigation by any individual member uneconomic. Class actions list the class representatives137 as the named parties, suing on their own behalf and on behalf of other unnamed class members. The action does not automatically proceed as a class action. Rather, it starts as a putative class,138 and does not become a true class action until the court certifies the class.139 In the certification process, the court will consider whether the class is truly too large to proceed individually, whether there is sufficient commonality among the class members, whether the class representatives are typical of the other class members, and whether the class members and their attorneys are qualified to represent the interests of the class. Once certified, the court exercises a degree of control over a class action that differs from most other litigation. Of particular note, settlements and attorney’s fee arrangements must be approved by the court, with the court ensuring that the representatives and attorneys do not enrich themselves at the expense of the class members. d) Summons

233

The complaint does not actually require the defendant to participate in the lawsuit. Rather, the document that attaches the defendant and requires the defendant to appear 131 Fed.

R. Civ. P. 65(c). R. Civ. P. 65(a)(2). 133 Fed. R. Civ. P. 20(a)(2). 134 Fed. R. Civ. P. 20(a)(1). 135 Sammelklagen / recours collectifs / demanda colectiva / azioni collettive, azioni di gruppo, azioni di classe [lit.]. 136 Fed. R. Civ. P. 23. 137 Vertreter / représentants collectifs / representantes de los demandantes colectivos / rappresentanti della classe [lit.]. 138 vermeintliche Sammelklage / recours collectif putatif / demanda colectiva putativa / azione putativa collettiva. 139 die Sammelklage bestätigen / autoriser le recours collectif / autorización judicial de la demanda colectiva / certificare l’azione collettiva (nel senso di autorizzazione da parte della corte). 132 Fed.

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III. The Pleadings and defend is the summons.140 The summons is a short, preprinted form that is available on most courts’ websites.

2. Service of Process After the complaint is filed, the plaintiff must arrange to have the complaint and the 234 summons served within 90 days.141 This service, called “service of process,”142 can occur in a number of different manners. a) Waiver of Service The Federal Rules of Civil Procedure contain a waiver of service143 procedure.144 The 235 plaintiff sends a request to the defendant asking the defendant to waive formal service. If the defendant agrees (by returning the signed waiver), it gets 60 days to respond to the complaint, increased from the normal 21 days. If the defendant does not sign the waiver, the plaintiff must perfect (perform) formal service, and can then recover the costs of that service from the defendant unless the defendant had good cause to decline the request. 236

Practice Tip Waiver requests are quite common, and it is also quite common to grant the waiver. Indeed, the rules strongly incentivize such cooperation, and to refuse to waive service not only risks bearing the costs of service but also sets an uncooperative tone for the rest of the litigation.

b) Service on a Corporation Most states require a corporation or other business entity to designate a registered 237 agent for service of process as requirement for registering to do business in the state. Service of process occurs for such entities merely by delivering the complaint and summons to that agent. 238

Practice Tip Many companies use a corporation called “C.T. Corporation” as their registered agent for service of process. Sending the complaint and summons to C.T. Corporation will typically result in successful service of process. Upon receipt, C.T. Corporation forwards the documents to the party, who can then arrange for counsel and defend itself.

c) Service on an Individual Service on an individual is more complicated than service on a corporation. The gold 239 standard for service on an individual is personal service,145 in which a non-party over the age of 18 hands the complaint and summons to the defendant. Abode service146 is another option, in which the complaint and summons is left at the defendant’s dwelling with a person of suitable age and discretion who also lives there.

140 Vorladung

/ assignation / emplazamiento / citazione in giudizio. R. Civ. P. 4(m). 142 Zustellung / signification / traslado de la demanda / notificazione (degli atti del processo, in generale e, nel caso specifico, dell’atto di citazione). 143 Verzicht auf die formelle Zustellung / renonciation à la signification formelle / renuncia de notificación formal / rinuncia alla notifica formale. 144 Fed. R. Civ. P. 4(d). 145 persönliche Zustellung / remise en mains propres / entraga personal de la demanda al demandado / notificazione personale [lit.], consegna dell’atto a mani proprie del destinatario/convenuto. 146 Wohnungszustellung / signification à domicile / entrega al domicilio del demandado / notificazione nella residenza, nella dimora o nel domicilio del convenuto. 141 Fed.

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Chapter 2 Federal Civil Litigation i. Service by Means Authorized in State Court 240

The Federal Rules of Civil Procedure also authorize service by any means authorized by the rules of procedure in the state where the federal court is located. Thus, for a case pending in federal court in Ohio, a plaintiff may serve the complaint and summons by certified mail147 if the Ohio rules authorize such service. ii. Service by Extraordinary Means

241

When the normal forms of formal service are ineffective, a plaintiff may request that the court authorize other means of service of process. Thus, for example, if a plaintiff cannot locate a defendant despite good faith efforts, the court might authorize service by notice in a newspaper and by mail to the defendant’s last known address.

3. Responding to the Complaint 242

A defendant generally has two options when served with a complaint and summons. First, it may file a motion challenging various aspects of the complaint. Second, it may file an answer,148 admitting and denying the allegations in the complaint. Additionally, in conjunction with the answer, a defendant may assert a variety of claims back against the plaintiff or against other parties. a) Time for Responding to a Complaint

Defendants must either answer or file a motion to dismiss within 21 days after they are served with the complaint and summons (although extensions of time by agreement of counsel are quite common).149 If a defendant has accepted the plaintiff ’s request for waiver of service, the time for the defendant’s response is extended to 60 days. If the defendant files a motion to dismiss, the time for filing the answer is delayed until 14 days after the court denies the motion (no answer being required if the court grants the motion). 244 The plaintiff may seek a default judgment150 if a defendant fails to respond to a complaint within the time allowed.151 There are two steps to obtaining a default judgment. First, the plaintiff obtains a default from the clerk of court. This is a purely ministerial process, and the clerk’s office automatically enters the default152 if the plaintiff submits evidence of failure to respond, typically in the form of an affidavit. 245 To collect money from the defendant or obtain other relief, however, a plaintiff needs to complete step two, obtaining a default judgment. The procedure for a default judgment depends on the nature of the relief sought. If the complaint seeks a sum certain— like in a breach of contract case—the clerk’s office may also enter the default judgment. However, if the complaint seeks damages that are not readily susceptible of a mathematical calculation—like pain and suffering—or equitable relief, the plaintiff must file a motion for default judgment. The judge will then rule on the motion and award the relief the judge deems appropriate. 243

147 Einschreiben mit Rückschein / lettre recommandée avec accusé de réception / correo certificado / a mezzo di lettera raccomandata con avviso di ricevimento. 148 Klageerwiderung / conclusions en réponse / contestación a la demanda / comparsa di risposta. 149 Fed. R. Civ. P. 12(a)(1)(A). 150 Versäumnisurteil / jugement par défaut / sentencia en rebeldía / sentenza contumaciale. 151 Fed. R. Civ. P. 55. 152 Versäumnis / défaillance / rebeldía / contumacia.

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III. The Pleadings 246

Practice Tip Default judgment is a very harsh result. Accordingly, if a defendant defaults inadvertently, the courts are generally receptive to a motion to open or strike the default judgment. A defendant should file a motion to set aside the default as soon as possible and explain the circumstances leading to the failure to respond to the complaint.

b) Motions to Dismiss The primary mechanism for challenging the adequacy of a complaint is by motion to 247 dismiss.153 Rule 12(b) of the Federal Rules of Civil Procedure authorizes motions to dismiss for lack of subject matter jurisdiction, lack of personal jurisdiction, lack of venue, defects in service of process, failure to properly set forth a claim entitling the plaintiff to relief, and failure to join a necessary party.154 Additionally, a defendant may move to strike portions of the complaint that are egregious and may ask the court to require the plaintiff to amend the complaint to add more detail.155 i. Failure to State a Claim The most common and most important Rule 12 challenge is a motion to dismiss for 248 failure to state a claim156 under Rule 12(b)(6). Such a motion may contend that the complaint does not contain sufficient factual detail to meet the plausibility standard (discussed above) or that the applicable law does not support the plaintiff ’s request for relief. In general, a motion to dismiss for failure to state a claim is evaluated solely on the 249 basis of the four corners of the complaint157—the allegations in the complaint, which are taken as true at this early stage of the process. The plaintiff does not need to identify the evidence to be used to prove the allegations, and the court does not assess the plaintiff ’s likelihood of prevailing or of proving its allegations true. The idea is that the discovery process is where the evidence is gathered, and a case may proceed to discovery so long as the plaintiff can meet the plausibility pleading standard. 250

Practice Tip Federal courts prefer to have cases adjudicated on the merits, not on technicalities. Accordingly, if the defendant files a motion to dismiss and the plaintiff believes it can cure the deficiencies raised in the motion, the plaintiff can request leave to amend the complaint (as discussed below). Such motions are commonly granted.

ii. Waiver of Rule 12 Defenses Many of the early challenges to a complaint must be asserted at the outset or they are 251 waived.158 If these defenses are not asserted either in a Rule 12 motion or in the answer, they are lost. Furthermore, if the defendant asserts any of the Rule 12 defenses in a Rule 153 Antrag auf Klageabweisung / demande de rejet / petición para desestimar la demanda / istanza di rigetto della domanda [lit.] (corrispondente, in linea di principio, all’istanza di declaratoria di inammissibilità). 154 Fed. R. Civ. P. 12(b)(1)-(7). 155 Fed. R. Civ. P. 12(e) and (f). 156 Antrag auf Klageabweisung wegen fehlender Schlüssigkeit / rejet pour absence de juste motif / petición para desestimar la demanda debido a la imposibilidad de formalizar una demanda / istanza (diretta ad ottenere una pronuncia) di rigetto della domanda in quanto manifestamente priva di un ragionevole fondamento giuridico. 157 bereits als wahr geltende Behauptungen / exclusivement dans la limite des prétentions énoncées par les parties / basado exclusivamente en lo que está expresamente contenido en la demanda / in base al tenore letterale dell’atto di citazione. 158 See Fed. R. Civ. P. 12(g) and (h).

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Chapter 2 Federal Civil Litigation 12 motion, it waives any other Rule 12 defenses it does not also include in the motion. The reason for these waiver provisions is both efficiency and to prevent the defendant from seeing how the case is going, and then asserting these defenses if the defendant gets some unfavorable rulings from the judge. 252 There are a few defenses that are not waived in this manner. Subject matter jurisdiction may be raised at any time, even on appeal following trial. Failure to state a claim and failure to join a necessary party are also excluded from the waiver rules.159 c) Answer 253

Unless the case is dismissed or settled, the defendant eventually must file an answer160 to the complaint. The answer must contain two components. First, it must respond to the allegations in the complaint, admitting the allegations that the defendant agrees are true, denying the allegations that the defendant contends are false, and denying allegations that, following a good faith investigation, the defendant lacks sufficient information to admit or deny.161

254 Practice Tip The answer is typically organized to mirror the complaint, with a numbered paragraph in the answer to correspond to each numbered paragraph in the complaint. Paragraphs in complaints often contain a number of allegations. The Rules explicitly prohibit a defendant from denying the entire paragraph based upon one small aspect that the defendant denies.162 Accordingly, the answering paragraphs often include a combination of admissions and denials. Because facts not denied are deemed admitted, the better practice is to admit those facts the defendant does not contest and then deny all facts not specifically admitted.

255

An answer must also set forth the defendant’s affirmative defenses,163 in addition to responding to the allegations in the complaint.164 Affirmative defenses are often referred to as “yes, but” defenses, where the defendant is offering an excuse for the alleged conduct. For example, if the allegation was the tort of battery—an offensive touching—the defendant might assert consent as an affirmative defense; “yes I touched you, but I had your consent so it was not a battery.”165 Rule 8(c) contains a list of commonly asserted affirmative defenses. d) Additional Claims by the Defendants

256

In addition to answering the allegations in the complaint, a defendant may assert a variety of claims, both for contribution towards the liabilities asserted against that defendant and for affirmative additional relief. i. Counterclaims

257

A defendant may assert claims back against the plaintiff, and these claims are called “counterclaims.”166 There are two categories of counterclaims: compulsory counter-

159 Fed.

R. Civ. P. 12(h). / conclusions en réponse / contestación a la demanda / comparsa di risposta. 161 Fed. R. Civ. P. 8(b). 162 Fed. R. Civ. P. 8(b)(4). 163 Affirmative Einreden / moyens de défense affirmatifs / defensa afirmativa / difese « affermative » [lit.], obiezioni del convenuto. 164 Fed. R. Civ. P. 8(c). 165 Körperverletzung / dommages corporels / daños corporales / lesioni personali. 166 Gegenansprüche / demandes reconventionnelles / demanda de reconvención / domande riconvenzionali. 160 Klageerwiderung

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III. The Pleadings claims167 and permissive counterclaims.168 A compulsory counterclaim is one that arises out of the same transaction or occurrence as the claim asserted by the plaintiff against the defendant.169 A defendant must assert all compulsory counterclaims or they are waived. The idea behind this rule is that it is more efficient to adjudicate all claims related to a single incident or transaction in one action, rather than a series of actions. Any claims that the defendant has against the plaintiff that do not arise out of the 258 same transaction or occurrence are permissive counterclaims.170 The defendant may, but is not required to, assert any permissive counterclaims, or may save them for a later action. Remember that the court must have subject matter jurisdiction, personal jurisdiction, 259 and venue for each claim. These requirements will not be difficult to satisfy for compulsory counterclaims, which will almost certainly qualify for supplemental jurisdiction, but may prohibit some permissive counterclaims. ii. Crossclaims If there are multiple defendants, one defendant may want to assert a claim against an- 260 other defendant. Such claims are called “crossclaims.”171 A crossclaim must arise out of the same transaction or occurrence as the original claim the plaintiff asserted against the defendant asserting the crossclaim.172 All crossclaims are permissive. 261

Practice Tip A crossclaim requires one defendant to prove its claim against another defendant. Defendants often believe that asserting crossclaims and developing evidence against each other is “doing the plaintiffs’ work for them,” and will agree among themselves not to file crossclaims, relying on their permissive nature.

Once a defendant has asserted one crossclaim against another defendant, Rule 18 al- 262 lows the defendant to assert any claims it has against that defendant, whether or not related to the original claim in the case. However, the defendant will need an independent basis for subject matter jurisdiction over any unrelated claims. iii. Third-Party Claims Plaintiffs often have the ability to sue some, but not all, of the defendants involved in 263 an incident. Particularly in tort actions where joint and several liability173 exists—such that each defendant is potentially liable for the entire liability to the plaintiff and then entitled to contribution from other tortfeasors—a plaintiff may only choose to sue the defendants with “deep pockets”—lots of money—or who are clearly liable. Such defen167 zwingende Gegenansprüche / demandes reconventionnelles obligatoires / demanda de reconvención obligatorio / domande riconvenzionali obbligatorie. 168 erlaubte Gegenansprüche / demandes reconventionnelles autorisées / demanda de reconvención autorizado / domande riconvenzionali autorizzate. 169 Fed. R. Civ. P. 13(a)(1). One exception is that a claim that the defendant had already filed against the plaintiff in another action does not become a compulsory counterclaim when the plaintiff files the action against the defendant. Another exception is that, if a counterclaim would require joining a party over whom the court does not have jurisdiction, the counterclaim will not be considered compulsory. Fed. R. Civ. P. 13(a)(2). 170 Fed. R. Civ. P. 13(b). 171 Gegenforderungen / actions récursoires / demanda en contra de la co-parte / eccezioni riconvenzionali, controcrediti [lit.] opposti dal debitore-convenuto. 172 Fed. R. Civ. P. 13(g). The crossclaim may, but is not required to, include a claim for contribution from the co-defendant. 173 gesamtschuldnerische und einzelschuldnerische Haftung / responsabilité conjointe et solidaire / obligación conjunta / responsabilità in solido e individuale.

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Chapter 2 Federal Civil Litigation dants may want to assert contribution claims against some of the other tortfeasors that the plaintiff chose not to include. In such circumstances, a defendant has the right to implead or join174 additional defendants into the action. 264 Third party practice proceeds much like the original complaint and answer process, but with its own nomenclature. The defendant impleading a defendant is called a “thirdparty plaintiff”175 and the newly joined defendant is a “third-party defendant.”176 The defendant may file a motion to dismiss or answer to the third-party complaint, and may assert counterclaims, crossclaims, and their own “fourth-party complaints.”

4. Amending Pleadings The pleadings control the issues that are, and are not, in the case. Parties are not irrevocably bound by the pleadings, however, and may request leave to amend them. In general, courts liberally allow amended pleadings “when justice so requires,” and only deny a motion to amend if amendment would prejudice other parties.177 “Prejudice”178 in this sense means that the delay in including the new allegations in the complaint has caused harm to the other party, not that the other party is disadvantaged by the new allegations. 266 The only complex aspect of amendment involves the statute of limitations179—the statute that sets the last date by which a complaint must be filed. If the original complaint was filed within the statute of limitations period but the amendment is filed after the period has “run” or lapsed, the court must determine whether the amended complaint relates back to the original complaint—is deemed to have been filed on the date of the original complaint. 267 When an amended complaint seeks to add a new claim against a party already named in the original complaint, the amended complaint will relate back if the new claim arises out of the same transaction or occurrence set out, or attempted to be set out, in the original complaint.180 268 If the amended complaint seeks to add a new party, the test for relation back is much more difficult to satisfy. The new claim must arise out of the same transaction or occurrence set out, or attempted to be set out, in the original complaint and two additional things must occur within 90 days of the filing of the original complaint: 1) the new defendant must receive notice of the claims and 2) the new defendant must know that, but for a mistake in identity by the plaintiff, the new defendant would have been included in the original complaint. 265

IV. Case Management 269

As a case proceeds through the litigation process, the judge who is randomly assigned to the case may conduct conferences with the parties’ lawyers and may issue orders set-

174 verklagen / mettre en cause / inclusión de partes adicionales a un pleito que ya ha comenzado / citare in giudizio o chiamare in causa altre parti nel processo. 175 Dritt-Kläger / demandeur tiers / demandante contra tercero / convenuto che chiama in giudizio un terzo (assumendo nei confronti di quest’ultimo la posizione di attore). 176 Dritt-Beklagter / défendeur tiers / tercero demandado o tercera demandada / convenuto terzo chiamato. 177 Fed. R. Civ. P. 15. 178 beeinträchtigen / porter préjudice / perjudicar / arrecare pregiudizio, avere conseguenze pregiudizievoli. 179 Verjährungsfrist / délai de prescription / ley de prescripción / legge sulla prescrizione. 180 Fed. R. Civ. P. 15(c).

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IV. Case Management ting the deadlines and other parameters to control the orderly operation of the action.181 The judge must enter an initial Case Management Order182 near the beginning of the case establishing, among other things, deadlines for completing discovery, adding new parties, and amending the pleadings. The initial case management order typically extends through discovery and summary judgment, but does not set the trial date (because the deadlines change so often that it is not practical to try to set a trial that early in the process). Many judges will then set another conference after discovery is completed to map out the remaining activities until the time of trial. Depending on the complexity and duration of the case, the judge may set additional pretrial conferences. Shortly before trial, the judge will typically hold a final pretrial conference.183 At that 270 final conference, the judge will discuss the witnesses and exhibits the parties plan to offer at trial, procedures for the jury, if the case is a jury trial case, and other trial logistics.

1. Settlement Settlement is a frequent topic of discussion at most pretrial conferences. The judge 271 may ask the lawyers to describe any settlement negotiations that have already occurred and to give their views on settlement prospects. The judge may offer to help mediate the settlement discussions. Many judges are reluctant to get involved in the settlement discussions, however, for fear that they cannot perform that function without creating the appearance that they are no longer neutral or unbiased—particularly in non-jury proceedings where the judge will be the ultimate fact finder. Accordingly, many judges will offer to assign a magistrate judge to mediate settlement discussions or to refer the case to a private mediator. Additionally, many courts have local rules that require the parties to participate in 272 some form of alternative dispute resolution, or A.D.R.,184 at some specified point in the litigation process. Common forms of A.D.R. are mediation (in which a professional mediator, who has no power to make rulings or decide a winner and a loser, facilitates settlement discussion between the parties), non-binding arbitration185 (in which the parties conduct a very short trial—often less than one day with perhaps one witness per side—and the arbitrator makes a non-binding ruling that may help the parties understand their litigation risks and be more likely to compromise), and early neutral evaluation (where the parties present some threshold issue to a neutral with extensive experience who provides a sense of how a court would be likely to rule, again to help the parties understand their litigation risks and be more likely to compromise). a) Discovery The majority of the time and money in most complex federal court litigation is in- 273 curred in the discovery process. Discovery in U.S. federal courts, and in most U.S. state courts, is fundamentally different from discovery in most other countries. Discovery is quite expansive, and is primarily conducted with very little judicial involvement. Federal

181 Fed.

R. Civ. P. 16. Prozessführungsverfügung / ordonnance initiale de gestion de l’instance / orden inicial sobre la gestión del caso / ordinanza iniziale sulla gestione (della trattazione) della causa. 183 letzte Sitzung vor der Hauptverhandlung / dernière réunion préliminaire / última reunión preliminar / ultima riunione preliminare (delle parti prima del giudizio). 184 außergerichtliche Streitbeilegung / modes alternatifs de résolution des conflits / resolución extrajudicial / metodi alternative di risoluzione delle controversie. 185 unverbindliche Schiedsgerichtsbarkeit / arbitrage non-exécutoire / arbitraje no vinculante / arbitrato non vincolante. 182 erste

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Chapter 2 Federal Civil Litigation courts have two primary categories of discovery procedures: automatic disclosures186 and discretionary discovery187 devices. This section will discuss both types of discovery. i. Discovery Planning Conference With one narrow exception discussed below, the parties may not conduct any discovery until they have conducted a discovery planning conference.188 At that conference, the parties meet and try to reach agreement about the parameters of the discovery process, such as how long discovery will last, whether to use the default limits on the number of interrogatories and depositions, whether discovery will be phased in any manner. 275 One topic of increasing importance in the discovery conference is the manner of handling electronic discovery. Electronically Stored Information, or E.S.I.,189 is now often the most expensive and problematic aspect of discovery. For larger, more complex cases, parties often hire E.S.I. consultants who collect and process the E.S.I. At the discovery conference, the parties discuss the format for production of E.S.I. (such as pdf, jpeg, tiff, etc.), whether they will produce metadata (the hidden data about files that many programs store, such as the date of creation and the author), the identity of the record custodians whose files will be searched, and the manner and terms for searching. The parties then file a discovery report190 with the court reporting on their agreements and their positions on issues upon which they could not agree. Most courts have forms for the discovery report on their websites. 274

ii. The Scope of Discovery All discovery in federal courts is governed by one common definition of the scope of discovery. Parties may discover any documents or information that are: 1) not privileged; 2) relevant to any party’s claims or defenses; and 3) proportional to the needs of the case (which entails balancing the expected benefits and burdens of the discovery, using factors set forth in Rule 26(b)(1)).191 277 The rules also limit discovery that is unduly burdensome, harassing, or cumulative.192 A party believing that an individual discovery request is problematic may object to the individual request. A party seeking broader protection from certain kinds of discovery may seek a protective order193 from the court.194 276

iii. Privileges 278

A variety of privileges shield certain information from discovery. Although there are a variety of privileges that apply in very specific narrow circumstances, the two most

186 automatische Aufdeckungen / divulgation automatique / divulgaciones automáticas / esibizione o divulgazione automatica. 187 frei wählbare Offenlegungsmittel / divulgation discrétionnaire / divulgaciones voluntarias / esibizione o divulgazione discrezionale o volontaria. 188 Fed. R. Civ. P. 26(f). 189 elektronisch gespeicherte Informationen / informations enregistrées sous forme éléctronique / información almacenada electrónicamente / informazioni archiviate elettronicamente. 190 Offenlegungsbericht / rapport de divulgation / reportaje sobre la exhibición de pruebas / rapporto o relazione di esibizione o divulgazione probatoria. 191 Fed. R. Civ. P. 26(b)(1). 192 Fed. R. Civ. P. 26(b)(2). 193 Schutzverfügung / mesure protectrice / orden de protección / provvedimento cautelare-protettivo. 194 Fed. R. Civ. P. 26(c).

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IV. Case Management common privileges in federal court are the attorney-client privilege195 and the protection for trial preparation materials.196 b) Attorney-Client Privilege Communications between lawyers and their clients are privileged and not discover- 279 able. Although the precise elements of the privilege vary from jurisdiction to jurisdiction, they generally follow a similar pattern, covering communications between a lawyer and client made in confidence for the purpose of obtaining legal advice. If the privileged information is disclosed to third parties the privilege will be waived for that information, and potentially for all information in the same subject matter. c) Trial Preparation Materials The protection for trial preparation materials, sometimes called work product, is 280 found in Rule 26(b)(3) and is consistent across all the federal courts.197 It protects documents (but not oral communications) prepared in anticipation of litigation by a party or its representative (and thus does not require a lawyer’s involvement). This protection is not absolute—if an opposing party has a substantial need for the information and cannot obtain the equivalent information from another source, it may obtain the trial preparation materials. In that circumstance, the producing party may redact any legal impressions from the document. For example, if a party took photographs of the scene of an accident, and then time and weather changed the scene before an opposing party could examine the scene, the opposing party could likely obtain the photographs. d) Privilege Log A party who withholds a document on the basis of privilege must notify the request- 281 ing party and describe the document in sufficient detail that the requesting party and the court can assess the privilege assertion (but without actually disclosing the privileged information). The most common mechanism for providing this information is a privilege log, a document that lists each privileged document and provides for each document information like the date it was created, the author, all recipients, a description of the document, and the privilege or privileges asserted. The explosion in E.S.I. has caused an attendant increase in the frequency of inadver- 282 tent production of privileged documents—in the gigabytes or terabytes of E.S.I. that parties produce, it is common to miss some privileged documents. The Rules contain a provision, sometimes referred to as a “claw back” provision,198 designed to allow a party to request that an opposing party return an inadvertently produced privileged document.199 Once a party invokes the provision, opposing parties must return, destroy, or sequester the allegedly privileged documents. If they believe the documents are not actu-

195 anwaltliche Schweigepflicht / secret professionnel de l’avocat envers son client / secreto profesional del abogado / privilegio del rapporto avvocato-cliente [lit.], nel senso di relazione privilegiata, tutelata dal segreto professionale dell’avvocato. 196 Schutz der Materialien zur Prozessvorbereitung / protection des documents préparatoires à l’instance / protección de documentos preparados en anticipación a un pleito o litigio judicial / tutela privilegiata dei documenti strumentali alla preparazione del dibattimento. 197 Fed. R. Civ. P. 26(b)(1). 198 Rückforderungsklausel / disposition de récupération / cláusula de recuperación de documentos que fueron entregados inadvertidamente / disposizione revocatoria, disposizione di recupero di documenti riservati prodotti per errore o inavvertitamente. 199 Fed. R. Civ. P. 26(b)(5)(B).

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Chapter 2 Federal Civil Litigation ally privileged, they may petition the court to determine the privilege status for the documents.

2. Automatic Disclosures 283

Although the majority of discovery in federal court occurs by affirmative request by the parties, the Rules also require each party to disclose certain information without a triggering request from an opposing party, either on dates set by the court or the default dates established in the Rules. There are three automatic disclosures, the initial disclosure, the expert disclosure, and the pretrial disclosure. a) Initial Disclosure

In the initial disclosure,200 each party discloses the fact witnesses and documents that the party may use to support its own claims or defenses. There is no obligation to disclose witnesses or documents that are adverse to the disclosing party, although that information may often be obtained through one of the affirmative discovery devices. Additionally, each party must disclose information about insurance that might be available to cover claims against that party and information about the damages that party seeks (a calculation of the amount and the supporting documents).201 285 The initial disclosure occurs either 14 days after the parties conduct their discovery conference under Rule 26(f) or on the date set by the judge, if the judge sets a date in the case management order. The consequence of failing to disclose a witness, document, or other piece of information required in the initial disclosure is that the party may not use that witness, document, or information at trial.202 284

b) Expert Disclosure The expert disclosure is designed to provide opposing parties with information about the expert opinions the party intends to offer. In the U.S. federal courts, fact or percipient witnesses203 may testify about their personal observations related to the dispute being litigated. Only expert witnesses may provide opinion testimony.204 287 The nature of the disclosure depends on the nature of the expert. The classic expert is one that a party engages to provide opinions for the pending litigation. For such witnesses, each party must disclose an expert report.205 An expert report is a document signed by, and typically authored by, the expert which describes: the expert’s opinions; the bases for those opinions; the expert’s qualifications, prior testimony, and publications; and the rate that the expert charged for the opinions.206 288 Sometimes a party intends to offer testimony from an expert who has not been engaged in the normal fashion. A treating physician is a common example—the physician treated the plaintiff and has information and opinions about the plaintiff ’s medical condition, but the plaintiff did not separately engage the physician as an expert witness. For such experts, the party must disclose a summary of the expert’s opinions, but not a full expert report. 286

200 Aufdeckung

zu Beginn des Prozesses / divulgation initiale / divulgación inicial / divulgazione iniziale. R. Civ. P. 26(a)(1). 202 Fed. R. Civ. P. 37(c). 203 Tatsachen- oder Wahrnehmungszeugen / témoins factuels / testigo de los hechos / testimone del fatto. 204 Meinungsaussage / témoignage d’opinion / testimonio de opinión / testimonianza resa in forma di opinione. 205 Expertenbericht / rapport d’expertise / dictamen pericial / consulenza tecnica. 206 Fed. R. Civ. P. 26(a)(2). 201 Fed.

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IV. Case Management Finally, parties sometimes use consulting experts—experts who advise the party or 289 the party’s attorney about issues in the case but who will not testify at trial. The rules shield such experts from discovery altogether. 290

Practice Tip A common strategy is to engage all experts as consulting experts initially. At the appropriate time, when expert disclosures are due, the lawyer can then convert those experts the lawyer intends to call at trial into testifying experts, and make the appropriate disclosures. Experts who the lawyer decides not to call, for strategic or other reasons, remain consulting experts shielded from discovery.

Expert disclosures are due 90 days before the trial date, or at such other time set by 291 the court. As with the initial disclosure, the sanction for failing to properly disclose an expert or an opinion is exclusion of the expert or opinion.207 c) Pretrial Disclosure The final disclosure is the pretrial disclosure, in which each party discloses the wit- 292 nesses, exhibits, and deposition testimony the party intends to use at trial. In order to account for the overly protective listing of every potential witness and exhibit, the Rule requires that parties disclose separately the witnesses and exhibits they “expect” to use and those they “may” use.208 Pretrial disclosures are due 30 days before the trial date, or at such other time set by 293 the court. As with the other disclosures, the sanction for failing to properly disclose a witness, exhibit, or deposition testimony is exclusion.209

3. Discretionary Discovery In addition to the automatic disclosures, the Rules establish a number of discre- 294 tionary discovery devices a party may use to obtain information related to the dispute. The following sections describe those devices. a) Interrogatories The Rules authorize parties to serve interrogatories on each other.210 An interrogato- 295 is simply a written question. Interrogatories may pertain the facts in dispute, or may inquire about an opposing party’s contentions about how the law applies to the facts, sometimes called “contention interrogatories.”212 Each party may serve up to 25 interrogatories on each other party. In limited circumstances, the responding party may refer the requesting party to doc- 296 uments in lieu of answering an interrogatory. A party may only do so, however, when the responsive information is contained in the documents that the responding party identifies, and the burden of finding the responsive information is equal for both parties.213 ry211

207 Fed.

R. Civ. P. 37(c). R. Civ. P. 26(a)(3). 209 Fed. R. Civ. P. 37(c). 210 Fed. R. Civ. P. 33. 211 Beweisfrage / question de démonstration / interrogatorio / interrogatorio, interrogazione scritta. 212 streitige Beweisfrage / question sur les faits litigieux / interrogatorio contra la posición legal de la otra parte / interrogatorio diretto ad accertare su quale fondamento giuridico ovvero su quali premesse teoriche o su quali fatti si basano le convinzioni della controparte. 213 Fed. R. Civ. P. 33(d). 208 Fed.

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Chapter 2 Federal Civil Litigation 297

Interrogatories are served214 upon opposing parties (typically by email), but are not filed215 with the court. They may be served at any time after the parties’ discovery conference and at least 30 days before the end of the discovery period. The recipient must then respond within 30 days (although extensions of time are common). The response may include objections to the interrogatories interposed by the lawyers and responsive information (provided by the party but typically drafted by the lawyers).

298 Practice Tip Because interrogatories are drafted by lawyers and responded to—often quite carefully—by lawyers, they can consume significant resources without commensurate gain. Accordingly, interrogatories are generally most useful for obtaining very specific pieces of information that a witness would be unlikely to recall during a deposition.

b) Requests for Inspection The Rules authorize parties to serve requests for inspection216 of documents or things on each other.217 Most commonly, parties are seeking access to the documents relevant to a dispute, and requests to inspect such documents are often referred to as “document requests.”218 If the dispute involves a defective product, a piece of land, or something else with physical existence, parties may inspect the product, property, or thing under this rule. There is no limit on the number of requests to inspect that a party may propound. 300 Like interrogatories, requests to inspect are served upon opposing parties but are not filed with the court. The recipient has two obligations: to serve a response within 30 days (although extensions of time are common); and to make the responsive, nonprivileged documents or things available for inspection. The timing constraints for document requests are different from the other discretionary discovery devices—the rules authorize early service of document requests before the parties’ discovery conference. However, the point of this provision is not to accelerate the document exchange process, but rather to identify potential problems with the document exchange process and allow the parties to address those potential problems themselves or bring them to the court’s attention. Accordingly, the response for such early document requests is not due until 30 days after the parties’ discovery conference. They must be served, at the latest, so that the response is due before the end of the discovery period. The response may include objections to the requests to inspect, but the responding party must state whether it is withholding any documents on the basis of the objections. 301 After providing the response to the requests, the responding party may either provide the requesting party with copies of responsive documents or make those documents available for inspection. The document exchange or inspection typically occurs at a mutually convenient time, but typically not at the same time as service of the response. Parties are obligated to produce all nonprivileged responsive documents in their possession,219 custody,220 or control.221 This important phrase encompasses not only the doc299

214 zugestellt

/ signifiées / emplazamiento / notificato. / déposées / presentado / depositato. 216 Anfrage auf Untersuchung anderer Beweismittel / requête en inspection / solicitud de inspección / richiesta di ispezione [lit.], richiesta di esame o controllo di oggetti o documenti. 217 Fed. R. Civ. P. 34. 218 Anfrage auf Akteneinsicht / demandes de documents / solicitud de documentos / richiesta di documenti [lit.], richiesta di produzione di documenti. 219 Besitz / possession / propiedad / possesso. 220 Gewahrsam / garde / posesión / custodia. 221 Kontrolle / contrôle / control / controllo. 215 eingereicht

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IV. Case Management uments in the party’s files, but also: documents held by a party’s agent or affiliate, documents on remote servers or in the cloud; documents on employees’ laptops, smart phones, and personal computers; etc. In terms of organizing the documents, the responding party has two choices. It may 302 make them available for inspection organized in the manner they are ordinarily kept (i.e., there is our file room, please look for yourself), or the responding party may identify the documents responsive to each request. 303

Practice Tip The most common method for producing documents is to organize them by response. The responding party bates labels the documents (puts a uniquely identifying number on each page of each document) and informs the requesting party which documents are responsive to each request. The Rules contemplate that the responding party bears the cost of gathering the responsive documents, and the requesting party pays the copying costs. If the parties have roughly equal quantities of documents, however, they often agree that each party will pay the cost of copying its responsive documents.

c) Requests for Admission The third form of written discovery is requests for admission,222 which asks an op- 304 posing party to admit or deny the matter set forth in the request.223 Requests for admission may relate to the facts in the case, the application of the law to those facts (similar to a contention interrogatory), or the authenticity of a document (to avoid having the record custodian appear and testify to the authenticity of the document at trial). Requests for admission may be served after the parties’ discovery conference, and as late as 30 days before the discovery deadline. The response to a request for admission is due 30 days after service of the request. 305 The responding party may admit the request, deny the request, or state that after reasonable investigation the responding party is unable to admit or deny the request. Requests for admission are very powerful, because any matter admitted is conclusive- 306 ly established, and cannot be controverted at trial. Contrast this with an answer to an interrogatory or a statement in a deposition (discussed below), which may be introduced at trial, but which the party making the statement may try to explain away to the jury (e.g., “I misspoke,” “I was confused,” “I have just now remembered . . .”). 307

Practice Tip Any matter not denied within 30 days is deemed admitted (absent an extension of time to respond). Thus, careful attorneys will immediately calendar the due date for requests for admission so as not to inadvertently admit them.

A party making an admission—by failure to respond timely or by affirmative admis- 308 sion—may seek leave of court to withdraw the admission.224 The judge has discretion to allow or deny the withdrawal, and will typically consider prejudice to other parties caused by the withdrawal. The sanction for an improper denial is that the party making the request may recover the costs and attorney’s fees it incurred in proving the fact that was improperly denied.

222 Zugeständnis / demande d’admission / solicitud de admisiones / richiesta di ammissione (finalizzate ad ottenere dall’avversario la conferma di determinati fatti). 223 Fed. R. Civ. P. 36. 224 Fed. R. Civ. P. 36(b).

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Chapter 2 Federal Civil Litigation d) Depositions The most powerful discovery tool is the deposition.225 A deposition is a procedure where a party or witness is required to appear to be questioned orally by the attorneys for the parties.226 The entire procedure is captured by one means or another—sometimes by stenographer or court reporter227 and sometimes by videographer. Parties may take depositions any time between the parties’ discovery conference and the end of discovery. Expert depositions often occur in a separate phase after the completion of fact discovery. 310 The reason that depositions are so powerful is that they are often an attorney’s only opportunity to speak directly with an opposing party, without filtering by the party’s attorney (as occurs with interrogatories). Depositions are initiated by service of a notice of deposition,228 a simple form that identifies: the witness; the date, time, and location of the deposition; and the manner of recording. For nonparties, the person noticing the deposition must also serve a subpoena229 on the witness, as discussed below. Each side of the case is limited to ten depositions lasting up to seven hours each. 311 Questioning at a deposition proceeds much like trial. After the witness takes an oath to tell the truth, the lawyer noticing the deposition starts asking questions. The lawyer representing the witness may object to questions, but is required to do so in a non-suggestive manner (i.e. a manner that does not coach the witness how to respond). The witness then generally proceeds to respond to the question even if there is an objection— the merits of the objection are not decided, if at all, until the time that a party offers the deposition testimony into the record for trial or a motion. The lawyer representing the witness may not instruct the witness not to answer a question except to protect privileged information or in other very limited circumstances.230 The lawyer for each party, including the party being deposed, has an opportunity to ask the witness questions. 309

312 Example Typically, the lawyer representing the witness does not ask many, or even any, questions of the witness. The reason for this is that the lawyer has other means of obtaining information or sworn testimony from that witness. For example, if the lawyer needs information, the lawyer can simply ask the witness off the record. Likewise, if the lawyer needs a statement from the witness to support or oppose a motion, the lawyer may prepare an affidavit for the witness. Thus, a lawyer typically has very little need to ask question on the record during a deposition. If, however, the witness has given misleading or inaccurate testimony, the lawyer for that witness will frequently ask questions to address such testimony (e.g. “What did you mean when you testified earlier that . . .”). Additionally, if the lawyer has concerns that the witness might not be available to testify at trial, the lawyer will question the witness so as to be able to use the transcript at trial.

313

A party’s ability to use a deposition transcript or recording at trial depends on the circumstances. Assuming the deposition was properly noticed, a party may always use a deposition transcript for impeachment.231 Thus, if the witness is in court testifying on the witness stand and makes a statement that is inconsistent with the witness’s testimony 225 eidliche Aussage / déposititon sous serment / declaración bajo juramento / deposizione (fatta sotto giuramento durante il processo), testimonianza (resa sotto giuramento ma non in sede giudiziale), deposizione testimoniale. 226 Fed. R. Civ. P. 30. 227 Stenographen des Gerichts / greffier / taquígrafo de tribunal / cancelliere, stenografo del tribunale. 228 Ankündigung der eidlichen Aussage / notification de déposition / deposiciones / avviso o preavviso di deposizione. 229 Vorladung / citation / citación judicial / citazione o intimazione a comparire in giudizio come testimone. 230 Fed. R. Civ. P. 30(c)(2). 231 Infragestellung der Glaubwürdigkeit / récusation du témoin / utilización de la transcripción para poner en duda la credibilidad del testigo / utilizzo della trascrizione di una deposizione per attaccare la testimonianza di un teste.

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IV. Case Management at the deposition, a lawyer may ask the witness about the prior deposition testimony, casting some doubt as to the witness’s credibility. If the witness is a party or is unavailable (dead, ill, outside the court’s subpoena power, etc.), however, the deposition transcript may be used as substantive evidence—to help prove a fact relevant to a claim or defense in the case—as well as for impeachment.232 e) Depositions of Organizations When a party is a corporation or other large entity, it can be difficult to find the right 314 witness to testify about a topic. Rule 30(b)(6) provides a very important tool to address this uncertainty.233 Rather than serving a deposition notice for a particular individual, a party may serve a Rule 30(b)(6) notice on the corporation, with a list of the topics about which the serving party wishes to ask questions. The corporation must then designate a person or persons to testify as to the topics. That person then testifies not to his or her own personal knowledge, but to the collective knowledge of the entire corporation. If no person already has that collective knowledge, the corporation must educate the representative, having him or her review documents and interview other people so as to be prepared to provide the collective information held by the corporation. The representative’s testimony is then binding on the corporation. f) Physical or Mental Examinations The least frequently used discretionary discovery device is the provision allowing a 315 party to arrange for an examination of another party’s physical or mental condition, when that condition is “in controversy.”234 Thus, if the plaintiff is claiming a back injury, the defendant would be able to arrange for a doctor to examine the plaintiff ’s back. Unlike the other discovery devices, examinations of another party require a motion 316 and court order, not a simple request. However, when the examination is plainly appropriate, parties often arrange the examination by stipulation. g) Duty to Supplement The Rules create an ongoing duty to supplement disclosures and discovery respons- 317 es.235 This duty not only extends to a response that the party subsequently learns was incorrect at the time it was made, but also to a response that was correct at the time but has subsequently become incorrect or incomplete. h) Discovery of Nonparties Parties are required to respond to interrogatories or document requests and are re- 318 quired to appear when served with a deposition notice. Nonparties are not bound by such papers, however, and may only be compelled to participate in discovery by subpoena.236 A subpoena is a form of process like a summons,237 and must be served in the same manner—such as personal or abode service238—as discussed above.

232 Fed.

R. Civ. P. 32. R. Civ. P. 30(b)(6). 234 Fed. R. Civ. P. 35. 235 Fed. R. Civ. P. 26(e). 236 Vorladung / citation / citación judicial / intimazione a comparire in giudizio; Fed. R. Civ. P. 45. 237 Ladung / assignation / notificación de una citación judicial / citazione in giudizio. 238 Wohnungszustellung / signification à domicile / entrega de la citación al domicilio / notificazione nella residenza, dimora o domicilio. 233 Fed.

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Chapter 2 Federal Civil Litigation 319

Subpoenas are limited to two activities: producing documents and appearing for testimony. In other words, a party may not use a subpoena to obtain answers to interrogatories or requests for admission. The location of performance of the subpoena is controlled by the witness’s location, not the location of the action. Thus, for example, a witness will be required to produce documents or appear and testify within 100 miles of the witness’s home or workplace, which might be quite distant from the courthouse where the case is pending. i) Discovery Involving Foreign Parties The procedures described above apply to discovery between two U.S. parties, generally following, among other things, Federal Rules of Civil Procedure 26 and 34.239 When discovery involves a legal or natural person that is a citizen of another country, the analysis becomes more complicated. Such discovery may be subject to treaties between the two countries, such as the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters.240 For example, a party may seek documents from a foreign person by a device called letters of request or letters rogatory. Such requests are typically channeled through the United States Department of State. The discovery may also be limited by the other country’s laws. In some countries, the taking of evidence under unauthorized procedures may subject the interrogator to severe—even criminal—sanctions. Before conducting discovery involving foreign parties, therefore, careful practitioners consult U.S. law and procedures, international treaties, and the foreign country’s laws and procedures. And finally, for a civil lawyer making a request to a U.S. court for help in obtaining evidence for a non-U.S. proceeding taking place outside of the U.S., the use of letters rogatory has been replaced in large part by applications under 28 U.S.C. § 1782.241 Section 1782 proceedings will be further discussed in Chapter 4, “U.S. International Arbitration Law and Practice.” j) Discovery Enforcement

320

Rule 37 contains the primary provisions for enforcing discovery obligations.242 If a party is not satisfying its discovery obligations, an opposing party may seek an order compelling performance of those obligations.243 Before filing a motion to compel, however, a party must meet and confer244 with the recalcitrant party to try to resolve the dispute without court involvement. This meet and confer requirement is a regular component of the discovery dispute process. If the meet and confer is unsuccessful, the party may the file a motion to compel. The judge has broad discretion when ruling on a motion to compel (and indeed throughout the discovery process). The prevailing party will be entitled to recover the attorney’s fees it incurred in connection with the motion. The recovery of attorney’s fees for the prevailing party is another common theme of the discovery dispute process. 239 Fed.

R. Civ. P. 26, 34. Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, Mar. 18, 1970, 23 U.S.T. 2555, U.N. No. 12140. 241 28 U.S.C.A. § 1782. 242 Fed. R. Civ. P. 37. 243 Fed. R. Civ. P. 37(a). 244 sich treffen und mit der Gegenpartei austauschen / rencontrer et échanger avec la partie adverse / reunión con la parte contraria / incontrarsi e conferire con la controparte. 240 Hague

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V. Dismissals and Summary Judgment If the recalcitrant party still fails to comply after the court has issued an order compelling performance, the party seeking compliance may file a motion for sanctions. Available sanctions include precluding the recalcitrant party from offering evidence on affected issues, deeming certain facts established, or even as a last resort deciding the entire case against the recalcitrant party.245 Some discovery conduct results in automatic sanctions or consequences, without the need to seek a motion to compel first. For example, if a party fails to appear for its deposition after proper notice, the party is immediately subject to sanctions.246 Likewise, the sanction for failing to respond to requests for admission is that the requests are automatically deemed admitted.247 The other source of sanctioning authority for discovery transgressions is Rule 26(g), which contains a signature requirement similar to that found in Rule 11 for other court papers.248 An attorney signing a discovery request, response, or disclosure certifies to the court that it is well grounded in fact and law and not made for an improper purpose such as harassment, delay, or causing expense to another party. Before leaving this focus on discovery, it is worth noting that U.S. litigation may make discovery requests upon parties in other sovereign jurisdictions, and foreign parties may use discovery in the U.S. Most often, when U.S. litigation seeks discovery of facts in a foreign jurisdiction, the party files a letter of request as per Federal Rules of Civil Procedure 26 and 34.

321

322

323

324

V. Dismissals and Summary Judgment Fewer than two percent of the cases filed in federal court proceed all the way through 325 trial. The majority that survive an early motion to dismiss under Rule 12 are resolved through dismissal (often as part of a settlement) or by motion for summary judgment. This section discusses both.

1. Dismissals a) Voluntary Dismissals A plaintiff has a limited right to voluntarily dismiss the action the plaintiff has com- 326 menced. Sometimes, the plaintiff realizes almost immediately that there are serious flaws in the case, and the plaintiff decides not to continue. A plaintiff may voluntarily dismiss a case unilaterally, simply by filing a notice and without court involvement or approval or the consent of the defendant, as long as the defendant has not yet filed an answer or motion for summary judgment.249 Voluntary dismissal is most common, however, following settlement. The parties do 327 so by stipulation, again obviating the need for court approval.250 328

Practice Tip Although court approval is not required for a stipulated dismissal following settlement, such a dismissal ends the court’s jurisdiction over the dispute. Parties that want the court to retain the ability to enforce the terms of the settlement agreement often file a motion for voluntary dismissal, along with a proposed stipu-

245 Fed.

R. Civ. P. 37(b). R. Civ. P. 37(d). 247 Fed. R. Civ. P. 37(c)(2). 248 Fed. R. Civ. P. 26(g). 249 Fed. R. Civ. P. 41(a)(1)(A)(i). 250 Fed. R. Civ. P. 41(a)(1)(A)(ii).

246 Fed.

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Chapter 2 Federal Civil Litigation lated order that states that the court retains jurisdiction to enforce the settlement agreement. If the court enters such an order, the parties can return to the court and ask the judge to enforce the order, without the need to commence an entirely new action for breach of the settlement agreement.

329

A plaintiff wishing to dismiss an action after the time for dismissal as of right must file a motion to dismiss if the defendant will not stipulate to dismissal. The court has discretion to grant the motion, and may impose conditions on the dismissal such as payment of fees that the defendant has incurred.251 b) Involuntary Dismissals

330

A defendant may also file a motion for involuntary dismissal in limited circumstances. If the plaintiff has failed to prosecute the case—that is, has failed to do the things required to advance the case toward trial or resolution—or has failed to obey the Federal Rules of Civil Procedure or court orders, the court may grant an involuntary dismissal against the wishes of the plaintiff.252 Such dismissals are not common.

2. Summary Judgment The purpose of a trial is to resolve disputes of fact, primarily through hearing conflicting testimony from witnesses and assessing their credibility. The judge determines the applicable law based on legal precedent, without the need to hear witness testimony. Accordingly, trial is only necessary when the facts are in dispute—if the facts are not disputed, then the court can determine the outcome without the need for a trial. 332 The procedure for asking the judge to adjudicate the case without trial is called summary judgment.253 The court will grant summary judgment when there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law.254 Both plaintiffs and defendants may seek summary judgment, and may do so as to the entire case, single claims or defenses, or even individual facts. 333 In contrast to motions to dismiss under Rule 12, which are primarily based on allegations in the pleadings, motions for summary judgment are based on record evidence. Thus, a party seeking or opposing summary judgment may not rely on allegations in the pleadings or assertions in a brief,255 but instead must submit documents, affidavits, deposition testimony, or other similar evidence for the court’s consideration. A party may also base a motion for summary judgment on the opposing party’s lack of record evidence—essentially arguing to the court that the plaintiff cannot prove its case or the defendant cannot prove its defense. The party who will have the burden of proof at trial must then come forward with sufficient evidence that, if believed by the jury or judge at trial, would enable the party to win.256 334 For example, if a plaintiff filed an action for breach of contract, the plaintiff would have to prove that the parties formed a contract in order to prevail at trial. A defendant could move for summary judgment without submitting any record evidence by arguing that the plaintiff has no evidence that the parties ever formed a contract. To avoid summary judgment, the plaintiff would need to provide record evidence of contract forma331

251 Fed.

R. Civ. P. 41(a)(2). R. Civ. P. 41(b). 253 Urteil im Schnellverfahren / jugement sommaire / petición de sentencia en procedimiento sumario / giudizio sommario. 254 Fed. R. Civ. P. 56(a). 255 The nature and function of briefs will be discussed in detail in Chapter 3, “Civil Procedure Brief Drafting Strategy.” 256 See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). 252 Fed.

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VI. Trial tion, such as by submitting a contractual document or by submitting an affidavit or deposition testimony attesting to the formation of the contract. When reviewing summary judgment papers, the court will construe all disputed evi- 335 dence in favor of the party who is not moving for summary judgment, and will draw inferences from such evidence in favor of that non-moving party.257 To create a genuine dispute of fact, the non-moving party must however submit more than “a mere scintilla” of evidence, which is to say that the non-moving party must submit enough evidence to support a jury verdict in the non-moving party’s favor.258

VI. Trial Only about 1.2 % of the cases filed in federal courts make it all the way through trial, 336 so trial has become an unusual occurrence for most federal litigators. For those cases that do proceed to trial, there are two primary options: a jury trial, in which the jury makes the factual findings and enters a verdict;259 or a non-jury or bench trial;260 in which the judge is the fact-finder and enters a judgment.261

1. Jury Trials a) The Right to a Jury The right to a trial by jury is one of the fundamental rights of the United States civil 337 litigation system. The right is embodied in the “Bill of Rights”262 as the Seventh Amendment263 to the United States Constitution, which provides: In suits at common law, where the value in controversy shall exceed twenty dollars, 338 the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any court of the United States, than according to the rules of the common law.264 This language does not create a new right, but rather “preserves” the right as it existed 339 under common law in 1791, when the Seventh Amendment was ratified.265 Thus, it may be necessary to conduct historical analysis to determine whether a particular claim is subject to the right to a jury trial. The general principle, however, is relatively straightforward.

257 See

Tolan v. Cotton,134 S.Ct. 1861, 1863–66 (2014). See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). 259 Entscheidung / verdict / veredicto / verdetto. 260 Einzelrichterprozess / procès sans jury / juicio sin jurado / processo senza giuria, processo dinanzi al giudice togato monocratico. 261 Urteil / jugement / sentencia / sentenza. 262 Grundrechtekatalog / déclaration des droits / declaración de derechos / « Carta dei diritti » [lit.], espressione che nell’ordinamento statunitense indica i primi dieci emendamenti della Costituzione federale che garantiscono le libertà e i diritti fondamentali dei cittadini. 263 siebter Zusatzartikel / septième amendement / séptima enmienda / settimo emendamento (della Costituzione degli Stati Uniti). 264 U.S. Const. amend. VII. 265 See Fed. R. Civ. P. 38(a). 258

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Chapter 2 Federal Civil Litigation i. Claims “At Law” versus Claims “In Equity” The basic distinction governing the analysis of the right to a jury trial is whether the claim is one that was traditionally “at law” or “in equity.”266 Until the Federal Rules of Civil Procedure were enacted in 1938, federal courts were divided into courts of law267 and courts of equity. Courts of equity adjudicated claims for equitable relief,268 like claims for injunctions, declaratory judgments, restitution, and accountings. Courts of law adjudicated claims for money damages, such as tort and breach of contract claims. Traditionally, courts of law used juries whereas courts of equity did not.269 341 This distinction is a very helpful guidepost today for determining which claims include the right to a jury trial. If the claim seeks money damages, it will likely entitle the parties to a jury, if the party so chooses. If the claim seeks equitable relief, the parties usually may not request a jury, and the case will likely be tried by a judge. 340

ii. Claims Not Existing in 1791 Many claims that parties bring in federal court in modern times did not exist in 1791, at the time the Seventh Amendment “preserved” the right to a jury trial. For example, virtually all claims based on federal statutes, such as federal civil rights claims270 did not exist in 1791. For such claims, it is not possible to determine whether they would have been tried before a judge or jury in 1791. 343 The Supreme Court271 has developed an analysis to evaluate such claims for a jury right. Courts will determine the common law claim from 1791 most analogous to the statutory claim, and will also consider whether the relief sought is more like money damages or equitable relief. If the analogous 1791 common law claim afforded the parties a right to a jury trial, the new statutory claim is more likely to provide the same right. Likewise, if the relief is more like money damages, the statutory claim is more likely to provide a right to a jury trial.272 342

iii. Complaints with Legal and Equitable Claims 344

Sometimes, a complaint contains multiple claims, some of which include a right to a jury trial, and some of which do not. In that instance, the court will bifurcate273 the case into two phases, and will have the jury hear the jury trial issues first, then the judge will hear the remaining claims second. This order is important, because the opposite order

266 Aufgrund des Rechts der Gerechtigkeit / en équité / la ley de equidad / secondo l’“equity law“, secondo le regole dell’”equity”[lit.], laddove il termine inglese “equity” non è traducibile con “equità” ed è privo di un equivalente esatto nei sistemi di civil law, in quanto indica, nel sistema inglese e negli ordinamenti da esso derivati, un insieme di regole di origine giurisprudenziale nate a integrazione del common law in senso stretto e preordinate a mitigarne la rigidità. 267 ordentliche Gerichte / cour de droit, en opposition aux cours d’équité / tribunal de justicia / tribunali ordinari (competenti in materia di common law). 268 Rechtsbehelfe aus dem Recht der Gerechtigkeit / réparation en équité / remedio de equidad / rimedio equitativo, in via equitativa (secondo l’“equity“). 269 The reason for this historical distinction was the notion that equitable remedies like injunctions— orders that a party take or refrain from taking certain actions—are more intrusive and potentially require more ongoing enforcement. For these reasons, it was perceived to be more appropriate to have a judge oversee equitable remedies. 270 See 42 U.S.C.A. § 1983. 271 Oberster Gerichtshof / Cour Suprême / Corte Suprema / Corte Suprema (degli Stati Uniti). 272 See Chauffeurs, Teamsters and Helpers, Local No. 391 v. Terry, 494 U.S. 558, 565 (1990). Of these two factors, the nature of the relief sought carries more weight in the analysis. 273 aufteilen / diviser / dividirse en dos / dividere (il processo) in due fasi.

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VI. Trial might result in the judge making factual findings that affect the jury trial claims, effectively depriving the parties of their right to have those claims fully heard by a jury. b) Procedure for Asserting the Right to a Jury Both plaintiffs and defendants have the right to a jury trial. Parties assert this right by 345 making a demand274 for a jury trial. The demand must be in writing and both served on all other parties and filed with the court.275 It may be a separate stand-alone document, but most typically is simply a statement on the complaint or answer that might read, “A trial by jury is demanded as to all claims.”276 The demand must be served no later than 14 days after the last pleading directed to the issue (typically, the answer). Parties waive their right to a jury trial by failing to make a timely demand. Once one party has demanded a jury trial, all other parties are entitled to rely on that 346 demand. Thus, if the plaintiff serves and files a jury trial demand, the defendant does not need to file its own demand. Accordingly, once a party has made a jury trial demand, it may not unilaterally withdraw the demand, and instead needs consent of all parties.277 c) Selection and Composition of a Jury Civil juries consist of between six and 12 members.278 The court clerk will call in a 347 venire panel279—a group of potential jurors from which the jury will ultimately be selected. The lawyers then participate in voir dire280—a process in which the potential members of the jury provide information through questionnaires and oral questioning by the judge or the lawyers designed to provide some background information about the potential jurors and to uncover any connection with the parties or other sources of bias. After voir dire is completed, the lawyers have opportunities to ask that certain poten- 348 tial jurors be struck from the panel. If jurors have a connection with the parties, lawyers, or the case, or otherwise evidence significant bias, the judge may strike them for cause.281 In addition, each side may exercise three peremptory strikes282—strikes that the party may exercise with cause or explaining its reasoning.283 At the completion of the process of striking potential jurors, the judge will impanel the jury from the remaining jurors.

274 Aufforderung

/ demande / solicitud / istanza, domanda. R. Civ. P. 38(b). 276 ein Prozess mit Geschworenen wird für alle Ansprüche gefordert / un procès devant jury est demandé pour tous les moyens en demande / un juicio con jurado para todos los cargos de la demanda / un processo con la partecipazione della giuria è richiesto per tutte le pretese (soggiacenti alla domanda giudiziale). 277 Fed. R. Civ. P. 38(d). 278 Fed. R. Civ. P. 48(a). The judge will set the number of jurors, taking into account the length and complexity of the trial. 279 Gruppe potentieller Geschworener / groupe de jurés potentiels / posible grupo de jurados / gruppo di giurati potenziali. 280 Befragung / voir-dire, processus d’interrogation des jurés potentiels / cuestionamiento de los potenciales jurados / esame preliminare dei potenziali giurati mediante interrogatorio. 281 aus wichtigem Grund streichen / récusation motivée / eliminar a un potencial jurado por causa justificada / escludere un (potenziale) giurato per giusta causa. 282 Geschworene streichen lassen / récusation péremptoire ou d’office / eliminar a un potencial jurado sin necesidad de justificación / esclusione perentoria [lit.]. 283 Fed. R. Civ. P. 47(b); 28 U.S.C.A. § 1870. Although parties may exercise their peremptory strikes for almost any reason or for no articulated reason, they may not strike jurors based on race or gender. See Edmonson v. Leesville Concrete Co., Inc. 500 U.S. 614, 616 (1991) (race); J.E.B. v. Alabama ex rel. T.B., 511 U.S. 127, 129 (1994) (gender). 275 Fed.

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Chapter 2 Federal Civil Litigation d) The Trials Most federal courtrooms have similar configurations. The bench,284 where the judge sits, is typically an elevated area in the front of the courtroom. Right below the bench is another row of seating for the court reporter285—the stenographer who records the proceedings—and the judge’s staff or law clerks286—lawyers who assist the judge. Next to or near the bench is the witness stand,287 a chair in a partitioned area where the witnesses sit while testifying. Near the witness stand is a podium, where lawyers may, and in some courtrooms must, stand while questioning witnesses. Off to one side, typically near the witness stand, is the jury box,288 a partitioned area where the jury sits during the trial. Behind the podium are counsel tables,289 two tables where the lawyers and parties or party representative sit during trial. Generally, the plaintiff sits at the table closest to the jury. Finally, at the back of the courtroom is the gallery,290 where the public and other interested persons may sit and observe—unless sealed by the judge, most trials and court proceedings are open to the public. 350 After some opening remarks by the judge, including instructions to the jurors about how to conduct themselves during trial, the trial begins with an opening statement by the plaintiff ’s lawyer. The purpose of the opening statement is to orient the jury to the case that the plaintiff hopes to prove during trial. The defendant’s lawyer may make an opening statement immediately following the plaintiff ’s statement, or may defer until the plaintiff has finished submitting its evidence through witness testimony, stipulations or judicial recognition of facts. 351 The plaintiff then calls its witnesses and moves its evidence into the record. For each witness the plaintiff calls, the plaintiff ’s lawyer first conducts direct examination.291 Generally, during direct examination, the lawyer must ask open-ended questions, not leading questions,292 thus putting the thoughts of the witness on the record, rather than a statement by the lawyer that the witness only confirms. The defendant may object to the questions. As with deposition testimony, objections should be stated in a non-suggestive manner. If a party objects to a question, the judge will sustain293 or overrule294 the objection, sometimes conducting a sidebar295 conference out of the jury’s hearing if the judge would like to hear the parties’ positions regarding the objection. 352 The opposing party then cross-examines296 the witness, and may use leading questions. During cross-examination, a lawyer may try to impeach the credibility of the wit349

284 Richterbank

/ siège / tribunal / banco del giudice. / greffier/ taquígrafo de tribunal / cancelliere, stenografo di tribunale. 286 juristische Mitarbeiter des Richters und der Geschäftsstelle / assistants de justice auprès du juge / asistente legal / assistenti giudiziari. 287 Zeugenstand / barre / banquillo de testigos / banco dei testimoni. 288 Geschworenenbank / banc des jurés / banquillo del jurado / banco dei giurati. 289 Tische der Anwälte / tables des avocats / los escritorios en los que los abogados están sentados / tavoli o scrivanie degli avvocati. 290 Besucherraum / tribune / tribuna para el publico / tribuna per il pubblico. 291 direkte Befragung / interrogatoire principal / cuestionamiento directo / esame diretto. 292 Suggestivfragen / questions orientées / pregunta sugestiva / domande suggestive (letteralmente: domande “che guidano”). A leading question is one that suggests the answer. Thus, for example, “Did you arrive home at 10:00 p.m.?” is a leading question. A nonleading alternative might be, “At what time did you arrive home?” 293 genehmigen / retenir / aprobar / accogliere. 294 verwerfen / rejeter / negar / respingere. 295 vertrauliches Gespräch / aparté / conversación confidencial entre el juez y los abogados que no puede ser escuchada por el jurado / colloquio confidenziale tra il giudice e l’avvocato, lontano dallo spazio uditivo della giuria (il termine “sidebar” indica il ripiano collocato di fronte alla poltrona del giudice). 296 Kreuzverhör / contre-interrogatoire / contrainterrogatorio / interrogatorio incrociato [lit.], controesame. 285 Protokollführer

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VI. Trial ness as well as draw out additional facts. The scope of the cross-examination is generally limited to the topics that were raised on direct examination. Following cross-examination, the party originally calling the witness may conduct redirect examination.297 Redirect examination is limited to rehabilitating298 the witness’s credibility and responding to the new facts elicited during cross-examination. Some judges limit examination to these three rounds, but others allow further questioning. The plaintiff must also move its exhibits—documents and tangible things—into the 353 record. Documents are often moved into the record after a witness has testified as to their authenticity and their significance in the dispute. Documents may also be moved into the record without supporting witness testimony if the parties have stipulated to their authenticity or the court takes judicial notice299 of them (such as with public records). If the plaintiff is introducing deposition testimony as substantive evidence and the witness is not present, the plaintiff may essentially reenact the testimony for the jury, having someone sit in the witness stand and pretend to be the witness. When the plaintiff finishes putting in its evidence, it rests. The defendant often moves 354 for judgment as a matter of law300 at this time.301 A motion for judgment as a matter of law, or J.M.O.L., asserts that the plaintiff has failed to introduce sufficient evidence to support its claims. The standard is similar to the standard for summary judgment, discussed above. 355

Practice Tip The Rules provide that, if the judge does not grant a motion for judgment as a matter of law, the judge is deemed to have submitted the case to the jury subject to the judge’s right to reconsider the motion at the end of the case.302 Judges frequently take advantage of this provision, allowing the jury to reach its verdict, then entering judgment notwithstanding the verdict if the judge believes the verdict is not reasonably supported by the evidence. In that manner, if the case is appealed and the appellate court determines that the judge was wrong, there is no need for a new trial. Even though these motions are most frequently denied, however, it is important to make them because parties may waive their right to appeal for issues not properly raised in a Rule 50 motion.303

After the plaintiff rests, the defendant puts its evidence into the record. Questioning 356 proceeds in parallel to the process during the plaintiff ’s case. At the conclusion of the defendant’s case, the plaintiff may move for judgment as a matter of law, arguing that the defendant has failed to prove its defenses (but such motions are not as common). The plaintiff then has another opportunity to offer evidence designed to rebut the evidence introduced during the defendant’s case. Once all the evidence is in the record, the judge provides jury instructions or a jury 357 charge304 to the jury. The jury charge is a description of the legal principles that govern the dispute. The idea is that the jury will determine the facts and apply the law, as described by the judge, to those facts. Before giving the jury charge, the judge will invite the parties to submit proposed jury instructions. The judge will then craft the jury 297 nachträgliche

Befragung / réinterrogatoire / repregunta / riesame. des Zeugen wiederherstellen / réhabiliter la crédibilité du temoin / rehabilitación de la credibilidad del testigo / riabilitazione del testimone (nel senso di ristabilire la credibilità del teste medesimo). 299 gerichtlich zur Kenntnis nehmen / admission d’office / un hecho que se incluye en el acta / conoscenza giudiziaria [lit.], “notorietà” dei fatti allegati in giudizio (il termina indica i fatti “notori” di cui si ritiene che il giudice abbia conoscenza e che le parti non sono, pertanto, tenute a provare). 300 Antrag auf Urteil von Rechts wegen / jugement de question de droit / sentencia como cuestión de derecho / sentenza come questione di diritto [lit.], sentenza su questioni di puro diritto. 301 Fed. R. Civ. P. 50(a). 302 Fed. R. Civ. P. 50(b). 303 Unitherm Food Systems, Inc. v. Swift-Eckrich, Inc., 546 U.S. 394 (2006). 304 Anweisungen / instructions données au jury / instrucciones al jurado / istruzioni impartite alla giuria. 298 Glaubwürdigkeit

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Chapter 2 Federal Civil Litigation charge from the parties’ submissions and its own resources. The judge must then provide the parties with an opportunity to object to the charge before the judge reads it to the jury. The parties waive any objections not raised during this opportunity.305 358 Practice Tip Most jurisdictions have books of model jury instructions—instructions that courts have found to be accurate and appropriate. Model jury instructions are an important resource when drafting proposed jury instructions.

After the judge charges the jury, the jury retires to the jury room to deliberate. They start by choosing a foreman,306 the person who will organize the jury deliberations and communicate with the judge if issues arise during the deliberations. The members of the jury then discuss the case until they reach a verdict. Verdicts must be unanimous, unless the parties stipulate otherwise.307 360 Jury verdicts can come in a variety of forms. The simplest form is the general verdict,308 which generally allows the jury to either check a box indicating that they find in favor of the defendant or check a box indicating that they find in favor of the plaintiff, specifying the amount of damages. Special verdicts309 contain a series of questions for the jury to answer, such as “do you find that the parties entered into a contract?” and “do you find that the defendant breached the contract?” The judge can then enter the appropriate judgment based on the jury’s answers to the questions. General verdicts with interrogatories310 combine the two approaches.311 361 Once the jury reaches its verdict, the foreman alerts the judge. The lawyers reassemble in the courtroom, and the jury returns to the jury box. The foreman hands the verdict to the judge, who reads it aloud. The parties may ask that the judge poll the jury— asking each member individually if they joined in the verdict to ensure that it was unanimous.312 The judge then discharges the jury. 362 The jury verdict is not, on its own, enforceable. Rather, the judge must enter a judgment in the docket.313 The entry of a judgment is the event that allows a successful plaintiff to collect its damages. 359

2. Non-Jury Trials 363

Non-jury trials proceed much like jury trials, except the judge is the fact finder and the proceedings are more streamlined. Judges frequently allow more leading questions in non-jury trials and are laxer regarding the rules of evidence—reasoning that these rules are designed to prevent confusion or prejudice to the jury but are unnecessary with a legally-sophisticated judge. Deposition testimony is simply submitted in writing rather than read aloud, and sometimes direct testimony is submitted in writing and only crossexamination is live.

305 Fed.

R. Civ. P. 51(d). / président / presidente del jurado / presidente o capo dei giurati. 307 Fed. R. Civ. P. 48(b). 308 allgemeines Urteil / verdict général / sentencia general / verdetto della giuria in termini generali. 309 Sonderurteile / verdicts spéciaux / sentencia especial / verdetto speciale della giuria su fatti circostanziati. 310 allgemeine Urteile mit Beweisfragen / verdicts généraux avec interrogatoire / sentencias generalescon interrogatorio / verdetti in termini generali con interrogatori [lit.]. 311 See Fed. R. Civ. P. 49. 312 Fed. R. Civ. P. 48(c). 313 See Fed. R. Civ. P. 54. 306 Vorsitzender

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VII. Post-Trial Remedies At the conclusion of a non-jury trial, the judge does not enter a verdict.314 Instead, 364 the judge enters findings of fact315 and conclusions of law316 into the record.317 Although the judge may enter these findings and conclusions orally, they are more typically entered in written form. The judge often asks the parties to submit proposed findings of fact and conclusions of law, and then drafts her own findings and conclusions using the parties’ submissions as a resource, a practice not too dissimilar from the civil law system’s use of an advocate general. Advisory Juries Advisory juries318 are sometimes used by courts for claims where the parties are not 365 entitled to a jury319 When the judge uses an advisory jury, the jury deliberates like a normal jury, but the judge is not obligated to follow the jury’s verdict.

VII. Post-Trial Remedies After trial has concluded and the judge has entered judgment, the parties have limited 366 options for asking the judge to reconsider or alter the judgment.

1. Renewed Motion for Judgment as a Matter of Law In the immediate aftermath of the trial, the parties may renew the motions for judg- 367 ment as a matter of law they made during trial.320 A renewed motion for judgment as a matter of law must be filed within 28 days after the entry of judgment, and is a prerequisite for appealing the issues that might be raised in such a motion. The standard is the same as for the original motion (or a summary judgment motion), but is an opportunity for the judge to consider the motion again after all the evidence is in.

2. Motion for a New Trial Additionally, parties may seek a new trial.321 A motion for a new trial must be filed 368 within 28 days after the entry of judgment, and is often filed in combination with, and in the alternative to, the renewed motion for judgment as a matter of law. In general, a court will grant a new trial in order to prevent a miscarriage of justice.322

3. Motion for Relief from a Judgment Finally, a party may ask the court to amend or strike a judgment based on changed 369 circumstances or other extraordinary issues of fundamental fairness.323 Common grounds for seeking relief from a final judgment include: mistake; excusable neglect;

314 Urteil

/ verdict / sentencia / verdetto. / détermination des faits / determinación de los hechos / accertamento dei fatti, risultanze istruttorie idonee a dimostrare i fatti. 316 rechtliche Würdigung / conclusions en droit / conclusiones de derecho / conclusioni in diritto. 317 Fed. R. Civ. P. 52(a). 318 beratende Geschworene / jury consultatif / jurado consultivo / giuria consultiva [lit.]. 319 Fed. R. Civ. P. 39(c). 320 Fed. R. Civ. P. 50(b). 321 Fed. R. Civ. P. 59. 322 See Michigan Millers Mut. Ins. Co. v. Asoyia, Inc., 793 F. 3d 872, 878 (8th Cir. 2015). 323 Fed. R. Civ. P. 60(b). 315 Tatsachenfeststellungen

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Chapter 2 Federal Civil Litigation newly discovered evidence that, with reasonable diligence, could not have been discovered earlier; and the catch-all category known as “any other reason that justifies relief.”324 370 There is no set time limit for a request for relief from a final judgment, except that certain of the grounds must be asserted within one year of the entry of the judgment.325 Relief under Rule 60 is viewed as extraordinary, and is not frequently granted.

VIII. Appeal Tremendous inefficiencies and delays would result if parties could appeal each order that is not final (known as an “interlocutory” order) in the case that did not favor them. Accordingly, with a few exceptions discussed below, a party may only appeal from a final judgment326 or final order,327 one that disposes of all claims in the case. Although this chapter focuses on federal civil litigation at the trial level, this section provides a brief overview of the appellate process. 372 A party initiates an appeal by filing a notice of appeal328 within 30 days after the entry of the final judgment or order.329 The notice of appeal is a simple form that identifies the orders that are being appealed, but does not describe the specific issues to be raised in the appeal. The parties then have an opportunity to designate the record on appeal,330 the documents that the parties want to be available to the appellate court during its review. Once the record is set, the court sets a briefing schedule.331 Appellate briefs are more tightly constrained than most trial court briefs, with detailed requirements for each section of the brief. 373 The court then sets a date, time, and location for oral argument. Most oral arguments for appeals are conducted before a panel of three judges, with the outcome determined by a majority of the judges. Arguments typically have a time limit, split equally between the parties, which the panel strictly enforces. The appellant332—the party bringing the appeal—argues first, and may reserve a portion of its time for rebuttal.333 In a half-hour argument, the appellant might reserve two of its fifteen minutes for rebuttal. The appellee334 argues second, and may not reserve time for any further rounds. 374 In limited circumstances, a party may bring an interlocutory appeal335 of a non-final order. Parties have a right to an interlocutory appeal of certain interlocutory orders specified by statute. Most importantly, injunctions, upon interlocutory orders, can be granted, continued, modified, refused, or dissolved.336 For other orders, parties may request an interlocutory appeal but it is a two-step, difficult process. First, a lawyer seeking interlocutory appeal must persuade the trial judge of three things: 1) that the issue to be 371

324 Fed.

R. Civ. P. 60(b)(1)-(6). R. Civ. P. 60(c). 326 Endurteil / jugement définitif / sentencia final / sentenza irrevocabile. 327 abschließende Verfügung / ordonnance définitive / orden permanente / ordinanza conclusiva. 328 Berufungsantrag / déclaration d’appel / notificación de apelación / istanza di ricorso in appello. 329 Be aware that certain post-trial motions stay the period for appeal. See Fed. R. App. P. 4(a)(4)(A). 330 Berufungsakte / dossier d’appel / acta de apelación / atti di appello. 331 Ablaufplan für das Einreichen von Schriftsätzen / délai de dépôt des conclusions / calendario para la presentación de documentos al tribunal / calendario del deposito delle memorie. 332 Berufungskläger / appelant / apelante / appellante. 333 Erwiderung / réfutation, ou réponse / contestación / contestazione o confutazione. 334 Berufungsbeklagter / intimé / apelado / appellato. 335 einstweilige Berufung [lit.] / appel interlocutoire / apelación interlocutoria / appello incidentale, appello interlocutorio [lit.]. 336 28 U.S.C.A. § 1292(a). 325 Fed.

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X. Finality appealed involves a “controlling question of law”337 which can be resolved “quickly and cleanly,” the resolution of which is likely to affect the future course of the litigation; 2) there is substantial ground for difference of opinion on the legal question; and 3) an immediate appeal may “materially advance” the termination of the litigation.338 Second, the court of appeals must agree that it will hear the interlocutory appeal. Both of these determinations are discretionary; satisfaction of the requirements does not guarantee an interlocutory appeal. It is important to understand that an appeal does not render the judgment unenforce- 375 able. This limitation is particularly important for defendants who have lost. In order to prevent the plaintiff from enforcing a judgment, an appealing defendant must post a supersedeas bond 339—security that the plaintiff may use to satisfy the judgment if the defendant’s appeal is ultimately unsuccessful.

IX. Collection Obtaining a favorable judgment signals a victory for the plaintiff, of course, but a 376 judgment is a piece of paper that the plaintiff cannot spend like cash. Defendants with sufficient assets will typically pay, or satisfy, judgments against them. For those defendants who cannot, or will not, satisfy a judgment voluntarily, plaintiffs must employ a process called “collection.”340 Plaintiffs have a number of tools to locate and obtain assets to satisfy a judgment. 377 Discovery in aid of execution341 begins the process.342 The plaintiff may send interrogatories or document requests asking the defendant to identify bank accounts and other real and tangible property. The plaintiff may also require the defendant to appear for a deposition to inquire about the nature and location of such assets. Informal discovery, like title searches, may lead to additional information. Once the plaintiff has identified assets, the plaintiff may go through a process in which they “attach” their judgment to money in the defendant’s bank accounts, “garnish” a portion of the defendant’s wages, or have the U.S. Marshals343 auction the defendant’s property.

X. Finality The final concept for this chapter describes the doctrines the courts have developed 378 to prevent a disappointed party from trying to relitigate matters the party already lost. There are separate, but very similar, doctrines addressing the finality of litigation resolving disputed claims and individual issues.

337 zentrale Rechtsfrage / question de droit centrale / cuestión central de derecho / questione di diritto determinante. 338 28 U.S.C.A. § 1292(b). 339 dazwischentretende Bürgschaft / cautionnement d’appel / fianza / cauzione per la sospensione [lit.] (versamento di una cauzione a garanzia di una pronuncia di inibitoria provvisoria dell’esecuzione durante la pendenza in appello del processo). 340 Eintreibung / recouvrement / colleción / riscossione, recupero. 341 Ermittlung der Zahlungsfähigkeit / divulgation pour besoins d’exécution / determinación de la capacidad de pago / accertamento a supporto dell’esecuzione [lit.], determinazione dei valori rilevanti ai fini della solvibilità della controparte nel processo. 342 Fed. R. Civ. P. 69(a)(2). 343 Gerichtsvollzieher / huissier / alguacil federal de EE.UU. / corpo speciale statunitense di polizia giudiziaria, ufficiali aventi funzione di sceriffo o ispettore.

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Chapter 2 Federal Civil Litigation 1. Claim Preclusion or Res Judicata 379

The first of these doctrines precludes the relitigation of entire claims. This doctrine was referred to as “res judicata” for many years, but is now more commonly referred to as “claim preclusion.”344 Claim preclusion prevents the same parties from litigating the same claim a second time, and has the following elements: 1) a prior claim that was fully adjudicated on the merits; 2) the current action involves the same claim as the prior action; and 3) the parties in the second action are the same as, or in privity,345 a legal relationship,346 with the parties in the first action.

2. Issue Preclusion or Collateral Estoppel The second of these doctrines precludes the relitigation of specific issues. This doctrine was referred to as “collateral estoppel“347 for many years, but is now more commonly referred to as “issue preclusion.”348 Issue preclusion prevents a party that has lost an issue from litigating the same issue a second time, and has the following elements: 1) a prior issue that was actually litigated and decided; 2) the current action involves the same issue as the prior action; 3) the party against whom preclusion is sought was a party in the first action or in privity with a party in the first action who had adequate incentive to contest the issue; and 4) the determination of the issue in the earlier case was essential to the judgment in that case. 381 Courts have further divided issue preclusion into two categories: defensive issue preclusion349 and offensive issue preclusion.350 Defensive issue preclusion describes the situation when a defendant seeks to use issue preclusion to block a claim against it.351 380

382 Example For example, assume a plaintiff is injured by a lawnmower and brings a products liability claim against the manufacturer of the lawnmower. Further assume that one of the elements of the products liability claim is that the plaintiff had been using the product in its intended manner. At trial, the jury returned a special verdict that included a finding that the plaintiff had not been using the lawnmower in its intended manner. If that same plaintiff sought to bring a products liability claim against the manufacturer of the lawnmower blade, that manufacturer could assert defensive issue preclusion. Based on these facts, the plaintiff would likely be precluded from contending that they had been using the lawnmower in its intended manner (and thus could not pursue the claim against the blade manufacturer).

383

In contrast, offensive issue preclusion describes the situation when a plaintiff seeks to use issue preclusion to establish a claim against the defendant. Using the above example, 344 Anspruchsausschluss / autorité de la chose jugée / prohibición absoluta de juzgar sobre la cosa nuevamente / preclusione della domanda giudiziale, in quanto sul caso specifico si è già formato il giudicato. 345 Interessengemeinschaft / communauté d’intérêts / relación de interés mutuo / situazione comportante consenso, concorso, compartecipazione tra i soggetti di un rapporto giuridico, fonte della loro legittimazione sostanziale. 346 “Privity” requires a close relationship between the parties. Thus, for example, a parent and subsidiary corporation will be deemed to be in privity with each other. If the subsidiary loses a claim in litigation, the parent corporation would likely not be permitted to bring the same claim against the same defendant. 347 innere Rechtskraftwirkung / autorité de la chose jugée collatérale / prohibición de volver a juzgar un asunto que ya ha sido decidido por un tribunal / preclusione del riesame di una questione particolare tra le stesse parti già decisa con precedente sentenza. 348 Ausschluss von Rechtsfragen auf Basis des Rechtskraftprinzips / autorité de la chose jugée des questions de droit / prohibición de volver a juzgar las mismas cuestiones legales / preclusione di questioni di diritto. 349 defensiver Ausschluss von Rechtsfragen / autorité de la chose jugée des questions de droit utilisée comme défense / exclusión defensiva de cuestiones de derecho / preclusione difensiva di questioni di diritto [lit.]. 350 offensiver Ausschluss von Rechtsfragen / autorité de la chose jugée des questions de droit utilisée comme attaque / exclusión ofensiva de cuestiones de derecho / preclusione offensiva di questioni di diritto [lit.]. 351 See Parklane Hosiery Company, Inc. v. Shore, 439 U.S. 322, 329 (1979).

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XI. Conclusions suppose in the first action, the jury’s special verdict also included a finding that the lawnmower was defectively designed. Another plaintiff injured by the same model lawnmower might bring an action against the manufacturer and use issue preclusion to assert that the manufacturer should be precluded or estopped from contending that the lawnmower was not defectively designed. While such an assertion meets the elements of issue preclusion, the courts have rec- 384 ognized a particular risk with offensive issue preclusion. Suppose 100 individuals were injured by the model lawnmower in question. Suppose in the first 24 lawsuits, the jury returned a special verdict with a finding that the lawnmower was not defectively designed, but in the 25th lawsuit, the jury found that the lawnmower was defectively designed. Unfettered offensive issue preclusion would allow the next 75 plaintiffs to prevail on the issue of defective design, despite the fact that 96 % of the juries had reached the opposite conclusion. Such a result would be manifestly unfair to the defendant. Accordingly, the courts have discretion as to whether to apply offensive issue preclusion.352

XI. Conclusions Understanding U.S. civil procedure can guide a student or lawyer through the entire 385 process of litigation in the U.S. from the filing of a complaint all the way to disposition of an appeal. No topic of substantive law offers that guidance. In addition, a study of U.S. civil procedure can help a lawyer from outside the U.S. counsel a client who has been served with a discovery request due to a dispute arising in the U.S. And finally, understanding U.S. civil procedure can help a lawyer to understand the procedural basis from which a U.S. lawyer understands his or her own legal system in the common law tradition.

352 Parklane

Hosiery Company, Inc. v. Shore, 439 U.S. 322, 331–32 (1979).

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CHAPTER 3 CIVIL PROCEDURE BRIEF DRAFTING STRATEGY Literature: Anne M Burr & Howard Bromberg, U.S. Legal Practice Skills for International Law Students (1st ed., 2014). Bryan A. Garner, The Winning Brief (2d ed., 2004). Michael D. Murray & Christy H. DeSanctis, Advanced Legal Writing and Oral Advocacy: Trials, Appeals, and Moot Court (1st ed., 2009). Michal D. Murray & Christy H De Sanctis, Appelate Advocacy and Moot Court (1st ed., 2006). Richard K Neumann & Kristen Konrad Tiscione, Legal Reasoning and Legal Writing (7th ed., 2013). Antonin Scalia & Bryana A. Garner, Making Your Case (1st ed., 2008).

I. Introduction In the U.S. civil procedure system, lawyers typically are permitted to communicate with judges only (1) through written documents called briefs,1 (2) in-person in the courtroom or judges’ chambers2 during scheduled court proceedings, and (3) on scheduled telephone conferences in which all parties to a case are present. While there is considerably more emphasis given in the common law generally, including in the U.S., to oral practice skills, a large and essential part of practice are written arguments. This chapter explains the role and importance of, and drafting strategy for, written briefs filed in a civil court during a litigation in the U.S. federal system. Because briefs are such a valuable vehicle of communication between the lawyer and trial judge—or panel of appellate judges—deciding a case, U.S. attorneys must invest a significant amount of time in researching, outlining, drafting, and editing these legal documents. Different types of legal briefs apply or are required by court rules in different phases of a federal civil litigation, but the overall process of researching and writing a legal brief is basically the same for each brief genre. A civil lawyer might also recognize that the number and types of briefs through which a U.S. lawyer argues a case are strong evidence of the adversarial nature of U.S. litigation in which the lawyer is responsible, in public and private law, in criminal and in civil litigation, to advocate the client’s position, orally and in writing, at every step of the proceedings. The judge remains the neutral referee who can accept or demand that briefs be submitted throughout the process, to formally record the arguments made by these advocates. 387 This chapter starts by describing the purpose of briefs, how attorneys and courts use these documents in practice, and a standard organizational structure that courts expect to see in persuasive written submissions. Next, this chapter summarizes the different types of legal briefs that U.S. lawyers write during different phases of a federal civil litigation, and within that framework, explains the U.S. lawyer’s research and writing process and strategy. This chapter next provides sample structural outlines of three common types of trial-level briefs, including (1) a brief in support of a discovery motion3 (a request to the court to issue a subpoena4 effecting a procedural or substantive action in the case) to resolve a dispute between parties during the investigative phase of a litiga386

1 Schriftsätze

/ conclusions / alegatos escritos / memorie. / bureau / despacho del juez / studio, ufficio (personale) del giudice. 3 Antrag auf Offenlegung von Beweisen / demande de divulgation / moción de descubrimiento / istanza di esibizione o divulgazione di prove. 4 Vorladung / citation / emplazamiento / citazione, intimazione a comparire. 2 Richterzimmer

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II. Purpose of Briefs in Federal Civil Litigation tion, (2) a brief in support of an evidentiary motion5 to resolve disputes over documents, witnesses, or other types of proof that may be presented at trial, and (3) a brief in support of a "substantive” or “dispositive” pre-trial motion such as a motion for summary judgment6 before trial. Finally, this chapter highlights potential brief-writing pitfalls and how, while good briefs facilitate efficient and fair judicial decision-making, poorly written briefs shift the burden of research and analysis to court personnel, slowing down the adjudication process.

II. Purpose of Briefs in Federal Civil Litigation In the practice of law in the U.S., a legal brief is a persuasive document written by a 388 lawyer that summarizes the key issue, or issues, that the court is requested, or needs, to decide at a specific point in time in a litigation. A brief highlights the legal question(s), presents the applicable law, and sets forth compelling arguments to convince the court to rule in the client’s favor on each issue. The brief ’s primary purpose is “to educate and guide the court’s decision”7 on either a discrete legal issue that is just one part of the whole of a case (i.e., an isolated discovery, evidentiary, procedural, or substantive issue), or perhaps the entire case. The brief-writer’s task is to narrow the particular legal question or questions the court must answer as clearly and as focused as possible, describe the procedural and substantive facts relevant to the legal questions, research and cite to pertinent legal authority, carefully select an appropriate number of precedential cases to illustrate the governing law, and present arguments that will assist the court in analyzing the matter and rendering a fair decision in an efficient manner. As discussed in Chapter 2, “Federal Civil Litigation,” typically a litigant on one side of 389 a case files a motion8 (a short one- or two-page document) asking the court to issue an order9 implementing a certain action in the case. The moving party10 also submits an accompanying longer brief to explain the reasons why the requested result is justified. This brief might be called a Memorandum of Law in support of the motion or a Memorandum of Points and Authorities. Court rules usually grant the opposing party in the case a certain number of days to research, write, and submit an opposition brief,11 countering the contentions in the initial brief. The court rules also might permit the initial party the opportunity to submit a reply brief,12 responding to the assertions in the opposition brief. Federal courts usually impose a strict page number limit, or word count limit, on the length of each type of briefs. Some briefs can be very short and others can be dozens of pages, depending on the court rules, the complexity of the issues involved, and the phase of the litigation. Reply briefs are shorter than initial and opposition briefs. In certain instances, multiple parties in a case might submit briefs simultaneously in- 390 stead of in the foregoing alternating sequence. A judge may request concurrent briefing 5 Unterstützung eines Beweisantrags / demande de preuve ou support / alegato escrito en el que se presentan los argumentos en favor de una moción probatoria / istanza di assunzione probatoria. 6 Antrag auf ein Urteil im Schnellverfahren / requête en jugement sommaire / moción de juicio sumario / istanza di giudizio sommario. 7 In the Matter of Witt, 481 B.R. 468, 473 (N.D. Ind. Bankr., 2012); see also Litton Systems, Inc. v. Sundstrand Corp., 750 F. 2d 952, 955 n. 1 (Fed. Cir. 1984) (The purpose of a brief “is to aid the court in reaching a correct and just decision.”) 8 Antrag / requête / moción / istanza. 9 Verfügung / ordonnance / orden / provvedimento, ordine. 10 Antrag stellende Partei / requérante / parte promovente / istante, parte richiedente. 11 erwidernder Schriftsatz / conclusions en opposition / memorial de oposición / comparsa di risposta in opposizione. 12 weiterer Schriftsatz / conclusions en réponse / contestación / memoria di replica.

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Chapter 3 Civil Procedure Brief Drafting Strategy on a particular matter in a case, or may direct the parties to file pre-trial briefs13 summarizing the claims and corresponding evidence that will be presented at trial. In that instance, lawyers submit their individual briefs at the same time, and there may not be an opportunity to submit opposition and reply briefs. 391 Because most U.S. civil courts suffer congestion in their dockets14 (e.g., the roster of cases pending in the particular court at any given time), judges rely on litigants’ briefs to narrow and resolve as many contested issues as possible in advance of proceeding with trial. Thus, briefs are a useful tool for lawyers to remind the judge who the parties in the case are, the factual background of the conflict, the substantive legal questions, the governing law (constitutions, statutes, regulations, or cases, or any combination of these), and the reasons why each party believes the court should rule in its favor on the pressing legal matters. Judges use the briefs to analyze the facts, legal rules, and persuasive arguments before deciding the legal questions, writing a judicial opinion15 explaining the court’s findings, and then issuing an order16 to enforce the outcome. Judges might render a decision solely after reading and evaluating the briefs, or may request the lawyers to present oral arguments17 on the issues therein. In oral arguments, which occur in the courtroom (or sometimes in judges’ chambers), each lawyer is allotted a certain number of minutes to speak about the issues discussed in the briefs, during which the judge may interrupt with questions.

III. A Common Organizational Structure for Briefs 392

As explained in more detail in Part D below, different phases of a federal civil litigation trigger the need for distinct types of briefs used for varied purposes. A civil case in an U.S. federal court usually follows this chronological progression: (1) the pleadings18 phase in which parties file a complaint19 and an answer,20 and possibly cross-complaints21 and third-party pleadings,22 (2) fact and expert discovery23 (the investigative phase of a case), (3) pre-trial,24 (4) trial,25 (5) post-trial,26 and (6) appeal.27 Briefs are used in each phase to whittle down the scope of the disputes between the parties; judges try to streamline the issues that will be addressed at trial by addressing, in advance, various conflicts over, for example, the scope of discovery (the documents and witnesses that must be disclosed among the parties), evidence (the documents and witness testiVorprozess-Schriftsätze / conclusions préliminaires / alegatos preliminares / memorie preliminari. Prozessliste / liste des procès / sumario de casos pendiente en un tribunal / ruolo generale delle cause, elenco delle cause a ruolo. 15 gerichtliche Stellungnahme / opinion judiciaire / opinión judicial / parere giudiziario. 16 Verfügung / ordonnance / orden / provvedimento, ordine. 17 mündliche Verhandlungen / plaidoiries, ou exposé oral / alegatos orales / esposizione orale, difese orali. 18 Parteivorbringen / phase introductive, incluant également les conclusions / alegatos escritos / allegazioni delle parti. 19 Klageschrift / demande / demanda / atto di citazione. 20 Erwiderung / conclusions en réponse / contestación / comparsa di risposta. 21 Gegenklagen / demande reconventionnelle / contrademanda / domanda riconvenzionale. 22 Plädoyer von Dritt-Parteien / plaidoyer d’une partie tierce / alegatos de tercera partes / allegazioni di terzi [lit.]. 23 Offenlegung von Fakten und Expertenmeinungen / phase de divulgation, portant sur les faits mais aussi sur les rapports d’experts / descubrimiento de hechos, descubrimiento de prueba pericial / divulgazione di fatti e di risultanze di perizie o di una consulenze tecniche. 24 Vorprozess / phase préliminaire / previa al juicio / (nella fase) pre-dibattimentale. 25 Gerichtsverhandlung / procès / juicio / in giudizio, durante il giudizio. 26 Nachverhandlung / après-jugement / posterior al juicio / (nella fase) post-dibattimentale. 27 Berufung / appel / apelación / in appello. 13 14

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III. A Common Organizational Structure for Briefs mony28 that may be presented at trial), and questions of fact and law. Court rules impose requirements on what information lawyers should include in different types of briefs. However, most briefs include the following components: (1) the caption29 of the case; (2) the docket number30 of the case; (3) the title of the brief and the name of the party submitting it; (4) a persuasive introduction identifying the legal questions that the court must decide, succinct reasons why the party should prevail, and the specific procedural action requested of the court; (5) a summary of the substantive and procedural facts that are relevant to the legal questions presented; (6) the party’s arguments, supported by legal rules and analysis of precedent and case facts, with proper citation to the factual record and legal authority; (7) a conclusion, reiterating the substantive court decision and resulting procedural action requested by the filing party;31 and (8) a signature block,32 containing a line for the attorney to sign the brief, and providing the attorney’s contact information. Checklist Briefs filed in a federal civil court usually contain the following components: • • • • • •

Case Caption Docket Number Title of Brief and Name of Party Filing It Introduction Factual and Procedural Background Argument • Legal Issues to be Decided • Governing Rules of Law • Explanations of Precedential Cases • Citations to Facts and Legal Authority • Persuasive Arguments Conclusion Signature Block

• •

The caption of the brief identifies the name of the court (showing the jurisdiction 393 governing the case), the names of the parties, and a notation of the parties’ assigned roles, i.e., whether they are the plaintiff, the defendant, etc. The docket number of the case is the identification number assigned to the litigation when the plaintiff first filed the complaint. Lawyers must include the correct docket number on each brief so the court’s clerk33 properly can file the brief within the right case. A single U.S. federal court might process hundreds of cases at the same point in time and many briefs are filed by various lawyers and parties every day. Federal courts have an electronic brief filing system; lawyers submit briefs online, and the court clerks ensure that the federal judges obtain copies of the papers for substantive review. The title of the brief indicates the category of brief being filed and the name of the party submitting it, so the court clerks and the judges can make sure they know which party is requesting which specific action, and the arguments made by that particular party in support of that action. Zeugenaussagen / témoignage / declaración testimonial / testimonianza, prova testimoniale. Rubrum / entête / título del caso / intestazione / titolo della causa. 30 Aktenzeichen / numéro de dossier / número asignado al caso / numero di ruolo / assegnato a una causa. 31 klagende Partei / partie requérante / parte promovente / parte che agisce in giudizio promuovendo una azione. 32 Unterschriftenzeile / bloc de signature / bloque de firma / spazio per l’apposizione della firma. 33 Justizbeamter / greffier du tribunal / secretario del tribunal / cancelliere del tribunale. 28 29

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Chapter 3 Civil Procedure Brief Drafting Strategy 394 Example Here is an example of a brief caption and title: UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK Kroehl Industries, Inc., Plaintiff, v.

Docket No. 20-CV-32670

Braun Pharmaceuticals, Co., Defendant. PLAINTIFF KROEHL INDUSTRIES, INC.’S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT

Beneath the caption and title, the text of the brief begins with a persuasive introduction. Here, the brief-writer clearly denotes the legal questions that the court must decide and often infuses a case theme. For example, the writer might state that “This case is about freedom to contract,” or that “This case is about a violation of human rights.” A good introduction concisely outlines three to five reasons why the court should rule in favor of the party submitting the brief and states the exact substantive and procedural outcome sought. A strong introduction ideally should be no more than a page of doublespaced text. The goal of the introduction is to capture the court’s attention quickly. 396 The next section of the brief typically is the statement of facts,34 in which the briefwriter relays the client’s story, substantively and procedurally. Because space within a brief often is limited by court rules, the fact section should contain enough background facts to provide the court with context about the nature of the parties’ dispute, and then summarize the legally significant facts which are relevant to the legal questions that are the subject of the brief. In this section, brief-writers cite to items found in the factual and procedural record, such as documents, deposition transcripts, or prior court decisions in the case. 397 The longest part of the brief is the argument section. Here, many brief-writers employ an organizational framework using acronyms like I.R.E.A.C. (Issue,35 Rule,36 Explanation,37 Application,38 Conclusion)39 or C.R.E.A.C. (Conclusion, Rule, Explanation, Application, Conclusion), or variations thereof. These structural frameworks help to ensure that each argument is logical and adequately supported by facts and law. In the rule (R) section of I.R.E.A.C. or C.R.E.A.C., the brief-writer cites to the applicable constitutional provision, statute, regulation, common law rule (or any combination of these sources of law), identifying definitions, elements, or factors that comprise the rule. Then, in the explanation (E) section, the brief illustrates the rule through descriptions of precedential cases. When describing case law, good brief-writers use a logical formula to explain the legally significant case facts,40 the court’s holding,41 and the court’s 395

Darstellung der Tatsachen / enoncé des faits / declaración de los hechos / esposizione dei fatti. Streitpunkt / problématique / cuestión legal / questione controversa. 36 anwendbare Regel / règle de droit applicable / regla aplicable / norma applicabile. 37 Erläuterung der Regel / explication de la règle / explicación de la regla / spiegazione della norma. 38 Anwendung auf den Sachverhalt / application aux faits / aplicación a los hechos / applicazione (della norma) ai fatti di causa. 39 Ergebnis / conclusion / conclusión / conclusione, esito. 40 Tatsachen des Falles / faits des decisions citées / los hechos del caso / i fatti di causa. 41 Entscheidung des Gerichts / décision de la Cour / decisión del tribunal / fondamento della decisione della corte (principio giuridico alla base della decisione giudiziale). 34

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III. A Common Organizational Structure for Briefs reasoning.42 In short, the formula is Facts + Holding + Reasoning. In the application (A) section, the brief-writer applies the definitions, elements, or factors of the legal rule to the party’s facts (called rule-based reasoning).43 The brief-writer then asserts additional persuasive arguments by analogizing to the precedential cases (called analogical reasoning)44 comparing and contrasting the client’s circumstances to and with the case law. Finally, the brief-writer might advance policy-based arguments, drawing upon public policy considerations to persuade the court of the desired result. Throughout the argument section, the brief-writer uses a uniform system of legal citation to refer to the factual record, constitution, statutes, regulations, and cases. The argument section also might contain persuasive headings and sub-headings, depending on the complexity of the issues and the length of the brief. At the end of the document, the brief ’s conclusion restates the substantive decision 398 and procedural action specifically requested of the court. Some brief-writers re-summarize the three to five reasons supporting the requested outcome that were first asserted in the brief ’s introduction, and also reiterate the case theme in the conclusion. The brief ends with the signature block, containing the signing attorney’s name and contact information. Rule 11 of the Federal Rules of Civil Procedure45—an ethical rule—requires an attorney signing a brief to certify that: (1) the brief is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation; (2) the claims, defenses, and other legal contentions in the brief are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law; (3) the factual contentions in the brief have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and (4) any denials of factual contentions in the brief are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.46 A signing attorney who violates this rule could be subject to sanctions or penalties.

399 400

Example Here is an example of a signature block in a brief: Date: March 26, 2020

Respectfully submitted, KOCH, BRAUN, NICHOLAS & LAU, LLP Derek Lau Derek Lau, Esq. 100 William Street, #15K New York, New York 11101 (800) 555–1212 [email protected] Counsel for Plaintiff, Kroehl Industries, Inc.

42 Begründung des Gerichts / raisonnement de la Cour / razonamiento seguido por el tribunal / ragionamento del giudice ovvero dei giudici della Corte. 43 Anwendung der gesetzlichen Regel auf den vorliegenden Sachverhalt / application de la règle de droit aux faits de l’espèce / razonamiento basado en la regla / ragionamento basato sulla norma/su norme. 44 Analogien zu den Präzedenzfällen / raisonnement par analogie / razonamiento por analogía / ragionamento giuridico per analogia, ragionamento analogico [lit.]. 45 Bundeszivilprozessordnung / règles fédérales de procédure civile / reglas federales de procedimiento civil / norme federali di procedura civile. 46 Fed. R. Civ. P. 11(b).

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Some briefs also may need attachments, such as the factual record documents cited in the statement of facts or the argument section. For example, a brief-writer may be permitted or required to attach excerpts from contracts, transcripts, or prior court orders.

IV. Types of Legal Briefs United States’ Lawyers Write in Various Civil Litigation Phases 402

As mentioned above, in the federal civil procedure process in U.S. courts, a litigation usually follows this progression: pleadings, fact and expert discovery, pre-trial, trial, post-trial, and appeal. Lawyers write many briefs throughout a single case, each for distinct purposes in the various phases.

1. Briefs in (or shortly after) the Pleadings Phase After a plaintiff files a civil complaint in federal court, the defendant is required to either file an answer,47 or a motion to dismiss the complaint based on certain legal grounds, within 21 days after being served with the summons48 and complaint.49 Defendants’ lawyers often submit briefs in support of motions to dismiss50 complaints on one or more of the following grounds: (1) lack of subject-matter jurisdiction,51 (2) lack of personal jurisdiction,52 (3) improper venue,53 (4) insufficient process,54 (5) insufficient service of process,55 (6) failure to state a claim upon which relief can be granted, or (7) failure to join a party under Rule 19 of the Federal Rules of Civil Procedure (which governs the joining of additional parties to a case).56 404 Alternatively, a lawyer might submit briefs in support of the following motions: (1) a motion for judgment on the pleadings57 (after the pleadings are closed);58 (2) a motion for a more definite statement of a pleading59 (if, for example, the language in the complaint is so vague or ambiguous that the defendant cannot reasonably prepare a 403

Klageerwiderung / conclusions en réponse / contestación / comparsa di risposta. Vorladung / assignation / emplazamiento / citazione in giudizio. 49 Fed. R. Civ. P. 12(a)(1)(A)(i). 50 Antrag auf Abweisung der Klage / demande de rejet / moción de rechazar la denuncia / istanza di rigetto della domanda giudiziale. 51 sachliche Zuständigkeit / compétence matérielle, ou d’attribution / jurisdicción material / competenza per materia. 52 persönliche Zuständigkeit / compétence personnelle / jurisdicción personal / competenza personale o territoriale. 53 fehlerhafter Gerichtsstand / faux lieu du for / tribunal improprio / sede giudiziaria impropria [lit.], foro non competente (nel senso di incompetenza per territorio del giudice adito). 54 fehlerhafte Prozesseinleitung / signification insuffisante / noticia formal inadecuado / vizi formali (dell’atto introduttivo del giudizio), vizio o difetto della “editio actionis”. 55 unzureichende Prozessführung / exception de procédure pour signification insuffisante / entrega de noticia formal inadecuado / vizio o difetto di notifica (degli atti di parte introduttivi del giudizio). 56 Fed. R. Civ. P. 12(b). 57 Antrag auf vorläufiges Urteil zu den Klagegründen / requête en jugement sur conclusions / petición de que se declare la cause de puro derecho y se dicte sentencia (basado exclusivamente en los alegatos escritos) / domanda di definizione del giudizio, di puro diritto, con sentenza (in base alle conclusioni formulate dalle parti). 58 Fed. R. Civ. P. 12(c). 59 Antrag auf konkretere Klagegründe / requête en clarification des conclusions / petición de que se clarifique los alegatos escritos / istanza/richiesta di precisazione delle allegazioni. 47

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IV. Types of Legal Briefs response);60 or (3) a motion to strike “an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter” from a pleading.61 The gist of a brief in support of a motion in (or shortly after) the pleadings phase of a 405 case is to demonstrate to the court that the entire case (or at least parts of it) should not proceed forward to discovery and trial because of a deficiency in the court’s jurisdiction over the case, the content of the pleading itself, the parties named in the case, or the way the pleading was served, or delivered, to the receiving party. When a motion and accompanying brief are filed during the pleadings phase, the op- 406 posing party has the opportunity to file an opposition brief, and the initial filing party may be permitted to submit a reply brief.

2. Briefs in the Fact Discovery Phase The fact discovery phase of a civil litigation is the parties’ opportunity to investigate 407 the events and circumstances that gave rise to the conflict, and evaluate the strengths and weaknesses of all parties’ claims62 or causes of action63 in the pleadings. A party might allege multiple claims or causes of action in a complaint or counterclaim, e.g., breach of contract, fraud, copyright infringement, defamation, etc. During this exploratory phase, all parties to the case exchange written requests for discovery,64 seeking (1) copies of documents, photographs, emails, etc., (2) answers to written questions (called interrogatories,)65 and (3) scheduled interviews of witnesses under oath (called depositions)66 which are transcribed by a court reporter into a transcript. Other forms of discovery include site visits, requests for written admissions, as well as physical or mental examinations. Because discovery can become very voluminous, time-consuming, labor-intensive, and expensive, this phase of a case often breeds conflict among the parties and their lawyers. There are two types of briefs that lawyers often file during fact discovery: the motion to compel67 and the motion for a protective order.68 If an opposing party refuses to respond to a legitimate written discovery request, de- 408 spite counsel’s attempts to work through the conflict, the party allegedly being deprived of discovery typically files a motion requesting the court to compel,69 the withholding side to comply with the party’s written discovery request and the court rules. Motions to compel are accompanied by relatively short briefs as compared to more lengthy dispositive briefs like motions to dismiss and motions for summary judgment. Because these latter types can “dispose” of substantive legal issues in the case, they need to be more in depth. Briefs in support of motions to compel quote excerpts from the formal written discovery request and the dilatory response, cite the applicable discovery rule and perhaps a few cases in which courts have granted similar requests in the past, summarize Fed. R. Civ. P. 12(e). Fed. R. Civ. P. 12(f). 62 Ansprüche / prétentions / demandas / domande, rivendicazioni. 63 Anspruchsgrundlagen / cause d’action / causa de la demanda / fondamento dell’azione. 64 Anträge auf Offenlegung / requêtes en divulgation / solicitudes de descubrimiento de pruebas / richieste di esibizione o divulgazione di prove. 65 Antworten auf schriftliche Fragen / questions écrites / preguntas escritas / interrogatori scritti. 66 außergerichtliche Vernehmungen vereidigter Zeugen / dépositions / deposiciones (testimonio de un testigo) / deposizioni giurate, dichiarazioni testimoniali rese sotto giuramento. 67 Antrag auf eine richterliche Anordnung / requête d’ordre de la Cour / petición para obligar a lo otra parte a hacer algo / istanza di intimazione [lit.], istanza all’autorità giudiziaria diretta ad intimare alla controparte o ad un terzo di ottemperare a una richiesta di esibizione o divulgazione probatoria. 68 Antrag auf eine Schutzverfügung / requête de mesure protectrice / orden de protección / provvedimento cautelare-protettivo. 69 See Fed. R. Civ. P. 37(a)(3). 60

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Chapter 3 Civil Procedure Brief Drafting Strategy the reasons why the moving party believes it is legally entitled to the information or documents requested, and describe the reasonable efforts exerted by the moving party’s lawyer to resolve the conflict without court intervention. This type of brief requires an extra component in addition to the standard organizational template described in Part C above; many courts require the lawyer to include a written certification of the attempts made by the moving party’s lawyer to resolve the discovery dispute without seeking court assistance. 409 In contrast to the motion to compel, if one party believes that an opposing party’s discovery requests are unreasonable or overly burdensome, or seek information that is privileged70 (governed by the attorney-client privilege or attorney work product doctrine)71 or otherwise protected from discovery, the allegedly burdened party customarily files a brief in support of a motion for a protective order.72 This type of brief may either ask the court to issue an order precluding the discovery altogether, or alternatively suggest restricted circumstances for the production of the requested information. For example, sometimes lawyers will agree to produce the requested information subject to a confidentiality agreement73 or under court seal.74 410 In the fact discovery phase, opposing parties respond to motions to compel or motions for protective orders by filing opposition briefs. The court also may allow the moving party to file a shorter reply brief.

3. Briefs in the Expert Discovery Phase 411

Expert discovery75 is the phase of a civil case in which parties engage third party consultants who are “qualified as an expert by knowledge, skill, experience, training, or education”76 to help the judge or the jury understand a particular “scientific, technical, or other specialized”77 aspect of the lawsuit. The expert phase of a litigation involves the parties’ identification of the names of their respective testifying consultants, the exchange of expert reports78 summarizing the topics each expert will address and their opinions thereon, depositions79 (interviews by lawyers of the experts under oath, transcribed by a court reporter and produced as a written document), and ultimately trial testimony. Because of the risk that an expert might unfairly influence the factfinder, the expert must be qualified under certain evidentiary standards80 before he or she may tes70 vertraulich / protégé, par le secret professionnel par exemple / privilegiado debido al secreto profesional del abogado / oggetto di tutela privilegiata (protetto dal segreto professionale dell’avvocato). 71 Doktrin der geschützten Arbeit / secret des pièces établies en vue d’un litige / protección de documentos preparados en anticipación a un pleito o litigio judicial / dottrina del “prodotto del lavoro dell’avvocato” [lit.], estensione della tutela privilegiata della riservatezza sottesa al rapporto cliente-avvocato anche agli atti compiuti e ai documenti raccolti o redatti dall’avvocato medesimo nell’espletamento delle attività difensive per il cliente). 72 Antrag auf eine Schutzverfügung / requête de mesure protectrice / petición para un orden de protección / istanza di provvedimento cautelare-protettivo. 73 Vertraulichkeitsvereinbarung / accord de confidentialité / acuerdo de confidencialidad / accordo di riservatezza. 74 Siegel / sceau / sello / sigillo. 75 Offenlegung von Expertenmeinungen / phase de divulgation des expertises, ou intervention des experts dans la phase de divulgation / descubrimiento de prueba pericial / divulgazione di relazioni peritali e consulenze tecniche. 76 Fed. R. Evid. 702. 77 Fed. R. Evid. 702. 78 Expertenberichte / rapports d’expertise / informes de expertos / perizie tecniche (che possono riguardare anche questioni di diritto). 79 Vernehmung vereidigter Zeugen / dépositions / deposiciones / deposizioni. 80 See Daubert v. Merrell Dow Pharmaceuticals, Inc., 43 F. 3d 1311 (9th Cir. 1995); Fed. R. Evid. 702.

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IV. Types of Legal Briefs tify in court. If one party believes that the opposing party’s expert fails to satisfy the required standard, the lawyer files a motion in limine,81 using the Latin, “in limine,” to mean “at the start.” A brief in support of a motion in limine explains to the court what aspects of the expert’s expected opinion testimony is objectionable, the applicable rule and standard regarding admissibility of expert testimony at trial, case law in which similar expert testimony has been excluded at trial, and arguments as to why the particular expert should be prohibited from testifying. The brief-writer may attach excerpts from the expert’s report or the deposition transcript to support the argument. Once the lawyer for a party files a motion in limine and an accompanying brief, the 412 opposing party’s lawyer files an opposition brief. The court may allow the moving party to file a shorter reply brief. Sometimes cases involve multiple motions like these, and the court might rule on all such motions in unison at a combined evidentiary hearing.

4. Briefs in the Pre-Trial Phase After fact and expert discovery are concluded, a federal civil case moves into the pre- 413 trial phase,82 during which the lawyers for all parties select and identify the exhibits and witnesses to present at trial, submit exhibit and witness lists to the court, and propose jury instructions (if the case involves a jury). During this pre-trial phase, lawyers might file additional motions in limine to preclude opposing parties from presenting certain evidence (i.e., exhibits or fact witnesses) at trial. Lawyers also prepare briefs that might dispose of some or all of the legal issues in the case, eliminating the need for a trial on some or all of the issues. These briefs are called “dispositive” briefs,83 such as briefs in support of motions for summary judgment.84 In a brief in support of a pre-trial motion in limine, the lawyer identifies the item of 414 evidence—usually a document or a witness—that should be precluded from trial, explains to the court the legal standard for excluding the evidence, cites and describes cases in which courts have forbidden a party from presenting similar evidence at trial, and states the reasons why such evidence should be barred from trial in the instant case. Lawyers submitting these types of briefs usually argue that the evidence is prejudicial, irrelevant, cumulative, or unreliable as hearsay85 (defined as “an out-of-court statement offered for the truth of the matter asserted”).86 A brief in support of a summary judgment motion87 is one of the most sophisticated 415 and labor-intensive types of brief that a lawyer writes. The standard for obtaining summary judgment in federal court is found in Rule 56 of the Federal Rules of Civil Procedure, which states that “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to

81 Antrag auf Beweisablehnung / requête in limine litis / solicitúd previa de exclusión de ciertas pruebas / istanza “in limine litis” [lit.], istanza diretta a contestare ovvero ad escludere determinate prove. 82 Phase des Vorprozesse / phase préliminaire / fase preliminar / fase preliminare del processo. 83 verfügende Schriftsätze / conclusions décisives, des arguments qui tendent à mettre fin à tout litige, comme certaines ecxeptions en défense / alegatos escritos dispositivos / memorie dispositive [lit.], memorie aventi carattere dispositivo (dirette, cioè, a definire, risolvere o escludere determinate questioni mediante l’esercizio del potere dispositivo/sostanziale delle parti). 84 Antrag auf ein Urteil im Schnellverfahren / requêtes en jugement sommaire / sentencia en procedimiento sumario / decisione sommaria, giudizio sommario [lit.]. 85 Hörensagen / propos rapportés / testimonio de oídas / (prova) per “sentito dire”, prova basata su dicerie. 86 Fed. R. Evid. 801(c); United States v. Arteaga, 117 F. 3d 388, 395 (9th Cir. 1997). 87 Urteil im abgekürzten Verfahren / requête en jugement sommaire / petición de sentencia en procedimiento sumario / istanza di decisione sommaria ovvero di giudizio sommario [lit.] (indica, in generale, la richiesta di procedimento abbreviato, ma non è un equivalente esatto del “giudizio abbreviato”italiano).

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Chapter 3 Civil Procedure Brief Drafting Strategy judgment as a matter of law.”88 Thus, the brief-writer must invest time in satisfying both parts of the standard in a brief in support of a summary judgment motion: (1) using the evidence obtained during discovery to establish that all the material facts in the case are undisputed; and (2) showing that the brief-writer’s client is entitled to judgment in the case because either the moving party89 can satisfy all the required elements of the legal rule governing a claim in its pleading against the opposing side, or the opposing party cannot satisfy all the elements of the rule governing a claim in its pleading against the moving party. 416 Because of this difficult legal standard, a lawyer writing a summary judgment brief needs to add a few extra substantive components not required in other types of briefs. First, he or she must identify all the material facts that are not in dispute. Some federal courts require brief-writers to list all the undisputed material facts in separately numbered paragraphs in a Statement of Material Facts Not in Dispute,90 and then cite to the factual record, including deposition transcripts, documents obtained during discovery, written responses to discovery questions, or stipulations,91 which are mutual written agreements between litigants on specific case facts.92 Second, the brief-writer must include the Rule 56 standard for summary judgment within the brief, and then describe case law showing similar factual circumstances in which courts granted summary judgment. In the argument section of a summary judgment brief, the lawyer must include the rule of law governing the relevant claim93 (also called the “count” of a complaint, or a “cause of action”). If the brief-writer is asking the court to grant summary judgment on a claim asserted by his client against an opposing party, the lawyer must list the required elements of the legal rule governing that claim, and show methodically that each element is satisfied, using the undisputed facts. In contrast, if the brief-writer is requesting the court to grant summary judgment on a claim that the opposing party is asserting against the client, the lawyer must use the undisputed facts to show that at least one of the required elements of the governing rule cannot be satisfied. 417 During the pre-trial phase, once a lawyer for party files a motion in limine or a motion for summary judgment, the opposing party has the opportunity to file an opposition brief. The court may also allow the moving party94 to file a shorter reply brief. In an opposition to a motion for summary judgment, the responding brief-writer must demonstrate that the moving party is not entitled to summary judgment, either because there are material facts in dispute or the required elements of the rule governing the claim either are not met (if referring to the moving party’s claim against the responding party) or are all met (if referring to the responding party’s claim against the moving party). To show that material facts are in dispute, the responding party must provide excerpts from deposition transcripts, documents obtained during discovery, written responses to discovery questions, and stipulations between the parties. 418 In both the initial and opposition summary judgment briefs, the lawyers attach copies of the factual documents as numbered exhibits95 so the court can review them. SummaFed. R. Civ. P. 56(a). Antragsteller / requérant / parte peticionaria / istante, parte richiedente. 90 Erklärung der unbestrittenen materiellen Fakten / enoncé des faits pertinents non contestés / declaración de hechos probados / esposizione dei fatti rilevanti non controversi. 91 schriftliche Vereinbarungen / stipulations écrites / estipulación de hechos / accordi (accordi scritti, stipulati, in generale, tra i difensori delle parti, relativi a determinati fatti o aspetti del processo). 92 Fed. R. Civ. P. 56(c)(1)(A). 93 relevanter Anspruch / demande pertinante / demanda relevante / domanda rilevante, rivendicazione rilevante. 94 Antragsteller / requérant / parte promovente / parte istante, parte richiedente. 95 Anlagen / preuves, ou pièces / anexos / allegati. 88

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IV. Types of Legal Briefs ry judgment briefs are consequently often much longer than other types of trial-level briefs. Ideally, the court uses the lawyers’ briefs to render decisions on all the pre-trial motions to either narrow the evidentiary and substantive issues before trial, or decide the entire case without the need for a trial.

5. Briefs in the Trial Phase If the court was not able to decide all the legal issues in the case through the various 419 pre-trial motions, the matter proceeds to trial. During the trial stage, although the lawyers are busy delivering opening statements and presenting exhibits and witness testimony in the courtroom to the judge or possibly a jury, the lawyers still write and submit additional briefs. If lingering evidentiary issues arise, lawyers might file supplemental motions in limine, or perhaps will file other types of motions, such as to preclude witnesses from being present in the courtroom while other witnesses are testifying.96 A lawyer also might submit a brief asking the court to award the party a judgment97 as a matter of law;98 a brief in support of such a motion must be filed before the case is submitted to the jury and must outline the standard for judgment as a matter of law, plus the facts, legal rules, and application of the rules to the case facts entitling the party to the judgment.

6. Briefs in the Post-Trial Phase After a trial ends and the court enters judgment for the prevailing party, lawyers may 420 file several additional briefs. A party who does not prevail at trial has a few options: (1) a renewed motion for judgment as a matter of law,99 (2) a motion for a new trial,100 (3) a motion to amend the court’s findings (in a non-jury trial),101 (4) a motion to amend or alter a judgment,102 and (5) a motion for relief from a judgment.103 A prevailing party may file a brief in support of: (1) a motion to amend the court’s findings,104 (2) a motion to alter or amend a judgment (perhaps to add interest to the damages award),105 and (3) a motion for costs and attorneys’ fees.106 In each of these briefs, a good brief-writer identifies the rule governing the post-trial procedural act, states the legal standard that must be satisfied to obtain the procedural action requested, cites examples of case law in which courts have granted such procedural acts, and persuasively summarizes the factual and legal arguments that support the request. The opposing party will be permitted to file a responsive opposition brief challenging the procedural act requested, and the court may permit the moving party to file a shorter reply brief.

Fed. R. Evid. 615. Urteil von Rechts wegen / jugement de plein droit / sentencia como cuestión de derecho / sentenza su una questione di diritto. 98 Fed. R. Civ. P. 50(a). 99 Fed. R. Civ. P. 50(b). 100 Id.; Fed. R. Civ. P. 59(a). 101 Fed. R. Civ. P. 52(b). 102 Fed. R. Civ. P. 59(e). 103 Fed. R. Civ. P. 60(b). 104 Fed. R. Civ. P. 52(b). 105 Fed. R. Civ. P. 59(e). 106 Fed. R. Civ. P. 54. 96

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Chapter 3 Civil Procedure Brief Drafting Strategy 7. Appellate Briefs 421

Once a court enters a final judgment in a civil case at the trial level in the federal system, the parties may be able to appeal107 the judgment to a higher court within the same jurisdiction. Unlike some civil law jurisdictions, appeals in the U.S., due in large part to the notion that all facts must be capable of being determined by the jury, do not entertain the entry of new evidence. If new evidence needs to be admitted, the case must be sent back to the court of first instance where a jury could be present. The appealing party (called the appellant)108 files a notice of appeal,109 and after the appellate court110 assumes jurisdiction over the case, the court establishes a briefing schedule.111 While appellate briefs include many of the same components as a trial brief (i.e., caption, title, introduction, statement of facts, argument, conclusion, signature block) and the arguments therein reflect a similar structural logic as trial briefs (I.R.E.A.C. or C.R.E.A.C.), federal courts of appeals require several additional components in appellate briefs that are not required in trial-level briefs. Checklist Rule 28 of the Federal Rules of Appellate Procedure112 requires the following components to be included in a brief in support of an appeal: (1) (for parties that are nongovernmental corporate entities) a corporate disclosure statement,113 so the judges on the appellate court can determine whether they have any ethical conflicts of interest114 adjudicating the appeal; (2) a table of contents, noting the page numbers within the brief where each distinct piece of substantive content can be found (identified by descriptive headings and sub-headings); (3) a table of authorities, noting all the cited cases (in alphabetical order), statutes, regulations, and other sources of law, and the page numbers within the brief where they are referenced; (4) a statement of jurisdiction, including: (A) the basis for the trial court’s subject-matter jurisdiction115 over the case, with citations to applicable jurisdictional statutes and describing the relevant facts establishing the trial court’s jurisdiction; (B) the basis for the court of appeals’ jurisdiction, with citations to applicable jurisdictional statutes and describing the relevant facts establishing appellate jurisdiction; (C) the filing dates showing the timeliness of the appeal; and

107 Rechtsmittel gegen das Urteil einlegen / interjeter appel / apelar la sentencia / impugnare la sentenza, ricorrere in appello avverso la sentenza. 108 Partei, die in Berufung geht / appelant / apelante / appellante (chi ricorre in appello). 109 Berufungsantrag / acte d’appel / aviso de apelación / notificazione di appello (nel senso di avviso). 110 Berufungsgericht / cour d’appel / tribunal de apelación / corte d’appello, tribunale d’appello. 111 Schriftsatzterminplan / délais de dépôt des conclusions / calendario de los alegatos escritos / calendario del deposito delle memorie. 112 Bundesberufungsverfahrensordnung / règles fédérales de procédure d’appel / reglas federales del procedimiento de apelacion / Norme Federali statunitensi di procedura in appello. 113 geschäftliche Offenlegungserklärung / déclaration d’actionnariat social / declaración corporativa / dichiarazione di divulgazione societaria, informativa societaria. 114 ethische Interessenkonflikte / conflits d’intérêts / conflictos de interés / conflitti di interessi (sul piano deontologico). 115 Rechtsgrundlage der sachlichen Zuständigkeit des Gerichts / compétence matérielle / competencia material / competenza per materia.

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(5) (6)

(7) (8)

(9) (10)

(D) an assertion that the appeal is from a final order or judgment by the trial court that disposed of all the parties’ claims, or information confirming the court of appeals’ jurisdiction on some other basis; a statement of the issues116 presented for review; a concise statement of the case, including (A) a summary of the facts relevant to the issues submitted for review; (B) the pertinent procedural history; (C) the trial court’s rulings presented for review; and (D) appropriate references to the record (trial testimony, exhibits, trial court decisions); a summary of the argument; the argument, including: (A) the issues;117 (B) for each issue, a concise statement of the applicable standard of review; (C) the appellant's arguments, with citations to the factual record and sources of law; a short conclusion stating the precise relief sought; and a certificate indicating that the brief complies with the page and type-volume limitations118 in the Federal Rules of Appellate Procedure.119

The standard of review120 refers to the amount of deference121 (respect) that the ap- 422 pellate court must give to the trial court’s findings. The standard of review should not be confused with the scope of review. The scope of review concerns what the appeals court may review, whereas the standard of review concerns why the appeals court is reviewing the cases. In the U.S. legal system, appellate courts give great deference to trial courts on issues of fact but less deference on issues of law. Trial courts are considered to be in a better position than appellate courts to judge the reliability of witnesses and exhibits presented in court in the physical presence of the judge, while appellate courts are responsible for promoting consistency in the application of legal rules in questions of law. Appellate briefs can be very voluminous. In addition to drafting the lengthy brief with 423 all the foregoing required components, the appellant’s lawyer also must prepare an appendix122 to the brief, which contains the trial court docket entries, the relevant portions of the pleadings, the trial court’s judgment, and other parts of the record to which the parties wish to direct the court's attention.123 After the appellant’s lawyer files the initial appellate brief124 the responding party, 424 called the appellee,125 files an opposition brief containing the same substantive components as listed above, except the appellee does not need to include a jurisdictional statement, an issue statement, a statement of the case, or the standard of review, unless the 116 Bekanntgabe der Streitpunkte, die zur Berufung vorgelegt werden / enoncé des questions soulevées en appel / declaración de las cuestiones presentadas al tribunal de apelación / esposizione delle questioni (controverse) per le quali si richiede, al giudice di appello, il riesame delle statuizioni del giudice di primo grado. 117 Streitpunkte / questions / cuestiones / questioni [lit.], questioni controverse (tra le parti). 118 Fed. R. App. P. 32(a)(7). 119 Fed. R. App. P. 28. 120 Prüfungsmaßstab / critère de contrôle / criterio de revisión / criterio di riesame. 121 Beachtung / déférence / deferencia / deferenza [lit.], rispetto, considerazione. 122 Anhang / annexe / anexo / appendice (contenente dati e riferimenti degli atti relativi alla decisione impugnata). 123 Fed. R. App. P. 30. 124 Antrag auf Zulassung der Berufung / conclusions en appel initiales / alegato escrito de apelación / atto di citazione in appello, atto di appello. 125 Gegenpartei / intimé / apelado / appellato.

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Chapter 3 Civil Procedure Brief Drafting Strategy appellee disagrees with the way the appellant described those items.126 After the opposition brief is filed, the appellant’s lawyer files a shorter reply brief.

V. The Research and Writing Process 1. Drafting Initial Briefs In the U.S. federal court system, near the beginning of each case, but after the parties have filed the pleadings (the complaint, answer, and any cross-pleadings or third-party pleadings), the court establishes a case management schedule127 (also called a scheduling order) calendaring deadlines for fact discovery, expert discovery (including submission of expert reports, depositions, and evidentiary motions), pre-trial submissions, and the trial date. Lawyers use these court-imposed deadlines to plot a drafting timeline for researching, writing, and submitting briefs during each phase of the case. Likewise, after the trial and in an appeal of a civil case, the appellate court establishes deadlines for the lawyers’ submission of the initial, opposition, and reply briefs. Thus, the first step a lawyer takes in the brief-writing process—whether at the trial or appeal level—is to establish the due date upon which the final version of each brief must be submitted to the court. The next step is to review the applicable court rules to determine whether the court requires inclusion of substantive components beyond the standard sections described in Part C above, and whether there is a page or word count limit for the length of the brief. 426 Subsequently, the lawyer identifies the specific legal issues or questions that the party wants the court to decide. Some briefs limit discussion to one issue; others address multiple issues. Strong organization (using an I.R.E.A.C. or C.R.E.A.C. framework for each legal analysis) is essential so the judge (or sometimes a panel of judges in an appeal) can understand the distinct issues, their governing rules, and the filing party’s various arguments. 427 The brief-writer’s next step is to research the law governing the legal issues. Legal research can be a very time-consuming part of the brief-writing process. For each legal issue to be discussed in the brief, the lawyer first must determine the proper body of law that controls the legal question—another consideration of jurisdiction.128 Federal law might apply, or a particular state’s law might govern the case. Some cases might involve the law of more than one jurisdiction. 428 For example, in a case involving both contract and tort claims, the parties might have negotiated a choice-of-law provision in a contract dictating that New York law governs any contract interpretation issues; however, the law of a different state where a physical injury or property damage occurred might control the parties’ tort claims. For each distinct legal issue in a brief, the lawyer researches pertinent constitutional provisions, statutes, regulations, and case law in the proper jurisdiction to find rules of law that relate to the client’s circumstances. Statutes and regulations often contain definitions of specific legal terms, checklists of required elements of a legal rule, or a range of factors that courts will weigh to determine whether a rule has been satisfied or violated. Even without a controlling statute or regulation, U.S. common law may provide a synthesized 425

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R. App. P. 28(b). / calendrier de gestion du dossier / calendario de administración del caso / calendario di gestione della causa [lit.], programma (preventivo) dei tempi di trattazione della causa. 128 Zuständigkeit des Gerichts / compétence / jurisdicción / considerazione sulla giurisdizione [lit.], considerazione sulla competenza giurisdizionale. 127 Zeitplan

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V. The Research and Writing Process rule with required elements or a spectrum of factors for the court to apply to the parties’ facts. Legal researchers find and read numerous precedential cases in which courts have analyzed various factual circumstances in light of governing rules of law. Some legal issues are discussed in a mere handful of cases, enabling an efficient and quick legal research process. Broader legal concepts—such as causes of action129 for breach of contract130 and negligence131—are discussed in literally hundreds of written judicial opinions, adding to the workload of the brief-writer who must find, read, and sift through each relevant case, synthesize rules, and choose the best case examples to discuss in the brief. Because most briefs are subject to courts’ page number or word count limitations, lawyers must make strategic decisions about how many precedential cases to discuss in a brief. Ethical rules require lawyers to inform the court about mandatory authority,132 which means cases that are binding on the court rendering the present decision because they were decided by a higher court within the same vertical judicial hierarchy. However, because the purpose of legal briefs is to persuade the court to rule in the client’s favor on the legal issues at hand, lawyers strategically may include cases from other jurisdictions as persuasive authority,133 especially in situations in which the mandatory authority in the jurisdiction is sparse, unfavorable, or has not addressed factual circumstances similar to the parties’ case. Lawyers use law libraries and electronic legal research databases to find constitutional provisions, statutes, regulations, and cases to include in a brief. Three well-known, privately-owned electronic legal research tools in the United States are Westlaw, LexisNexis, and Bloomberg Law. These devices help attorneys find the most up-to-date sources of law, and ensure that the cases to be included in a brief have not been reversed, vacated, or superseded by statute. Once the legal researcher locates and reviews the statutes, regulations, and case law, the next step is to extract or synthesize a clear rule of law from these sources that can be applied to the client’s facts. For example, a typical rule of law governing a breach of contract action requires the party to prove three basic elements: (1) the existence of a contract, (2) breach of the contract, and (3) damages or injury to the non-breaching party. During the research phase of the brief-writing process, the lawyer excerpts this rule from the sources of law, and then reviews the client’s factual circumstances to identify details, events, and specifics to tie to each required component of the rule. If the court’s briefwriting rules allow, or require, factual documents to be attached as exhibits or appendices to the brief (such as in a motion for summary judgment), the lawyer begins collecting these addenda during the fact-gathering part of the research phase. The next step is to organize the brief. The brief-writer outlines all the brief components specifically required in the court rules, and then structures the argument section of the brief using an I.R.E.A.C. or C.R.E.A.C. framework for each distinct legal issue. Examples of the organizational structure of three different types of trial-level briefs are provided in Part G below. Subsequently, the brief-writer prepares a first draft of the brief, inserting headings and sub-headings as guideposts to separate each required structural component and further organize the arguments for each issue. Some lawyers use sub-headings to highlight 129 Anspruchsgrundlagen

/ cause d’action / causas de acción / fondamento dell’azione. / rupture contractuelle / incumplimiento de contrato / violazione del contratto, inadempimento contrattuale. 131 Fahrlässigkeit / négligence / negligencia / negligenza. 132 bindende Entscheidungen / sources obligatoires / autoridad vinculante / efficacia imperativa. 133 überzeugende Entscheidungen / sources persuasives / fuente persuasivo / efficacia persuasiva. 130 Vertragsbruch

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Chapter 3 Civil Procedure Brief Drafting Strategy each element or factor of the rule of law, and then discuss and analyze that distinct part of the rule beneath the appropriate sub-heading. Court rules also require brief-writers to use a uniform system of citation when referring to statutes, regulations, and case law; citation allows the court to easily find the sources of law and ensure the brief-writer accurately has quoted from or relied upon the legal authority. Inserting proper citation into a brief is another time-consuming task. 434 Good lawyers edit briefs multiple times and then meticulously proofread the final version before submission to the court. Most courts allow, or require, electronic filing, so the lawyer must allow sufficient time to finalize the brief, collate any attachments, exhibits, or appendices, and upload all the required documents into the court’s electronic filing system. Once the brief is filed, the electronic court filing system notifies the opposing parties of the filing; the court rules specify the number of days within which the opposing parties must file opposition briefs.

2. Drafting Opposition Briefs The effort required to research, outline, write, and finalize an opposition brief often depends upon the writing quality of the initial brief. A brief-writer can respond more efficiently to a well-written initial brief—one that clearly identifies the legal issues, applicable rules, and persuasive arguments in an organized manner and accurately cites to the factual record and legal authority—than a poorly organized and unclear brief with deficient logic and citation deficiencies. In the latter case, the responding brief-writer first must take the time to unearth the pertinent issues and re-organize them into a responsive framework that makes sense. Either way, the first step in drafting an opposition brief134 is to carefully read the initial brief, circling the various legal issues, highlighting passages that warrant a counter-argument, noting faulty factual and legal statements, and identifying the sources of law relied upon by opposing counsel. The responsive brief-writer should not rely upon the sources of law contained in the initial brief, but must conduct fresh research to ensure that the constitutional provisions, statutes, regulations, and cases mentioned in the initial brief are relevant and quoted accurately. The brief-writer should check to see if: (1) the initial brief omitted or glossed over any key parts of the pertinent statutes or regulations, (2) the initial brief excluded any relevant cases in the jurisdiction that are mandatory authority, and (3) any cases cited in the initial brief were reversed or vacated in a later court decision. The brief-writer must read each case cited by opposing counsel to determine if the initial brief contains any misstatements of law. From a factual standpoint, the responsive brief-writer must review the facts described in the initial brief and determine if: (1) any facts helpful to the client have been omitted or misstated, and (2) if any unhelpful facts were included and need to be further explained to the court. 436 Once the responsive brief-writer has vetted the initial brief, checked the facts and law, and performed new research, the next step is to outline the responsive brief. The lawyer can decide strategically whether to follow the same organizational structure of the issues and arguments in the initial brief, or whether to re-organize the responsive issues and arguments into a different chronology, to present a more logical and persuasive analysis to the court. 437 The responsive brief-writer then drafts, edits, proofreads, finalizes, and submits the opposition brief within the court-imposed deadline and in compliance with any page 435

134 erwidernder Schriftsatz / conclusions en opposition / memorial en oposición / comparsa di risposta in opposizione.

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VI. Persuasion in Brief-Writing number or word count restrictions, filing the brief electronically, with a notification sent to opposing counsel.

3. Drafting Reply Briefs Court rules typically require reply briefs to be shorter in length than initial and oppo- 438 sition briefs. To write a reply brief, the lawyer reviews the opposition brief to identify facts, law, and arguments that warrant a response. The reply brief is not an opportunity to re-state all the arguments made in the initial brief; instead, its purpose is to provide counterarguments to the legal reasoning and analysis presented in the opposition brief. Again, the lawyer may choose to organize the reply brief in a structure that parallels the chronology of topics in the opposition brief, or may re-organize the responsive points in a logic flow that is more persuasive and favors the client’s position. The lawyer drafts, edits, proofreads, finalizes, and submits the reply brief to the court, 439 and opposing counsel is notified of the filing. Thereafter, the court may schedule oral argument, allowing the lawyers for the parties to present their positions verbally in court. Alternatively, the court may choose to render its decision on the legal matters solely upon reviewing the briefs, without allowing oral argument.

VI. Persuasion in Brief-Writing The goal of every brief-writer is to convince the court—based on the facts and law— 440 to rule in the filing party’s favor, e.g., ordering the opposing party to produce documents or a witness it erroneously has been withholding, determining that an expert is not qualified to testify at trial, or finding that there is no need for a trial at all because the briefwriter demonstrated that no material facts relating to the cause of action for breach of contract are in dispute, all the required elements of the rule of law are met, and the filing party is entitled to judgment as a matter of law. The best brief-writers use Aristotle’s three modes of persuasion: logos (logic or reasoning), pathos (emotion), and ethos (character or credibility). Logic is achieved through the organizational structures discussed above: I.R.E.A.C. or C.R.E.A.C.; describing cases using a Facts + Holding + Reasoning formula; applying the definitions, elements, or factors of a legal rule methodically to the facts of the case to convince the court of the proper outcome (rule-based reasoning); comparing and contrasting the client’s facts to prior precedent (analogical reasoning), etc. While legal rules may seem rational and unemotional, good brief-writers also engage 441 with pathos to connect the brief ’s reader to the client’s factual circumstances. Using case themes (such as fairness, equality, judicial economy, freedom, the importance of keeping promises, protection against discrimination, global inclusion, empathy, etc.), the briefwriter links the parties’ specific conflict to broader societal or even global concerns, invoking an element of humanity and shared experience to inspire the court to render a fair decision. Effective brief-writers also use vibrant language, imagery, and analogies to enliven the case facts for the reader. However, brief-writers must balance pathos with ethos—character and credibility—by scrupulously and accurately describing both the strong and weak facts (giving context to the weak facts instead of manipulating or ignoring them) and favorable and unfavorable law. The required certification under Rule 11 of the Federal Rules of Civil Procedure, as described above, reinforces the importance of ethical brief-writing. Instead of entirely disregarding adverse facts and law—which can tarnish the credibility of the brief-writer once the court inevitably discovers these omissions—the best brief-writers focus on explaining to the court how presumed disadvantaHeidi K. Brown

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Chapter 3 Civil Procedure Brief Drafting Strategy geous facts can be viewed in a different light and why seemingly negative precedent is distinguishable from the client’s case. A brief-writer also demonstrates ethos by: (1) complying with the court’s briefing rules (including substantive, procedural, and formatting requirements and page or word count limitations), (2) carefully checking grammar, spelling, punctuation, citation, and formatting, and (3) submitting a polished professional document to the court, on time.

VII. Three Sample Structural Outlines of Briefs that United States’ Lawyers Write 1. Sample Discovery Brief135 Outline 442

The following is an example of how a brief-writer might outline a brief in support of a motion to compel136 an opposing party to comply with a written discovery request to produce corporate annual profit and loss reports:

443 Example Outline: Brief in Support of a Motion to Compel Discovery:137 • • • •

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Caption (Court Name, Parties, Designation of Parties as Plaintiff/Defendant) Case Docket Number Title of Brief: Plaintiff ’s Memorandum in Support of Its Motion to Compel Defendant to Produce Corporate Annual Profit and Loss Reports Introduction • Introductory sentence: Stating which party is filing the brief, and citing the Federal Rule of Civil Procedure (and any local court rule) procedurally authorizing motions to compel • Short description of the specific type of discovery sought • Reference to the Federal Rule of Civil Procedure authorizing the form of discovery • Three to five reasons why the Plaintiff is entitled to the documents • Specific request of the court: An order directing the Defendant to produce the documents within a certain number of days Statement of Facts • Sentence briefly describing the factual nature of the parties’ lawsuit • Specific item of discovery requested: Corporate annual profit and loss statements • How the discovery was requested: An excerpt from Plaintiff ’s First Request for Production of Documents138 • Defendant’s refusal to produce the documents: An excerpt from Defendant’s written Objections139 to Plaintiff ’s First Request for Production of Documents • Description of the details surrounding Defendant’s refusal to produce the documents • Certification that Plaintiff ’s counsel has met-and-conferred with Defendant’s counsel in an attempt to resolve the discovery dispute without judicial intervention

135 Offenlegungs-Schriftsatz / conclusions en divulgation / alegatos escritos acerca del procedimiento de descrubrimiento de pruebas / memoria diretta a richiedere l’esibizione di prove. 136 Antrag auf richterliche Zwangsanordnung / requête d’ordre de la Cour / petición de obligar la divulgación de pruebas / istanza diretta ad obbligare (ovvero a costringere) la controparte a divulgare prove. 137 Schriftsatz zur Unterstützung eines Antrags auf eine richterliche Anordnung zur Offenlegung / conclusions à l’appui d’une requête d’ordre de divulgation de la Cour / alegatos escritos en apoyo de la petición de obligar la divulgación de pruebas / memoria scritta a supporto dell’istanza di intimazione (diretta cioè ad intimare alla controparte o ad un terzo di ottemperare alla richiesta di esibizione o divulgazione di prove). 138 Ursprüngliche Aufforderung des Klägers, schriftlich zu bestimmten Aspekten des Rechtsstreits Stellung zu nehmen / première demande de production de documents du requérant / citación inicial para la producción de documentos / prima domanda, prima richiesta (proposta dall’attore) di esibizione di documenti. 139 Einwände / oppositions, ou refus écrits opposés à la première demande / objeciones escritos / obiezioni scritte, obiezioni formulate per iscritto.

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Argument • Persuasive introduction: Perhaps a sentence about the fundamental purpose of discovery (theme)140 • Issue: Defendant has wrongfully withheld its corporate annual profit and loss statements on the erroneous ground that the documents are protected by the attorney-client privilege since they were drafted by in-house corporate counsel • Rule: Citation to the Federal Rule of Civil Procedure governing the scope of discovery • Rule: Citation to the Federal Rule of Civil Procedure governing document discovery procedure • Rule: Citation to the Federal Rule of Civil Procedure governing objections141 to discovery on the basis of attorney-client privilege142 • Rule: Definition of the attorney-client privilege in the appropriate jurisdiction • Rule: Citation to the common law rule from case law governing when the attorney-client privilege covers documents created by in-house corporate counsel; exception when the documents were prepared in the ordinary course of business and not while rendering legal advice • Explanation: Three-to-five carefully selected cases in the appropriate jurisdiction showing that courts have compelled production of corporate annual profit and loss statements (or analogous documents) when prepared by in-house corporate counsel in the ordinary course of the company’s business • Application: Analyzing the nature of the Defendant’s corporate documents being withheld in light of the rules, and comparing Defendant’s documents to the documents ordered produced by the courts in the precedent cases • Reiterating the three to five arguments stated in the introduction to persuade the court why the Plaintiff is entitled to the withheld documents Conclusion • Re-stating Plaintiff ‘s specific request that the court issue an order compelling the Defendant to produce the documents within a certain number of days • Reiterating the theme of the purpose of discovery Signature Block Attachments • Excerpts from Plaintiff ’s First Request for Production of Documents • Excerpts from Defendant’s Objections to Plaintiff ’s First Request for Production of Documents • Correspondence (emails and letters) between parties’ counsel attempting to resolve the discovery dispute

2. Sample Evidentiary Brief Outline The following is an example of how a brief-writer might outline a brief in support of a 444 motion in limine143 to exclude a handwriting expert from testifying at trial: 445

Example Outline: Brief in Support of a Motion in Limine • • • •

Caption (Court Name, Parties, Designation of Parties as Plaintiff/Defendant) Case Docket Number Title of Brief: Defendant’s Memorandum in Support of Its Motion in Limine to Exclude Plaintiff ’s Handwriting Expert from Testifying at Trial Introduction • Introductory sentence: Stating which party is filing the brief, and citing the Federal Rule of Civil Procedure (and any local court rule) procedurally authorizing motions in limine

140 Grundlegender Zweck der Offenlegung / objectif fondamental de la divulgation / propósito fundamental del procedimiento de descubrimiento de pruebas / scopo fondamentale dell’esibizione o divulgazione delle prove. 141 Einsprüche / oppositions / objeciones / obiezioni. 142 anwaltliches Berufsgeheimnis / secret professionnel de l’avocat envers son client / secreto profesional de abogados / privilegio del rapporto avvocato-cliente [lit.], (nel senso di relazione privilegiata, tutelata dal segreto professionale dell’avvocato). 143 Antrag auf Beweisablehnung / requête soulevée in limine litis / solicitud previa de exclusión de ciertas pruebas / istanza preliminare diretta ad escludere o limitare l’ammissione di determinate prove.

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Identification of the name of the expert, scope of expert testimony, and opinions sought to be excluded from trial • Reference to the Federal Rule of Evidence governing the admissibility of expert testimony and the standard for qualification of an expert witness • Three to five reasons why the expert should be precluded from testifying • Specific request of the court: An order precluding the expert from testifying at trial Statement of Facts • Sentence briefly describing the factual nature of the parties’ lawsuit • Procedural description of the Plaintiff ’s expert designation Date the expert’s name was disclosed to the Defendant Date the expert submitted a report to the Defendant Date of the expert’s deposition • Summary of opinions rendered by the expert Argument • Persuasive introduction: Perhaps a sentence about the purpose and potential risks of expert testimony (theme) • Issue: Plaintiff ’s handwriting expert is not qualified to render expert testimony; she used flawed handwriting evaluation techniques; and her testimony—if allowed—would only confuse the jury and prejudice the Defendant • Rule: Citation to the evidentiary rule governing expert qualifications (Fed. R. Evid. 702: an individual must possess the requisite amount of “knowledge, skill, experience, training, or education” regarding the subject of the expert testimony) • Rule: Citation to the standard governing admissibility at trial of expert testimony under Daubert v. Merrell Dow Pharmaceuticals, Inc., 43 F.3d 1311 (9th Cir. 1995) • Explanation: Three-to-five carefully selected cases in the appropriate jurisdiction showing that courts have excluded handwriting experts (or analogous experts) if they fail to satisfy the standards under Fed. R. Evid. 702 and the Daubert case • Application: Comparing the Plaintiff ’s expert’s qualifications and methodology to the elements of the Fed. R. Evid. 702 / Daubert standards, and to the qualifications and methodology of the handwriting experts described in the case law • Reiteration of the three to five arguments stated in the introduction regarding why the Plaintiff ’s expert should be precluded from testifying at trial • The proposed expert does not possess the appropriate degree of “knowledge, skill, experience, training, or education” required under the evidence rules • The expert used unreliable methods or principles to arrive at the opinions • The expert’s testimony will confuse or mislead the jury Conclusion • Re-stating the specific request that the court issue an order precluding the expert from testifying at trial • Reiterating the theme of the purpose of, and risks associated with, expert testimony Signature Block Attachments • Expert’s curriculum vitae • Excerpts from expert report • Excerpts from expert’s deposition transcript

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3. Motion for Summary Judgment 446

The following is an example of how a brief-writer might outline a brief in support of a motion for summary judgment144 in a case involving a claim that an insurance company breached a contract with its insured:

447 Example Outline: Brief in Support of a Motion for Summary Judgment • •

Caption (Court Name, Parties, Designation of Parties as Plaintiff/Defendant) Case Docket Number 144 abgekürztes

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Title of Brief: Plaintiff ‘s Memorandum in Support of its Motion for Summary Judgment on Its Breach of Contract Claim Introduction • Introductory sentence: Stating which party is filing the brief, and citing the Federal Rule of Civil Procedure (and local court rule) authorizing motions for summary judgment (Fed. R. Civ. P. 56) • Indication that the Plaintiff seeks summary judgment on its claim against an insurance company for breach of contract • Reference to the Fed. R. Civ. P. 56 summary judgment standard (there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law) • Reference to the three elements of the common law rule in the particular jurisdiction governing a claim of breach of contract (existence of a contract, breach, damages) • Brief factual statement of how the three elements are met • Specific request of the court: An order granting summary judgment on the breach of contract claim Statement of Material Facts Not in Dispute • Sentence briefly describing the factual nature of the parties’ lawsuit and contractual dispute • Brief summary of the procedural status of the case (pleadings, discovery, any other pending motions, scheduled trial date) • Reference to the section of Fed. R. Civ. P. 56 (and possibly a local court rule) requiring the party moving for summary judgment to state each undisputed fact in a separate numbered paragraph, supported by references to the factual record • Separate numbered paragraphs identifying each undisputed fact, organized around the three elements of the cause of action for breach of contract—existence of a contract, breach, and damages (with citations to the factual record, including depositions, documents, affidavits or declarations, stipulations, and discovery responses) • Separate numbered paragraphs to show the existence of a contract • Separate numbered paragraphs to show that the insurance company breached the contract • Separate numbered paragraphs to show that the Plaintiff suffered damages Argument • Persuasive introduction: Perhaps a sentence about the purpose of summary judgment to narrow issues or trial, or eliminate the need for trial (theme) • Issue: Plaintiff is entitled to summary judgment on the breach of contract claim against the Defendant insurance company • Rule: Fed. R. Civ. P. 56 summary judgment standard (there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law) • Rule: Stating the three elements of a cause of action for breach of contract (existence of contract, breach, damages) • Explanation: A description of carefully selected cases in the appropriate jurisdiction showing that courts have granted summary judgment in previous cases in which the plaintiff has demonstrated the existence of an insurance contract, breach of the contract by the insurance company, and resulting damages • Application: Linking the undisputed material facts to the three required elements of the rule governing breach of contract, to show that each element is satisfied (using headings and sub-headings to separate the analysis of each required element), and comparing the moving party’s facts to the case law in which the court granted summary judgment Conclusion • Re-stating the specific request that the court issue an order granting summary judgment in favor of the Plaintiff on the cause of action for breach of contract • Reiterating the theme of the purpose of summary judgment Signature Block Attachments • Excerpts from the factual record (documents, transcripts, etc.) to support each separately numbered paragraph of undisputed material facts

VIII. Conclusions and Potential Pitfalls in Brief-Writing A well-written legal brief can effect positive change, enabling the court to render a 448 fair decision in an efficient manner. A bad legal brief is a problem—for the judge, opposHeidi K. Brown

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ing counsel, the parties, the system, and the brief-writer himself or herself. Because a brief ’s purpose is “to educate and guide the court’s decision,”145 a brief must be logical, clear, respectful, and forthright, and must include all the requisite facts and legal rules needed by the court to render a well-reasoned decision. “Accuracy in every respect is an essential aspect of a helpful brief,”146 including references to procedure, standards of review, substantive governing rules, case facts, and citations to the record and legal authority. Courts issue brief-writing rules to fulfill three critical functions. Substantive rules communicate to lawyers the nature of the key content that judges need in order to answer challenging legal questions. Procedural and formatting rules such as page or word count limits, margins, fonts, line-spacing, footnotes, permissible or required attachments, and filing deadlines (1) ensure that the evaluative system is as fair as possible to all litigants involved in the same case (i.e., each side in a case has an equal platform and opportunity to communicate with the judge) and (2) encourage efficiency in moving massive amounts of paper through crowded dockets.147 When attorneys disregard these rules and submit poorly written briefs, they improperly shift their workload to court personnel and opposing counsel. For example, if a brief fails to cite properly to the factual record and the law, court personnel must hunt down the proper transcript pages, statutes, and case law before the judge can begin to review the legal issues—slowing down the judicial process and increasing costs for all participants. Similarly, if a brief contains illogical arguments, nonsensical organization, or exaggerations of facts and law, the lawyer writing the responsive brief first must invest the time to highlight all the foregoing deficiencies, re-organize the issues and arguments, and address the flaws in the initial brief, before beginning to assert counter-arguments in an opposition brief—a time-consuming and expensive endeavor. Unfortunately, too often, lawyers ignore these court rules and system-wide standards, and fail to submit high-quality briefs. A survey of case law in the United States shows that, while judges routinely compliment lawyers who submit excellent briefs and point out how such high-quality written work product enables efficient and sound decisionmaking, judges also admonish lawyers who submit briefs that (a) are difficult to understand due to unclear structural logic or language, (b) lack required substantive components, (c) mishandle case facts, (d) misuse the applicable law, (e) defy procedural and formatting rules, (f) contain rampant typographical, grammatical, or general proofreading errors, (g) exhibit a disrespectful tone, or (h) are filed late.148 The consequences for poor brief-writing can include adverse rulings (a judge may decline to address the issues raised in an incomprehensible brief), monetary sanctions, and disciplinary action. Overall, while brief-writing indeed is a labor-intensive and time-consuming task, a well-written brief can transform a case, laying the foundation of facts, rules, precedent, persuasive arguments, and public policy themes to enable the court to decide the case, or parts thereof, in the client’s favor, and perhaps even effect societal change. Good briefwriters are some of the most powerful lawyers in the legal profession, simply through the written word alone.

145 In the Matter of Witt, 481 B.R. 468, 473 (N.D. Ind. Bankr. 2012); see also Litton Systems, Inc. v. Sundstrand Corp., 750 F. 2d 952, 955 n. 1 (Fed. Cir. 1984). 146 United States v. Price, 44 M.J. 430 n.1 (United States Court of Appeals for the Armed Forces, 1997). 147 Reyes-Garcia v. Rodriguez & Del Valle, Inc., 82 F. 3d 11, 14 (1st Cir. 1996). 148 Heidi K. Brown, Converting Benchslaps to Backslaps: Instilling Professional Accountability in New Legal Writers by Teaching and Reinforcing Context, 11 Journal of Legal Communication and Rhetoric 109 (Fall 2014).

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CHAPTER 4 UNITED STATES’ INTERNATIONAL ARBITRATION LAW AND PRACTICE Literature: Steven Baicker-McKee, Federal Civil Rules Handbook (2017). Gary B. Born, International Arbitration: Cases and Materials (2d ed. 2015). Anne M. Burr & Howard Bromberg, U.S. Legal Practice Skills for International Law Students (2014). E. Alexandra Dosman & Clara Flebus, The Federal Arbitration Act and State Arbitration Acts: Impact of Federalism on International Arbitration in the U.S., in International Arbitration in the United States (Laurence Shore et al. eds., 2017). Timothy Kautz, What Is “Manifest Disregard of Law?” SchiedsVZ (2011). Pedro J. Martinez-Fraga, The American Influence on International Commercial Arbitration: Doctrinal Developments and Discovery Methods (2009).

I. Introduction If an international arbitration has any connection to the U.S., it is indispensable for a 453 civil lawyer to understand U.S. arbitration laws, practices, and cultural norms. Whether a party resides in the U.S., a U.S. court exercises jurisdiction over a party or relevant entity, the arbitration is seated1 (or has its venue) in the U.S., evidence is located in the U.S., or assets are held in the U.S. and enforcement could be sought there, knowledge of U.S. laws, practices, and norms may affect case preparation. Confronted with an international dispute with a U.S. connection, an attorney may wish to (1) use U.S. federal courts to support an international arbitration against a U.S. entity, (2) obtain evidence located within the U.S., (3) pursue the annulment or vacatur2 of an award issued by a tribunal seated in the U.S., (4) enforce a non-domestic3 arbitral award in the U.S., or (5) anticipate the predispositions of arbitrators or tactics of opposing counsel who were trained in the U.S. The first hurdle for any introductory chapter on international arbitration is defini- 454 tional. “Arbitration” is not defined in the U.S. Arbitration Act (commonly known as the Federal Arbitration Act (F.A.A.))4 or in the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards5 (the “New York Convention” (N.Y.C.)), which the F.A.A. implements into U.S. federal law. The United Nations Commission on International Trade Law’s Model Law on International Commercial Arbitration (the 1 The “seat” of the arbitration is its juridical home or, in the terms used by Article V(1)(d) of the New York Convention, “the country where the arbitration took place.” See Gary B. Born, International Arbitration: Cases and Materials, 599–600 (2d ed. 2015). 2 Aufhebung (des Schiedsspruchs) / annulation (de la sentence arbitrale) / anulación (del laudo arbitral) / annullamento (del lodo arbitrale). 3 To U.S. courts, a “non-domestic” arbitration award is one that arises out of a relationship that “involves property located abroad, envisages performance or enforcement abroad, or has some other reasonable relation with one or more foreign states.” The citizenship or residence of the parties is not conclusive and there can be an “international arbitration” between two U.S. parties, even when the arbitration is seated in the U.S. Federal Arbitration Act [“FAA”], 9 U.S.C. § 202 (2018); see also Bergesen v. Joseph Muller Corp., 710 F. 2d 928 (2d Cir. 1983). 4 Bundesgesetz zu Schiedsverfahren / loi fédérale sur l’arbitrage / ley federal sobre la abritraje / legge federale sull’arbitrato; F.A.A., 9 U.S.C. §§ 1–16, 201–08, 301–07 (2018). 5 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38 [hereinafter “New York Convention” or “N.Y.C.”] (codified in the U.S. as F.A.A. §§ 201–08).

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Chapter 4 United States’ International Arbitration Law and Practice “U.N.C.I.T.R.A.L. Model Law”), which may have at least persuasive value in some U.S. jurisdictions, is likewise of little assistance, circularly defining “arbitration” as “any arbitration whether or not administered by a permanent arbitral institution.”6 455 This chapter proceeds on the basis that arbitration7 is the most structured form of alternative dispute resolution (A.D.R.), through which parties “consensually submit a dispute to a non-governmental decision-marker, selected by or for the parties [pursuant to their agreement to arbitrate], to render a binding decision resolving a dispute in accordance with neutral judicial procedures affording the parties an opportunity to be heard [i.e., “due process”].”8 Due to arbitration’s similarities to litigation—both are adjudicatory proceedings that result in a binding decision by a neutral third entity—arbitration is often described by comparison or reference to litigation. This chapter does not depart from that tradition! 456 The U.S. legal system and public policy favor arbitration and value it as a time-saving, cost-effective means of dispute resolution that promotes party autonomy,9 while relieving stressed court dockets.10 This presumption in favor of arbitration “applies with special force in the field of international commerce.”11 Federal courts eagerly enforce arbitration agreements,12 and arbitration is available to resolve a variety of commercial disputes, including those sometimes considered non-arbitrable in other jurisdictions, such as those related to employment13 and antitrust.14 457 Arbitration is assumed to be faster than litigation because there are limited opportunities for a “do-over” or “second bite:” there are no merits appeals of arbitral awards, and opportunities to vacate an unfavorable award are limited to the grounds enumerated in F.A.A. § 10(a).15 Yet many of arbitration’s benefits—including confidentiality16 and the 6 United Nations Commission on International Trade Law [“U.N.C.I.T.R.A.L.”], U.N.C.I.T.R.A.L. Model Law on International Arbitration, art. 2, U.N. Doc. A/61/17 (2006) [hereinafter “U.N.C.I.T.R.A.L. Model Law”]. 7 Schiedsverfahren / arbitrage / arbitraje / arbitrato. 8 Born, supra note 1 at 336 (brackets indicate text added to make the definition consistent with enforceability under article V of the New York Convention); cf. Arbitration, Black’s Law Dictionary (9th ed. 2009) (“A dispute-resolution process in which the disputing parties choose one or more neutral third parties to make a final and binding decision resolving the dispute.”). 9 See e.g., AT&T v. Concepcion, 563 U.S. 333, 346 (2011); Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983) (“[D]oubts concerning the scope of arbitral issues should be resolved in favor of arbitration.”). See generally Southland Corp. v. Keating, 465 U.S. 1 (1984). 10 Prozessliste / liste de dossiers / expediente o lista de litigios / ruolo delle cause, ruolo (generale) delle cause pendenti presso il tribunale. 11 Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 631 (1985). 12 Schiedsvereinbarung / convention d’arbitrage / acuerdo de arbitraje / patto compromissorio, compromesso; See e.g., Mitsubishi Motors Corp., 473 U.S. 614 (largely regarded as the seminal case to adopt a presumption that arbitration clauses are enforceable). 13 Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018) (holding that the F.A.A. required courts to enforce arbitration agreements according to their terms, even in the employment context); see also Bautista v. Star Cruises, 396 F. 3d 1289, 1299 (11th Cir. 2005) (noting that “to read industry-specific exceptions into the broad language of the Convention Act would be to hinder the Convention’s purpose” and concluding that there is “no justification for removing from the Convention Act’s scope a subset of commercial employment agreements”—even employment contracts for seamen, who otherwise appear to be facially excluded from the F.A.A. under F.A.A. § 2). 14 Mitsubishi Motors Corp., 473 U.S. at 633–34 (finding that antitrust matters are arbitrable and noting that the complexity of business matters is within the expertise of arbitrators, since the process of selecting arbitrators builds in a component of impartiality which is necessary to adjudicate these matters). 15 F.A.A., 9 U.S.C. § 10(a). 16 Confidentiality is not automatic and must be agreed by the parties. Even if the parties do enter a confidentiality agreement, however, it will not prevent the award from entering the public eye during the enforcement phase, when the aggrieved party may submit the award and the arbitration agreement to the enforcing court. See F.A.A. §§ 9, 13, 207 (describing the process for confirmation of awards).

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II. The Binding Authorities time and cost savings associated with the absence of appellate review on the merits—are assumed or exaggerated. Nevertheless, one benefit of arbitration stands out among the rest: enforceability of result. Whereas a winning litigant may be unable to collect on a court judgment in another jurisdiction,17 the prevailing party in an international arbitration benefits from the nearly global enforceability of arbitral awards, thanks to the widespread ratification and implementation of the N.Y.C.18 Further, a court in a country party to the N.Y.C. may only refuse enforcement of an international or non-domestic award if one of the grounds expressly listed in Article V of the N.Y.C. is met: Article V(1) [. . .] (a)

The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or (b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or (c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or (d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or (e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. Article V(2) [. . .] (a)

The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or (b) The recognition or enforcement of the award would be contrary to the public policy of that country.19 This chapter focuses on select aspects of U.S. (international) arbitration law and practice that may have relevance for an attorney trained outside of the U.S. This chapter begins by discussing the legal and contractual frameworks applicable to international disputes that have a U.S. nexus. This is followed by some of the high (or low) lights of U.S. international arbitration law and practice, including as it relates to evidence and costs.

II. The Binding Authorities There are several sources of binding authority20 that may shape an international ar- 458 bitration award when related to the U.S. In their typical order of presentation, these include: (1) The arbitration agreement, whether contained in the contract underlying the dispute or created thereafter; (2) Any arbitration rules selected in the arbitration agreement; 17 To date, there is no active treaty on the enforcement of judgments that has comparable reach to the N.Y.C. See Overview of the Judgments Project, Hague Conf. on Priv. Int’l Law (Conférence de la Haye de droit international privé) (H.C.C.P.), https://www.hcch.net/en/projects/legislative-projects/ judgments/overview-judgments (last visited Jan. 19, 2020). 18 New York Arbitration Convention, Contracting States, http://www.newyorkconvention.org /countries (last visited Jan. 30, 2020). 19 New York Convention, supra note 5 at art. V; F.A.A., 9 U.S.C. § 201 (“The Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958, shall be enforced in United States courts in accordance with this chapter.”) 20 rechtsverbindlich / force obligatoire / aplicación vinculante / efficacia vincolante.

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Treaties; Federal law; State law; and Generally, the rules of the venue (including the venue’s immigration and labor laws and its regulations on attorney conduct).

International commercial arbitration challenges counsel and arbitrators to think about these authorities simultaneously and repeatedly, while keeping the will of the parties21 (as contained in the contract) and enforceability (as contained in the treaties and relevant local law) at the forefront. Consistent with that approach, this section begins with the will of the parties as contained in their agreements, and this is followed by a discussion of the applicable legal regimes.

1. The Arbitration Agreement Arbitration is a creature of contract. Reflecting the will of the parties, the contract determines whether there will be an arbitration and, if so, how that arbitration will be conducted.22 In this spirit, the U.S. allows parties the freedom to designate (1) the claims that will be submitted to arbitration, (2) the systems of law that will apply to the resolution of those claims (including the laws governing the dispute’s procedural due process), based on the law of the arbitration’s “seat,” and the law to be applied to the substance of the dispute, (3) the language in which the arbitration will be conducted, and (4) the rules —whether institutional or ad hoc—that will govern the arbitration procedure.23 Restricted only by fundamental notions of procedural fairness, parties also can specify the method by which they will select arbitrators, such as each party appointing one arbitrator, with a neutral third arbitrator agreed upon by the two party-appointed arbitrators, the parties, or even appointed by a neutral institution.24 There is a presumption that, absent party agreement, the dispute will be resolved by one arbitrator.25 461 Agreements to arbitrate that were concluded prior to a dispute are admissible. In the U.S. (international) arbitration context, a written contract containing an arbitration agreement can be understood as having two parts of equal footing: (1) the dispute resolution clause designating “arbitration” as the method for resolving disputes (known as the “arbitration clause”26 or “arbitration agreement”) and (2) everything else.27 In its most basic form, an arbitration clause reflects the parties’ wish to submit a dispute arising out of the contract to arbitration.28 460

Parteiwillen / volonté des parties / voluntad de las partes / volontà delle parti. See F.A.A., 9 U.S.C. § 2; Rent-a-Center, West, Inc. v. Jackson, 561 U.S. 63, 67 (2010) (“[T]he FAA reflects the fundamental principle that arbitration is a matter of contract.”) 23 See generally Damien Nyer & R. Jade Harry, Drafting Clauses Providing for International Arbitration in the United States, in International Arbitration in the United States 155–72 (Laurence Shore et al. eds., 2017). 24 Born, supra note 11, at 714 (citing inter alia, Hooters of Am., Inc. v. Phillips, 173 F. 3d 933 (4th Cir. 1999) (one party cannot have sole control over arbitrator selection, e.g., by maintaining a list of eligible arbitrators for both parties to choose among); Harold Allen’s Mobile Home Factory Outlet, Inc. v. Butler, 825 So. 2d 779, 783–85 (Ala. 2002) (excluding only one of the parties from selecting the arbitrator is unconscionable and offends fundamental notions of fairness)). 25 F.A.A., 9 U.S.C. § 5 (“[U]nless otherwise provided in the agreement the arbitration shall be by a single arbitrator.”). 26 Schiedsklausel / clause d’arbitrage / cláusula compromisoria / clausola compromissoria, clausola di arbitrato [lit.]. 27 See F.A.A., 9 U.S.C. § 2; Rent-a-Center, 561 U.S. at 67–69 (noting that article II of the N.Y.C. and § 2 of the F.A.A. place arbitration clauses on equal footing with other contracts). 28 New York Convention, supra note 5 at art. II; Tierra Verde Escape, LLC v. Brittingham Grp., LLC, No. 1:16-CV-100, 2017 U.S. Dist. LEXIS 137639 (W.D. Mich. Aug. 28, 2017) (“[A]rbitration should be 21

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II. The Binding Authorities The arbitration clause is an agreement that is considered “separable” from the rest of 462 the contract.29 It is legally separate from the contract in which it is contained and, therefore, may survive even allegations that the underlying contract is invalid.30 Separability31 is arguably a necessary precondition for the application of article II of the New York Convention because, without separability, enforcement of an arbitration agreement could not be guaranteed; every arbitration could be delayed by a court proceeding regarding the underlying contract’s validity.32 463

Practice Tip The arbitration agreement is the foundation of an international arbitration, and all of the terms contained therein are presumed important and serve to limit or expand the scope of the arbitrator’s jurisdiction. While arbitration is often praised for its flexibility, creating an arbitration agreement is not a time for creative writing. 33 Rather than form the boundaries of a tailored dispute resolution process, creative or innovative clauses often produce procedural side-litigation years after the contract has been concluded, as courts and attorneys attempt to divine the parties’ intentions. This leads to a tremendous expenditure of resources that could be avoided by using a standard arbitration clause offered by an arbitral institution. International arbitral institutions make it their business to facilitate the efficient arbitration of contractual disputes between parties. Many institutions offer—free of charge—examples of dispute resolution clauses that have been upheld by courts.34 Attorneys frequently copy and paste these clauses into their contracts and are encouraged to do so with as little modification as possible.

compelled if there is any possibility that the Parties intended to arbitrate.”); see also Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974): [T]he goal of the Convention, and the principal purpose underlying American adoption and implementation of it, was to encourage the recognition and enforcement of commercial arbitration agreements in international contracts and to unify the standards by which agreements to arbitrate are observed and arbitral awards are enforced in the signatory countries. F.A.A., 9 U.S.C. § 2. See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 402–07 (1967) (holding that the question of “fraud in the inducement of contract” is for the arbitrators, and not for the courts, insofar as a party does not claim that it was fraudulently induced to sign the arbitration clause, specifically). 31 Trennbarkeit [lit.] / séparabilité [lit.] / cláusula de separabilidad / scindibilità. 32 1958 New York Convention Guide, U.N.C.I.T.R.A.L., art. II, introduction para. 8: 29

30

The underlying principle that the parties to an arbitration agreement are required to honour their undertaking to submit to arbitration any dispute covered by their arbitration agreement is given effect by the mandatory requirement on national courts to refer the parties to arbitration when presented with a valid arbitration agreement. 33 See e.g., Lucky-Goldstar Int’l (H.K.) Ltd. V. Ng Moo Kee Engineering, Ltd., [1994] Arb. & Disp. Resol. L.J. 49 (H.K. Ct. First. Inst.) (cited in Born, supra note 1 at 340):

This is not the first case with which I have had to deal where the arbitration clause has left something to be desired . . .. Arbitral institutions and associations go to the trouble of drafting standard form arbitration clauses and disseminating them for the benefit of users, yet in far too high a percentage of cases something goes wrong. 34 See e.g., Standard ICC Arbitration Clauses (English version), Int’l Chamber of Com., https://iccwbo. org/publication/standard-icc-arbitration-clauses-english-version (last visited Jan. 19, 2020) (“All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.”); U.N.C.I.T.R.A.L., U.N.C.I.T.R.A.L. Arbitration Rules 29 (Apr. 2011), https://www.uncitral .org/pdf/english/texts/arbitration/arb-rules-revised/arb-rules-revised-2010-e.pdf (“Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the U.N.C.I.T.R.A.L. Arbitration Rules.”); Standard Arbitration Clause, Am. Arb. Ass’n, https://www.adr.org/Clauses; Int’l Centre for Dispute Res., AAA-ICDR Clause Drafting, https://www.icdr.org/clauses; Int’l Chamber of Com., Arbitration Clause, https://iccwbo.org/dispute-resolution-services/arbitration/arbitration-clause; Deutsches Sportschiedsgericht, DIS-Model Clauses, http://www.disarb.org/en/17/clause/overview-id0.

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Where the parties do not have an arbitration agreement before a dispute arises, they may still decide that they would prefer their dispute be resolved by arbitration, rather than litigation. In such cases, the parties may make a written agreement to submit their commercial dispute to arbitration (a “submission agreement,”35) and the arbitration will proceed pursuant to that agreement.36

2. The New York Convention and United States Federal Law The F.A.A. was originally enacted in 1925 to promote arbitration as an alternative to court litigation in the U.S.37 According to the U.S. Supreme Court, the “principal purpose” of the F.A.A. is “to ensure that private arbitration agreements are enforced according to their terms.”38 The nearly global enforceability of (1) agreements to arbitrate commercial disputes and (2) the resulting arbitral awards is owed to the N.Y.C.,39 which the U.S. implemented into federal law as Chapter 2 of the F.A.A. in 1970.40 The combination of the F.A.A.’s implementing provisions and international arbitration practice give the N.Y.C. such weight in the U.S. that practitioners cite to the N.Y.C. directly in U.S. courts (in place of citing to its implementing provisions in the F.A.A.).41 Additionally, the N.Y.C. shapes the procedural conduct of international arbitrations seated in the U.S. (and elsewhere), as counsel will often support procedural motions within an arbitration with references to enforceability under the N.Y.C.42 466 Each arbitration has an arbitral seat.43 The laws of the seat govern matters that are both internal and external to the arbitration, including potentially: 465

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)

the parties’ autonomy to agree on substantive and procedural issues; standards of procedural fairness in arbitral proceedings; timetable of arbitral proceedings; consolidation, joinder and intervention; conduct of hearings, including the parties' opportunities to be heard and the examination of witnesses; rights of lawyers to appear, and their ethical obligations, in the arbitral proceedings; pleading and evidentiary rules; permissibility and administration of oaths; disclosure, ‘discovery’, and related issues; confidentiality, rights and duties of arbitrators, arbitrators' remedial powers, including to grant provisional measures;

35 Vereinbarung zur Unterwerfung unter das Schiedsverfahren / convention de soumission / acuerdo compromisorio / accordo compromissorio, convenzione arbitrale (patto in base al quale le parti rimettono ad arbitri le decisioni su eventuali controversie inerenti all’esecuzione del contratto). 36 Cf. F.A.A., 9 U.S.C. § 2 (“[A]n agreement in writing to submit to arbitration an existing controversy arising out of [a contract evidencing a transaction involving commerce] shall be valid, irrevocable, and enforceable”). 37 AT&T Mobility, 563 U.S. at 339 (describing the history of the F.A.A.). 38 Id. at 344. 39 See New York Convention, supra note 5. 40 The F.A.A. implements the New York Convention in the U.S. See Chapter 2 of the F.A.A., 9 U.S.C. §§ 201–08. 41 Gary B. Born, The New York Convention: A Self-Executing Treaty, 40 Mich. J. Int’l L. 115 (2018). 42 Id.; David Hesse, The Seat of Arbitration Is Important. It’s That Simple, Kluwer Arb. Blog (June 10, 2018), http://arbitrationblog.kluwerarbitration.com/2018/06/10/seat-arbitration-important-simple. 43 Sitz des Schiedsgerichts / siège du tribunal arbitral / sede del arbitraje / sede arbitrale [lit.], sede dell’arbitrato.

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II. The Binding Authorities (13) arbitrators' relations with the parties, including liability, ethical standards, appointment and removal; (14) form, making and publication of the award; (15) interpretation and enforceability of the parties’ arbitration agreement (including issues of nonarbitrability); (16) conflict of laws rules applicable to the substance of the dispute; (17) quasi-substantive issues, such as rules concerning interest and costs of legal representation; [18] arbitrators’ competence-competence and the allocation of competence to consider and decide jurisdictional challenges between arbitral tribunals and national courts; [19] annulment of arbitral awards; [20] selection of arbitrators; [21] removal and replacement of arbitrators; [22] evidence-taking in aid of the arbitration; and [23] provisional measures in support of the arbitration.44 By designating a seat, the parties define the law that governs the scope of the arbitra- 467 tion and the courts that have supervisory power over the arbitration. The courts of the seat will be exclusively empowered to annul or vacate an arbitral award.45 The law of the seat, therefore, is the lex arbitri, and the seat is the arbitration’s juridical home. Excluded from the lex arbitri, however, are the procedural or evidentiary rules that would govern court proceedings in the seat’s courts. The U.S. Federal Rules of Civil Procedure (F.R.C.P.) and Federal Rules of Evidence, therefore, do not apply in international arbitration proceedings seated in the U.S. Instead, it is up to the parties to select the applicable procedural and evidentiary rules in their arbitration agreement; often, these are the rules of the arbitral institute whose clause they have adopted. In the U.S., the F.A.A. grants federal courts original jurisdiction for matters (such as 468 enforcement, annulment, or confirmation) related to an arbitration that would fall under the N.Y.C.46 Though federal courts have original jurisdiction, both federal and state law will govern a U.S.-seated arbitration, with federal law taking precedence over state law. Consequently, attorneys in an arbitration that is seated in the U.S. should use federal case law to expand upon parties’ rights and obligations under, and to elaborate the meaning of, the terms of the F.A.A., because federal law is binding authority. In general, attorneys should exercise more caution in citing cases from all other jurisdictions, including U.S. state courts, as these are merely persuasive authority47 to U.S. federal courts. That is, while they are not binding on either the tribunal or a subsequent U.S. court, they may be persuasive during the tribunal’s proceedings. Nevertheless, state court decisions are binding when state law is selected as the lex arbitri and the application of that case law is not inconsistent with the F.A.A., as interpreted by federal courts.48 Obiter dicta play a tremendous role in federal arbitration law. As is explained in 469 Chapter 1, “U.S. Law as Foreign Law,” in the common law system of using case precedent, the text of a prior decision can be divided between the necessary recitation of facts, See Born, supra note 11, at 599–600. The parties’ choice of the seat functions similarly to an exclusive jurisdiction clause, as far as annulment, vacatur, or set-aside is concerned. See Hesse, supra note 42. 46 F.A.A., 9 U.S.C. § 203; E. Alexandra Dosman and Clara Flebus, The Federal Arbitration Act and State Arbitration Acts: Impact of Federalism on International Arbitration in the U.S., in International Arbitration in the United States 42(Laurence Shore et al. eds., 2017). 47 überzeugend (nicht verbindlich) / autorité persuasive / precedente convincente / efficacia persuasiva, valore persuasivo. 48 AT&T Mobility, 563 U.S. at 341–44. 44

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Chapter 4 United States’ International Arbitration Law and Practice law, issues, reasoning and conclusions (called the ratio decidendi) and the court’s statements that are “beyond what is strictly necessary to resolve the parties’ specific problem” —that is, statements that extend beyond the case’s holding and those elements of fact and analysis that are necessary to that holding.49 These non-binding statements are called obiter dicta (sometimes called simply “dicta” by U.S. lawyers). Such statements, even when present in otherwise current and precedential opinions, are not binding and do not become law.50 As explained in Chapter 1, “U.S. Law as Foreign Law,” when one compares common law to civil law practice, one finds that the obiter dicta of a common law decision often function as the commentaries would in a civil law system. In the field of arbitration, however, where there are relatively few controlling opinions, U.S. Supreme Court dicta is often the only guidance that exists to provide meaning to a term in the F.A.A.51 As a result, parties will frequently use and debate the value of such dicta as persuasive authority in their briefs and memoranda when asserting the meaning of a term in the F.A.A.

3. State Law (and the United Nations Commission International Trade Law Model Law) The F.A.A., which applies to all international commercial arbitrations that are seated in the U.S.,52 regulates the beginning and end of an arbitration, but is largely silent on everything in between.53 In particular, the F.A.A. is silent on several important issues, including (1) whether arbitrators have the jurisdiction to decide (whether they can decide) that they have jurisdiction,54 (2) how to challenge arbitrators, and (3) the acceptability of interim or provisional measures or relief. State law can be used to fill these voids. Where the contract or the F.A.A. is silent on an issue and a state’s arbitration law is applicable, that state law may fill the gap, to the extent that it does not conflict with the F.A.A.55 471 Each state is free to adopt its own arbitration law. Indeed, in an effort to attract international arbitrations to their jurisdictions,56 some states have developed highly sophisticated legal bars focused on international disputes. While many state laws are based on the (Revised) Uniform Arbitration Act,57 several—including laws in popular arbitral seats like New York—are not. The U.N.C.I.T.R.A.L. Model Law has been sparsely adopted in the U.S.—in the states of California, Connecticut, Florida, Georgia, Illinois, 470

49 Anne M. Burr & Howard Bromberg, U.S. Legal Practice Skills for International Law Students 66 (2014). 50 Id. 51 William W. Park, The Arbitrability Dicta in First Options v. Kaplan: What Sort of Kompetenz-Kompetenz Has Crossed the Atlantic, 12 Arb. Int’l 137 (1996); see also Jack Coe, The Curious Case of Manifest Disregard [of the Law], Kluwer Arbitration Blog (May 17, 2010), http://arbitrationblog.kluwerarbitrat ion.com/2010/05/17/the-curious-case-of-manifest-disregard-of-the-law (regarding the role of dicta in the creation of the “manifest disregard of the law” doctrine). 52 F.A.A., 9 U.S.C. § 202. 53 Dosman & Flebus, supra note 46 at 42–43. 54 Referred to in different contexts as “Competence-Competence” and “Kompetenz-Kompetenz,” interchangeably and without regard for the specific meaning of those terms internationally. 55 AT&T Mobility, 563 U.S. at 341–44. 56 Dosman & Flebus, supra note 46. 57 Uniform Law Commission, Arbitration Act (1956), https://www.uniformlaws.org/committees/com munity-home?CommunityKey=f60b379c-6378-4d9d-b271-97522fad6f89 (last visited Jan. 12, 2020) (detailing enactment of the Uniform Arbitration Act); Uniform Law Commission, Arbitration Act (2000), https://www.uniformlaws.org/committees/community-home?CommunityKey=a0ad71d6-085f-46 48-857a-e9e893ae2736 (detailing enactment of the Revised Uniform Arbitration Act).

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III. United States’ Courts Enforce the Contract as Written Louisiana, Oregon, and Texas.58 In those states, the U.N.C.I.T.R.A.L. Model Law would be applicable to the extent that it is not pre-empted by the F.A.A.59

4. Institutional Rules While the F.A.A. and the N.Y.C. require that arbitration proceedings afford all parties 472 “due process of law”60 both lack the necessary mechanics for ensuring the same. As a result, the parties are largely free to create or select the procedural rules for their arbitrations and frequently do so by express reference to ad hoc or institutional rules within their arbitration agreement. These rules may contain requirements for any or all procedural elements of the arbitration, including: the appointment of arbitrators, deadlines, arbitrator powers, document exchange, the exchange of memorials, hearings, requirements for the award, and confidentiality, among others. U.S. courts have considered an arbitration agreement’s reference to institutional rules to constitute “clear and unmistakable” evidence that the parties agreed to be bound by those rules.61 Where rules are not selected by the parties, parties leave themselves at the uncertainty and, indeed, mercy of a court or arbitrator who may select the rules for them or order them to select rules.62

III. United States’ Courts Enforce the Contract as Written As discussed above, the principal purpose of the F.A.A. is “to ensure that private arbi- 473 tration agreements are enforced according to their terms.”63 Thus, pursuant to longstanding precedent, courts in the U.S. enforce arbitration agreements according to the terms in which they are written. In the U.S., “arbitrability”64 refers broadly to the ability of a dispute to be resolved by 474 arbitration. Arbitration is available to resolve most commercial disputes in the U.S.65 Under the F.A.A., the issue of who—as between the arbitrators or the courts—determines whether an arbitration agreement applies to a particular dispute is a matter of contract.66 Parties can delegate the determination of this threshold issue of arbitrability to arbitrators by using “clear and unmistakable” language indicating this choice. Such 58 U.N.C.I.T.R.A.L., Status: U.N.C.I.T.R.A.L. Model Law on International Commercial Arbitration (1985), with Amendments as Adopted in 2006, https://uncitral.un.org/en/texts/arbitration/modellaw/commercial_ arbitration/status. 59 Id.; see Sebastien Besson, The Utility of State Laws Regulating International Commercial Arbitration and Their Compatibility with the F.A.A., 11 Am. Rev. Int’l Arb. 211 (2000). 60 ordnungsgemäßes Gerichtsverfahren / procès équitable / el debido proceso legal / formula intraducibile, indica le garanzie costituzionali per cui nessuno può essere privato del “giusto processo” ovvero di una “procedura regolare” [lit.]. 61 First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). 62 See e.g., Tierra Verde, supra note 28 (enforcing the arbitration clause notwithstanding its invalid rules provision and directing the parties or their appointed arbitrators to agree on a set of rules to use for their dispute.). 63 AT&T Mobility, 563 U.S. at 344. See also Scherk, 417 U.S. at 519–20 (“[T]he agreement of the parties in this case to arbitrate any dispute arising out of their international commercial transaction is to be respected and enforced by the federal courts in accord with the explicit provisions of the Arbitration Act.”); Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524, 529 (2019) (citing Rent-a-Center, 561 U.S. at 67) (“Under the Act, arbitration is a matter of contract, and courts must enforce arbitration contracts according to their terms.”). 64 Schiedsfähigkeit / arbitrabilité / susceptible de arbitraje / arbitrabilità. 65 See e.g., F.A.A., 9 U.S.C. § 2; Mitsubishi Motors, 473 U.S. 614 (permitting arbitrators to decide a case arising under U.S. antitrust law); 14 Penn Plaza LLC v. Pyett, 556 U.S. 247 (2009) (permitting the submission of a civil rights claim to arbitration, pursuant to contractual agreement). 66 Schein, 139 S. Ct. at 529.

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Chapter 4 United States’ International Arbitration Law and Practice language often requires resolution of “any dispute” by arbitration and the selects arbitration rules that empower a tribunal to make such a determination.67 Ultimately, “[w]hen the parties’ contract delegates the arbitrability question to an arbitrator, the courts must respect the parties’ decision as embodied in the contract.”68 475 In the absence of “clear and unmistakable” evidence that the parties have agreed that an issue will be resolved by arbitration, that issue will be resolved by the courts.69 This affects both the form of dispute settlement in the first instance, as well as the level of review a decision may receive at the annulment or enforcement phases. In these latter phases, issues that were rightfully within the arbitrator’s competence receive deferential review, and decisions that were indeed the court’s to decide (but that a tribunal decided) are subject to de novo review.70 This is especially visible in the determinations regarding the “threshold” issues of arbitrability and jurisdiction, as well as the so-called “competence-competence,” described below.

1. Competence-Competence: Who Decides Upon the Authority of Who Decides Jurisdiction? In the U.S., the question of the entire contract’s validity is one that, pursuant to the F.A.A., is presumptively to be resolved by the arbitrators with final effect.71 However, that resolution does not answer the perplexing question of who—as between courts or arbitrators—has the legal ability and authority (competence) to decide disputes over the interpretation, validity, or enforceability of an arbitration agreement? In short, who has the legal ability and authority to decide who has the requisite legal ability and authority? Put even more succinctly, the resolution of this last question is known as determining the competence to determine competence. 477 The competence-competence doctrine72 involves the issue of whether an arbitrator or a court may determine its own jurisdiction. In practice, it is a complex matter in which one party will argue that there is no valid arbitration agreement and, therefore, the matter must be decided by a court. Rather than force each arbitration to a standstill at every jurisdictional motion, this doctrine enables tribunals to determine their own ju476

67 Id. at 526 (“The parties to such a contract may agree to have an arbitrator decide not only the merits of a particular dispute, but also gateway questions of arbitrability. Therefore, when the parties’ contract delegates the arbitrability question to an arbitrator, a court may not override the contract.”) (internal citations omitted). 68 Id. at 528. 69 First Options, 514 U.S. at 944 (1995). 70 “de novo” Prüfung [lit.] / révision “de novo” [lit.] / revisión “de novo” / verifica “de novo” [lit.], esame (di determinate questioni) compiuto “ex novo”. 71 Rent-a-Center, 561 U.S. at 72; Prima Paint, 388 U.S. at 402–03; Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 448–49 (2006) (“[R]egardless of whether the challenge is brought in federal or state court, a challenge to the validity of the contract as a whole, and not specifically to the arbitration clause, must go to the arbitrator.”). In reviewing the resulting award, courts should review the arbitrators’ determination of matters that have been delegated to the arbitrators with deference, and matters that were for the courts to decide de novo, without deference to the arbitrators’ views. See BG Group plc v. Republic of Argentina, 134 S. Ct. 1198, 1206 (2014) (“Where ordinary contracts are at issue, it is up to the parties to determine whether a particular matter is primarily for arbitrators or for courts to decide.”). 72 Kompetenz-Kompetenz / principe de la compétence-compétence [lit.] / doctrina de competencia con respeto al arbitraje / principio in base al quale gli arbitri hanno il potere di decidere in merito alla loro competenza e, quindi, anche in merito alla validità dell’accordo arbitrale, principio della competenza-competenza [lit.]; For a discussion on how the present U.S. law related to competence-competence resembles the doctrine of Kompetenz-Kompetenz that existed in Germany prior to 1998, see Jack M. Graves & Yelena Davydan, Competence-Competence and Separability-American Style, in International Arbitration and International Commercial Law: Synergy, Convergence and Evolution 162–68 (S. Kroll et al., eds. 2011).

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III. United States’ Courts Enforce the Contract as Written risdiction in the first instance, saving the review of the correctness of that decision for later determination by courts. The U.N.C.I.T.R.A.L. Model Law and the F.A.A. treat the issue of competence-competence differently. Under Article 15 of the U.N.C.I.T.R.A.L. Model Law, an arbitral tribunal has the power to rule on its own jurisdiction.73 The F.A.A., however, does not expressly empower arbitrators to rule on jurisdictional challenges, including challenges related to the validity and scope of the arbitration (issues of “substantive” arbitrability).74 Issues related to the validity or scope of the arbitration agreement are presumed to be for the court to decide, unless expressly delegated to the arbitrators.75 Nonetheless, arbitrators often decide their jurisdiction in the first instance, even when a party contests jurisdiction.76 This power, i.e., a tribunal’s ability to rule on its own jurisdiction and the level of review that such a decision will endure in the set-aside or enforcement phases of an arbitration, is encompassed by the competence-competence doctrine. The effect of the competence-competence doctrine is that an arbitration need not stop every time a party contests jurisdiction, pending a court’s determination of a competence issue. The question of competence-competence typically comes before the courts when a party seeks a court order to compel arbitration or when an aggrieved party seeks to vacate an arbitral award. If the parties have agreed that the arbitrator has competencecompetence, the court should give deference to the arbitrator’s decision on jurisdiction, setting it aside only in narrow circumstances.77 The decisions in the Rent-A-Center and Hall Street cases together support the notion that an arbitrator’s decision on jurisdiction is largely unreviewable where the parties have clearly and unmistakably provided the tribunal with competence-competence, except under the narrow circumstances set forth in § 10 of the F.A.A.78 If the parties did not agree to submit the question of arbitrability to the arbitrator, then the court should review the arbitrator’s determinations of substantive arbitrability de novo, or independently.79 As mentioned, the presumption that the courts decide questions of substantive arbitrability can be overcome by “clear and unmistakable” evidence that the parties agreed that the arbitral tribunal would decide its own competence.80 This clear and unmistakable evidence could include (1) a contractual provision stating that the arbitral tribunal has competence-competence,81 (2) the selection of institutional rules that provides the tribunal with competence-competence, or (3) the selection of governing state law that U.N.C.I.T.R.A.L. Model Law, supra note 6, art. 15. Materielle Schiedsfähigkeit / arbitrabilité substantive [lit.] / susceptible de manera substantiva de arbitraje / (questioni di) arbitrabilità “sostanziale” [lit.]: il termine può avere una pluralità di accezioni: nel caso specifico, l’arbitrabilità può essere riferita sia all’individuazione delle controversie che possono essere oggetto di arbitrato, sia alla competenza e autorità del collegio arbitrale di decidere una determinata controversia. 75 F.A.A., 9 U.S.C. § 4. However, there is a presumption that arbitral tribunals are competent on matters of “procedural” arbitrability, such as whether prerequisites like time limits, notice, laches, estoppel, or other conditions precedent to an obligation to arbitrate have been met. See BG Group plc v. Argentina, 134 S. Ct. 1198, 1207 (2014) (“Courts presume that the parties intend arbitrators, not courts, to decide disputes about the meaning and application of particular procedural preconditions for the use of arbitration.”). 76 See e.g., Rent-a-Center, 561 U.S. at 79–80 (2010). 77 First Options, 514 U.S. at 943. 78 Rent-A-Center, 561 U.S. at 78–80 (Stevens, J., dissenting) (describing “two distinct rules” to help courts decide the validity of delegation); Hall St. Assocs., LLC v. Mattel, Inc., 552 U.S. 576 (2008). 79 First Options, 514 U.S. at 943. 80 Id. at 944 (1995) (“Courts should not assume that the parties agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so.”) (internal quotations omitted). 81 BG Group plc, 134 S. Ct. at 1206 (“Where ordinary contracts are at issue, it is up to the parties to determine whether a particular matter is primarily for arbitrators or for courts to decide.”). 73

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478

479

480

481

Chapter 4 United States’ International Arbitration Law and Practice provides the tribunal with competence-competence.82 Merely arguing the arbitrability issue before an arbitral tribunal after it arises, however, is not “clear and unmistakable” evidence that a party wanted to be bound by an arbitrator’s decision on arbitrability.83 Thus, a party cannot waive or void84 its jurisdictional objections by conduct during the arbitration.85

2. Judicial Review of Arbitral Awards and Manifest Disregard of the Law 482

One of the chief characteristics of arbitration is that arbitral awards are final and not subject to merits appeal. The parties to an arbitration thus assume the risk that an arbitrator may make an error in fact or in law, and that there will be no remedy for this, beyond what is contained in the arbitral seat’s arbitration act. For arbitrations seated in the U.S., a dissatisfied party may apply for vacatur (also referred to as “annulment” or “set aside”) in the U.S. District Court where the award was rendered based on any of four grounds contained in § 10(a) of the F.A.A.: (1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.86

483

These four grounds relate to core and fundamental issues of procedural justice and fairness. Though the F.A.A. does not contain any room for judicial review based on mistake of law, “manifest disregard of the law”87 is arguably included as a potential ground for vacatur under § 10(a)(4) of the F.A.A.88 To demonstrate that an award may be vacated because the arbitrator exceeded his or her powers by manifestly disregarding the law: it is not enough for petitioners to show that the panel committed an error—or even a serious error . . . It is only when an arbitrator strays from interpretation and application of the agreement and effectively ‘dispenses his own brand of industrial justice’ that his decision may be unenforceable.89

This is a high bar; it requires an arbitrator to deliberately and expressly make a legal error by expressly recognizing that a law applies to a situation and then expressly indicating that he or she is disregarding that law. 485 Wilko v. Swan was the first case where the Supreme Court used the term “manifest disregard” of the law. In non-binding dicta, the Court stated that “the interpretations of the law by the arbitrators[,] in contrast to manifest disregard[,] are not subject, in the federal courts, to judicial review for error in interpretation.”90 After Wilko, from 1953– 484

See e.g., Schein, 139 S. Ct. 524. First Options, 514 U.S. at 946. 84 verzichten oder für ungültig erklären / renoncer ou annuler / renunciar / rinunciare a, ovvero annullare. 85 See id. 86 F.A.A. § 10(a)(1)–(4). 87 offensichtliche Missachtung des Gesetzes / méconnaissance manifeste de la loi / incumplimiento patente de la ley / palese inosservanza di norme giuridiche, palese inosservanza del diritto [lit.]. 88 “As befits a spectre, manifest disregard of the law [1] arose mysteriously, [2] changes shape capriciously; [3] is often summoned but rarely appears; [4] seems neither dead nor alive, and yet [5] can doom a party arbitrating in the U.S.” Timothy Kautz, What Is “Manifest Disregard of Law”?, Schieds VZ 20, 20– 21 (2011). His description provides an apt metaphor and analytical framework for understanding the history and application of “Manifest Disregard of the Law”. 89 Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 665–67 (2010) (internal citations omitted). 90 Wilko v. Swan, 346 U.S. 427, 436–37 (1953). 82 83

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III. United States’ Courts Enforce the Contract as Written 2008, U.S. courts treated “manifest disregard of the law” as either (1) an additional, common law or non-statutory basis for vacatur or (2) a blanket term, working as a synonym for the statutory misconduct captured by 9 U.S.C. §§ 10(a)(3) and (4).91 While each of the federal Circuit Courts recognized “manifest disregard of the law” as a ground for vacatur during this period, each adopted a different approach and test to determine whether this ground had been fulfilled.92 In 2008, the U.S. Supreme Court had the opportunity to address “manifest disregard 486 of the law” as a ground for vacatur in Hall Street v. Mattel, a dispute between a toy manufacturer (Mattel) and its landlord (Hall Street). The parties’ arbitration agreement stated that a federal court could override the arbitrator’s decision if the arbitrator’s conclusions of law were erroneous.93 The Supreme Court, however, held that that the four grounds for vacatur listed in § 10(a) of the F.A.A. were exhaustive and could not be expanded by contract.94 In response to Hall Street’s argument that the “manifest disregard of the law” doctrine 487 provides for a “general review of an arbitrator’s legal errors,”95 the Court, again in dicta, stated as follows: Maybe the term ‘manifest disregard’ was meant to name a new ground for review, but maybe it merely referred to the § 10 grounds collectively, rather than adding to them. Or, as some courts have thought, ‘manifest disregard’ may have been shorthand for § 10(a)(3) or § 10(a)(4), the paragraphs authorizing vacatur when the arbitrators were ‘guilty of misconduct’ or ‘exceeded their powers.’ We, when speaking as a Court, have merely taken the Wilko language as we found it, without embellishment, and now that its meaning is implicated, we see no reason to accord it the significance that Hall Street urges.96

Understandably, following Hall Street, U.S. circuit courts remained divided as to 488 whether “manifest disregard of the law” survived as an independent ground for vacatur or as a judicial interpretation of the F.A.A.97 Private parties in the U.S. usually must petition the U.S. Supreme Court to review a 489 case, and do so most often with a writ of certiorari. As a Court of final general jurisdiction as well as final constitutional jurisdiction, the Court is inclined to accept petitions for review for one of three legal reasons. First, it may feel that the federal appeals court simply made an error of law and therefore must review the case as would any other appeals review court. Second, the case may raise a new issue of law upon which the Court wishes to announce binding precedent for all subsequent cases. And finally, the Court may accept the petition because the circuit courts of appeal have made inconsistent interpretations and the Supreme Court wishes to harmonize them, as one will see in the discussion of the “wholly groundless” exception, below. But first, in the case of StoltNielsen v. AnimalFeeds International,98 the U.S. Supreme Court accepted the opportunity to consider “manifest disregard of the law.” In the Stolt-Nielsen case, several charter parties filed antitrust complaints against 490 Stolt-Nielsen alleging an illegal price fixing conspiracy. When, after a series of judgments, it became clear that each petitioner would need to arbitrate its claim, AnimalFeeds filed for class arbitration under the theory that each claim involved a similar Hall St., 552 U.S. at 585. See generally Kautz, supra note 88. 93 Hall St., 552 U.S. at 578–80. 94 Id. at 578–79. 95 Id. at 585–86. 96 Id. (internal citations omitted). 97 Kautz, supra note 88. 98 Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 665–67 (2010). 91 92

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Chapter 4 United States’ International Arbitration Law and Practice claimant, the same respondent, an identically worded arbitration clause, and identical claims arising out of the same conduct.99 During the arbitration, the parties stipulated that the arbitration clause was silent with respect to class arbitration,100 and the arbitrators later concluded that the clause allowed for class arbitration.101 Stolt-Nielsen filed an application to vacate the award in the District Court for the Southern District of New York.102 After a series of appeals, the Supreme Court granted the petition for writ of certiorari to “decide whether imposing class arbitration on parties whose arbitration clauses are ‘silent’ on that issue is consistent with the F.A.A.”103 Regarding “manifest disregard of the law,” the Supreme Court made the following remark—again in dicta: We do not decide whether ‘manifest disregard’ survives our decision in Hall Street as an independent ground for review or as a judicial gloss on the enumerated grounds for vacatur set forth at 9 U. S. C. § 10. Animal-Feeds characterizes that standard as requiring a showing that the arbitrators ‘knew of the relevant [legal] principle, appreciated that this principle controlled the outcome of the disputed issue, and nonetheless willfully flouted the governing law by refusing to apply it.’ Assuming, arguendo, that such a standard applies, we find it satisfied . . ..104

491

Thus, the Court made no determination on whether the “manifest disregard of the law” ground for vacatur exists but opined that, if a common law ground for vacatur based on “manifest disregard of the law” were to exist following Stolt-Nielsen v. Animal Feeds, it would require showing that the arbitrators: (1) knew of the relevant legal principle, (2) appreciated that this principle controlled the outcome of the disputed issue, and (3) nonetheless willfully flouted the governing law by refusing to apply it.105

492

Despite the high hurdle presented when one challenges an award based on a tribunal’s manifest disregard of law, manifest disregard may be one of the mostly commonly invoked grounds for vacatur. At the same time—and confirming the difficulty of proving claims of “manifest disregard of the law”—it is also the least successful ground for challenging an award.106 According to Kautz, the average success rate of challenges to arbitral awards based on manifest disregard of law is “between 3.8 % and 7.6 %, depending on the study.”107 In comparison, “the overall average success rate of challenges to arbitral awards (including [manifest disregard] challenges) is higher, namely approximately 8.5 % in the federal courts and 19.4 % in the state courts.”108

3. Non-Arbitrability and the “Wholly Groundless” Exception 493

Given arbitration’s aim of efficiency, several U.S. Circuit Courts implied a “wholly groundless” exception into the F.A.A., enabling them to dismiss claims that they believed could not result in a successful arbitration, even in the presence of the parties’ “clear and unmistakable” delegation of the claim to arbitration.109 In 2019, the U.S. Supreme Court 99

Id.

100 Id.

101 Id.

102 Id.

103 Id.

104 Id.

105 Id.

at 669–70. at 666–68. at 671, n.3.

supra note 88 at 23. (internal footnotes omitted). 108 Id. (internal footnotes omitted). 109 See e.g., Simply Wireless, Inc. v. T-Mobile US, Inc., 877 F. 3d 522 (4th Cir. 2017); Douglas v. Regions Bank, 757 F. 3d 460 (5th Cir. 2014); Jones v. Waffle House, 866 F. 3d 1257 (11th Cir. 2017). 106 Kautz,

107 Id.

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III. United States’ Courts Enforce the Contract as Written resolved a divide among the circuit courts of appeal regarding whether a court could determine arbitrability issues.110 The Supreme Court found that there was no such “wholly groundless” exception in the F.A.A. that would enable courts to step into the shoes of the arbitrator and dismiss what appeared to be groundless arbitration claims.111 That is, courts are not able to provide the post-award relief permitted by § 10 of the F.A.A. at the outset of a case; they must send even unviable cases to arbitration and wait for the arbitration to make that determination in an award. The Supreme Court stated that “[a]rbitrations can efficiently dispose of frivolous cases by quickly ruling that a claim is not in fact arbitrable.”112

4. Using United States’ Discovery in Support of an Arbitration: 28 U.S.C. § 1782 Regardless of where a case is seated, counsel may find one provision of U.S. law to be 494 tremendously helpful—or harmful: 28 U.S.C. § 1782(a),113 pursuant to which any interested person114 may request that the U.S. district court where the target person resides or is found exercise its discretion by ordering that person to give testimony or a statement, or to produce a document or other object for use in a proceeding before a foreign or international tribunal.115 Potential disputants may invoke § 1782 prior to initiating an arbitration, or even when proceedings are pending. While no collection of statistics currently exists to demonstrate how often § 1782(a) is used by foreign disputing parties, a review of published cases reveals that German courts and litigants have been using it for decades—even where opposing parties argued that the evidence so discovered would not be otherwise discoverable under the arbitration’s applicable substantive law or the procedural rules of the arbitration.116 110 Henry 111 Id.

Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019).

112 Schein, 113 28

139 S. Ct. at 531. U.S.C. 1782(a) (2016) states:

The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation. The order may be made pursuant to a letter rogatory issued, or request made, by a foreign or international tribunal or upon the application of any interested person and may direct that the testimony or statement be given, or the document or other thing be produced, before a person appointed by the court. By virtue of his appointment, the person appointed has power to administer any necessary oath and take the testimony or statement. The order may prescribe the practice and procedure, which may be in whole or part the practice and procedure of the foreign country or the international tribunal, for taking the testimony or statement or producing the document or other thing. To the extent that the order does not prescribe otherwise, the testimony or statement shall be taken, and the document or other thing produced, in accordance with the Federal Rules of Civil Procedure. A person may not be compelled to give his testimony or statement or to produce a document or other thing in violation of any legally applicable privilege. 114 interessierte Person / personne interessée / persona interesada / chiunque sia interessato, qualsiasi persona interessata [lit.]. 115 ausländisches oder internationales Gericht / tribunal étranger ou international / tribunal extranjero o internacional / tribunale straniero o internazionale. 116 See e.g., In re Application of Gemeinschaftspraxis Dr. Med. Schottdorf, No. M19–88 (BSJ), 2006 WL 3844464 (S.D.N.Y. Dec. 29, 2006) (granting discovery); Metallgesellschaft v. Hodapp, 121 F.3d 77 (2d Cir. 1997) (holding that the district court abused its discretion by denying discovery on the grounds that the evidence would not be discoverable under German law); In re Letter of Request from Amtsgericht Ingolstadt, Federal Republic of Germany, 82 F.3d 590 (4th Cir. 1996) (granting the Amtsgericht Ingolstadt discovery—in the form of a blood sample from a U.S. citizen—and disagreeing that a request under 28 U.S.C. § 1782(a) must comply with another country’s rules of discovery).

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Chapter 4 United States’ International Arbitration Law and Practice Section 1782(a) “is the product of congressional efforts, over the span of nearly 150 years, to provide federal-court assistance in gathering evidence for use in foreign tribunals.”117 The U.S. Congress created § 1782 in the hope that courts in other countries would likewise assist U.S. litigants.118 Reciprocity, however, is not required: the Congress created a one-way street that enables foreign litigants to benefit by requesting the testimony of U.S. persons or the production of U.S. documents even where the foreign litigants’ own laws—and, critically, the law or rules governing the arbitral procedure— would not require documents to be turned over.119 While discoverability120 under the relevant laws may be relevant to the court’s decision to exercise its discretion in regard to such applications,121 the Supreme Court has confirmed that § 1782(a) does not require that the material requested be discoverable under the rules governing the proceedings of the international tribunal.122 496 Each of the terms of 28 U.S.C. § 1782(a) has been the subject of extensive debate and litigation, much of which was resolved in the 2004 Supreme Court decision Intel Corporation v. Advanced Micro Devices, Inc.123 Pursuant to that decision, an “interested person” under § 1782 is defined as anyone with a “reasonable interest in obtaining assistance [from the courts].”124 Importantly, the Supreme Court expressly declined to limit the definition of “interested person” to “litigant” and instead in dicta noted the importance of the availability of § 1782 to non-litigants since in foreign proceedings, non-parties may be outside of the reach of the tribunal. The evidence held by non-parties, in the absence of § 1782, would be unobtainable.125 497 Since § 1782 discovery is available before a claim is even filed, it makes sense for the term “interested person” to have an expansive meaning. In fact, regarding the timing126 of an application under § 1782, the Supreme Court noted that Congress purposefully deleted the requirement that a proceeding be “pending” when enacting the statute.127 The legislative history indicates that evidence can be requested under § 1782 even during pre-trial investigation of criminal, civil, administrative, or other matters.128 Logically, given its availability in the pre-trial context, tribunal consent for such an application is not required.129 495

117 Intel

Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 247 (2004). Pedro J. Martinez-Fraga, The American Influence on International Commercial Arbitration: Doctrinal Developments and Discovery Methods 38 (2009); Intel Corp., 542 U.S. 241. 119 Id. 120 Möglichkeit der Anwendung des Offenlegungsverfahrens / susceptible d’étre soumis à la procédure de divulgation / susceptible de ser descubrido dentro del proceso del descubrimiento de pruebas / termine intraducibile con il quale si indica la possibilità di accedere a (ovvero di attingere da) elementi di prova avvalendosi della procedura di “discovery” (traducibile in italiano come “esibizione” o “ divulgazione” delle prove). 121 See Martinez-Fraga, supra note 118 at 38; Intel Corp., 542 U.S. at 259–62. 122 Intel Corp., 542 U.S. at 253–54, 259–63. 123 Id. at 241. 124 Id. at 255–57. 125 Id. at 255–59, 264–65. 126 Zeitpunkt / moment / coordinación / tempistica. 127 Id. at 257–59. 128 Id. at 254–55, 257–60. Note that, after an arbitration, if one were seeking discovery of assets against which an award could be enforced, one would look to Fed. R. Civ. P. 69(a). 129 There is at least one author who believes that “an [a]rbitral [t]ribunal’s blanket foreclosure of materials secured in accordance with Section 1782 runs the immediate and material risk of rending any prospective award unenforceable” because article V I(b) of the New York Convention proscribes recognition and enforcement of an arbitral award where a party was “unable to present his case.” Martinez-Fraga, supra note 118 at 88. 118 See

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III. United States’ Courts Enforce the Contract as Written The federal circuits are divided on whether an arbitral tribunal is to be considered a 498 “a foreign or international tribunal” under § 1782(a). In non-binding dicta, the Supreme Court provided extensive commentary on this question. After noting that the drafters of the provision drafted § 1782 to provide “for the rendering of assistance to foreign courts and quasi-judicial agencies,”130 the Supreme Court noted that Congress understood that the text would “provide the possibility of U.S. judicial assistance in connection with administrative and quasi-judicial proceedings abroad [since] the term ‘tribunal’ . . . includes investigating magistrates, administrative and arbitral tribunals, and quasi-judicial agencies, as well as conventional civil, commercial, criminal, and administrative courts.”131 Because this discussion was only in dicta, the U.S. Courts of Appeal remain divided 499 on whether § 1782 extends to proceedings before arbitral “tribunals.”132 Section 1782 applications in support of proceedings before arbitral tribunals have received negative treatment, particularly in the Fifth Circuit.133 In La Comisión Ejecutiva Hidroelecctrica del Rio Lempa v. El Paso Corporation,134 the U.S. Court of Appeals for the Fifth Circuit reviewed an order from the district court—i.e., the court of first instance—that granted a non-party discovery in an arbitration being held in Switzerland.135 The district court made numerous findings, including that (1) the discovery at issue was not permitted under Fifth Circuit precedent, (2) the discovery granted likely would not have been admissible before the Swiss tribunal, due to its procedural schedule, (3) neither party had as yet relied on the discovery order in its preparation for the arbitration, (4) granting the discovery would undermine the goal of speedy dispute resolution, and (5) the Swiss tribunal would not have granted the discovery if it had the authority to do so.136 In holding that § 1782 does not extend to proceedings before international arbitral tribunals, the Fifth Circuit Court of Appeals disagreed with the statement that the Supreme Court’s reference to arbitral tribunals was adoptable as dicta and instead stated that the Court’s use of the term was merely quoting the academic, Hans Smit.137 Following this, in the case of In re Arbitration Between Norfolk Southern Corp., the parties agreed that the U.S. Supreme Court did not completely resolve whether arbitral tribunals are “international tribunals” under § 1782.138 The district court in that case concluded that Congress in fact “stopped short of declaring that any foreign body exercising adjudicatory power falls within the purview of the statute.”139 That court interpreted Intel’s reference to “[a]rbitral tribunals” as including state-sponsored arbitral bodies and excluding “purely private arbitrations.”140 This approach was followed in In re Dubey in 2013.141 130 gerichtsähnliche Behörde / agence quasi-judiciare / agencia cuasi judicial / autorità (amministrativa) semi-giudiziale; Intel Corp., 542 U.S. at 257–58 (emphasis in original). 131 Id. (emphasis added). 132 See generally In re Dubey, 949 F. Supp. 2d 990, 993 (C.D. Cal. 2013) (noting the circuit split); Gea Group AG v. Flex-n-Gate Corp., 740 F. 3d 411 (7th Cir. 2014). 133 Republic of Kazakhstan v. Biedermann Int’l, 168 F. 3d 880, 883 (5th Cir. 1999); La Comisión Ejecutiva Hidroelecctrica del Rio Lempa v. El Paso Corporation, 617 F. Supp. 2d 481, 481 (S.D. Tex. 2008). 134 Id. 135 The Court considered this to be a Federal Rules of Civil Procedure [F.R.C.P.] Rule 60 motion for relief from a judgment or order because the F.R.C.P. do not recognize a general motion for reconsideration. El Paso Corp. v. La Comision Ejecutiva Hidroelectrica Del Rio Lempa, No. 08–20771, 2009 U.S. App. LEXIS 17596 (5th Cir. Aug. 6, 2009). 136 Id. at 484–87. 137 Id. at 486. 138 In re Arbitration Between Norfolk Southern Corp., 626 F. Supp. 2d 882, 884 (N.D. Ill. 2009). 139 Id. at 885; Hans Smit, International Litigation Under the U.S. Code, 65 Colum. L. Rev. 1015 (1965). 140 In re Arbitration Between Norfolk Southern Corp., 626 F. Supp. 2d at 884. 141 In re Dubey, 949 F. Supp. 2d at 990.

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Chapter 4 United States’ International Arbitration Law and Practice One U.S. case that accepted the notion that § 1782 covers proceedings before an arbitral tribunal comes from a Minnesota federal district court.142 In considering whether an arbitral tribunal is a foreign or international tribunal under § 1782, the district court ruled in In re Hallmark Capital Corp that the term “tribunal” extends to private arbitration bodies like international commercial arbitral tribunals.143 Conducting a plain language review of the statute (after finding that the question was not answered by its controlling circuit court of appeals—the Eighth Circuit—or within the statute itself), the first instance district court concluded that “both the ‘common usage’ and ‘widely accepted definition’ of ‘tribunal’ include arbitral bodies.”144 The court further reasoned that reading the section’s coverage to include arbitral tribunals is consistent with the Supreme Court’s ruling in Intel.145 In a separate case, relying on the Supreme Court’s ruling, the Court of Appeals for the Sixth Circuit approved use of § 1782 for discovery in relation to a commercial arbitration outside the U.S., interpreting the word “tribunal” to include commercial arbitral tribunals.146 501 Thus, there are strong arguments on either side of the issue as to whether § 1782 is available for proceedings before private arbitral tribunals. Since proceedings need not be pending for one to use § 1782, and since its use is available to non-parties, lawyers should keep its potential in mind for (anticipated) arbitration proceedings. 500

IV. Effects of U.S. Legal Culture on Discovery and Costs Whether practicing in international arbitration in the U.S., or arbitrating with a U.S. party, or with counsel or arbitrators who have received some of their training in the U.S., it is important to understand how U.S. public policy and the accompanying legal culture —broadly understood as the set of subconscious beliefs, habits, and assumptions acquired through legal training, practice, and experience in the U.S.147—may influence international arbitration proceedings. 503 In the U.S., the parties (through their counsel) are the principal drivers of an adjudication.148 Issues like the order of a case’s presentation, the witnesses that will be called to the hearing for examination by counsel, the schedule for document disclosure, and the format of the hearing are all aspects of a case that can be decided by agreement of the parties’ attorneys with minimal intervention from a judge.149 Consequently, an arbitrator who was legally trained in the U.S., unless otherwise asked, may likely adopt a more passive role during the arbitral proceedings, typically intervening only when asked and as necessary. An attorney who was trained in the U.S. might push for more aggressive cross-examination or discovery than would other attorneys. Lawyers should prepare for these possibilities in advance. 504 There are two major areas where U.S. legal culture may be surprising but relevant in international proceedings: (1) document production and (2) cost allocation following 502

142 In

143 Id.

144 Id.

re Application of Hallmark Capital Corp., 534 F. Supp. 2d 951 (D. Minn. 2007). at 954.

145 Id.

at 954–56. Ballantyne, Green Light for US Discovery in Aid of Commercial Arbitration, Global Arb. Rev. (Sept. 24, 2019), https://globalarbitrationreview.com/article/1198012/green-light-for-us-discovery-in-aidof-commercial-arbitration. 147 See Kirk W. Junker, US Legal Culture: An Introduction (Routledge, 2016). 148 Burr & Bromberg, supra note 49 at 5. 149 Steven Baiker-McKee, Federal Civil Rules Handbook (2017). 146 Jack

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IV. Effects of U.S. Legal Culture on Discovery and Costs the conclusion of a dispute. These special features of arbitrations with a connection to the U.S. are described below.

1. The (Ir)relevance of United States’ Style Discovery in International Arbitration In the U.S. and elsewhere, an arbitrator does not have the same powers as a judge. 505 Nevertheless, § 7 of the F.A.A. gives arbitrators broad evidence-gathering powers, authorizing the majority of arbitrators in a particular case to “summon in writing any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record, document, or paper which may be deemed material as evidence in the case.”150 With respect to the production of documents by a non-party, the arbitrator must order the witness’s attendance at a hearing and receive documents from him or her at that time.151 When a witness refuses to comply with a summons152 from the arbitrators, the parties can seek assistance from the U.S. district court in the district where the arbitrators are sitting.153 U.S. courts are supportive of international arbitration, and those courts—not the arbitral tribunal—may issue a subpoena154 under Rule 45 of the F.R.C.P. and compel the presence of a witness or production of documents under the threat of punishment for contempt.155 As indicated above, an arbitration proceeding neither benefits from, nor suffers un- 506 der the rules of civil procedure or the rules of evidence of the seat (subject to the rules of that particular seat). Nonetheless, attorneys and arbitrators frequently attempt to import aspects of their home legal culture into the arbitration’s procedure. Although many courts and arbitration practitioners are quick to highlight that parties choose arbitration in part to avoid U.S. court procedures or U.S.-style discovery,156 many publicly available awards—and even court decisions—demonstrate that many parties, arbitrators, or “interested persons” use some aspects of U.S.-style discovery in arbitrations.157 Attorneys who are trained in the U.S. are taught to regard discovery (and related doc- 507 ument disclosure) as a beneficial exercise that has the potential of sparing both sides considerable expense. For instance, advocates and arbitrators who are trained in the U.S. may have learned that discovery provides parties an opportunity to investigate the strengths and weaknesses of their positions before trial:158 the documents that the claimant needs to prove its case—or, likewise, that the respondent may need to establish its defense—are often in the other party’s possession. Discovery may help parties evaluate whether bringing or continuing a case is worthwhile—not just because of the potential financial burden associated with document production but because, after discovery, it may be that one’s case is not nearly as strong as one had previously believed! Document exchange remedies unfairness by enabling parties to have an equal opportunity to

150 F.A.A., 9 U.S.C. § 7. The “hearing” pursuant to § 7 of the F.A.A. need not be a full merits hearing, but may be a preliminary hearing or another hearing occurring at any time in the proceeding. Stolt-Nielsen Transp. Grp., Inc. v. Celangese AG, 430 F. 3d 567, 579 (2d Cir. 2005). 151 Hay Group, Inc. v. E.B.S. Acquisition Corp., 360 F. 3d 404, 407 (3d Cir. 2004). 152 gerichtliche Vorladung / convocation / citación / citazione in giudizio, citazione a comparire. 153 F.A.A., 9 U.S.C. § 7. 154 gerichtliche Vorladung zur Aussage / assignation / citación para obligar a una parte que se presente / termine intraducibile, indica l’intimazione a comparire come testimone davanti all’autorità giudiziaria, ovvero l’ordine di produrre documenti o prove. 155 Fed. R. Civ. P. 45. 156 See e.g., La Comisión Ejecutiva Hidroelecctrica del Rio Lempa, 617 F. Supp. 2d at 486. 157 Steven Baicker-McKee, Federal Civil Rules Handbook 110, 120–29 (2017). 158 Burr & Bromberg, supra note 49 at 18; see Martinez-Fraga, supra note 118 at 62–66.

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Chapter 4 United States’ International Arbitration Law and Practice examine evidence and to present their cases fully, thus enabling a tribunal to resolve a case based on the truth that emerges. 508 In U.S. court proceedings, discovery is a process that can be conducted without—or with minimal—intervention from the judge.159 Although the F.R.C.P. do not apply in an arbitration,160 it is conceivable that an attorney who is trained using the F.R.C.P. might approach “document production” with an interest in, or an expectation of, engaging directly with opposing counsel at the earliest possible time to obtain a broad range of documents. An arbitrator approaching “document production” from this perspective may be more willing to order parties to disclose documents than would an arbitrator from a jurisdiction that neither permits nor encourages such extensive exchange. Counsel must be prepared for these cognitive biases.

2. Who Pays? Costs and the “American Rule” Foreign parties and counsel are often shocked to learn that in U.S. court proceedings, it is not customary for the losing party to pay the winning party’s costs and expenses. In the absence of extreme bad faith or a statutory provision to the contrary, U.S. courts are hostile toward this equitable remedy.161 Rather, the “American Rule” on costs and fees is that both should “fall where they lay,” meaning that each party must pay its own legal fees and expenses, regardless of the case outcome.162 510 In the context of the U.S. legal system, the “American Rule” makes sense. First, unlike many countries where fee shifting is the norm, the U.S. does not regulate legal fees. Instead, fee amounts are constrained by the rules of professional responsibility that are promulgated by the bar associations of each U.S. state, and they are evaluated based on “reasonableness.” Reasonableness is in part determined by reference to what the client agreed to pay or in fact paid for services in the absence of a promise that the other side would pay. There is no legally mandated, legislator-reviewed, upward limit on fees. Thus, a losing party in the U.S. would be without protection as far as the amount of costs claimed by the winning party, making it unfair to order that party to carry the costs of the winner, absent a glaring exception. Additionally, it is perceived to be fundamentally unfair to compel another to bear the costs of a relationship, when he or she had no opportunity to influence the bargained-for exchange. There are a variety of public policy goals that may be supported by the American Rule, including access to justice and the need to avoid excessive legal fees.163 There are also exceptions to the rule that each party pays his or her own fees however, set by statute in cases such as civil rights or environmental litigation. 511 Outside of the U.S., having the winner pay his or her own fees offends the sense of justice of many. Yet that this is even an issue may come as a surprise to counsel who has been trained in the U.S., given how fundamental the idea of each bearing his or her own costs is within the U.S. The F.A.A. does not provide for cost shifting or for the award of attorney’s fees to the party who is successful in confirming an arbitration award.164 Whether (1) an arbitrator in an arbitration seated in the U.S. can award costs or (2) a U.S. court can award costs to the prevailing party in a recognition and enforcement ac509

supra note 157 at 110, 120–29. See Fed. R. Civ. P. 26(b)(1); Baicker-McKee, supra note 158 at 110, 120–29. 161 Baicker-McKee, supra note 157 at 452–55. 162 Id. 163 John F. Vargo, The American Rule on Attorney Fee Allocation: The Injured Person’s Access to Justice, 42 Am. U. L. Rev. 1567 (1993). 164 Tai-Heng Cheng, Recovery of Fees and Costs, in International Arbitration in the United States. 159 Baicker-McKee, 160

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V. Conclusion tion is determined by the parties’ arbitration agreement, including any reference to arbitration rules and state law contained therein. The presumption that costs fall where they lie is so strong that, in arbitrations seated in the U.S., U.S. courts have vacated arbitral cost awards where the tribunal’s authority to award costs was unclear.165 Thus, to avoid such a proceeding, counsel should be sure that the tribunal’s authority to award costs exists—whether in the arbitration agreement or subsequently—before moving for costs. Many arbitration rules empower the arbitrator to direct how the costs shall be borne following the close of proceedings. Counsel should be aware of the American Rule and be prepared to make submissions on its (in)applicability to an international dispute.

V. Conclusion The final words on international arbitration in the U.S. are that (1) it is governed by 512 the contract and (2) the U.S. legal system strongly supports it. Thus, it should come as no surprise that roughly 32 % of the world’s international arbitrations are seated in the U.S.166 For these, as well as for other cases where an arbitrator or opposing counsel has received training in the U.S., one may be assisted by expert knowledge of key, unique aspects of U.S. (international) arbitration law. This chapter serves as a step toward that knowledge. U.S. (international) arbitration laws, practices, and cultural norms may prove indispensable to an attorney who has been trained in the civil law system, but who is involved in an arbitration that has any connection to the U.S.

165 Id.

at 446. Hodis, 2018 International Arbitration Survey: The Evolution of International Arbitration, Queen Mary U. London, http://www.arbitration.qmul.ac.uk/research/2018. 166 Adrian

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CHAPTER 5 CONTRACTS—DRAFTING AND CONTENT Literature: Frank Adoranti, The Managers Guide to Understanding Commonly Used Contract Terms: Boilerplate Clauses (2d ed., 2010). Mark Anderson & Victor Warner, Drafting and Negotiating Commercial Contracts (2d ed., 2007). Fabio Bortolotti, Drafting and Negotiating International Commercial Contracts (1st ed., 2008). Peter Butt & Richard Castle, Modern Legal Drafting (2d ed., 2007). Charles M. Fox, Working with Contracts (2d ed., 2008). Tina L. Stark, Drafting Contracts (1st ed., 2007).

I. Introduction 513

In the 21st Century, practicing lawyers all over the world constantly encounter contractual agreements written in English. Many of these are drafted according to either U.S. law, U.S. drafting standards, or both. Therefore, it is essential that one has a solid working knowledge of how modern English language contracts are drafted in the United States. This chapter is designed to serve as a guide to both the structure and wording of English language contracts. Breaking the contract into its component parts and then discussing the wording used in each section itself, is aimed at more easily understanding the often imposing monolith of an English language contract and improving the competency in both drafting and modifying existing contracts. Thus explaining how and why English language contracts are drafted and structured the way they are and providing the reader with the tools to make their contract drafting easier and more effective.

II. Drafting the Front of the Contract: Exordium, Preamble and Transitional Language We will begin by exploring what is commonly termed the front of the contract. The front of the contract includes the Exordium (Introductory Clause),1 Preamble (sometime referred to as Recitals),2 and Transitional Language/Words of Agreement.3 These elements identify the agreement, explain its purpose, and state that the parties agree to the provisions that follow. The purpose of the front of the contract is to provide background information as to both the parties themselves, and the relationship between the parties entering into the contractual agreement. 515 It should be noted from the outset that these provisions are not considered to be substantive elements of the contractual agreement itself under the common law. Rather, all elements of the contract above the transitional language, discussed at more length below, are considered to be merely background information to the agreement between the parties. Therefore, when drafting a contract, substantive provisions of the agreement between the parties should not appear above the transitional language. 514

1 Einleitungsklausel / exorde, ou designation des parties / introducción / formula introduttiva, con l’indicazione delle parti contraenti. 2 Präambel / préambule / preámbulo / preambolo. 3 Überleitungsformulierung / formulation transitoire / lenguaje transicional / formula transitoria che segna l’avvio della parte dispositiva del contratto.

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II. Drafting the Front of the Contract 1. The Exordium/Introductory Clause What follows is an example of a traditional, and well-drafted, introductory clause; 516 technically known as the exordium: 517

Example MERGER AGREEMENT This merger agreement is dated August 15, 20XX, and is between Alcove Enterprises, Inc., a Delaware corporation (“Alcove”) and Triad Manufacturing, a California corporation (“Triad”).

Neither the term “Agreement” nor the term “Contract” is used in the title and throughout the contract. In the document itself there is no need to capitalize “agreement” if it is merely referring to the contract itself. If the agreement is comprised of more than one document or somehow relates to a contractual relationship memorialized in another document, then the term “agreement” should be defined in the definition section and “Agreement” capitalized throughout the document. The title of the document should also clearly identify the contractual agreement at hand and distinguish it from other agreements. At the same time, the contract title should not be a term that is too long and cumbersome. The title of the agreement should then be “pulled down” to the first sentence using the exact same wording. There is no need to capitalize it, as the goal should be to use lower case letters in the first sentence for both grammatical and aesthetic reasons. The first sentence should begin with “This” so that you can structure it as a sentence. For similar reasons, you should use the term “is dated” so that the sentence has a verb; the phrase “is dated” is also simpler and clearer than “made” or “is entered into.” The actual dating of the contract, and the importance of the form and proper wording, will be discussed in the next section. The term “between” should be used, rather than the older and antiquated “between and among” or “by and between”. While standard written English might still distinguish “between” as referring to two parties and “among” as referring to three or more, in legal English “between” can also refer to three or more and thus this duality of usage has been abandoned in modern contract drafting. The names of the parties should be written in all capital letters, followed by the type of legal entity they are and where that legal entity exists. This serves the purpose of quickly identifying the liability exposure of the entities entering into the contractual agreement, and jurisdictional issues, as well as orientating the reader more generally as to the relationship between the parties. While common, modern drafting style dictates that the parties not put their addresses in the exordium, rather, the address should appear in a separate notification section4 located in the body of the contract (and discussed later in this chapter). This makes the exordium clearer and less cluttered. Following the identification of the legal entity, write the name of the parties as it will be referred to in the body of the contract. As the name of the parties is usually long and cumbersome, a shortened version of the name is usually used. The shorted reference name should be set off with parentheses, underlined, and quotation marks. It is also preferable to customize the names of the parties, rather than using abstract legal terms such as “lessor/lessee,” “creditor/debtor,” “transferor/transferee” etc., which might lead to unnecessary confusion.

4 separater Informationsabschnitt / section de notification séparée / sección separada de información / paragrafo separato inerente a comunicazioni e notifiche.

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Chapter 5 Contracts—Drafting and Content 2. Dating the Contract Since the exact time at which a contract becomes enforceable can have significant legal implications, the dating of the contract is a crucial consideration. For example, the date of the contract can profoundly influence the covenants, representations and warranties made by the parties. Therefore, within the common law traditions, certain conventions dictate how one signals the parties’ intention regarding contract dates. For example, if a contract is meant to become immediately effective upon the signing of both parties on the same date, modern drafting convention dictates that the date that appear in the exordium. This date should generally be the only date provided in the contract, meaning that the signatories should not date their signatures. 523 It is often the case, however, that the parties do not physically sign the contract at the same time, particularly in the common law system, which lacks the need to have a notary present. These time discrepancies are often due to logistics, unexpected delays or are intended to avoid gaps in coverage. The traditional way that U.S. contracts reflect the reality that one or more parties signed a contract on a date other than that dated in the introductory clause, is to state that the agreement is “dated as of” the given date (emphasis added). The use of “as of ” immediately signals to the reader that the date which follows is the effective date of the contract, with all the provisions of the contract such as covenants, representations and warranties pegged to that date. 522

524 Practice Tip If at the beginning of the contract the phrase “is dated” is used, it implies that the parties signed the contract on that date, and that the provisions of the contract come into effect as of that date. If at the beginning of the contract the phrase “dated as of ” is used, it implies that one or more of the parties signed the contract after that date, but that the parties wish that date to be the effective date of the contract. This is especially important in order to lock in representations and warranties made by the parties. When drafting a contract with an “as of ” date, you should also indicate its actual signing date somewhere else in the contract. This might be critical for taxation or other reasons. In addition, not all parties dealing with English language contracts may realize the significance of the “as of ” phrasing. Therefore, as precaution in international contracts, it might be wise to include the “as of ” signing date in the concluding paragraph: To evidence the parties’ agreement to this agreement’s provisions, the parties have executed and delivered this agreement on January 1, 20XX, but as of the date set forth in the exordium. Lastly, there are situations where the parties wish to execute a contract presently that will only take effect at a later date. In that situation, the parties should avoid putting a date in the exordium at all. Rather, the parties should include an “effective date” provision within the contract, ideally isolated and titled as such in order for the parties to quickly and easily find it.

525 Example When drafting a contract in which the document will be signed before the contract becomes effective, use the following format: STOCK PURCHASE AGREEMENT This stock purchase agreement is between Alcove Enterprises, Inc., a Delaware corporation (“Alcove”) and Triad Manufacturing, a California corporation (“Triad”). (and then in the body of the contract) Effective Date. This agreement is effective as of December 1, 20XX.

526

The goal in all three versions–present, earlier or later dating–is to signal the option the parties have chosen and to assure that there is no ambiguity or confusion as to when contractual provisions come into effect.

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II. Drafting the Front of the Contract 3. The Preamble Most contracts of any length or complexity contain, following the title and before the body of the contract, a group of paragraphs known as the preamble (a.k.a. recitals).5 Courts use the recitals to help determine the intent of the parties. The recitals state any background information that the parties regard as relevant and serve to introduce the body of the contract. More importantly, the drafter must be careful not to cast provisions in the form of recitals that are in fact representations or agreements. Just as the opening arguments in a common law trial are not considered evidence but rather an orienteering overview, so too is the preamble viewed a mere introduction without substantive effect. Due to this fact, the parties should not address in any detail the rights and obligations of the parties in the preamble. You should also not state in the agreement itself that the preamble is “incorporated by reference.” There are four common types of recitals. The first is context recitals, describing the circumstances leading up to the making of the agreement. A second type is the purpose recitals which indicate in broad terms what the parties wish to accomplish. A third type is the concurrent transaction recitals which is, as the name implies, utilized when there are a number of agreements being entered into at the same time. Last, and most important perhaps, are the substantive recitals which point the court toward a particular type of remedy by, for example pointing out that an item subject to the contract is unique and thus paving the way for equitable relief. Similarly, in the event of ambiguity, as the guiding principle of contract interpretation is “the intent of the parties” this type of preamble may point to the envisioned relationship between the parties or the specificity of performance expected. The structure of the recitals should once again be simple, clear and logical. The goal is to make the preamble clear and readable by, for example, using conventional paragraph structure, rather than numbering. For example, although now completely archaic, one still often encounters preambles prominently featuring “WITNESSETH” and “WHEREAS”. This phrasing had a time and a place. For centuries English language contracts were written by hand. In order to avoid attempts to alter the contract’s meaning by changing the punctuation, they were written as one long single sentence without any punctuation, sometimes running on for pages. In order to break up the flow and to structure these documents, “WITTNESSETH” and “WHEREAS” were written prominently at various points throughout the document as reference points. Obviously, modern paragraph structuring, the use of punctuation and a miniature printing press in every home has made the use of this style completely unnecessary. Albeit having persisted into the modern time due to being passed from legal generation to generation, and making the document look very lawyerlike, the usage of this phrasing is to be avoided.

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4. The Transitional Language and Words of Agreement In order to draw a bright line between the introduction to the contract and the “legal- 532 ly binding” section of the contract, the common law contract uses transitional language, also known as words of agreement.6 Once again, historic legalese without any modern logical or legal basis long dominated this section of the contract. For example, traditionally it was common to use the phrase “know all men by these presents” or “Now, therefore, in consideration of the premises and mutual promises herein contained, the 5 Präambel

/ préambule / preámbulo / preambolo. / formulation transitoire, de type “Il a été convenu ce qui suit:” / frase transicional / formula transitoria che segna l’avvio della parte dispositiva del contratto. 6 Überleitungsformulierung

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Chapter 5 Contracts—Drafting and Content parties hereby agree as follows”.7 Rather than using these archaic forms, modern drafting conventions should be employed. 533 Practice Tip If the contract contains a set of recitals, the lead-in should read: Accordingly, the parties agree as follows: –or– The parties therefore agree as follows: (emphasis added) If the contract does not contain a set of recitals, the lead-in should simply read: The parties agree as follows: This transitional language should follow immediately after the preamble and before the definition section. It marks a clear line as to where the background information regarding the contract ends and where the substantive elements of the contract begin.

534

By applying these simple and logical drafting conventions to your exordium, preamble and transitional language, the “front” of your English language contracts will conform to modern drafting style. By consistently using these conventions in your daily work, you will quickly develop a simple structure to add both uniformity and clarity to your English language contracts.

III. Drafting the Body of the Contract 535

The body of the contract is where the negotiated agreement between the respective parties is transformed onto paper in the form of a written agreement. Taking the nuances of an oftentimes long, detailed negotiation process onto paper is often a daunting task, particularly in a foreign language. Also, understanding the conventions of drafting and usage are not always self-evident. Therefore, this section is designed to give you the essential knowledge and tools to transform your negotiated agreement into a legallybinding written contract.

1. The Definition Section English language contracts are famous, or perhaps infamous, for their extensive definition sections. While often cumbersome on first blush, they serve an essential purpose, namely to make the reading of the body of the contract itself easier. This section will discuss some of the basic standards used in drafting English language definition sections. 537 The definition section is written in alphabetical order, and includes any defined terms the parties feel would be relevant to interpreting the contract accurately and in a way in that the parties intend. Therefore, it normally includes terms of art that are unique to this particular agreement, lists of items that allow the body of the contract itself to be less cumbersome, or usage that is counter to commonly understood usage of a word. What should not appear in the definition section are commonly understood legal definitions or everyday usages of non-legal terms. Rather, the definition section should be re536

7 In order to form a binding contract, the common law requires, among other elements, an offer, acceptance and consideration [Gegenleistung / Contrepartie / contraprestación / contropartita di scambio (il termine, comunque, è sostanzialmente intraducibile, in quanto privo di un equivalente nell’ordinamento italiano e nei sistemi di civil law in generale)]. While a complex legal concept, consideration can be summarized as a “bargained for exchange”. It was thought that if the parties stated that “good consideration” had been given, then the court would enforce the contract. However, the courts have consistently ruled that just because someone states consideration has been given, it does not make it true, and thus the contact could be found to lack consideration regardless of such a statement. As this phrasing does not in reality serve as a legal safety net, it should be avoided.

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III. Drafting the Body of the Contract served for clarifying and distinguishing usage by the parties to the contract that in some way varies from common usage. The general wording of each definition varies as to the number of times the defined 538 term actually appears in the contract. If a contractual term appears multiple times in a contract, the definition itself should be in the definition section, using the following structure: (defined term) “means” (definition). However, if it appears only once in the document, the definition can be in the body of the agreement, with a cross-reference to the particular section of the contract in which the definition appears being written in the definition section: (defined term) “has the meaning assigned to it in” (Contract Section). It is also important to note that if a word appears in the definition section, it must 539 then be capitalized in the body of the contract. This signals to the reader that the usage of the word is unique to this contractual relationship, rather than the conventional usage. If a drafter fails to capitalize the defined words throughout the contract, he or she runs the risk of causing confusion or misunderstanding that can have grievous consequences.

2. The Correct Use of “Operative Language” When drafting the body of the contract, it is essential to gain an understanding of 540 what is known as “operative language;”8 these are the words that establish the rights, duties and privileges of the parties to the contract. Once one has mastered the use of this language, one can not only transform any negotiated agreement into an iron-clad contract, but can also greatly improve the wording and structure of existing English language contract templates that may be used in daily work. The legal writing culture of the United States diverges from some civil law legal writ- 541 ing cultures as concerns words that are used repetitively. In some civil legal cultures, for example, a lawyer is encouraged to use new words to express the same idea as the document progresses. In contrast, U.S. lawyers adhere to what is commonly termed the Golden Rule of Drafting, namely, “never change your language unless you wish to change the meaning, and always change your language if you wish to change the meaning.” It is important then that if a word is used to represent one idea or legal concept, it is not only used consistently, but also exclusively, to represent that concept. Therefore, the consistent, if repetitive, use of words throughout the document is taken as a key building block of effective legal writing. a) The Correct Usage of the Word Shall When drafting contracts, perhaps the most misused, and misunderstood, usage re- 542 lates to the word shall. Too often, lawyers randomly use the word shall in order to give the contract an air of legality and formality. The result though is only confusion and ambiguity, with the word shall being used in very contradictory ways within a single legal agreement. The word shall is normally used in two ways: one correctly; the other incorrectly. 543 First, the correct use: the word shall should only be used to represent a duty of one or both of the parties under the contact. If shall is used in this sense, no other word but the name of one of the parties signing the contracts should precede that word. For example: “The Buyer shall . . .”, “The Seller shall . . .”, “The Parties shall . . . ”, etc. Second, the incorrect use: when shall is used as a substitute for is, is to, should, is required to, etc. For 8 rechtswirksame Sprache / vocabulaire juridique / cláusulas operativas / parte sostanziale o dispositiva del testo contrattuale.

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Chapter 5 Contracts—Drafting and Content example: “The products shall . . .”, “The agreement shall . . .”, “The merger shall . . .” etc. Indeed, modern United States drafting convention has adopted this perspective, dictating that shall is to be used to signal duties, and only duties, in English language contracts. Checklist To separate good shalls from bad shalls employ the following standard: The word shall is being used correctly in a contract: (1) If the name of one of the parties signing the contract precedes the word shall. (2) If the verb used in relation to the duty is a “duty verb”. Thus, the sentence should have the following structure: (Party to Contract) shall (duty verb) Incorrect: Seller shall receive (one cannot have a “duty” to “receive” something; rather, you have a “right” to receive something) Correct: Seller shall deliver (one can have a “duty” to deliver something) (3) An easy, but essential, tool in distinguishing a good shall and bad shall is to simply substitute the expression “has an obligation to” for the word shall. If the word shall is substituted with this phrase, and the substituted phrase makes sense grammatically, logically, and legally, then shall is being used correctly; that is, to express a party’s duty under the contract. For example: Correct: Seller shall deliver = Seller has an obligation to deliver. Correct: Buyer shall pay = Buyer has an obligation to pay Conversely, if the phrase “has an obligation to” does not grammatically, logically, or legally make sense when substituted for the word shall in a contract, then the word is, is to be, are, or are to be should be substituted for the word shall; or the sentence should be restructured to represent a duty. For example: Incorrect: The computer shall . . . = The computer has an obligation to . . . But this is illogical, a computer cannot have a duty under a contract. Correct: The Computer is to . . .; The Computers are to . . .. 544

Another common usage error often found in contracts is the following: “The Buyer shall be entitled to . . .”. This would imply that the Buyer “has an obligation to be entitled to” something, thus stating that the Buyer “has a duty to have a right to” something. This clearly makes no sense. It has to be either a duty or a right, not both. Therefore, the correct usage is to strike out the word shall and simply use the “entitled to” language to represent a right under the contract. Checklist If a contact uses the phrase shall be or shall have, the usage of the word shall in that context is wrong: Incorrect: The Seller shall be exempt . . . = The Seller has an obligation to be exempt. But, a party cannot logically have a duty to be exempt. Correct: The Seller is exempt . . .. -orThe Seller is entitled to an exemption . . .. Likewise, the use of shall is incorrect under modern drafting convention if a party precedes shall and shall is coupled with a form of the verb to have (thus, as an auxiliary or helping verb): Incorrect: The Party shall have obtained permission from the shareholders . . . (creating a condition).

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III. Drafting the Body of the Contract Correct: The Party must obtain permission from the shareholders . . .. Incorrect: Either Party shall have the right to terminate . . . (creating discretionary authority). Correct: Either Party may terminate . . .. By following the contract drafting conventions relating to the use of the word shall as 545 outlined above, English language contracts are much more concise and accurate. b) The Correct Usage of the Words Will and Must The two operative language words that need to be discussed are the correct usage of will and must. As a general rule of thumb, whenever possible, one should use the word shall to express duties in English language contracts. However, for limited purposes, or in certain contexts outside expressions of contractual duties, words such as must or will sometimes appear in contractual agreements. This section will therefore discuss when and if these words should be used in English language contracts. Let us begin with the word will. As a general rule, will should be avoided in English language contracts for several reasons. Firstly, it is simply a weak word to express duties. To say “I will” do something in English does not reflect any degree of commitment, but merely a reference to a potential future action. Secondly, the word will, almost by definition violates the Golden Rule of Drafting: Use the same word to represent the same thing, use a different word to represent a different thing. Since the word will is essential for the expression of English grammar’s future tense, it should be reserved for this purpose, and not used to represent a duty. Another reason why the word will generally has no place in English language contracts is because, unlike some civil law legal cultures that have more flexible views on contract grammar, a well drafted English language contract should always be written in the present tense. For under the common law it is assumed, as the expression goes, that “the contract is always speaking.” This means that conceptually from a common law perspective, the contract is not drafted “now” to refer to future events, but rather is a living document, the provisions of which come into existence at the very instance the incorporated rights are vested and the duties are owed. Therefore, with English language contracts drafted in the present tense, there is generally no need for the use of future tense grammar, and thus the use of the word will. For all the foregoing reasons, the word will should be avoided in English language contracts. Unlike will, the word must plays an important, if limited, role in modern English language contract style. While generally, the word must sounds too strong a word to represent duty language throughout a contract, the use of must is helpful to place extra emphasis on certain duties. It is thus used to add stress to an otherwise “standard shall.” By using the word must rather than shall, it is as if the drafter has put a shall in bold red ink and underlined it. If one were to do that in the text of a contract itself, of course, it would look rather odd, so instead the contract drafter uses the word must. Legally of course, a duty is a duty, and regardless of whether the duty is represented by the word shall or must, it has to be performed; but both as a matter of judicial interpretation and practicality, putting the other party on notice in a slightly more dramatic manner does have its place. If a right is triggered, but can disappear again if certain things are not done within a restricted time period, it is important to emphasize this fact to the party subject to the potential forfeit of right due to lack of compliance. Thus, modern drafting convention employs the word must rather than shall in this situation. The most common and useful use of must in modern English language contract drafting is when a condition is used to trigger a right, which itself may lapse if certain criteria are not followed or met. For example, if I have an insurance contract and someKeith E. Wilder

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Chapter 5 Contracts—Drafting and Content one breaks my window, my insurance will normally cover the damages, but only on condition that I notify them within 30 days of the breakage and provide at least three repair estimates in writing. Therefore, on the occurrence of an event (the condition) I have a right, but that right might lapse if certain criteria are not met. In order to stress the reality of a right coming into being, but potentially going away again, must is employed to stress that the agreed criteria have to be met within a certain time frame. 552 Practice Tip The modern, concise way to structure this sort of contractual situation is the following; Use the word must in contracts: To add emphasis to an important duty, such as confidentiality agreements, non-disclosure agreements, non-competition agreements, etc. To emphasize that certain conditions have to be met before a conditional right vests: If or when (Triggering Condition) (Party) must (criteria 1, 2, 3) (time limit). For example, the above described insurance policy might read: If the car is damaged, the policy holder must provide three written estimates to Company X within 60 days.

c) The Correct Usage of the Words Entitled To 553

In most contractual relationships the parties have both duties as well as rights. The phrase entitled to is used in English language contracts to express rights. For every duty, there is a correlating right. Thus, legally, the following phrases have exactly the same legal consequences: Seller shall deliver . . .. Buyer is entitled to receive . . ..

So a contract could be written entirely using “duty language” and thus the word shall, or, if the drafter wanted, a contact could be drafted entirely using “rights language”, and therefore use the phrase entitled to. However, since the use of shall allows for sentence structures that are in the active voice and less cumbersome, it is the preferred choice. 555 Thus, given the fact that either construction can be used, but one is preferred to the other, it raises the question why the entitled to rights structure would ever be used. The answer lies not in the grammar, but rather in the psychology. By giving a party to the contract a right, the drafter allows that party to have a sense of entitlement. This can be important in consumer contracts or employment contracts. It allows for the parties to a contract to have a sense that the agreement is more of a “two-way street”. For example, rather than phrasing a consumer contract that the manufacturer has a duty to replace the item, the contract can be phrased in a way that gives the consumer a right to a replacement. Rather than an employer having a duty to pay a bonus upon a salesperson reaching certain goals, the agreement can and perhaps should be phrased in a way that gives the salesperson a right to a bonus. While subtle, the strategic and conscious use of entitled to in contractual agreements can have far-reaching beneficial consequences. 554

556 Practice Tip Use the phrase entitled to in contractual agreements to create a psychological sense of entitlement and empowerment in the other party.

d) The Correct Usage of the Word May 557

Contractual relationships are comprised of duties, rights and privileges. Privileges are rights without a duty corollary. A privilege therefore allows a party to exercise discretionary authority. In English language contracts, such discretionary authority is expressed with the word may. Sometimes may is simply used in its simple grammatical

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IV. Drafting The Back of the Contract: Boilerplate Provisions sense, in choosing between various options. From a contract drafting perspective, however, may is significant in that it allows the party who is exercising the may to act and make decisions unilaterally. For example, if “Seller may replace or refund . . .,” this allows the Buyer to unilaterally decide what remedy they will exercise in the situation. The Buyer has no say in the matter. By drafting privilege or discretionary authority may language in favor of one’s client, 558 one therefore allows the client to make unilateral decisions as the contractual relationship actually unfolds. This can in the end substantially empower the party that controls the mays in a well-drafted contract. 559

Practice Tip Using the word may in contractual agreements creates unilateral privileges and discretionary powers. Therefore, when drafting and reviewing contracts, be conscious of how many mays are being exercised by the various parties. Attempt to maintain such unilateral privileges and discretionary powers in favor of the client.

IV. Drafting The Back of the Contract: Boilerplate Provisions Having wrapped up our discussion of the use of operative language in English language contracts; we must now turn to another essential element of contract drafting, namely boilerplate provisions.9 The term “boilerplate” is often used to describe the provisions in the contract that are found in every contract. These provisions provide a road map, telling the two parties how the contract, as a legal document distinct from the individual provisions of the negotiated agreement, is to be interpreted. These “housekeeping functions” are traditionally found at the back of the contract, often under the heading Miscellaneous or Administrative Provisions. Many people who work regularly with contracts tend to dismiss these standard provisions as “just boilerplate,” but one should not assume that one understands those terms without reading them, and one should never underestimate their importance. While English language contracts may have ridden to significance on the coattails of the general ascendancy of the English language in international business, it was a matter of serendipity that the traditional theory and structure of English language contracts lent itself naturally to its new international role. For the nature of common law contracts has always been that the document itself creates its own, self-contained legal universe. While many civil law contracts look to a common law lawyer like academic footnotes, the Anglo-American contracts traditionally do not reference statutes and legal provisions dealing with general contract law outside of the agreement itself. While general common law rules of contract apply, the parties are nearly always free to modify those rules, and if not, silence is deemed to mean that one accepts the applicability. Therefore, the only document that needs to be referenced to interpret the contract, is the contract itself. This traditional reality means that English language contracts are uniquely suited for their new role, crossing jurisdictional lines with great ease. It is therefore essential for anyone working with English language contracts to be able to understand standard boilerplate provisions, to recognize them when they see them, and perhaps most importantly, to notice when they are missing, poorly worded, or disadvantageous to personal interests or those of the client. Without these provisions, the parties have little influence on how the contract itself will be interpreted by a court or arbitrator. In addition, key business issues are regularly hidden in these provisions, and 9 standardmäßige Vertragsklauseln / dispositions contractuelles standard / lenguaje contractual estándar / clausole contrattuali standard.

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1. Standard Boilerplate Clauses Standard Boilerplate clauses include all of the following:

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a) Severability Clause 565

Most parties do not want an entire contract to become void (no longer legally binding) because a single clause within the contract is not enforceable under the law. In order to avoid this problem, a clause is normally placed in a contract that allows the void clause (or clauses) to be “cut out” of the contract, so that the rest of the contract is still valid. A typical Severability Clause10 looks similar to the following:

566 Example The invalidity, in whole or in part, of any term of this agreement does not affect the validity of the remainder of the agreement.

b) Merger, Integration or “Zipper Clauses” 567

Many times contracts involve many discussions, and thus lots of paper (or at least emails) moving between the parties over the course of the contract negotiation. In order for the parties to make it clear to a reader of a contract that this contract represents the final agreement between the parties, a merger clause11 is often included. In addition, under basic common law theory, it serves the important purpose of making sure that a contract will not be altered or supplemented through what is known as parol evidence.12

568 Example This agreement signed by both parties constitutes a final and exclusive written expression of all the terms of this agreement and is a complete and exclusive statement of those terms.

569 Practice Tip When drafting a merger clause, it is often helpful to describe the agreement being signed as final and exclusive in order to make clear that the parties agree that the agreement is fully integrated. If the parties are signing multiple agreements contemporaneously, use a defined term to refer to all the agreements. For example, use the term Transaction Documents. The merger provision should then state that those documents together constitute the final and exclusive agreement of the parties. Be sure that each of the other agreements being executed includes a merger provision that is exactly the same as the one in the primary agreement.

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c) Force Majeure Clause 570

Also known as an “Act of God”13 clause, it protects both parties from being found in breach of contract due to factors beyond the parties’ personal control.

salvatorische Klausel / clause de divisibilité / cláusula de separabilidad / clausola di salvaguardia. Vollständigkeitsklausel / clause d’intégralité / cláusula de integración / clausola di completezza o d’intero accordo. 12 mündliche Erklärung / déclaration complémentaire, non prevue au contrat / prueba extrínseca a un instrumento, relativa al contenido de éste / prova orale relativa a fatti, atti o patti estrinseci a un atto scritto. 13 höhere Gewalt / force majeure / fuerza mayor / forza maggiore. 10

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IV. Drafting The Back of the Contract: Boilerplate Provisions 571

Example Force majeure. Deliveries may be suspended by either party in case of acts of God, war, riots, fire, explosion, flood, strike, lockout, injunction, inability to obtain fuel, power, raw materials, labor, containers, or transportation facilities, accident, breakage of machinery or apparatus, national defense requirements, or any cause beyond the control of such party, preventing the manufacture, shipment, acceptance, or consumption of a shipment of the goods or of a material upon which the manufacture of the goods is dependent.

d) Modification and Waiver Clause The parties are always free to modify the contract at a later date, but often times this 572 causes major problems. This is particularly true when a contract is modified orally. If later problems arise between the parties, such oral modification can be both difficult to prove or disprove. In order to avoid this problem, most contract contain a “modification and waiver clause.”14 573

Example All Modifications and Waivers Must Be in Writing. This contract may be modified or rescinded only by a writing signed by both of the parties.

e) Assignment and Delegation Clause The Common Law assumes that a party can assign rights15 under a contract to third 574 parties and delegate duties 16 under a contract to third parties. If the parties do not want this to happen, they must insert a clause in the contract forbidding it. The assignment and delegation provisions are one of the boilerplate provisions that a lawyer tailors most often. When one does tailor this provision, one must remember to address both assignment and delegation, not just assignments. They are two different legal concepts and thus need to be dealt with separately. 575

Examples • •

Either Seller or Buyer may assign its rights under this agreement. Buyer or Seller may not delegate its duties under this agreement without written permission.

An anti-assignment clause17 is what it sounds like; a provision in a contract that pro- 576 hibits a party from assigning rights under a contract. This provision is often paired with anti-delegation provisions to ensure that the parties deal only with each other–the party with whom each originally contracted. However, making an anti-assignment provision enforceable requires detailed, carefully drawn, provisions and it often still does not work. To best avoid any problems, draft the anti-assignment provision to prohibit an assignment of rights under the agreement.18 If the provision prohibits only the assignment of the agreement,19 courts will generally interpret the provision as an anti-delegation provision. To create an anti-assignment provision that renders an assignment void, one must take away not only the right20 to assign, but also the power21 to assign as well. 14 Abänderungs- und Verzichtsklausel / clause de modification et de renonciation / cláusula de modificación o renuncia / clausola di modificazione e di rinuncia. 15 Rechte übertragen / transférer des droits / cesión de derechos / trasferire diritti. 16 Pflichten übertragen / déléguer des obligations / delegar obligaciones / trasferire obblighi. 17 Klauseln zum Verbot der Rechteübertragung / clause d’interdiction de transfert / cláusula de intransferibilidad / clausole di divieto di cessione. 18 Übertragung von Rechten auf Basis des Vertrags / transfer des droits sous le contrat / cesión de derechos en virtud del contrato / trasferimento di diritti in base al contratto. 19 Vertragsübertragung / transfert du contrat / transferencia del contrato / cessione del contratto. 20 Recht / droit / derecho / diritto. 21 Ermächtigung / pouvoir / poder / potere.

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An anti-Delegation clause,22 unlike anti-assignment provisions, provisions are generally enforceable and easy to draft. Include a provision stating that neither party may “delegate performance.” Use the word “performance” not “duty” because technically “performance” is broader, referring to both duties and conditions. f) Choice of Law or Governing Law Clause

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In international contracts, it is extremely important to determine whose legal system is going to govern the contract. In order to make this clear, the parties normally include a “Choice of Law”23 clause.

579 Example In a contract between a California Company and a Canadian Company, where the parties want California law to govern, they include this provision: The validity, interpretation, and performances of this Agreement is controlled by and construed under the laws of the State of California, as if performed wholly within the state and without giving effect to the principles of conflict of law.

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In many commercial transactions, within the U.S. context, the parties wish New York or Delaware law to govern, even though the transaction has no relationship with the chosen state. A drafter should evaluate whether the law of the jurisdiction under consideration is well developed and predictable. For example, Delaware and New York both have well developed (and thus predictable) bodies of corporate law. This can be done even if the transaction has no relationship with the chosen state, as long as the amount of the transaction meets certain statutory thresholds in each state. In addition, evaluate whether the particular body of state law is hostile or friendly to the type of client/subject matter being handled in the contract. g) Choice of Forum Clause

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This clause dictates not what law will be used, but what court will hear the case. This is known as “jurisdiction.”24 In international contracts, or any contract where there is large physical distance between the parties, this clause can be important. A choice of forum provision that mirrors the choice of law provision increases the likelihood that the choice of law provision will be enforced.

582 Example Any legal suit, action or proceeding arising out of or relating to this Agreement shall be commenced in a federal court in the state of Colorado, and each party hereto irrevocably submits to the non-exclusive jurisdiction and venue of any such court in any such suit, action or proceeding.

22 Klauseln zum Verbot der Pflichtenübertragung / clause d’interdiction de délégation / cláusula contra la delegacion de ejecución contractual / clausole di divieto di delegazione dell’adempimento contrattuale. 23 Rechtswahlklausel / clause de droit applicable, ou electio juris / elección del derecho applicable / scelta del diritto applicabile. 24 Gerichtsbarkeit / juridiction, ou compétence / jurisdicción / giurisdizione, foro competente.

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IV. Drafting The Back of the Contract: Boilerplate Provisions 2. Secondary Boilerplate Clauses The following clauses are frequently, but are not by necessity, included in English lan- 583 guage contracts: a) Successors and Assigns Clause These provisions are very common in commercial contracts, and deal with the conse- 584 quences of an assignment or delegation: 585

Example Successors and Assigns. This agreement binds and benefits the parties and their respective successors and assigns.

This provision is added to clarify whether an assignment also includes a delegation 586 (and thus the associated duties, rather than simply the rights). The inclusion of a successor25 and assign26 provision eliminates the necessity of an express assumption, binding the assignee to perform as it is also a delegate; and restates the common law that the non-assigning party must give the benefit of its performance to the assignee. b) Notice Clause Nearly all contracts contain notice clauses. They not only list the addresses to which 587 parties should send their notices, but they also allocate the risk of a notice’s non-receipt. Traditionally in the U.S., notice provisions usually state that a notice is effective three days after its deposit in a U.S. Postal Service mailbox. This means that, even if the notice is lost, the sender of the notice has rights against the recipient three days after mailing. Therefore, the risk of non-receipt is on the recipient. As this can lead to inequitable results, many parties now insist that the risk of non-receipt should be on the sender. To do so, notice must be effective only upon receipt. A well-drafted notice provision should state the method by which notice may be giv- 588 en (email, fax, in-hand, post, etc.). One should note that many contractual agreements specifically exclude regular postal services due to its unreliability. If regular postal service is permitted in the agreement, it should specify that it must be sent by registered or certified mail with a return receipt. Lastly, the notice provision should state how a party may change its address for purposes of the agreement. c) Counterparts Clauses It is quite common to have multiple copies of any one particular contractual agree- 589 ment. The parties often want to make clear in the agreement itself that all the executed copies are equally valid, albeit that they are a duplicate original of a contract that the parties signed and thus including a counterparts clause themselves.27 590

Example Counterparts. This agreement may be executed in one or more counterparts, each of which is an original, and all of which constitute only one agreement between the parties.

Drafters use this provision to expedite transactions when not all the parties attend the 591 agreement’s signing. It is also used so as to create multiple originals so that each party can have a fully executed original. A well-drafted counterparts clause also states that the Rechtsnachfolger / successeur / sucesor legal / successore, avente causa. Abtretungsempfänger / ayant droit / cesionario / cessionario. 27 mehrere Ausfertigungen / doubles / firmado en varios ejemplares / esemplari originali del contratto. 25

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Chapter 5 Contracts—Drafting and Content counterparts “constitute only one agreement.” This means that each party makes only one set of promises even though the parties may have executed multiple counterparts, creating multiple fully executed originals. d) Waiver of Jury Trial Clause The U.S. Constitution and many state constitutions guarantee the right to a jury trial. While a waiver of this right is possible, the courts generally do not treat such a waiver lightly. Therefore in order to make such a provision binding on the parties, the drafter must take extra care to assure any court reviewing such a contractual agreement that the party willingly and knowingly waived such a right. 593 Here are some guidelines which will increase the likelihood for a court to uphold a jury trial waiver. It is generally advisable to locate it as the last general provision, immediately before the signature blocks. This is done in an effort to avoid any claims that the waiver of the jury trial was somehow buried in the body of the contract and not seen by one of the signing parties. To further highlight the significance of the jury waiver, it is advisable to state directly in the caption of that particular contract provision that the right to a jury trial is being waived. Unlike in other parts of the contract, it is also advisable to use bold letters and larger font size. Also, if possible, both parties should give up their respective right to a jury trial. 594 Lastly, if one or both of the parties are a natural person, have the person initial the provision in the margin and require the person’s lawyer to sign a form stating that he or she has explained the provision, and its potential consequences, to his or her client. 592

595 Practice Tip If parties are executing multiple agreements as part of a single transaction, make sure that the boilerplate is the same in each agreement.

V. Conclusion It is hoped that through the systematic discussion of purpose, structure and wording of the front, middle and back of a typical English language contract above, the reader has gained a more thorough understanding of how and why they are structured as they are. Regardless of the topic at hand, be it an employment contract, tort settlement or a merger and acquisition agreement; the fundamental building blocks of English language contracts remain fundamentally similar. 597 The front of the contract lays the groundwork for the relationship between the parties. By utilizing the exordium to establish who the parties are and what type of legal entity they represent, as well as to lock in the date of performance, a practicing lawyer can quickly and easily establish the parties’ legal status and associated liability exposure. Through proper drafting of the preamble, the parties can quickly and succinctly establish their vision of how the contractual relationship should unfold. 598 The body of the contract, when properly drafted, allows the drafter to create the legal infrastructure upon which the negotiated agreement is concretely transformed. Through a properly structured definition section, and the associate use of capitalization, the drafter assures that the agreement itself is streamlined, consistent, and tailored to the client’s needs and understanding. Through the proper employment of such seemingly insignificant words as shall, must, entitled to, and may, the informed drafter can craft the respective duties, rights and privileges of the parties involved. Thus the drafter is assured of a concise and clearly understood contractual agreement that reflects the needs and desires of the client. 596

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V. Conclusion Lastly, the back of the contract’s boilerplate assures that the contractual agreement, as 599 a legal document apart from its particulars, conforms with the manner in which the parties wish the applicable contract law to apply to them. By modifying and adapting these provisions, the aware drafter assures that the contract, as a contract, will be enforced as desired if and when any problem with its interpretation or enforcement arises.

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CHAPTER 6 CONFIDENTIAL INFORMATION AND RESTRICTIVE COVENANTS Literature: Richard A. Bales et. al., Understanding Employment Law (2007). Michael Evan Gold, An Introduction to Labor Law (3d ed., 2014). Mark Rothstein, et. al., Employment Law Cases and Materials (8th ed., 2015). David Twomey, Labor and Employment Law: Text and Cases (15th ed., 2012).

I. Introduction 600

Businesses today place more value on their intangible assets than ever. High on the list among these intangible assets are their confidential information and trade secrets. The loss of these assets is a constant risk for many businesses. It is estimated that about half of all employees who leave their jobs retain confidential information from their former employers. In Europe, this has been demonstrated most clearly through the General Data Protection Regulation (E.U.) 2016/679 that came into effect in 2018. Legal protection of confidential information in the U.S. is also robust but has been complicated. The sources of legal protection, the types of claims and the varieties of remedies have all required careful attention to the law of one or more of fifty states that control the rights and obligations involved. A new federal statute enacted in May 2016 promises to reduce the inconsistency in this area of law and to make enforcement more uniform. Still, legal practitioners should pay attention to state law when advising clients or handling disputes.

II. Protection of Business Information Is Always Balanced Against Personal Freedom This chapter will describe the basic system of legal protection for confidential business information in the U.S. To understand these legal protections however, it is important to recognize the interests competing against such safeguards. In particular the law’s high regard for the protection of private property, in the form of company confidential information for example, directly and strongly conflicts with the law’s high regard for the free movement of employees in the form of people being at liberty to exploit their talents to the fullest. 602 Such free movement of employees involves a fundamental human right: the right to select one’s employment. But more than just a personal freedom, valuable as it is, this freedom is also seen as a key component of the country’s general economic health; experts consider both the spread, and speed, of innovation as being encouraged by the freest movement of employees throughout the economy, unrestricted by obligations to former employers. 603 In addition, the qualities that make an employee valuable in the workplace–initiative, thoroughness, enthusiasm, commitment, problem-solving ability, curiosity, good humor, the ability to work with others, and the like–are intrinsic to the employee and can never be owned by an employer. These desirable qualities can be wrongly limited however, by improper use of restrictive covenants. 601

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IV. Common Form of Legally Protected Business Information It is helpful to keep these competing interests in mind when considering how to apply 604 business information protections in the U.S. Awareness of this tension will also help a lawyer from outside the U.S. to understand one of the most important points of this chapter: that the degree of protection of confidential business information varies significantly from state to state, and that proper representation of a client means knowing the protections available in the state where the business maintains the confidential information.

III. Legal Language Can Be Confusing Another basic factor that makes this type of practice challenging are the legal terms 605 used to describe it. There is no authoritative source for what to call all the related legal concepts. Practitioners and courts use many terms interchangeably and often confusingly. Thus it is best to state immediately the meanings for words that are used. This chapter uses the term “confidential business information”1 to identify the broadest possible field of information that a company might seek to protect. Trade secrets are probably the best known form of this information. Trade secrets are considered a subset of intellectual property law and are also covered 606 in this book in Chapter 8, “Intellectual Property Protection and Enforcement in the U.S.” Increased attention is naturally collecting around this term because it has been legislatively defined in the Uniform Trade Secrets Act, and now the federal Defend Trade Secrets Act, passed in 2016 and addressed below. The careful practitioner nonetheless should be aware of potentially broader definitions of protectable information available under common law for example. In addition, a business may by contract designate information as confidential which would not meet the definition of trade secret in a statute. Protecting this information may be possible by a court action for breach of contract.

IV. Definition of a Common Form of Legally Protected Business Information The most commonly known form of confidential business information is trade se- 607 crets. A trade secret typically has been defined as: (1) any information which is valuable to the company, such as by giving it an advantage over competitors who do not have such information, and (2) which the company makes reasonable efforts to maintain as secret.2 A trade secret can be information in almost any form: a formula, program, drawing, 608 device, process, compilation, or list. It need not be technical. The most familiar example of a trade secret has been a customer list, compiled by a company’s sales department, which would contain the particular information obtained by the company’s sales department during their personal interactions with customers. The definition of protectable confidential information sharpens when one considers 609 similar information that is not protected. Public information cannot be protected. Thus, if collections of customer information can be compiled from public sources, that collection is unlikely to be protected by a court. Sometimes employees bring with them infor1 vertrauliche Geschäftsinformationen / informations commerciales confidentielles / informaciones comerciales confidenciales / informazioni commerciali riservate. 2 See e.g., 12 Pa. Cons. Stat. Ann. § 5302.

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Chapter 6 Confidential Information and Restrictive Covenants mation that they personally developed, perhaps when they conducted their own research before being hired, or when they owned their own business. This is also unlikely to be seen as a trade secret. 610 But even these distinctions are closely divided. A company’s collection of even public information can be protected if the company can show it derives value from the relationship of public information with other, confidential information inside the company.3

V. Three Forms of Legal Protection for Business Secrets Business secrets have been considered so important to healthy economic functioning that in the U.S. they are protected by three different, and sometimes overlapping, forms of law. These forms of law are: (I) contracts; (II) statutes; and (III) common law. 612 A fourth degree of overlap was added in 2016, when the federal government enacted its own trade secret statute, which complements the trade secret statutes passed by state legislatures. This shared competency in the U.S. federal system will be discussed below. 611

1. Contract Law Trade secret protection in contracts usually covers two areas of conduct of the former employee: (1) non-disclosure, or confidentiality,4 and (2) non-competition.5 The generic name for contractual provisions of this type is restrictive covenants. There is a good argument that these two areas address the same subject, which is the protection of the former employer’s confidential business information. Many lawyers, and some courts, believe that a contract in which an employee agrees not to work for a competitor is entirely enforceable as written. But most courts would not automatically enforce such an agreement without a balancing analysis that accounts for proof of whether confidential business information is genuinely at risk.6 614 Preventing employees from leaving their employment for the purpose of going to work for a competitor is a convenient, and legal, method to reduce competition. To insure that the restriction is lawful however, a court will ask whether the restriction is being used to protect a legitimate business interest.7 Legitimate business interests include trade secrets, confidential information, good will,8 and unique or extraordinary skills obtained through employment.9 615 If the former employer can show that its confidential business information have been used by the former employee in his or her new job, it is likely to obtain court relief. The evidence of such conduct often comes from customers, or former customers, who for example move their accounts to follow the former employee. 616 If the former employer cannot show that it is protecting legitimate business interests, a court is not likely to enforce the non-competition provision. For example, if a former employee was a salesperson and her new job for the competitor is in human resources, the former employer will be unable to show it is protecting a legitimate business interest, 613

3 See

e.g., Thomas & Betts Corp. v. Richards Mfg. Co., 342 Fed. App’x 754, 760 (3d Cir. 2009). / clause de confidentialité, ou non-divulgation / acuerdo de no-divulgación / non divulgazione o riservatezza [lit.], accordi o clausole di riservatezza. 5 Wettbewerbsverbot / clause de non-concurrence / acuerdo de no-competencia / divieto di concorrenza. 6 See e.g., Hess v. Gebhard & Co., 808 A. 2d 912, 920–21 (Pa. 2002). 7 berechtigtes geschäftliches Interesse / intérêt commercial légitime / interés comercial legítimo / legittimo interesse commerciale. 8 ideeller Firmenwert / valeur d‘entreprise / crédito mercantil / avviamento, avviamento commerciale (positivo) di un’azienda. 9 Id. 4 Geheimhaltungsvereinbarungen

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V. Three Forms of Legal Protection for Business Secrets because its sales information is not threatened by the former employee’s activities in human resources. In this situation, a court is likely to consider the restrictive covenant merely as a way to diminish competition. This is not an acceptable use of such covenants and such a covenant will likely not be enforced.10 a) Consideration One key point to remember in arranging any contract containing restrictive 617 covenants is that the company must be able to show consideration.11 Consideration is the mutual exchange of value by each party, even if simply an exchange of promises of future performance. At the beginning of an employment relationship, consideration will be seen as being 618 included in the entire package of salary and benefits that the employee receives when he or she starts a new job. If the employer wishes to change the contract in any way during the course of the employment relationship however, even to make it less restrictive, the employee must receive new consideration. This is merely fundamental contract law, set against the rigid rules of interpretation courts apply to restrictive covenants; restrictive covenants are necessary and legal, but considered by some as a hindrance to the efficient functioning of a free market economy. If a new promise is given by the employee, then a new exchange of value must be given by the employer. The concept of consideration was discussed in Chapter 5, “Contracts—Drafting and Content.” The new consideration for any new restrictive covenant can take many forms; the 619 easiest to suggest is additional money, in an amount that is minimally compensatory for the rights being surrendered. Checklist Other types of consideration include: • • • •

improvements in non-salary benefits; a promotion; positive new job responsibilities; and the opportunity to earn more, even without the promise that the employee will actually do so.12 b) Basic Terms of Typical Restrictive Covenants

The typical contractual restrictive covenant addresses three subjects: (1) scope; (2) 620 duration; and (3) geography. The subject of scope refers to describing the types of information that constitute trade secrets; typically this language is broad. The information it covers can be found, for example, in the definitions of trade secrets in the Uniform Trade Secrets Act:13 formulas; programs; devices; processes; software; compilations; and lists. The subject of time refers to the amount of time the former employee must keep the trade secrets confidential. And finally, the subject of geography refers to the physical area in which the former employee is prohibited from working after leaving his or her employment. The reasonableness of the temporal and geographic aspects of a restrictive covenant 621 must be determined in light of the nature of the business interest the company seeks to Id. Gegenleistung / contrepartie / contraprestación / contropartita di scambio. 12 See e.g., Wainwright’s Travel Svc. v. Schmolk, 500 A. 2d 476, 478 (Pa. Super. 1985). 13 einheitliches Gesetz zu Betriebs- und Geschäftsgeheimnissen / loi uniforme sur le secret d’affaires / ley uniforme de secretos comerciales / legge uniforme sul segreto industriale. 10

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Chapter 6 Confidential Information and Restrictive Covenants protect. Given the reality of companies that operate around the world, and whose information is processed using powerful software, these restrictions can encompass the globe and can last for many years. The protection afforded the customer list for a local insurance company, by contrast, is likely to be much narrower in geographic and temporal scope–100 kilometers and two years, for example. 622 Practice Tips •

It is permissible to identify in an agreement which state’s law will govern interpretation of the agreement (choice of law), and where disputes involving the agreement must be heard (choice of forum). Consider inserting such language into your agreements. Among the practical considerations in obtaining contractual trade secret protection is whether to make the agreement a stand-alone document, or whether to include the necessary provisions in other agreements, such as an employment agreement that includes terms for salary, benefits, duration, and the like. The ultimate form of the agreement should make no difference to enforceability. A standalone agreement can sometimes emphasize the importance of the subject matter and avoid the potential confounding language contained in other sections of the overall agreement. But including the same terms in a more comprehensive contract should make no difference in effectiveness if the entire document is carefully reviewed. Some states allow courts to throw out unenforceable or overbroad provisions in restrictive covenants, and to re-write the provisions in a form that is enforceable under the applicable state law. Restrictive covenants thus should contain provisions stating that, if allowed in that jurisdiction, a judge may rewrite the invalid portions of the covenants to make them enforceable in that jurisdiction.

•

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2. Statutes 623

Until 2016, the contract law of trade secrets was controlled by the law of each individual state. The potential confusion that might have been created by this multitude of legislatures-up to fifty different state statutes on the subject-was reduced by the adoption by forty-seven states (all except New York, Massachusetts, and North Carolina) of a Uniform Trade Secrets Act-that is, a law drafted by experts in the field that was enacted in similar form by almost all state legislatures.14 Checklist The state statutes that were enacted to implement the Uniform Trade Secrets Act contain sections which: define the terms used, such as “trade secret”15 and “misappropriation;”16 provide for interim, or injunctive, relief; provide for monetary damages; provide for attorneys’ fees for willful misappropriation and bad faith claims; allow courts to preserve the secrecy of the trade secrets in question during the litigation; set forth the statute’s intended effect on other law.

• • • • • •

See e.g., Pennsylvania’s Uniform Trade Secrets Act, 12. Pa. Cons. Stat. Ann. §§ 5301– 5308. 624 Some states are legislating against what they see as overuse of restrictive covenants. Oregon, for example, has restricted its enforcement of non-compete agreements and introduced several worker-favorable conditions for their use.17 California has also taken a worker-friendly approach to restrictive covenants, establishing that any restraint on See e.g., Pennsylvania’s Uniform Trade Secrets Act, 12. Pa. Cons. Stat. Ann. §§ 5301–5308. Betriebs- und Geschäftsgeheimnis / secret d’affaires / secreto comercial / segreti industriali. 16 widerrechtliche Verwendung / détournement / apropiación indebida / appropriazione indebita. 17 O.R.S. § 653.295. 14

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V. Three Forms of Legal Protection for Business Secrets trade is void unless an exemption is specifically permitted by statute.18 Of course, protection of trade secrets is one of the exemptions allowed. Louisiana and Alabama have also taken strong approaches against the enforcement of non-compete agreements.19 These differences by state make it crucial that you investigate the particular laws of the state where the trade secrets are maintained.

3. Common Law Illegal conduct not covered by contract or statute, or where the business is seeking a different remedy or liability for a different defendant, may be the subject of a claim based on binding case precedents, which is also referred to as common law. With the expansion of statutes covering trade secret violations, and the sophistication of contracts covering the same issues, common law has become less important in providing remedies. It does nonetheless still provide guidance in remedying illegal conduct. Some claims under this category are unfair competition and intentional interference with contractual relations.20 One of the foundations of a properly functioning justice system is to rely on evidence to support a claim or defense, rather than suspicion or mere accusation. The area of confidential business information is considered so sensitive and important however, that in some jurisdictions a claim can be won without evidence of active wrongdoing; instead, the inevitable disclosure doctrine21 only requires that a former employer prove that the departing employee was hired for a position in which it would be inevitable that he or she would, at some future time, pose a substantial threat of revealing confidential business information.22 Competitors commonly seek to hire away persons with certain expertise or knowledge, to obtain such expertise or knowledge for themselves. If such knowledge or expertise takes the form of confidential business information, the hiring can be stopped by a court. This remedy is available in some states even if there is no proof that the departed employee has actually disclosed protected information. If the former employer can show that the duties of the new position with the new employer are such that there is a substantial risk that, sooner or later, intentionally or not, he or she will be required by the duties of the new job to disclose confidential information that is enough proof to justify court intervention. In this way, the law can prevent collusion between a departed employee and a new employer to hide or delay disclosure of confidential business information until the concern of a lawsuit diminishes. Practitioners should be aware that the inevitable disclosure doctrine applies in some states but not others. It is still valid in Pennsylvania, for example, but not California.23 Other states have adopted reasoning similar to the California courts when rejecting the use of the inevitable disclosure doctrine.24 Cal. Bus. & Prof. Code § 16600. La. Rev. Stat. § 23:921(A)(1); Ala. Code § 8–1–190(a). 20 See e.g., Air Products and Chemicals, Inc. v. Johnson, 442 A. 2d 1114, 1119–20 (Pa. Super. 1982). 21 Doktrin der unvermeidbaren Aufdeckung / doctrine de la “divulgation inévitable” / doctrina de la "divulgación inevitable” / dottrina della “divulgazione inevitabile”. 22 See e.g., Bimbo Bakeries U.S.A., Inc. v. Botticella, 613 F. 3d 102, 113 (3d Cir. 2010). 23 See e.g., Schlage Lock Co. v. Whyte, 101 Cal. App. 4th 1443 (2002); Globespan Inc. v. O'Neill, 151 F. Supp. 2d 1229 (C.D. Cal. 2001); Bayer Corp. v. Roche Molecular Sys. Inc., 72 F. Supp. 2d 1111 (N.D. Cal. 1999). 24 See e.g., Saturn Sys., Inc. v. Militare, 252 P. 3d 516, 526–27 (Colo. App. 2011) (Colorado); Tubular Threading, Inc. v. Scandaliato, 443 So. 2d 712, 715 (La. Ct. App. 1983) (Louisiana); LeJeune v. Coin Acceptors, Inc., 849 A. 2d 451, 471 (Md. 2004) (Maryland); Gov. Tech. Servs., Inc. v. IntelliSys Tech. Corp., 1999 WL 1499548, 1 (Va. Cir. Ct.) (Virginia). 18

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VI. Overlapping Sources of Law 629

Due to overlapping application of sources of law, legal protection for confidential business information almost always exists. Many companies express concern if their contracts with employees, which contain restrictive covenants, are incomplete or become outdated. It can be very helpful to remind them that, even without any contract containing restrictive covenants, they probably have statutory and common law protections for their confidential business information.

VII. Defenses Against Wrongful Use of Confidential Information Suits 630

The best defense against trade secret lawsuits for a company hiring the former employee of a competitor is not to seek, obtain, or use, the employee’s confidential business information from his or her former employer. In establishing the hiring company’s innocence if challenged, it will help to have a written acknowledgment signed by the new employee when hired. Checklist A new employee should agree in writing that he or she: • • • •

is not bringing any confidential business information to the new job; has not been asked to disclose any confidential business information; has been directed not to use or disclose any confidential business information; and, has been advised that he or she can be terminated for using or disclosing confidential business information from a previous employer.

Along these lines, lawyers representing plaintiffs in cases of misappropriated confidential business information typically must consider whether to sue only the former employee, or to sue the new employer as well. This is always a question of proof. All lawsuits must have a reasonable basis in fact and law before they are filed. A plaintiff should not accuse any person or company of illegal conduct unless it has facts to allege that such conduct has occurred or that such conduct is imminent. 632 Thus, deciding whether to sue the new employer depends on whether the proof shows that the new employer is aware of, or is encouraging, the use of another’s confidential business information. There are many occasions when the new employee is acting without the knowledge of the new employer; the new employer should not be accused of wrongdoing in that situation. If evidence later comes to light that the new employer had an active role in the wrongdoing, then the new employer can be added later as a defendant. 631

VIII. Remedies 633

Trade secret protection is one of the few areas of the law where the plaintiff can obtain interim relief,25 before a court makes a final decision. That extraordinary relief is further indication of the importance the law assigns to trade secret information.

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VIII. Remedies Interim relief comes in two forms: (1) a temporary restraining order, or T.R.O.;26 634 and (2) a preliminary injunction.27 Like almost all aspects of trade secret law, there are variations between these forms from state to state. Federal law provides a reliable guide to the differences between the two. A T.R.O. is based on proof of immediate and irreparable injury. A T.R.O. can be issued without the involvement of the accused party.28 Such an order automatically expires after 14 days however, unless extended for good cause.29 A preliminary injunction follows roughly the same standard, but is entered only after 635 a hearing on the evidence obtained up to that point. Such a hearing, and a limited period of evidence collection, will be set on an accelerated schedule depending on the potential degree of harm brought by the passage of time. If the wrongful disclosures are happening on a daily or weekly basis, it is possible to get a hearing in two-to-four weeks. Sometimes the accused party is willing to agree to maintain the status quo in the time period before the hearing, which allows more time to collect evidence and prepare for the hearing. Checklist The party seeking a preliminary injunction typically must prove four elements: • • • •

immediate and irreparable harm not compensated by money damages; likelihood of success on the merits when the case is fully developed; the harm to the plaintiff outweighs the potential harm to any other interested party if the injunction is granted; and whether the public interest, if any, favors relief.30

Under this standard, in some states, it is possible even to prohibit an executive with 636 confidential business information from continuing to work at a new employer.31 Monetary damages are also available for misappropriation of confidential business 637 information. These can be calculated in several ways, such as in lost profits of the plaintiff, or improper gains of the defendant. As a corollary to a preliminary injunction it is also possible to seek a permanent in- 638 junction32 against any use of misappropriated business information by the offending party if the plaintiff can show that the misappropriated information will be valuable long into the future.

26 einstweilige Verfügung / ordonnance restrictive temporaire / orden de protección temporal / ordinanza restrittiva preliminare. 27 vorläufige Unterlassungsklage / injonction préliminaire / orden preliminar / inibitoria temporanea. 28 See e.g., Federal Rule of Civil Procedure 65(b). 29 Id. 30 See e.g., Bimbo Bakeries U.S.A., Inc. v. Botticella, 613 F. 3d 102, 109 (3d Cir. 2010). 31 Id. at 118. 32 dauerhafter Unterlassungsanspruch / injonction permanente / orden judicial permanente / inibitoria definitiva.

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IX. The Defend Trade Secrets Act – the First Federal Statute on the Subject In 2016 the U.S. Congress put into place the federal Defend Trade Secrets Act33 (D.T.S.A. or Act).34 Any examination of trade secret protection must consider this new statute. As described above, trade secret protection, while generally following a uniform pattern, was controlled by the law of fifty separate states. Now, the D.T.S.A. provides federal protection to trade secrets through a unified federal court system operated by a single sovereign. This has the effect of opening federal courts to all claimants that wish to file in that forum, as well as promoting more uniform decisions. With the passage of this Act, the U.S. Congress has put federal trade secret protection on a par with federal protection of patents, copyrights, and trademarks. 640 A lawyer should be aware that the D.T.S.A. does not replace state law, which continues to exist alongside it.35 Indeed, one can expect federal courts, interpreting and applying the D.T.S.A. in its early stages, to borrow heavily from state law decisions. One of the main reasons to expect this approach is because the terms of much of the D.T.S.A. were modeled on the language of the Uniform Trade Secrets Act. The definition of trade secret is similar, 36 and the remedies available are similar, including injunctions against disclosure, and money damages.37 Money damages can take three forms: (1) actual losses by the plaintiff; (2) wrongful gains by the defendant, called unjust enrichment; or (3) reasonable royalties. Punitive damages38 and attorneys’ fees are available for willful violations.39 641 Note that under the D.T.S.A., a plaintiff cannot prevent an individual defendant from entering an employment relationship.40 Here again is recognition of the tension in balancing protection of trade secrets against protection of an individual’s ability to take employment of his or her choice, with Congress not allowing the D.T.S.A. to prevent a person from working. The D.T.S.A. also provides protection for whistleblowers who report alleged wrongdoing to government authorities; they cannot be sued under the Act.41 642 In a general review, other features of the D.T.S.A. are worth noting. For example, there is no recognition of the inevitable disclosure doctrine; actual or threatened misappropriation must be proved with evidence. The most controversial feature of the D.T.S.A. is the provision for ex parte civil seizure of property to prevent wrongful disclosure of trade secrets.42 This provision is unusual, but not unique; a claim of copyright infringement can also involve such a process.43 Three factors suggest it will not be much used. One is the vagueness of exactly what can be seized. Another is the extremely high evidentiary and procedural standards that must be met. The third is a related provision for damages awardable to a defendant whose property is wrongly seized. 639

33 Gesetz zur Verteidigung von Betriebs- und Geschäftsgeheimnissen / loi sur la protection des secrets d’affaires / ley de la defensa de secretos comerciales / legge statunitense sulla tutela dei segreti industriali e aziendali. 34 See 18 U.S.C. §§ 1832–33; 1835–36; 1838–39. 35 18 U.S.C. § 1838. 36 18 U.S.C. § 1839(3). 37 18 U.S.C. § 1836(b)(3). 38 Entschädigungen mit Strafcharakter / dommages et intérêts punitifs / daños punitivos / danni punitivi [lit.]. 39 18 U.S.C. § 1836(b)(3)(C). 40 18 U.S.C. §§ 1836(b)(3)(A)(i)(I). 41 18 U.S.C. §§ 1833(b). 42 18 U.S.C. §§ 1836(b)(2). 43 17 U.S.C. § 503.

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X. The Future

X. The Future Practitioners must pay increasing attention to protection of confidential business in- 643 formation for a number of reasons. Much of trade secret law in the United States, until recently, was developed when information processing was done with pencil, graph paper, and typewriter. Now, the ability of businesses to collect, process, and analyze data is exploding in scope and complexity. This same technological sophistication that helps businesses develop confidential business information however, also helps employees misuse confidential business information. On the employer side, lawyers must play a role in helping companies protect this information, which encourages innovation. On the employee side, lawyers also must be vigilant in protecting the rights of departing employees to earn a living. These persons can be unfairly targeted by their former employers as an improper way to reduce competition.

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CHAPTER 7 THE BACK-TO-BACK CONTRACT: THE BIRTH OF A NEW CONTRACT TYPE Literature List Robert F. Cushman, Michael C. Loulakis, Design-Build Contracting Handbook (Aspen Publishers, 2001). E. Allan Farnsworth, William F. Young, & Carol Sanger, Contracts, Cases and Materials (6th ed.) (N.Y., Foundation Press, 2001). T. Bart Gary, Incorporation by Reference and Flow-Down Clauses, in The Construction Lawyer (1990). William M. Hill & Mary-Beth McCormack, Pay-If-Paid Clauses: Freedom of Contract or Protecting the Subcontractor from Itself?, in The Construction Lawyer (2011). Antonio Lordi, Sulla ragionevolezza dei termini di pagamento nella subcontrattazione, in Contratto e impresa (2001). Daniel Markovits, Contract Law and Legal Methods (Foundation Press, 2012). Michael Noone & Robert E. Benson, The “Pay-When-Paid” Dilemma, in The Colorado Lawyer, (1996). Jörn Zons, The Minefield of back-to-back subcontracts, Part 1, in Construction Law International (2010). The French codes are often difficult to comprehend, but they can be read by everyone; nothing, on the other hand, can be more obscure and strange to the uninitiated than a legislation founded upon precedents. – Alexis de Tocqueville1

I. The Principles of Clarity, Transparency and Specularity 644

In the construction industry and large general contracting,2 it is quite common in the U.S. that the parties agree to flow down3 the terms and conditions4 and the technical specifications of the main contract to the subcontract. To accomplish this, the contractor, during the bidding process, warns the subcontractors-offerors that if the main contract will be awarded, the terms and conditions of the main contract and the technical specifications will flow down to the subcontractors.5 This contractual strategy is clear. The contractor6 tries to allocate the overall risks of the main contract to its subcontrac1 Alexis

de Tocqueville, Democracy in America 277 (1835, 1840). My study focuses on private construction contracts. Public works and their peculiar discipline are outside the scope of the present work. 3 The bibliography on the back-to-back contract (or flow down subcontract) is quite extensive in the U.S. and abroad, even though it focuses more on specific issues rather than offering general concepts and principles to apply to the back-to-back contract. As general reference on incorporation by reference and flow down clauses see Robert F. Cushman, Michael C. Loulakis, Design-Build Contracting Handbook, 296 (Aspen Publishers, 2001); T. Bart Gary, Incorporation by Reference and Flow-Down Clauses, in The Construction Lawyer 10, 3 (1990); Michael Noone & Robert E. Benson, The “Pay-WhenPaid” Dilemma, in The Colorado Lawyer, Vol. 25, N. 11/79 (1996); William M. Hill & Mary-Beth McCormack, Pay-If-Paid Clauses: Freedom of Contract or Protecting the Subcontractor from Itself?, in The Construction Lawyer, (2011); Jörn Zons, The Minefield of back-to-back subcontracts, Part 1, in Construction Law International 5, 1 (2010); Id., The Minefield of back-to-back subcontracts, Part 2, in Construction Law International, 5, 2, 2010. I have previously touched this subject publishing an article on payment terms in subcontracting the subject with respect to the Italian construction law and comparative law, see Antonio Lordi, Sulla ragionevolezza dei termini di pagamento nella subcontrattazione, in Contratto e impresa 717 (2001). 4 Geschäftsbedingungen / conditions générales / términos y condiciones generales / condizioni generali. 5 Subunternehmer / sous-traitants / sucontratistas / subappaltatori. 6 Auftragnehmer/ partie contractante / contratista / appaltatore. 2

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I. The Principles of Clarity, Transparency and Specularity tors on the basis of their scopes of work through an incorporation by reference of the main contract in the subcontract. The U.S. and several states have either created statutory law or binding case precedent on the matter, or both. The purpose of this chapter is twofold. From a practical viewpoint, it illustrates the 645 main issues and how they are addressed by the courts and the statutes. From a theoretical viewpoint, it lays down the main features of what, in the author’s opinion, should now be considered a new contract type. The advantages of accepting the concept of a new contract type are that we can begin to highlight general principles and rules applicable to “back-to-back” contracts. This allows us to better understand its discipline and the limits to the enforceability of the back-to-back provisions. Echoing the points made in Chapter 5 of this book, “Contracts,” one of the difficulties 646 of doing legal research in this field is the lack of clear and unified terminology. Authors refer to this subject in the following ways: back-to-back contracts7 or subcontracts; incorporation by reference of the prime contract provisions in the subcontract; flow-down provisions of the prime contract in the subcontract; payment terms of that distinguish pay-when-paid from pay-if-paid provisions; and a variety of notions that focus on public works subcontracting that is governed by public procurement legislation.8 In general, the issues that the contractor tries to address with the back-to-back con- 647 tract are: a) risks related to the execution of the scope of the subcontract; b) risks of payment delays or non-payment from the owner;9 c) risks of delay and liquidated damages (L.D.) of the performance of the subcontract; d) risks related to change orders; and e) risks related to the termination for default or for convenience of the main contract and of the subcontract. Checklist In negotiating a back-to-back contract, the parties should carefully examine the following risk allocation: • • • • •

risks related to the execution of the scope of the subcontract; risks of payment delays or non-payment from the Owner; risks of delay (and liquidated damages) of the performance of the subcontract; risks related to change orders; risks related to the termination for default or for convenience of the main contract and of the subcontract.

How does the contractor intend to allocate these risks? Can he legally do it? In other 648 words, will the back-to-back provisions inserted in the subcontract be enforceable? These are the main questions that lawyers, scholars and legislators intend to answer. From the contract theory viewpoint, a back-to-back or flow-down contract appears to 649 be difficult to justify. If a contract is based on the consent of the parties, that is, on their wills, the content of agreement should relate only to the operation negotiated and agreed 7 In Oceaneering Intern., Inc. v. Cross Logistics, Inc., Slip Copy (2013) 2013 WL 3229664 there is a definition of “back-to-back” contract. “Oceaneering and Cross entered a “Back-to-back” Subcontract Agreement (the “Back–to–Back”). The Back–to–Back states that: “3 1. Owner [Cross] will act as a subcontractor to Charterer [Oceaneering] in accordance with the relevant terms and conditions of the Main Contract . . . on a “back-to-back” principle. 2. “Back-to-back” shall mean that the Charterer and Owner shall have the same rights, obligations, liabilities and limitations with respect to each other as Company [Mariner] and Contractor [Oceaneering] have to each other under the Main Contract, including any amendments thereto, applied Mutatis Mutandis with the substitutions of “Charterer” for “Company,” “Owner” for “Contractor”. 8 See supra note 3. 9 Auftraggeber / donneur d’ordre / comitente / committente.

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Chapter 7 The Back-to-Back Contract: The Birth of a New Contract Type between the parties. With the back-to-back contract the parties make reference to an external content that was not, by definition, an expression of their wills. 650 Often when there is a controversy related to a back-to-back contract, the issue becomes whether the back-to-back provision is enforceable against the party even if the party was not involved in the negotiation and in the decision making process. This is what we can call the “limited consent” problem10 of a back-to-back negotiation and the resulting contract. There is at least a part of the content of the subcontract that is not based on the mutual assent of the parties (meeting of the minds): i.e. the part incorporated by reference in the subcontract. The content-makers are only partially parties of the back-to-back contract, because part of the subcontract flows down from the main contract. In this respect the subcontractor finds itself in a position of content-taker without having the possibility of negotiating those terms.11 651 Another problem of the back-to-back contract is the “actionability of the rights and remedies of the contractor” set forth in the subcontract. Can the contractor exercise rights and remedies toward the Subcontractor, even if the owner has not exercised such rights and remedies toward the contractor with respect to the scope of work of the Subcontract? Sometimes the Parties are careful in establishing that the contractor can exercise a certain remedy only if and when the owner has done the same towards the contractor (e.g. liquidated damages), however in lack of a specific clarification it is unfair to give to the contractor the actionability of its rights without a specular situation between the contractor and the owner. 652 Practice Tip The parties can clarify in the liquidated damages clause of the subcontract that: it is agreed that Subcontractor shall only be responsible for the payment of liquidated damages to Contractor, if Owner assesses and collects liquidated damages from Contractor with respect to the Scope of Work of the Subcontractor.

From the analysis of the statutes and the cases reported in subsequent sections of this chapter, I will define the main characteristics of this new contract type and the main issues to take into consideration when the parties negotiate a back-to-back contract. I will also propose some solutions for further consideration and study. 654 In particular, I will propose a theory of the back-to-back contract based on two principles: the principle of “clarity and transparency” and a principle that I call “specularity.” The aim of these principles is to mitigate the two problems above. The principle of clarity and transparency requires that the contractor, during the execution of the project, keep the subcontractor informed on the execution of the prime contract.12 The principle of specularity requires that the contractor is able to act upon rights and remedies of the subcontract related to rights and remedies of the owner in the prime contract, but only if the owner has actioned such specular rights and remedies toward the contractor. 653

10 Problem der eingeschränkten Zustimmung / problème du consentement limité / problema del consentimiento limitado / problema del consenso limitato. 11 The terminology content-taker and content-maker is borrowed from “term-makers” and “term-takers” used in the different subject of the contracts of adhesion (see Daniel Markovits, Contract Law and Legal Methods 1268 (Foundation Press, 2012). It is not my intention to suggest that the back-toback contracts should be regulated as the contracts adhesion; however they have some aspects in common especially with respect to the formation of consent. 12 It is not enough that the contractor forwards to the subcontractor the terms and conditions and other documentation related to the Prime Contract. There must be a continuous effort of the contractor to keep the subcontractor/s abreast of the content and execution of the prime contract.

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II. Contract Drafting: Risk Allocation in the Back-to-Back Contract

II. Contract Drafting: Risk Allocation in the Back-to-Back Contract 1. Risk Related to the Execution of the Scope of the Subcontract The first concern of a general contractor is the proper execution of the scope of work 655 he negotiated and agreed with the owner. For this reason, the contractor requires that the back-to-back contract incorporates by reference, all the documentation with which the Subcontractor needs to comply. To that end the contractor will make available to the Subcontractor all the relevant documentation. 656 In all back-to-back contracts, the so-called mutatis mutandis13 clause is present: Subcontractor shall assume toward contractor the same obligations and responsibilities that Contractor assumes toward Owner under the Prime Contract insofar as they relate to the Work of this Subcontract Agreement. Conversely, Contractor shall assume toward Subcontractor the obligations and responsibilities Owner assumes toward Contractor under the terms and provisions of the Prime Contract insofar as they relate to the Work of this Subcontract.

Another relevant clause would be: “With respect to the Prime Contract obligations, 657 the term ‘Subcontractor’ shall be deemed substituted for ‘Contractor,’ and ‘Contractor’ for ‘Owner’ and any other corresponding changes made whenever the context may require.” The problem with this clause is that it does not clarify whether the contractor can use remedies towards the Subcontractor even if the same remedies have not been exercised by the owner towards the contractor. For instance if there is a liquidated damages provision in the main contract, can the contractor assess L.D. toward the subcontractor even if the owner has not assessed L.D. toward the contractor with respect to the scope of work of the subcontract? 658

Practice Tip Even if there is a mutatis mutandis clause, the parties need to carefully negotiate how and when the remedies and the provisions of the main contract can operate in the Subcontract. However, in my opinion, as a general rule the contractors’ actionability of rights and remedies should always find a specular actionability of rights and remedies in the Prime Contract.14

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Example: Scope of Work Clause Generally, the Scope of Work clause of the back-to-back contract includes the following language: The Contract Documents consist of Owner’s Contract including, but not limited to, the Contract Terms and Conditions, Special Conditions, General Requirements, Technical Specifications, Contract Drawings, and any other documents that are part of the Contract. or The Subcontract shall incorporate all such requirements from the Contract as they apply to the Subcontractor as well as additional terms and conditions and schedule requirements as may be necessary

13 A Medieval Latin expression meaning that “the necessary changes having been made.” The expression Mutatis Mutandis is often included in the back-to-back contract see Kiewit Offshore Services, Ltd v. Daewoo, 2005 WL 6459468 (S.D.Tex.) (Exhibit) United States District Court, S.D. Texas article 8 Terms and Conditions of the Main Contract “All terms and conditions of Main Contract shall be applied to this Subcontract Mutatis Mutandis as far as applicable.” 14 For instance, no assessment and collection of L.D. if the same has not been done by the Owner toward the Contractor; no termination for default if the same has not been done by the Owner toward the Contractor; no termination for convenience if the same has not been done by the Owner toward the Contractor; no directives to execute a change order [Ausführungsanweisungen über Vertragsänderungen / consignes pour l’exécution d’un ordre de modification / órden para cambiar el contrato / ordini di esecuzione di una variante di progetto] if the same has not been done by the Owner toward the Contractor and so on.

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Chapter 7 The Back-to-Back Contract: The Birth of a New Contract Type in order to reasonably ensure Contractor's ability to meet the requirements of the Contract. To this purpose, the Contract and its Contract Documents are integral parts of this Subcontract. or The Subcontractor accepts, for the Supply and Services, complete technical, quality, financial and legal responsibility for the Supply and Services to the same extent as the Contractor must accept responsibility to the Client for the overall scope of work.

2. Risk of Payment Delays or Non-Payment from the Owner 660

The contractor with the payment provision tries to shift the risk of non-payment from the owner with respect to the payments related to the scope of work of the subcontract to the subcontractor. As we will see more specifically in the next section of this chapter, the subject of pay-when-paid and pay-if-paid provisions have received different answers from the states’ legislators. Generally we can find two types of payment provisions in the back-to-back contract: the pay when paid and the pay if paid provision. The pay when paid clause specifies the time of the payment. It does not (and should not) create a condition precedent for the payment.15 On the other side, a pay if paid clause allocates the risk of nonpayment from the owner to the subcontractor and it creates a condition precedent for the payment.

661 Examples A Pay-if-Paid Clause: Subcontractor acknowledges that Contractor’s receipt of payment from the Owner is a condition precedent to Contractor’s obligation to pay Subcontractor, regardless of the reason for Owner’s nonpayment, whether attributable to the fault of Owner, Contractor, Subcontractor, or to any other cause. Within thirty (30) calendar days after receipt of each payment, Contractor shall pay to Subcontractor the amounts of Subcontractor’s work. A Pay-When-Paid Clause: It is understood that Contractor shall receive payments from Owner from time to time for materials and equipment furnished and work performed in accordance with the terms of the Contract Documents. Within thirty (30) calendar days after receipt of each such payment, and in any event no later than sixty (60) days after presentation of an invoice by the Subcontractor, Contractor shall pay to Subcontractor the values of Subcontractor’s work as reflected in the Owner’s payment or determined by Contractor to represent material and equipment furnished or work performed by Subcontractor.

3. Risk of Delays and Liquidated Damages of the Performance of the Subcontract 662

With respect to possible delays caused by the subcontractor, the contractor flows down the same amount of L.D. with the same cap that the contractor has in its prime contract. On the other side the subcontractor’s position is that the amount of the L.D. must be proportionate to the scope of work, as well as the cap. The contractor’s perspective is that if the owner assesses and collects L.D. for delays caused by the subcontractor, the L.D. amount and cap are governed by the prime contract, and therefore the same amount and cap should bind the subcontractor. The subcontractor, on the other side, is not willing to accept the prime contract’s provisions because it is not proportionate to 15 See Lemoine Co. of Alabama, LLC. v. HLH. Contractors, Inc., 62 So. 3d 1020 (Ala. 2010) where is stated “A reasonable interpretation of [a pay-when-paid clause, like the one in paragraph 4,] is that it creates on the part of [the general contractor] an absolute obligation to pay; the language that follows-‘within thirty (30) days after the last of the following to occur: (a) ․, (b) ․, (c) ․, (d) ․’-is reasonably read as merely specifying a time for payment, rather than as creating a condition precedent to payment.”

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II. Contract Drafting: Risk Allocation in the Back-to-Back Contract the subcontract’s value.16 A compromise between the two positions can be to limit the amount of L.D. to a reasonable percentage and cap and to make this remedy actionable only if the owner has assessed and collected L.D. from the contractor. 663

Practice Tip The actionability of the L.D. of the contractor toward the subcontractor could be limited as follows: “It is agreed that Subcontractor shall only be responsible for the payment of liquidated damages to Contractor, if Owner assesses and collects liquidated damages from Contractor.”

4. Risk Related to Change Orders The change orders clause in a back-to-back contract takes into consideration two 664 kinds of changes: the changes that may derive from the prime contract and the changes exclusively related to the subcontract. The main issues of the change orders are: a) the timing of the notices; b) the transparency of the negotiation process of the change orders with the owner; and c) the right of the contractor to issue directives for extra-works even in the event that the Owner has not issued directives. When the changes are originated by the owner, it becomes crucial that the subcontractor has visibility of the change order process. The contractor needs to inform the subcontractor of all the steps that need to be taken to successfully negotiate a change order, therefore avoiding delays and preclusions established in the prime contract. The notice requirements in the back-to-back contract should be carefully examined in comparison with the notice requirements of the prime contract to make sure that the subcontractor has enough time to submit and negotiate the changes with the owner. With respect to the directives; they should not be allowed in a back-to-back contract unless they are directives flowing down from the owner. The change orders clause is a field where we can see the issues mentioned in the introduction of this paper: the “limited consent”17 problem and the “actionability of the rights and remedies of the contractor” problem. To be clear, these two problems must always be kept in mind in the study and review of a back-to-back contract, but the change orders provision offers a great place to understand these issues and to try to find solutions. The subcontractor is not aware and cannot be aware of the potential changes of the 665 prime contract. He needs to rely on the contractor. The “limited consent” must be balanced by the utmost transparency of the contractor. It is not sufficient to establish fair notice requirements. The contractor must keep the subcontractor abreast of the execution of the project and cooperatively work with the subcontractor in the preparation, submission and negotiation of the change orders with the owner. On the other side, if the contractor would have autonomous actionability of directives toward the subcontractor, without a correspondent directive of the owner toward the contractor, a very one-sided provision that does not appear to be justifiable would be created. The contractor’s actionability of rights and remedies should always find a specular actionability of rights and remedies in the prime contract. 5.Risk Related to the Termination for Default or for Convenience This is another subject where the principles of “transparency” and “specularity” play a 666 very important role. The issue is that the contractor may want to include the possibility of terminating the subcontract for default or for convenience-independently from the termination provisions of the prime contract-in the subcontract. This possibility should 16 Imagine for instance, a Prime Contract with a price of $1 billion and a subcontract of $50 million. If the Prime Contract has a cap of 20 %, a flow down provision will reverse on the subcontractor a. L.D.s’ exposure of $200 million. 17 eingeschränkte Zustimmung / consentement limité / consentimiento limitado / consenso limitato.

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Chapter 7 The Back-to-Back Contract: The Birth of a New Contract Type not be allowed because it creates double rights (in the contractor) with respect to the same contract situation. In the event of an alleged default situation of the subcontractor, if the owner is not considering the non-performance of the subcontractor as a default situation and he is not actioning any remedy toward the contractor, the contractor should not be able to put the subcontractor in default. The same has to be said in the event of a termination for convenience. The contractor should not be able to terminate the subcontractor for convenience if the owner has no intention to terminate the contractor with respect to the scope of work subcontracted.

III. Enforceability of the Back-to-Back Provisions 667

There are several statutes and cases in U.S. law addressing some of the issues of backto-back contracts. Analysis of the statutes and cases confirms my theory that the two principles guiding the solution of the issues are the principle of clarity and transparency and the principle of specularity.

1. Case Law The leading case in respect to enforceability of back-to-back contracts is Guerini Stone Co. v. P.J. Carlin Const. Co.18 In this case a subcontractor sued the contractor for damages that terminated the subcontract because of delays caused by the owner. The contractor objected that delays were caused by the Owner and that the Subcontractor was bound by the prime contract and by the powers of the Owner to issue change orders and suspend work. 669 The U.S. Supreme Court found in favor of the subcontractor, stating: 668

The reference in the subcontract to the drawings and specifications was evidently for the mere purpose of indicating what work was to be done, and in what manner done, by the subcontractor. Notwithstanding occasional expressions of a different view, in our opinion the true rule, based upon sound reason and supported by the greater weight of authority, is that in the case of subcontracts, as in other cases19 of express agreements in writing, a reference by the contracting parties to an extraneous writing for a particular purpose makes it a part of their agreement only for the purpose specified.20

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In Guerini Stone, the Supreme Court applied the terms of the contract to the facts presented and noted that the “defendant agreed to furnish the foundation in such manner that plaintiff might build upon it without delay. This is inconsistent with any implication that the parties intended that delays attributable to the action of the owner should leave plaintiff remediless.”21 Consequently, the Court held that the general contract was not admissible in evidence against the plaintiff, unless it was sought to be admitted for the purpose of distinguishing the drawings and specifications to which the subcontract referred.22

240 U.S. 264 (1916). Citing Woodruff v. Hough, 91 U.S. 596, 602, 23 L. ed. 332, 335; Neuval v. Cowell, 36 Cal. 648, 650; Mannix v. Tryon, 152 Cal. 31, 39, 91 Pac. 983; Moreing v. Weber, 3 Cal. App. 14, 20, 84 Pac. 220; Short v. Van Dyke, 50 Minn. 286, 289, 52 N. W. 643; Noyes v. Butler Bros. 98 Minn. 448, 450, 108 N. W. 839; Modern Steel Structural Co. v. English Constr. Co. 129 Wis. 31, 40, 41, 108 N. W. 70. 20 Citing Shaw v. First Baptist Church, 44 Minn. 22, 24, 46 N. W. 146; Avery v. Ionia County, 71 Mich. 538, 546, 547, 39 N. W. 742; Stein v. McCarthy, 120 Wis. 288, 295, 97 N. W. 912. 21 240 U.S. 264. 270 (1916). 22 Id. at 276. 18

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III. Enforceability of the Back-to-Back Provisions This decision shows that mere general reference to a prime contract is not sufficient 671 to bind the subcontractor to the provisions of the prime contract. In other words, if the contractor wants to incorporate by reference some provisions of the prime contract, it has to be transparent with the subcontractor regarding what these provisions are and the consent of the subcontractor needs to be attained. In U.S. Steel Corp. v. Turner Const. Co., the issue was whether the forum selection 672 clause contained in the prime contract was incorporated by reference into the subcontract and therefore whether the subcontractor was bound by the forum selection clause in the general contractor’s prime contract so as to be required to litigate its claims in a New York state court. 673 The Court decided in favor of the subcontractor holding the following: U.S. Steel asserts that it is not bound by the forum selection clause since it appears only in the prime contract and relates solely to disputes arising between I.B.M. and Turner. U.S. Steel contends that only the prime contract terms which relate to the character and manner of the work to be performed by it as subcontractor are incorporated by reference into the subcontract. It argues that as a matter of New York contract law, all additional, unrelated provisions of the prime contract, such as the forum selection clause, are not incorporated into the subcontract and therefore not binding upon U.S. Steel. . . . Under New York law, the application and relevant scope of a forum selection clause is determined by an objective consideration of the language of the provision, not the subjective, undisclosed intention of its draftsman.23 Courts which have construed similar contractual provisions have held under analogous factual situations that absent clear language to the contrary, similar incorporation clauses in a construction subcontract bind a subcontractor only to the prime contract provisions which relate to the scope, quality, character and manner of the work to be performed by the subcontractor. Prime contract provisions unrelated to the work of the subcontractor, such as a “dispute” clause governing the resolution of monetary claims between the project owner and general contractor, are not incorporated by reference into a subcontract.24

This decision again confirms the principle of transparency. In lack of clear and unam- 674 biguous disclosure of the prime contract provisions and a specific consent of the subcontractor, the provisions of the prime contract cannot be applied to the subcontractor. The principle of transparency requires that the contractor selects and clarifies to the subcontractor the provisions of the prime contract that the contractor intends to incorporate by reference in the subcontract. In this way the subcontractor can examine the provisions and provide consent. In Plum Creek Wastewater Authority v. Aqua-Aerobic Systems, Inc., the issue was 675 whether the subcontractor was bound by a forum selection clause included in the prime contract. However this time the Court reaches the conclusion that the flow down clause in the Prime Contract is clear and not ambiguous. Also this decision confirms that if the contractor has been transparent in the negotiation, the subcontractor will be bound by the terms of the prime contract. Where a forum selection clause agreed to during arms-length negotiations by sophisticated parties specifies venue and jurisdiction with mandatory or obligatory language, clause is presumptively valid and must be enforced unless party seeking to avoid agreed-to forum demonstrates that enforcement would be unreasonable under circumstances . . .. Flow down “clauses are designed to incorporate in-

City of New York v. Pullman, Inc., 477 F. Supp. 438, 442 (S.D.N.Y. 1979). U.S. Steel Corp. v. Turner Const. Co., 560 F. Supp. 871 (1983), citing Washington Metropolitan Area Transit Authority v. Norair Engineering Corporation, 553 F. 2d 233, 235, (D.C. Cir. 1977); John W. Johnson, Inc. v. Basic Construction Company, 429 F. 2d 764, 775 (D.C. Cir. 1970); United States v. Fryd Construction Corporation, 423 F. 2d 980, 983 (5th Cir. 1970); Caldwell v. United States for John H. Moon, 407 F. 2d 21 (5th Cir. 1969); United States for the Use of B’s Company v. Cleveland Electric Company, 373 F. 2d 585, 588 (4th Cir. 1967). 23

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Chapter 7 The Back-to-Back Contract: The Birth of a New Contract Type to the subcontract those provisions of the general contract relevant to the subcontractor’s performance.”25

Such clauses mean that “the same rights and duties should flow equally from the owner down through the general contractor to the subcontractor, as well as flowing from the subcontractor up through the general contractor to the owner.”26 677 In Topro Services, Inc. v. McCarthy Western Constructors, Inc.,27 the Court continues this line of reasoning, noting 676

that under Arizona law—which requires that a contract must clearly evidence an intent that the document be made part of it in order to incorporate a document by reference—the forum selection clause in the prime contract did not bind a subcontractor. The basis for the court’s ruling was that: 1) the plain meaning of flow down clause in the subcontract—in which the subcontractor “binds itself to [the general contractor] for the performance of subcontractor’s work in the same manner as [the general contractor] is bound to the owner for such performance under [the general contractor’s] contract with the owner”—was to require the subcontractor to adhere to same performance requirements as the general contractor in completing its “work;” 2) the prime contract required the general contractor to “insert provisions with the venue and service of process requirements . . . in all subagreements, altering those paragraphs only to identify properly the contracting parties;” and 3) the subcontract contained no specific language incorporating terms of the prime contract in their entirety or the forum selection clause individually.28

The case of Scott Co. of California v. U.S. Engineering Co. is another forum selection case. The Court had to decide “whether the specific language of a construction subcontract is sufficient to incorporate by reference a forum selection clause from the main construction contract and, if so, whether the forum selection clause is enforceable.”29 The Court held that the clause was incorporated into the subcontract and that the clause was therefore enforceable.30 679 In the Court’s opinion, there is also evidence that the Court’s decision was inspired by the application of a principle of clarity and transparency. The Court wrote: 678

The subcontract's reference to the owner's contract is clear and unequivocal. Paragraph 2 of the subcontract requires the subcontractor to perform its work in accordance with this subcontract and in accordance with the first-tier subcontract and the owner's contract, together with all plans, drawings and specifications, and including but not limited to the general conditions, supplemental conditions, special conditions, addenda, amendments and any and all other documents or instruments referred to in the aforesaid first-tier subcontract and/or the owner's contract, all of which documents are incorporated herein and made a part of this subcontract and are hereinafter referred to as the “contract

25 Plum Creek Wastewater Authority v. Aqua-Aerobic Systems, Inc., 597 F. Supp. 2d 1228, citing U.S. ex rel. Quality Trust, Inc. v. Cajun Contractors, Inc., 486 F. Supp. 2d 1255, 1263 (D. Kan. 2007) (quoting United Tunneling Enterprises, Inc. v. Havens Const. Co., Inc., 35 F. Supp. 2d 789, 794–95 (D. Kan. 1998)). 26 Plum Creek Wastewater Authority v. Aqua-Aerobic Systems, Inc., 597 F. Supp. 2d 1228, citing United Tunneling v. Havens Const.; 35 F. Supp. 2d at 795 (quoting R. Cushman, The Construction Industry Formbook, § 5.08 (1979)); see also Industrial Indemnity Co. v. Wick Construction Co., 680 P. 2d 1100, 1103 (Alaska 1984). 27 827 F. Supp. 666, 667 (D. Colo. 1993). 28 Id.; see also A.D.T. Security Services v. Apex Alarm, 2006 WL 650166 (D. Colo. 2006) (not selected for official publication) (refusing to apply a prime contract’s forum selection clause based upon flow down language, where the subcontract also contained a contrary exclusive forum selection clause); U.S. Steel Corp. v. Turner Const. Co., 560 F. Supp. 871, 873 (S.D.N.Y. 1983). 29 1994 WL 519493 (N.D. Cal. 1994). See also Dynamic Drywall, Inc. v. Walton Construction Co., LLC 2007 WL 164351 (D. Kan. 2007). 30 1994 WL 519493 (N.D. Cal.1994). See also Dynamic Drywall, Inc. v. Walton Construction Co., LLC 2007 WL 164351 (D. Kan. 2007).

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III. Enforceability of the Back-to-Back Provisions documents.” The reference to the owner's contract in Paragraph 6 of the subcontract is equally plain.31

2. Statutes Several states have enacted statutes governing some recurrent issues of back-to-back 680 contracts.32 In particular the most prominent issue that the legislators have addressed is the pay-when-pay and pay-if-paid issue. The pay-when-paid clause only specifies the time of the payment. It does not (or should not) create a condition precedent for the payment.33 On the other side, a pay-if-paid clause allocates the risk of nonpayment from the owner to the subcontractor. With the few exceptions of New York, California, Massachusetts, North Carolina and 681 South Carolina, the general principle is that a pay-if-paid contract clause is enforceable as long as the parties have clearly indicated this intention.34 This is in line with the principles of transparency and specularity that, as described in this chapter, are the basis of the back-to-back contract. Massachusetts, North Carolina and South Carolina have enacted statutes banning the pay-if-paid clauses;35 in other states the courts reached the same conclusion.36 In North Carolina for instance § 22C-2 of the North Carolina General Statutes states: Performance by subcontractor: performance by a subcontractor in accordance with the provisions of its contract shall entitle it to payment from the party with whom it contracts. Payment by the owner to a contractor is not a condition precedent for payment to a subcontractor and payment by a contractor to a subcontractor is not a condition precedent for payment to any other subcontractor, and an agreement to the contrary is unenforceable.37

In Massachusetts, the pay-if-paid clause is generally not enforceable: “A provision in a 682 contract for construction which makes payment to a person performing the construction conditioned upon receipt of payment from a third person that is not a party to the contract shall be void and unenforceable.”38

31 Scott Co. of California v. U.S. Engineering Co 1994 WL 519493 (N.D.Cal. 1994). (Emphasis added.) See also Dynamic Drywall, Inc. v. Walton Construction Co., LLC 2007 WL 164351 (D.Kan. 2007). 32 A good summary is offered by William M. Hill and Mary-Beth McCormack, Pay-If-Paid Clauses: Freedom of Contract or Protecting the Subcontractor from Itself? in The Construction Lawyer, 2011, 26 et seq. 33 See Lemoine Co. of Alabama, LLC v. HLH Contractors, Inc., 62 So. 3d 1020 (Ala. 2010). 34 William M. Hill and Mary-Beth McCormack cit. p. 29:

the language should explicitly evidence both the contractor’s and the subcontractor’s mutual intent that the clause shift the risk of insolvency to the subcontractor. At a minimum, the language should state that “payment from the owner is a condition precedent to the contractor’s obligations to pay the subcontractor.” 35 Massachusetts Prompt Pay Act, M.G.L. c. 149, sec. 29E (2010). N.C. Gen. Stat. § 22C-2 (1987); S.C. Code. Ann. § 29–6–230 (2009). 36 Courts in New York and California also consider the pay-if-paid clauses void and unenforceable because against public policy. See West-Fair Elec. Contractors v. Aetna Cas. & Sur. Co., 78 F.3d 61 (1996):

[T]he New York Court of Appeals reasoned that a pay-when-paid provision which operates as a true condition precedent, rather than as a mere schedule for the disbursement of payments, requires a subcontractor to await payment until the general contractor has been paid by the owner. Because the subcontractor's right to receive payment is contingent upon this uncertain event, and because a subcontractor cannot enforce a mechanic's lien until the debt becomes due and payable. 37 William M. Hill and Mary-Beth McCormack, Pay-If-Paid Clauses: Freedom of Contract or Protecting the Subcontractor from Itself? in The Construction Lawyer 28 (2011). 38 Massachusetts Prompt Pay Act, M.G.L. c. 149, sec. 29E (2010).

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In Section 29E (e), this legislation applies to Private Construction Projects. However, the law also provides two exceptions: (1) to the extent of amounts not received from the third person because the person performing the construction failed to perform under its contract and failed to cure the non-performance within the time required by the contract after receipt of written notice as provided in the contract or, in the case of contract lacking a cure and notice provision, failed to cure the non-performance within 14 days after receipt of written notice of the failure to perform; or (2) to the extent of amounts not received from the third person because the third person is insolvent or becomes insolvent within 90 days after the date of submission of the requisition for which payment is sought; provided, however, that the person seeking to enforce the payment condition (i) filed a notice of contract under chapter 254 and in the case of a person having no direct contractual relationship with the original contractor, also sent a notice of identification within the time required under said chapter 254, prior to the person's submission of the first application for payment after commencement of performance at the project site and did not dissolve the lien created by the filing of such notice of contract; and (ii) within the time periods allowed by said chapter 254 files a statement of amount due and commenced or commences a civil action to enforce the lien; and (iii) pursues all reasonable legal remedies to obtain payment from the person with whom the person had a direct contract unless and until there is a reasonable likelihood the action shall not result in obtaining payment.39

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The rationale of these provisions, as well as the trend in the New York and California jurisdictions, is to avoid the result that a subcontractor bears the risk of insolvency or non-payment by the ultimate customer. These are risks that should be borne by the general contractor in consideration of the overall contract price.

IV. A New Contract Type From this analysis of the U.S., a new type of contract emerges with the following characteristics: it is a subcontract to a prime contract with a general mutatis mutandis provision and with several provisions incorporating by reference the provisions of the prime contract. 686 It is a contract type40 generally accepted by U.S. jurisdictions, even if there are some exceptions in relation to the so called pay-if-paid clause which would shift the risk of non-payment of the owner to the subcontractor.41 685

39 Massachusetts Prompt Pay Act, M.G.L. c. 149, sec. 29E (2010). N.C. Gen. Stat. § 22C-2 (1987); S.C. Code. Ann. § 29–6–230 (2009). 40 See E. Allan Farnsworth, William F. Young, Carol Sanger, Contracts, Cases and Materials 26 (6th ed.) (Foundation Press, 2001) (listing five categories of contracts: sale of goods, real estate, construction contracts, employment agreements and family contracts. In note b adds “Other types of agreements . . . include franchise and distributorship contracts, publishing contracts, and government contracts.”). 41 Besides what we have seen above, see E. Allan Farnsworth, William F. Young, Carol Sanger, Contracts, Cases and Materials 676 (6th ed.) (Foundation Press, 2001) (citing Wm. R. Clarke Corp. v. Safeco Insurance Co. 15 Cal., 882 (1997), where the court concludes “that pay-if-paid provisions like the one at issue here are contrary to the public policy of this state and therefore unenforceable because they effect an impermissible indirect waiver or forfeiture of the subcontractors’ constitutionally protected mechanic’s lien rights in the event of nonpayment by the owner.” The court in this case also recalls that “[t]he high court of New York has concluded.”).

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IV. A New Contract Type The leitmotif of the court decisions (with the exceptions indicated above) seems to 687 require that the contractor be clear and transparent on the conditions of the prime contract that he intends to flow down to the subcontractor (principle of clarity and transparency) and to allow the contractor to action the rights and remedies flowing down from the prime contract only if and when they have been actioned by the owner toward the contractor (according to the principle of specularity) with respect to the scope of work subcontracted. These two caveats should be able to mitigate the “limited consent” problem and the 688 “actionability of the rights and remedies of the contractor” problem. Unless the legislators or the courts forbid some particular risk shifting, as we have seen for the pay-if-paid clause, the contractor may flow down all the provisions of the prime contract to the subcontractor, insofar as they relate to the scope, quality, character and manner of the work to be performed by the subcontractor. In the future, a desirable study would be a full-length analysis of the back-to-back 689 contract. It would lay down not only the main principles of the back-to-back contract but also the overall discipline of this new type of contract with implications not only in the U.S. but also on a comparative law viewpoint with respect to foreign jurisdictions and international contracting.

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CHAPTER 8 INTELLECTUAL PROPERTY PROTECTION AND ENFORCEMENT Literature: James Bessen, Jennifer Ford & Michael J. Meurer, The Private and Social Costs of Patent Trolls, 11(45) Boston University School of Law Working Paper 1 (2011), http://papers.ssrn.com/sol3/papers.cfm? abstract_id=1930272. Colleen V. Chien, From Arms Race to Marketplace: The New Complex Patent Ecosystem and Its Implications for the Patent System, 62 Hastings Law Journal 297 (2010). Ira Glass & Chicago Public Media, When Patents Attack!, This American Life audio podcast, episode 441 (July 22, 2011). Richard W. Goldstein & Donika P. Pentcheva, AIPLA: 2015 Report of the Economic Survey (2015). Ashby Jones, When Lawyers Become ‘Trolls,’ Wall Street Journal (Jan. 23, 2012), http://www.wsj.com/a rticles/SB10001424052970203750404577173402442681284. Giles S. Rich, Laying the Ghost of the ‘Invention’ Requirement, 1 AIPLA Quarterly Journal 26 (1972). Michael Risch, Patent Troll Myths, 42 Seton Hall Law Review 457 (2012). Jeff John Roberts, Patent Trolls Hurt R&D Say Scholars in Letter to Congress, Gigaom, (Mar. 2, 2015), https://gigaom.com/2015/03/02/patent-trolls-hurt-rd-say-scholars-in-letter-to-congress/. John F. Witherspoon ed., Non-Obviousness – The Ultimate Condition of Patentability (1980).

I. Introduction This chapter provides an overview of intellectual property in the United States (U.S.) —specifically, how intellectual property protections are acquired and enforced. Intellectual property (I.P.) in the U.S. consists of four distinct regimes: copyright,1 patent,2 trademark,3 and trade secret.4 Unlike some other countries, the U.S. does not recognize industrial design as a sui generis I.P. right. Also, moral rights5 or droits d’auteur are severely circumscribed in the U.S. 691 Depending on the particular right at issue, I.P. rights in the U.S. can be obtained and enforced (a) in the federal (national) jurisdiction only; (b) in the state jurisdiction only; or (c) in both the state and federal jurisdictions. Copyright and patent, for example, are both creatures of federal law. These rights can only be obtained from the federal government, and only enforced in the federal court system. Conversely, trademarks can be registered in the federal system, or the state level, or both, and can be enforced in federal or state court. Trade secrets are not registerable per se, but owners of them can enforce their rights in federal court or state court. 692 This chapter surveys the key principles involved in obtaining I.P. rights in the U.S., in addition to providing information about the options available to those seeking to enforce their I.P. rights. The chapter’s focus is on U.S. law, without consideration of the country’s international treaty obligations which, in certain circumstances, require it to recognize I.P. rights obtained by individuals and entities in foreign countries. Actual costs involved for obtaining and enforcing I.P. rights in the U.S. are provided where practicable. 690

1 Urheberrecht

/ droit d’auteur, au sens stricte de copyright / derecho de autor / diritto d’autore. / brevets / patentes / brevetti. 3 Schutzmarken / marques déposées / marcas / marchi (marchi d’impresa o marchi di fabbrica depositati). 4 Betriebs- und Geschäftsgeheimnisse / secrets d’affaires / secretos comerciales / segreti industriali. 5 Urheberpersönlichkeitsrechte / droits moraux / derechos morales / diritti morali (d’autore). 2 Patente

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II. Eligibility Requirements for Obtaining Intellectual Property Rights I.P. rights are of increasing importance in the U.S. as the country moves toward a 693 knowledge economy that focuses more on high-tech products and services and less on traditional manufacturing and commodities. Therefore, the rudimentary understanding of how I.P. rights are obtained and enforced in the U.S. that this chapter provides, should be of interest to any person looking to do business in the U.S.

II. Eligibility Requirements for Obtaining Intellectual Property Rights 1. Copyright The U.S. Constitution establishes Congress’s ability “to promote the progress of sci- 694 ence and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”6 This clause gives Congress the authority to pass legislation concerning copyright and patent. The individual states do not have copyright laws, and are preempted from establishing their own copyright registration systems. The Copyright Act of 19767 establishes the features of modern copyright law in the 695 U.S. This law drastically relaxed the strict formalities previously required in order to obtain copyright protection in the U.S. Now, for works created on or after January 1st, 1978, copyright protection adheres immediately upon creation of a copyright-eligible work. The author need not apply for copyright registration, pay any fees, or use the © symbol in order to enjoy copyright protection. However, the author must file for registration with the U.S. Copyright Office8 if the author would like to enforce his copyright in court. 696

Practice Tip Use of the © symbol in the U.S. is unregulated. Any author can append the © symbol to a work that one has created that one believes is original, without first (or ever) seeking a federal registration. Works published without the © symbol on or after January 1, 1978 may be under copyright, as failure to use the symbol on the work has no bearing on the work’s copyright status.

Copyright in the U.S. protects original expressions9 fixed in a tangible medium.10 697 Tangible media include traditional media, such as pages and canvases, but also digital media, including film and microchips. The fixation requirement simply means that the expression cannot be fleeting, such as an impromptu and unrecorded speech, but instead captured in a medium that retains the expression. Literary works; musical works; dramatic works; choreographic works; pictorial, graphical, and sculptural works; motion pictures and other audiovisual works; and architectural works are all potentially subject to copyright protection.11 Federal courts in the U.S. have a long history of interpreting the contours of copyright 698 law, as does the U.S. Copyright Office, based in Washington, D.C. For example, courts have established that only original expressions, not facts or ideas, are eligible for copyright protection. In certain instances however, the expression of the idea and the idea 6 U.S.

Const., art. I, § 8, Cl. 8. Urheberrechtgesetz von 1976 [lit.] / loi sur le droit d’auteur [lit.] / Ley de Derecho de Autor de 1976 [lit.] / legge sul diritto d’autore del 1976 [lit.]. 8 Bundesamt für Urheberrecht der USA / office fédéral du droit d’auteur des Etats-Unis / Oficina Federal de Derecho de Autor de Estados Unidos / Ufficio federale statunitense per la tutela del diritto d’autore. 9 originärer Ausdruck / expression originale / expresiones originales / opere dell’ingegno. 10 körperliches Medium / médium tangible / soporte tangible / supporto tangibile, supporto materiale. 11 17 U.S.C. § 102(a). 7

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itself are said to “merge,” meaning that there is only one way to express the idea. If this is the case, no copyright protection is available. Titles, slogans and short phrases are not eligible for copyright protection, as they are deemed to lack sufficient originality. However, copyright can inhere in mundane expressions, such as email messages, advertisements, and organizational bylaws, as the law does not discriminate between valuable works and those of less value. An important principle of U.S. copyright law is that effort does not automatically result in copyright. This is known as the “sweat of the brow” doctrine. In a famous U.S. court case, a company attempted to claim copyright protection in a telephone directory it had created.12 Although the court recognized that the creation of the directory took great effort and expense, the court stated that those factors are irrelevant in determining copyright eligibility: only originality matters. Because the compilation of data in the directory was not original (names and telephone numbers are commonly listed in alphabetical order), the court denied copyright protection to the company. Instead of one right, copyright is better thought of as a bundle of rights, each of which can be owned or licensed independently of the other rights. The six rights include the right to reproduce the work, display the work, distribute copies of the work, prepare derivatives of the work, and to perform the work. The phrase “all rights reserved” connotes that the copyright owner has reserved the entire bundle of rights for himself. This is the default presumption in the U.S. Copyright lasts for a long time in the U.S. For works created by individual authors on or after January 1st, 1978, the duration of copyright is the life of the author plus 70 years. This means, for example that for work created in the year 2000, copyright will last for the duration of the author’s life, plus an additional 70 years. This term is nonrenewable and automatic upon fixation of the original expression, without the payment of fees or the need to file an application. Because of the long life of copyrights, a general presumption exists that most recent works are still under protection (this does not apply if, for example, the copyright owner has dedicated the work to the public domain).13 Certain kinds of works are deemed owned by a corporate entity, even though they were created by an individual. These can be thought of as corporate copyrights,14 and are known as “work made for hire” (W.M.F.H.).15 W.M.F.H. includes works created by employees during the course and scope of their employment. For example, an employee who writes a memo as part of his job duties does not own copyright in the memo; instead his employer does as W.M.F.H. The duration of copyright in W.M.F.H. is different than for works owned by individual authors. Copyright in W.M.F.H. lasts for 120 years after creation, or 95 years after publication, whichever occurs first.

704 Practice Tip U.S. copyright registrations are easily searchable online at www.copyright.gov. One can also electronically submit an application for copyright registration through that website. One needs not to be a licensed attorney to submit an application.

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As mentioned previously, obtaining a copyright registration is optional. Copyrights can be licensed and transferred regardless of whether they are registered, although certainly there are advantages to registering one’s copyright. The registration process is Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340 (1991). Gemeinfreiheit / domaine public / dominio público / pubblico dominio. 14 Urheberrecht von Unternehmen / droits d’auteur détenus par une personne morale / propiedad intelectual corporativa / diritti d’autore spettanti a un ente societario, diritti d’autore in capo a una società. 15 Auftragsarbeit / travail sur commande / obra por encargo / lavoro realizzato su commissione, opera creata su commissione. 12

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II. Eligibility Requirements for Obtaining Intellectual Property Rights straightforward and can be completed online without the involvement of an attorney. The U.S. Copyright Office maintains a website where filings can be made. The official governmental registration fee is $35 to $85 per work.16 An author must submit to the office a copy of the work that the author wishes to register, although the office’s review of the work is minimal. For example, no one at the office reads a novel to ensure that every expression in the novel is original. The office simply notes that works like novels are subject to copyright eligibility, and issues a registration certificate17 on the basis of the author’s application. These registration certificates typically are issued within six months of filing—quicker if additional fees are paid. There are advantages to registering one’s copyright, particularly from the standpoint of enforcement. Section III of this chapter discusses those advantages in more detail. A final note concerns the public domain in the U.S. Works that are out of copyright 706 (e.g. because the copyright expired), or have never been subject to copyright (e.g. works created by the U.S. government, or works that are not original), are in the public domain and free for everyone to use. However, there is no central repository of public domain works and determining the copyright status of older works can be complicated. This reality leads most people to be cautious in their unlicensed uses of works, although a fair use defense applies in certain instances. Section III discusses fair use in more detail. 707

Practice Tip Determining the copyright status of works, particularly those created before January 1st, 1978, can be complicated. Cornell University maintains a helpful, free resource for making these determinations, available at http://copyright.cornell.edu/resources/publicdomain.cfm. A private company called LimitedTimes also offers this service, providing copyright duration information for given works for a fee. See http://www.limi tedtimes.com/.

2. Patent The clause of the U.S. Constitution that gives Congress authority to pass legislation 708 concerning copyright is the same source of authority for patent law. The operable patent law in the U.S. for over 50 years was the 1952 Patent Act; this law was substantially amended and updated in 2011 as part of the America Invents Act (A.I.A.). The A.I.A. eliminated sui generis elements of U.S. patent law in order to bring the law into conformity with international norms. The biggest change concerned how patent rights are awarded. Prior to the implementation of the A.I.A., patents were awarded to the first true inventor, even if that individual failed to file a patent application on his invention before someone else did. This so-called “first-to-invent” feature of U.S. patent law was unique among industrialized nations. Now, under the A.I.A., patent rights go to the first inventor to file a patent application on an invention, although the law does provide a few additional safeguards such that “absolute novelty” is still not technically required. The individual states do not have patent laws and are preempted from establishing their own patent registration systems.

16 The price varies depending on whether the application is filed on paper or online, and for online filings, depending on the complexity of the filing. Visit http://copyright.gov/about/fees.html for more information. 17 Eintragungsbestätigung / certificat d’enregistrement / certificado de registración / certificato di registrazione.

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Chapter 8 Intellectual Property Protection and Enforcement U.S. patents come in three forms: utility,18 design,19 and plant.20 The most common of the three is the utility patent, which is a limited monopoly right granted by the federal government in exchange for an applicant’s disclosure of a new, useful and “nonobvious” process, machine, manufacture, composition of matter, or any new and useful improvement of one of those things, to the United States Patent and Trademark Office (U.S.P.T.O.).21 Establishing the novelty, utility, and “nonobviousness” of the claimed invention are the primary hurdles that must be cleared by an applicant for a utility patent. However, in recent years, satisfying the U.S.P.T.O. that the claimed invention is the appropriate subject matter of patent—and not, instead, prohibited subject matter—has taken on new importance.22 Prohibited subject matter consists of laws of nature, abstract ideas, and naturally-occurring phenomena. 710 The novelty requirement simply means that the disclosed invention must be new. Patents will not be granted for old inventions, and the rules are strict concerning the window in which an inventor can file for patent before forever losing his ability to patent the invention.23 Typically the window is one year from first public disclosure. This means that once an inventor publicly discloses his invention—for example in an article or at a conference—the inventor has one year from the date of that disclosure to file a patent application (i.e., absolute novelty is not required). Failure to file within that time period results in permanent forfeiture of rights. Public disclosures are encouraged under the A.I.A., as these serve as “prior art”24 that will defeat the novelty of any subsequently filed patent application that claims the same invention. 709

711 Practice Tip Patent rights last for 20 years from the date of application (for utility patents and plant patents), or 15 years from the date of issuance (for design patents). The U.S.P.T.O. maintains a publicly-searchable database of U.S. patents, located at www.uspto.gov/patent/.

The utility requirement is easier to meet and simply means that the applicant must establish that the invention is useful. Meeting the utility requirement does not require evidence that the invention is in use. Few patent applications are rejected for failure to meet the utility requirement. 713 The most onerous of the three major criteria for patentability, and what has been called the “ultimate condition of patentability,” is the nonobviousness requirement.25 Nonobviousness is an imprecise concept that essentially means that patents will not be granted for claimed inventions that are not sufficiently inventive, even if they are new and useful. The nonobviousness requirement recognizes that some advancements in 712

Nützlichkeit / utilité / patente de utilidad / brevetti di utilità [lit.], brevetti per modelli di utilità. Design, Gestaltung / conception / patente de diseño / brevetti per disegni industriali. 20 Pflanzenpatente [lit.] / brevets sur des végétaux / patente de plantas / brevetti per varietà vegetali, brevetti sulle piante [lit.]. 21 Patent- und Markenamt der Vereinigten Staaten [lit.] / bureau fédéral des brevets et des marques déposées des Etats-Unis / Oficina de Patentes y Marcas de Estados Unidos / Ufficio brevetti e marchi degli Stati Uniti [lit.], Ente federale di riferimento in materia di brevetti e marchi negli Stati Uniti. 22 Recent U.S. Supreme Court cases involving these issues include Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. __ (2012), Association for Molecular Pathology v. Myriad Genetics, 599 U.S. __ (2013), and Alice Corp. v. CLS Bank International, 573 U.S. __ (2014). 23 35 U.S.C. § 102. The rules regarding novelty are even stricter if the inventor wishes to obtain patent protection in international jurisdictions where absolute novelty is required. One public disclosure of the claimed invention by the applicant, prior to filing for patent protection, typically defeats the inventor’s ability to obtain a patent in foreign jurisdictions. 24 Vorheriger Stand der Technik / état de l’art antérieur / técnica anterior / stato della tecnica anteriore. 25 Giles S. Rich, Laying the Ghost of the ‘Invention’ Requirement, 1 AIPLA Quarterly Journal 26 (1972) (calling nonobviousness “the heart of the patent system and the justification of patent grants”); Non-Obviousness – The Ultimate Condition of Patentability (John F. Witherspoon ed., 1980). 18

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II. Eligibility Requirements for Obtaining Intellectual Property Rights fields of art have not occurred, but not because those advancements are not known, or not knowable. In patent parlance, some inventions are obvious to try,26 or would be obvious to one having ordinary skill in the art because they involve deploying known techniques to yield predictable results. These advancements are not eligible for patent protection, as they are deemed obvious, or not significantly inventive to merit patent protection. Patent examiners at the U.S.P.T.O. look to existing publications—patents, scholarly 714 articles, treatises and the like—in order to understand the state of knowledge in a given field (these documents collectively form the “prior art,” or established knowledge, in a given field). They then make a determination as to whether the applicant’s disclosed invention is nonobvious in view of the state of the art.27 Knowledge of the state of the art is not measured against what the most expert of experts know, but rather against the knowledge of a “person having ordinary skill in the art” (commonly abbreviated P.H.O.S.I.T.A.), an imaginary but theoretically objective construct. The goal of the nonobviousness requirement is to protect the public by drawing a line between what former U.S. President Thomas Jefferson called “the things which are worth to the public the embarrassment of an exclusive patent, and those which are not.”28 Utility patents are presumed valid upon issuance and last for 20 years from the date of 715 application, provided that the owner pays to the U.S.P.T.O. required maintenance fees that become due and owing at 3.5, 7.5, and 11.5 years after the patent’s issuance.29 The application process at the U.S.P.T.O. is costly and rigorous. Average attorney fees for preparing and “prosecuting”30 (i.e., shepherding an application through the examination process) a utility patent application are $10,000 to $30,000, depending on the complexity of the subject matter and location of the firm (e.g., firms in large cities charge more and patents concerning pharmaceuticals are costlier). Applications that do not meet the statutory requirements are rejected. For patents that are granted, typically three to four years elapse between filing and issuance. While patent applications require various disclosures, a patent’s claims are of chief importance, as they demarcate the specific invention that the patent’s owner can prevent others from using, manufacturing, importing, selling, or offering to sell without the owner’s permission, upon issuance of the patent.31 The second-most common type of patent—and of increasing importance lately, par- 716 ticularly in high-tech industries—is the design patent, which protects any new, original, and ornamental design for an article of manufacture. Design patents have only one claim (as opposed to the multiple claims typical of utility patents) and are valid for 15 years from date of issuance, with no maintenance fees required.32 Design patents are much cheaper to obtain than utility patents, costing only $180 to file, and with associat26 sich zur Durchführung aufdrängen / évident de tenter / obvio de intentar / invenzioni sulle quali è ovvio indagare [lit.] (criterio di valutazione dei requisiti di brevettabilità di una particolare attività inventiva, consistente nel verificare, tra le altre cose, il problema tecnico sotteso all’invenzione e nel vedere se era ovvio, per un tecnico del settore, indagare nell’ambito in cui si colloca l’invenzione stessa per risolvere problema ad essa soggiacente. 27 35 U.S.C. § 103. 28 Thomas Jefferson, letter to Isaac McPherson, August 13, 1813. 29 35 U.S.C. § 154. 30 Durchführung der Patent- oder Markenanmeldung / effectuer les démarches / realizando el trámite administrativo de la aplicación de patente / dare corso alla domanda di brevetto, proseguire nell’iter per l’accoglimento di tale domanda. 31 35 U.S.C. § 271. 32 The term of protection is 15 years for design patents that issue from applications filed on or after May 13, 2015. The term of protection is 14 years for design patents issuing from applications filed before that date.

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Chapter 8 Intellectual Property Protection and Enforcement ed legal fees averaging only $1,800. Everything from the shape of saddles and coat hangers, to the design of kitchen appliances, to ornamental handles on silverware, to features on smartphones have been protected by design patents. 717 The third type of patent available in the United States is the plant patent. Plant patents reward the disclosure of new, distinct varieties of asexually reproducing plants. The protection afforded plant patents lasts 20 years from filing. Plant patents protect the patent owner’s right to exclude others from asexually reproducing, selling, or using the patented plant. 718 Practice Tip A patent attorney33 or a patent agent34 typically drafts patent applications. Both patent attorneys and patent agents are members of what is called the patent bar and are licensed to practice before the U.S.P.T.O. Patent attorneys differ from patent agents in that they also hold law degrees and are licensed to practice law in at least one state in the United States. Patent agents often work for patent attorneys, and typically charge the client lower rates. However, they cannot opine on legal questions related to the patent application.

“The name of the game is the claim”35 is a famous expression in U.S. patent law.36 The claims are the most vital aspect of any patent, as they set forth the precise metes and bounds of the invention disclosed to the U.S.P.T.O. and recognized as meeting the criteria for patent protection. Drafting patents ultimately comes down to drafting claims, which is a unique combination of art and science. The person drafting a claim must be deeply familiar with the relevant field of science, but also know how to word the applicant’s invention in the most fitting and advantageous way. However, much of any issued patent does not consist of claims, but rather written narrative about the field of art and the invention, that helps situate the inventor’s contribution to the larger field. 720 Patent claims are numbered and most patents contain several claims, although some have only one claim. Broadly worded claims are typically better claims as they provide more protection to the patent owner.37 Patent examiners at the U.S.P.T.O. often try to narrow claims during the application process. Claims in issued patents are what interested parties review in order to obtain an understanding of the current state of the art in a given field. Knowing what is already claimed allows one to infer whether one’s actual or contemplated activities are likely to arouse the attention of a patent owner. Attorneys for patent applicants also look to the claims of issued patents. They will want to draft their client’s application so that the claimed invention does not tread too closely to the claims of other issued patents within the same field of art, otherwise the application risks being rejected. 719

Patentanwälte / avocat en brevets / abogado en materia de patentes / avvocati specializzati in brevetti. Patentvertreter / agent en brevets / agente de patentes / agenti brevettuali. 35 das wichtigste ist der Anspruch aus der Marke oder dem Patent [idm.] / le plus important est la réclamation basée sur le brevet ou la marque déposée [idm.] / lo mas importante son las reivindicaciones del patente [idm.] / il nome del gioco è: la rivendicazione [lit.]. 36 Giles S. Rich, The Extent of the Protection and Interpretation of Claims-American Perspectives, 21 Int'l Rev. Indus. Prop. & Copyright L., 497, 499 (1990) ("To coin a phrase, the name of the game is the claim."). 37 Broad claims do come with some risk, however. An independent requirement of patentability is that the patent enable a P.H.O.S.I.T.A. to practice the claimed invention without undue experimentation. 35 U.S.C. § 112. This requirement is called the enablement requirement [Ermöglichungskriterium [lit.] / exigence de habilitation / requisite de habilitación [lit.] / requisito della sufficiente descrizione, requisito della sufficiente divulgazione], and is aimed at making sure that the public receives the full benefit of knowledge about the invention, in exchange for the grant of a limited property right to the patent owner. Broad patents risk being invalidated in litigation if the full scope of the claims is not enabled. 33

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II. Eligibility Requirements for Obtaining Intellectual Property Rights 3. Trademark Unlike copyrights and patents, which are protected only under federal statutes, trade- 721 marks38 are governed by state common law (i.e., judge-made law) as well as state and federal statutes. Trademarks also differ from copyrights and patents in that their term of protection is potentially infinite, as owners of protectable marks have rights in them for as long as they use them. At the federal level, the granting of trademark protection finds its roots in Congress’s ability to regulate commerce between the states. Viewed as a right appurtenant to commercial activity, trademark protection by rights holders also protects consumers from confusion in the marketplace over the source of goods and services. Unlike many countries, the U.S. does not regard use as a requirement for trademark 722 protection. Common law rights do not inure in marks that are not used, and trademark registration certificates—whether from a state or the federal government—are not issued unless the applied-for mark is being used. Ultimately, registration at either level, state or federal, is not necessary in order to bring a cause of action for trademark infringement, as common law protection extends wherever the mark is used. For example, if a mark is used in only two states, the mark holder’s presumptive zone of protection only extends to those two states, subject to the rights of any senior claimants of the same mark. Although the use requirement is strict, what qualifies as a protectable trademark is 723 quite expansive. Under the federal Lanham Act of 1946, which provides the foundation for much of trademark law, “any word, name, symbol, or device, or any combination thereof ” is eligible for protection, provided that it indicates source, identifies goods, services, or both, and distinguishes those goods, services or both from those of others.39 State statutes and common law protection mirror these requirements. Of critical concern is that the mark indicates source as opposed to merely serving as a description of a product or service. Source indication means that a generic word such as apple cannot serve as a trademark for a brand of apple, for to award protection effectively would prevent others from accurately describing their product. But apple can serve to indicate source if used in relation to something other than the edible fruit. In short, distinctiveness40 is what is required. 724

Practice Tip Many are familiar with the ® and ™ symbols, which pertain to trademarks. Only registrants of trademarks registered with the U.S.P.T.O. are permitted to use the ® symbol in connection with their marks in the U.S. Use of the ™ symbol is unregulated. Anyone claiming rights in a distinctive word, phrase, or symbol may use the ™ symbol in connection with it, although using the symbol does not automatically confer any rights in the one using it. SM is similar to ™ and stands for “service mark.” “Trademark” is a term that technically refers to goods (for example, wallets) and not services (for example, advertising services), but in the U.S. it is common to use the term “trademark” to refer in general to both goods and services, or to use the word “mark” to refer to a trademark, a service mark, or both.

Trademarks often consist of words only, or words and design features, but even ele- 725 ments such as colors, smells, and sounds can serve as trademarks in the U.S., given the broad wording of the Lanham Act. In trademark parlance, trademark rights in things like colors are possible provided that the claimed mark is “nonfunctional”41—that is, no competitive need exists for others to use the color. The competitive need for a color varies based on the use to which it is put. Consider, for example, the color orange in or38 Schutzmarken / marques déposées / marcas registradas / marchi (marchi d’impresa o marchi di fabbrica depositati). 39 15 U.S.C. § 1127. 40 Unterscheidungskraft / caractère distinct / carácter distintivo / carattere distintivo. 41 ohne Gebrauchswert / non fonctionnel / no funcional / non funzionale [lit.] (nel senso di non adempiere, in concreto, a una funzione rilevante, se non a quella di identificare e distinguere un determinato marchio).

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Chapter 8 Intellectual Property Protection and Enforcement ange soda. Extending to Fanta exclusive rights in the color orange as used in relation to orange soda would put competitors at a significant, non-reputation related disadvantage, because consumers expect orange soda to be orange. In fact, they want their orange soda to be orange. If competitors could not use that color, because Fanta enjoyed trademark protection on it, they would sell less soda for reasons that have nothing to do with the reputation of their product. Black-colored orange soda simply is not appealing to consumers. Therefore, the color orange in the context of orange soda would be considered functional and not subject to trademark protection in the U.S. In other contexts—such as on jewelry boxes—the color orange could be distinctive.42 726 Practice Tip U.S. trademark registrations are easily searchable online at http://www.uspto.gov/trademarks-applicationprocess/search-trademark-database using the T.E.S.S. database. Trademark applications are also filed online. Although one does not need to be a licensed attorney to submit an application, legal representation is recommended. Assuming few or no “office actions”43 (i.e., refusals) or third-party oppositions during the process, an applicant can expect to receive a registration certificate within 12 to 18 months of filing.

Determining the scope of trademark protection requires assessing how a mark is used. For example, the registration system maintained by the federal government does not permit Apple, Inc. to enjoy exclusive rights in the word “apple” with respect to every product or service imaginable. Instead, Apple, Inc.’s rights in the word accompany its use of it. Registration certificates issued by the U.S.P.T.O. contain a listing of the goods, services, or both in relation to which a trademark is used and protected, and registrants cannot use these certificates as evidence of any superior right to use the mark in relation to goods, services or both outside of those listed on the registration certificate. The U.S.P.T.O. requires trademark applicants to divulge additional information during the application process, such as the date the applicant claims to have first used the mark in commerce in relation to the claimed goods, services or both. Applicants must also submit a specimen of the mark—evidence showing the mark as actually used—before the U.S.P.T.O. will permit registration. 728 Common law, state, and federal trademark protections overlay in complicated ways. Ultimately, however, being the first to use a particular mark confers certain protections on the first user. A prior domestic user of a trademark, used in relation to a given good or service, enjoys superior rights in that mark as used in connection with that good or service. The superior rights of the first user permit it presumptive ability to expand its use of the mark into new geographic regions within the U.S. (although not into new product markets). This superior right becomes constrained however, should a secondin-time user succeed in registering the mark on the federal or a state level. Such a registration provides its holder with federal or state rights to use the mark, limited geographically only by any third-party uses of the mark that predate the registrant’s registration. 729 Many mark holders prefer to seek federal registration over state registration, although state registration is easier and cheaper to obtain. Federal registration—which may be maintained in renewable, ten-year terms, assuming the mark is still in use and required filings are made with the U.S.P.T.O.—provides several benefits over state registration. First, federal registration provides rebuttable evidence of validity, ownership, and exclusive right to use the mark in commerce with respect to the claimed goods or services.44 727

42 Colors alone can never be inherently distinctive under U.S. trademark law, but can acquire distinctiveness once use of the color builds “secondary meaning.” Qualitex Co. v. Jacobson Products Co., 514 U.S. 159 (1995). 43 amtliche Einwendungen / objections administratives / actividad oficial administrativa / decisioni di rigetto, comunicazioni/risposte scritte in cui vengono sollevate obiezioni. 44 15 U.S.C. § 1057(b).

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II. Eligibility Requirements for Obtaining Intellectual Property Rights Second, federal registration provides rebuttable evidence of use of the mark in all fifty states, regardless of whether actual use has occurred in all states. Third, federal registration provides national constructive notice of the claim of rights. This benefit means that later adopters of the mark are deemed as being “on notice” of the senior user’s rights in the mark. Fourth, federal registration allows for the possibility of the mark becoming incontestable after five years of continuous use. Incontestability45 means the registration serves as conclusive evidence of the exclusive right to use the mark for the claimed goods or services in interstate commerce, which is a valuable asset for a company to have if it wishes to use its trademark registration to help substantiate a high valuation of the company in a sale or acquisition. No matter the protection afforded—at common law, based solely on use or use plus 730 registration in state or federal jurisdiction (or both)—the primary theory behind providing trademark protection in the U.S. is the same. Trademarks reduce consumer search costs by allowing consumers to quickly identify those goods and services that emanate from, or are affiliated with, a source they have come to recognize as denoting quality.46 This efficiency goal effectively rewards continuous and ongoing investment in a distinctive brand, and serves as a quality control measure for consumers. In addition, trademarks contribute to the intangible value of a company. For purposes of analyzing a mark’s distinctiveness, trademark law recognizes a con- 731 tinuum on which marks may be situated relative to their uses. Simply put, some trademarks are stronger than others. The U.S.P.T.O. evaluates trademark applications to ensure that only distinctive marks are permitted to register. Categorizations of marks include generic, descriptive, suggestive, arbitrary, and fanciful.47 Marks deemed suggestive, arbitrary, or fanciful are considered distinctive and capable of registration. Generic words are never capable of being registered, and if a mark ever becomes generic, it can lose its trademark protection.48 Marks deemed merely descriptive are presumed incapable of registration, absent compelling evidence that a “secondary meaning”—that is, a source identifying meaning, different from the descriptive meaning—exists in the marketplace. Descriptive marks are presumptively incapable of serving a trademark function, as permitting trademark protection in a descriptive mark could prevent others from accurately describing a feature or characteristic of their product. Suggestive marks lie between descriptive marks and arbitrary marks on the distinctiveness continuum. These types of marks suggest, but do not describe, the good or service in relation to which they are used. Because some mental thought is required in order to decipher the connection between the mark and the offering, the mark is deemed distinctive. “London Fog” as used in relation to raincoats is an example of a suggestive trademark.

Unanfechtbarkeit / caractère incontestable / incontestabilidad / incontestabilità (del marchio). Deven R. Desai, From Trademarks to Brands, 64 Florida Law Review 981 (2012). 47 Abercrombie & Fitch Co. v. Hunting World, 537 F. 2d 4 (2d Cir. 1976). 48 This phenomenon is known as “genericide,” [Generizid / Généricide, ou dégénérescence / una marca registrada pierde protección de la ley tras haberse convertido en una frase genérica / volgarizzazione del marchio (fenomeno che si realizza quando il marchio perde il suo carattere distintivo: i traducenti italiani “genericidio”e “genericizzazione” esprimono un significato analogo,vale a dire, il passaggio progressivo da una denominazione distintiva a una denominazione generica, che, sul piano linguistico, implica un allargamento semantico, in forza del quale un nome proprio “degenera” a nome comune, perdendo con ciò la propria “distintività”; dalla perdita del carattere distintivo di un marchio, in quanto troppo generico, può derivare la sua sopravvenuta inidoneità a godere di tutela giuridica] and occasionally occurs. Historical examples of trademarks that have lost protection in the U.S., and are now deemed generic because they have come to be known as a category of product, include escalator, aspirin, and trampoline. These trademarks became victims of their own success. 45

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Chapter 8 Intellectual Property Protection and Enforcement 732 Practice Tip Marks that are inherently distinctive are immediately capable of registration, as opposed to marks that are merely descriptive, which can only be registered upon establishing evidence of “secondary meaning.” The following list provides examples of a variety of marks and how they would be categorized on the distinctiveness continuum with regard to apples. Generic: APPLE Descriptive: TASTY Suggestive: FORBIDDEN Arbitrary: TEXTBOOK Fanciful: MOSETOWA

The strongest type of mark on the distinctiveness continuum is the fanciful mark. Fanciful trademarks are coined words—they have no meaning in the English language other than as trademarks. “Exxon” and “Kodak” are two examples. Fanciful terms enjoy the strongest protection, as any use of them in commerce by someone other than their owner presumptively infringes. That is because people have no way of understanding fanciful marks other than as trademarks, so multiple uses of the same fanciful mark confuses consumers. Fanciful marks are the strongest, but also the hardest to develop, as building consumer recognition between the mark and the related product or service offering requires significant expenditures on advertising. 734 When applying to the U.S.P.T.O. for a trademark registration, applicants must specify the goods or services or both, in relation to which they are using the marks they wish to register, based upon a standard international classification system. Upon application a trademark examiner at the U.S.P.T.O. conducts an investigation of the applied-for mark, assessing whether the mark actually is in use by the applicant, whether it is distinctive, and whether any identical marks exist in the same class or related classes in which the applicant seeks registration. The examiner searches the official registry of registered marks, as well as conducts Internet searches to locate similar marks in use that perhaps are not registered. The existence of an identical trademark does not necessarily defeat the applicant’s ability to register the mark, as the same mark can be registered to different owners for different goods or services or both. However, if the trademark examiner views the goods or services or both as being related, then a rejection may be issued. 735 Applicants have opportunities to challenge rejections made by the examining attorney. Assuming few rejections (and that the applicant overcomes any objection), an applicant can expect to receive a registration certificate from the U.S.P.T.O. within twelve to eighteen months after filing. However, once a trademark attorney is satisfied that an application meets the criteria for registration, the attorney does not immediately issue the applicant a registration certificate. Before a registration certificate issues, the application must pass through a stage where it is published for opposition. The U.S.P.T.O. publishes all applications that it is considering for registration in the Official Gazette, a governmental publication read mostly by trademark attorneys. Third parties who believe that they would be harmed if the U.S.P.T.O. registered a mark published in the Official Gazette have thirty days from the date of publication to formally oppose the prospective registration by filing what is called an “opposition.”49 Oppositions and other agency actions are discussed in more detail in Section III. 733

736 Practice Tip While individuals can represent themselves before the U.S.P.T.O., most choose to engage the services of a trademark attorney. These attorneys charge on average $1,719 to handle a basic trademark application,

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II. Eligibility Requirements for Obtaining Intellectual Property Rights depending on where they are located, where they practice, and the complexity of the application.50 The cost goes up significantly if an opposition is filed. The U.S.P.T.O.’s charge to review applications is minimal —$275 to $350 per class. Applications become costly if the applicant seeks protection in multiple classes.

Owners of federal trademark registrations must make filings with the U.S.P.T.O. and 737 pay fees at various intervals in order to maintain the registration. The first such date occurs between the fifth and sixth year after registration, then again between the ninth and tenth year, then every ten years thereafter. At each of these points, the registrant must certify that the registered mark is still being used in commerce. Marks that are no longer being use are subject to being cancelled if a third party files a cancellation action51 with the T.T.A.B. (these actions, called “cancellation proceedings,”52 are discussed in Section III). Third parties often take this step if a trademark registration exists for a mark that they believe is no longer being used and yet a trademark examiner has cited it as a reason to refuse registration of their own application to register the same or a similar mark.

4. Trade Secret Trade secret law protects information that derives economic value from not being 738 generally known, and is subject to reasonable efforts to keep secret. Common examples of trade secrets include formulas, technological information, business plans, customer lists, marketing strategies, techniques, patterns, and the like. Traditionally, only state law governed trade secrets in the U.S., with 46 states following a uniform law called the Uniform Trade Secrets Act,53 which defines what constitutes trade secrets and the misappropriation of them by others. As a result, trade secret law tends to be very similar across states. However, in 2016, President Obama signed into law a bill known as the Defend Trade Secrets Act (D.T.S.A.),54 which created a federal civil cause of action for trade secret misappropriation.55 Now, owners of trade secrets in the U.S. may sue for trade secret misappropriation in state court or in federal court, without regard to amount in controversy requirements. Trade secrets in the U.S. are protectable in perpetuity, without application or registra- 739 tion with the government, provided that the secretive subject matter maintains economic value from not being generally known (i.e. value comes from its secrecy), and is subject to reasonable efforts to maintain its secrecy. In reality, not every trade secret lasts forever. Sometimes their owners tire of the cost and expense of keeping them secret, so they permit the secret to become known. Other times the secret loses its economic value as market conditions change, or someone else lawfully reverse engineers56 the secret. “Reverse engineering” is used to describe buying the product, disassembling it, and studying it. Provided a competitor uses proper means to discover a secret, such as reverse engineering it, no cause of action lies for the owner whose secret is discovered. 50 Richard W. Goldstein & Donika P. Pentcheva, AIPLA: 2015 Report of the Economic Survey 76–80 (2015). 51 Löschungsantrag / demande de radiation / acción de anulación / istanza di cancellazione. 52 Löschungsverfahren / procédure de radiation / procedimiento de anulación / procedimento di cancellazione. 53 einheitliches Bundesgesetz der USA zu Betriebs- und Geschäftsgeheimnissen / loi fédérale uniforme des Etats-Unis sur les secrets d’affaires / Ley Uniforme de Secretos Comerciales de los Estados Unidos / Legge uniforme statunitense sui segreti industriali. 54 Bundesgesetz der USA zur Verteidigung von Betriebs- und Geschäftsgeheimnissen / loi fédérale des Etats-Unis sur la protection des secrets d’affaires / Ley Sobre la Defensa de Secretos Comerciales / Legge statunitense sulla tutela dei segreti industriali. 55 18 U.S.C. § 1836. 56 rekonstruieren, zurückentwickeln / rétroconcevoir, ou retro-ingénierie / ingeniería inversa / ricostruire, ricavare mediante operazioni di ingegneria inversa.

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Chapter 8 Intellectual Property Protection and Enforcement Also, no cause of action lies for the owner whose secret another person independently discovers, without reverse engineering it. 740 In light of these features, trade secret law has an important relationship with patent law. Patents can be viewed as providing an incentive so that inventors do not choose trade secret protection over patent protection. Without government involvement, presumably inventors would never freely share with the world the exact nature of their economically valuable inventions, preferring to keep the details of them secret. That is where patent law steps in. The government offers innovators an inducement to disclose their valuable secrets to the public: in exchange for disclosing to the U.S.P.T.O. a new, useful, and non-obvious invention, described in such a way that a P.H.O.S.I.T.A. could practice the invention without undue experimentation, the innovator receives a government-granted private right in the form of a patent, that allows the innovator to exclude others from practicing the invention for a limited time. Without this inducement, innovators might horde their best ideas and never share them with the public—in effect, keeping them as trade secrets. When they do share them, by seeking patent protection on them, others can incorporate these teachings into follow-on innovation, and the public benefits accordingly. Of course, even in the face of the patent incentive, many innovators prefer trade secret protection over patent protection, and information is eligible for trade secret protection regardless of whether it would be eligible for patent protection.

III. Enforcement of Intellectual Property Rights 741

Owners of I.P. rights may seek to enforce their rights against third parties who they believe are committing the infringement, or seek to invalidate I.P. rights asserted by others against them. They may first issue “cease-and-desist”57 letters, alleging that someone is infringing on their I.P. right, or proceed directly to court litigation or agency action. This section discusses the options available to I.P. right owners for all four areas of I.P.

1. Courts 742

Federal courts provide the exclusive venue for copyright and patent infringement actions, while trade secret misappropriation and trademark infringement cases can be brought in state or federal court. U.S. courts will only enforce copyrights and patents registered in the U.S., and trademarks and trade secrets used in the U.S., without regard to use or registration in countries outside the U.S. This section discusses relevant considerations for state and federal court litigation involving I.P.

743 Practice Tip I.P. litigation of any sort in the U.S. is expensive. A survey conducted in 2014 of I.P. attorneys practicing in the U.S. found the following average costs to take cases through trial, based on type of case and amount of damages at risk: Type of Case Copyright Infringement Copyright Infringement Copyright Infringement Copyright Infringement

Amount at Risk Less than $1,000,000 $1,000,000 to $10,000,000 $10,000,000 to $25,000,000 More than $25,000,000

Cost Through Trial58 $325,000 $663,000 $1,057,000 $1,901,000

57 Schreiben zur Unterlassungsanordnung / mise en demeure, cessation et abstention [lit.] / carta de cese y desistimiento / diffide, intimazioni, lettere di “cease-and-desist” [lit.] (lettera con cui si intima a terzi di interrompere una determinata attività lesiva dei diritti dell’attore e di non porla più in essere). 58 All figures from Richard W. Goldstein & Donika P. Pentcheva, AIPLA: 2015 Report of the Economic Survey 105, 173 (2015).

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III. Enforcement of Intellectual Property Rights Type of Case Patent Infringement Patent Infringement Patent Infringement Patent Infringement Trademark Infringement Trademark Infringement Trademark Infringement Trademark Infringement Trade Secret Misappropriation Trade Secret Misappropriation Trade Secret Misappropriation Trade Secret Misappropriation

Amount at Risk Less than $1,000,000 $1,000,000 to $10,000,000 $10,000,000 to $25,000,000 More than $25,000,000 Less than $1,000,000 $1,000,000 to $10,000,000 $10,000,000 to $25,000,000 More than $25,000,000 Less than $1,000,000 $1,000,000 to $10,000,000 $10,000,000 to $25,000,000 More than $25,000,000

Cost Through Trial58 $873,000 $2,164,000 $3,543,000 $6,341,000 $354,000 $670,000 $1,057,000 $2,078,000 $516,000 $1,238,000 $1,991,000 $3,956,000

a) Copyright Infringement occurs when someone impedes on one of the copyright owner’s exclu- 744 sive rights of copyright without license or permission. While obtaining registration of one’s copyright is optional, obtaining a copyright registration certificate from the Copyright Office59 is a prerequisite to suing for copyright infringement. Therefore, routine participants in the copyright system, such as movie studios and book publishers, obtain registrations as a matter of course, to protect their business interests. Registering the work soon after fixation provides certain benefits to its owner. In Chapter 1, “U.S. Law as Foreign Law,” it was explained that in the U.S., the base position is that unless otherwise specified, each side of a law suit pays her or her own attorney’s fees. Copyright is one of the areas of practice where such an exception is provided. Attorneys’ fees may be claimed along with “statutory damages”60 by a copyright owner who registers his or her work three months after first publication of it, or one month after learning of its infringement, whichever is earlier.61 Statutory damages differ from actual damages. Statutory damages allow a court to 745 presume damage from the mere fact that infringement occurred, without requiring the plaintiff to establish actual damages. Proving actual damages can be difficult—expert testimony typically is required, and experts often disagree on the extent to which the copyright owner has actually been damaged by another’s infringement (for example, maybe the damage figure the plaintiff claims is too speculative). Ultimately, the jury decides the appropriate amount of damages to award, and there too, much is left open to chance and the argumentation of lawyers. By comparison, statutory damages are—as the term suggests—set by statute: not less than $750 or more than $30,000 for each work upon which an infringement was committed, as the court considers just.62 The $30,000 maximum figure can be increased to $150,000 if the court finds that the infringement was committed intentionally. While provisions of the copyright law dealing with damages may seem esoteric, in re- 746 ality they provide a great benefit to copyright owners. That is because many copyrights are of little value, and yet the infringement of them can lead to the award of statutory

58 All figures from Richard W. Goldstein & Donika P. Pentcheva, AIPLA: 2015 Report of the Economic Survey 105, 173 (2015). 59 Amt für Urheberrechte [lit.] / bureau du droit d’auteur [lit.] / oficina de patentes / Ufficio per la tutela del diritto d’autore statunitense. 60 gesetzlicher vorgeschriebener Schadensersatz / domages et intérêts fixés par la loi / indemnización legal / risarcimento del danno derivante dalla violazione di un obbligo stabilito dalla legge (statutory duty). 61 17 U.S.C. § 412. 62 17 U.S.C. § 504.

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Chapter 8 Intellectual Property Protection and Enforcement damages. Copyright owners often rely on the threat of pursuing statutory damages in order to convince an infringer or would-be infringer to pursue a different course of action. 747 In order to succeed in a copyright infringement lawsuit, a plaintiff must establish that the defendant had access to the plaintiff ’s copyrighted work and that the defendant’s work is “substantially similar” to the plaintiff ’s. A jury,63 not a judge, generally decides whether the “substantially similar” requirement has been satisfied in any given case. The defendant may attempt to defend the case by stating that he independently created the work in question—essentially arguing that any similarities between the two works are purely coincidental. In theory, two people, working independently, could create works that are substantially similar, or even identical. If they do so, the one whose work comes second in time is not an infringer of the first author’s work. In practice, however, this seldom occurs. 748 A common defense to allegations of infringement is that the unlicensed use of the work by the defendant is protected by the statutory doctrine of fair use.64 The concept of fair use is intended to provide breathing room to other authors in creative landscapes that are often overly constrained by copyrights. The fair use doctrine recognizes that some unlicensed uses of copyrighted works are necessary in order for authors to contribute to society by commenting on, criticizing, or using in some fashion existing works protected by copyright. Many of these uses do not inure to the benefit of the copyright holder. In fact, the copyright holder may adamantly prefer that others not use its work, or at least not use it without paying a licensing fee. Without a fair use doctrine, rights holders would always have the upper hand, deciding on what terms and for what purposes others could use their work. Some uses, even if socially valuable, would be prohibited by rights holders. 749 Practice Tip Fair use is an important doctrine that often arises in the context of attempted copyright enforcement. Certainly not all unlicensed uses of copyrighted works are fair, but neither does every unlicensed use of a work constitute infringement. Courts often find unlicensed uses of works to be fair, and therefore noninfringing, if (1) the use transforms the purpose of the original work, imbuing it with new meaning or understanding; (2) the work in question is factual, and not highly creative, in nature; (3) minimal copying is involved, unless one needs access to more of the original so that others realize the second author is commenting on the original; or (4) the use does not disrupt an established licensing market.

Fair use is embodied in Section 107 of the Copyright Act. The fair use statute sets out four nonexclusive criteria that courts must consider in determining whether an alleged infringement is protected by fair use. These criteria are: (1) the purpose and character of the use; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.65 Resolution of these factors is highly fact specific and no single factor is determinative. 751 Other language in the fair use statute suggests that some uses are presumptively favored, including uses “for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research,” although the weight these uses should be given in a fair use analysis is unclear, and some courts have been stingy in their application of fair use even in these presumably favored instances. 752 Because fair use is a legal determination that takes time and substantial amounts of money to achieve through litigation, there are fewer judicial guideposts than one might 750

Jury / jury / jurado / giuria. lautere Nutzung / usage raisonnable / uso leal / utilizzo leale [lit.], utilizzo corretto. 65 17 U.S.C. § 107.

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III. Enforcement of Intellectual Property Rights expect indicating that which constitutes fair use in the U.S. Overreach by copyright holders that results in uncertainty for prospective fair users is therefore rampant in situations where authors wish to make unauthorized, unlicensed uses of someone else’s copyrighted work. b) Patent Infringement occurs when someone uses or incorporates a patented invention in a product or process without license or permission of the patent owner. Lawsuits for patent infringement may only be brought in federal court. Appeals of these decisions are heard by the United States Court of Appeals for the Federal Circuit (C.A.F.C.),66 a specialized court created in 1982 that is the only federal appellate court configured based on subject matter, not geography. Based in Washington, D.C., the C.A.F.C. has exclusive appellate jurisdiction over patent cases. Because of its authority in the realm of patents, decisions by the C.A.F.C. have high precedential value when it comes to interpreting principles of U.S. patent law. Patents have great value in litigation. Someone who manufactures without permission a product covered by a patent may be made to pay money damages to the patent owner. These damages typically are calculated to consist of a reasonable royalty, as determined by the court, unless the patent owner can convincingly establish his lost profits due to the infringement. The alleged infringer may also be enjoined, or ordered to stop, his infringement. The U.S. has seen an increase in patent litigation in the past decade, in part because of lawsuits brought by so-called “patent trolls,” or companies that view patent enforcement as their primary or sole means of revenue generation.67 These companies typically do not have any employees and do not manufacture any products or provide any services. Many view patent trolls unfavorably because they see these entities as delaying the fruits of innovation from reaching and benefitting the public, costing society billions of dollars in lost wealth. Even though they do not manufacture or sell any products, patent trolls can derail the launch of new technologies until market entrants pay them off or prevail in defending the infringement actions they often initiate.68 Others view patent trolls as efficient innovators that create patent markets by appropriately using the patent system to extract payments from market entrants.69 Whatever one’s view of patent trolls and their often opaque business models, one cannot dispute that they are participants in the U.S.’s “complex, heterogeneous patent ecosystem.”70 The claims of a patent are what courts must interpret in patent infringement lawsuits, so that a jury can understand the patented invention, and compare its protected features to the product or activity of the alleged infringer. Courts interpret disputed claim lan66 Bundesberufungsgericht / cour d’appel pour le circuit fédéral, au sein de l’ordre juridictionnel fédéral / Corte Federal de Apelaciones / Corte d’appello degli Stati Uniti per il circuito federale. 67 Jeff John Roberts, Patent Trolls Hurt R&D Say Scholars in Letter to Congress, Gigaom (Mar. 2, 2015), https://gigaom.com/2015/03/02/patent-trolls-hurt-rd-say-scholars-in-letter-to-congress/. 68 For examples see Colleen V. Chien, From Arms Race to Marketplace: The New Complex Patent Ecosystem and Its Implications for the Patent System, 62 Hastings Law Journal 297 (2010); Ira Glass & Chicago Public Media, When Patents Attack!, This American Life audio podcast, episode 441 (July 22, 2011); James Bessen, Jennifer Ford, & Michael J. Meurer, The Private and Social Costs of Patent Trolls, 11(45) Boston University School of Law Working Paper 1 (2011), http://papers.ssrn.com/sol3/papers.cfm? abstract_id=1930272. 69 Michael Risch, Patent Troll Myths, 42 Seton Hall Law Review 457 (2012); Ashby Jones, When Lawyers Become ‘Trolls,’ Wall Street Journal, (Jan. 23, 2012), http://www.wsj.com/articles/SB10001424 052970203750404577173402442681284. 70 Chien, supra note 68 at 355.

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Chapter 8 Intellectual Property Protection and Enforcement guage at an early stage of the litigation proceeding, in a hearing known as a “Markman hearing,” named for the U.S. Supreme Court case that established this practice.71 Courts analyze evidence during Markman hearings that help them come to a ruling as to the meaning of disputed language contained in the patent. Determining the meaning of the claims is important, as the meaning helps frame the alleged infringer’s activity as either falling within or outside the disputed claim. Settlement postures often change after a court’s ruling at the Markman hearing, as a favorable ruling on the meaning of disputed claim language can mean that a jury is likely to find the defendant’s conduct infringing. 757 Technically speaking, infringers infringe patent claims, not patents. That is because it is possible that a defendant could infringe only one or a few of a given patent’s claims, not all of them. If one’s patent claims a certain feature that a competitor adopts in its product, without permission, the competitor’s product is said to “read” on—that is, infringe—the patent’s claim. Another way of conveying the same meaning is to say that the patent’s claim “covers”72 the competitor’s product. 758 Patent infringement essentially is a strict liability offense. That means that a defendant’s knowledge of a patent, its thoughts about the patent’s validity, or its intentions with its conduct are irrelevant to the ultimate question of whether it infringed the patent.73 Judges have discretion to award enhanced damages if a defendant knew about the plaintiff ’s patent, but willfully decided to go ahead with its infringing activity anyway. c) Trademark 759

A cause of action for trademark infringement exists to prevent confusion in the marketplace. Jury determination of “likelihood of consumer confusion”74 forms the core of the cause of action and plaintiffs can plead their case in federal court under the Lanham Act, regardless of the registration of their trademark with the U.S.P.T.O.75 The Lanham Act makes actionable any use of a: word, term, name, symbol, or device, or any combination thereof . . . which is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities of another person.76

760

While historically courts required plaintiffs to establish consumer confusion regarding the source of the defendant’s goods or services, over time courts broadened the type and scope of confusion that is actionable, and Congress amended the Lanham Act accordingly. For example, now courts will entertain claims based upon the argument that a defendant’s use of a certain mark causes consumers to think that the defendant is spon-

Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996). / couvrir / la reivindicación “cubre” el producto del competidor / (la rivendicazione di un brevetto) copre i prodotti dei concorrenti. 73 U.S. patent law does recognize an experimental use exception to patent infringement. The exception is extraordinarily narrow, and applies only to uses of patented inventions “for amusement, to satisfy idle curiosity, or for strictly philosophical inquiry.” Roche Products., Inc. v. Bolar Pharmaceutical Company, 733 F. 2d 858, 863 (Fed. Cir. 1984). Not even unlicensed uses of patents by university researchers working in academic laboratories qualify as experimental uses in the U.S. Madey v. Duke University, 307 F. 3d 1351 (Fed. Cir. 2002). 74 wahrscheinliche Verbraucherirreführung [lit.] / risque important de confusion pour les consommateurs / probabilidad de confusión entre consumidores / probabilità di confusione per il consumatore [lit.], rischio che si ingeneri confusione nei consumatori. 75 In the alternative, they may elect to sue in state court, advancing claims based on state law. 76 15 U.S.C. § 1125(b). 71

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III. Enforcement of Intellectual Property Rights sored or affiliated with the plaintiff, even if consumers know that the defendant is the source of the product in question.77 Each federal appellate court has articulated a set of factors that should be considered 761 in likelihood of confusion analyses, and these factors and the weight they are given on application vary slightly by court. Typical factors considered in a likelihood of confusion analysis include the following: the extent of similarity—in sight, sound, appearance, and meaning—between the plaintiff ’s trademark and the alleged infringer’s mark; the degree of relatedness between the two parties’ respective goods or services; the degree of overlap between the channels of trade engaged in by the parties; the conditions under which the typical consumer buys each of the products (for example, a child buying on impulse versus a sophisticated purchaser engaging in a major purchasing decision); the number and nature of similar marks in use on similar goods; and the extent to which any evidence of actual consumer confusion exists (for example, consumers calling the defendant’s company for information about the plaintiff ’s product). If a likelihood of confusion exists, trademark infringement is found, and injunctive and monetary relief are possible awards to the plaintiff. Trademark infringement cases always require careful consideration of the nature of 762 the defendant’s use of the mark. While trademark law does not have a statutory fair use doctrine like copyright law, courts do recognize that some unlicensed uses of protected trademarks must be permitted, provided that those uses are not likely to cause consumer confusion. For example, courts permit competitors to reference each other’s products by name for purposes of true comparison, such as when the maker of a breakfast cereal states on its product that its cereal is “Lower in sugar than Kellogg’s Frosted Flakes.” The competitor may do this without seeking Kellogg’s permission (provided the statement is true). Likewise, journalists, authors, and other commentators can mention trademarks by name in their works (like the use of “Kellogg’s Frosted Flakes” in this paragraph), without seeking permission from the trademark owner, provided none of these uses amounts to a confusing use of the mark in commerce. d) Trade Secret Trade secret litigation is an area of growing importance in the U.S. legal system. A 763 cause of action for trade secret misappropriation exists when someone uses improper means to acquire a trade secret from another, or discloses a trade secret without consent by someone who used improper means to acquire it, or at the time of disclosure knew or had reason to know that the secret was acquired under a duty to maintain secrecy, or from someone under such a duty. The D.T.S.A., as well as most states’ laws, define improper means78 in the same way. Common examples of improper means include theft, bribery, misrepresentation, espionage, and breach of contract. Reverse engineering a product does not constitute improper means for purposes of trade secret misappropriation. A range of remedies are available for the owner of a trade secret that was misappro- 764 priated. These include injunctive relief, compensatory damages for actual loss, unjust enrichment damages, a reasonable royalty, and treble damages and attorneys’ fees in cases of malicious misappropriation. The D.T.S.A. offers one remedy that state trade secret 77 Confusion away from the point of sale, known as “post-sale confusion,” is actionable in some courts. Also actionable is “initial-interest confusion,” or the theory that a defendant’s mark causes consumers to have initial confusion as to the source, sponsorship, endorsement, or affiliation between the defendant’s product and the plaintiff, even though that confusion dissipates by the time of purchase. 78 unlautere Mittel / moyens illégaux / medios indebidos / mezzi illeciti o sleali.

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Chapter 8 Intellectual Property Protection and Enforcement laws do not. That remedy is ex parte civil seizure.79 This provision of the D.T.S.A. provides that in extraordinary circumstances, courts can order the seizure of defendant’s property even before the defendant has had an opportunity to have a hearing or be represented before the court. This remedy was written into law in order to provide recourse when employees take trade secrets from their employer and attempt to leave the country. If the court grants an ex parte civil seizure order, federal law enforcement officials will seize the offending property and hold it pending further direction of the court. The law provides that the court must hold a hearing on the seizure within seven days of the property being seized. The party seeking the seizure must post a bond with the court to protect against damages that may be caused by unlawful or improper seizure. The D.T.S.A. is so new that it remains to be seen how useful the ex parte civil seizure provision may be for litigants looking to recapture stolen trade secrets.

2. Agency Actions 765

The U.S.P.T.O. provides venue for certain kinds of agency actions involving patents and trademarks for aggrieved parties and rights holders. The following is an overview of some of the basic administrative actions that come before the U.S.P.T.O. a) Patent

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The U.S.P.T.O. provides ample opportunity for people to challenge the validity of issued patents, which tends to raise the costs of involvement in the patent system. In particular, the A.I.A. created two new procedures for post-grant challenges,80 which are heard by the Patent Trial and Appeal Board (P.T.A.B.):81 (1) post-grant review,82 (P.G.R.) and (2) inter partes review83 (I.P.R.).

767 Practice Tip In 2014, the average legal fees incurred for parties to take a P.G.R. or I.P.R. through to decision by the P.T.A.B. was $334,000. For parties to participate to decision in a trademark opposition or cancellation proceeding, the average legal fees incurred in 2014 were $138,000.84

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A P.G.R. can be used to challenge claims in patents that issue from applications filed on or after March 16, 2013. Given the typical three-year pendency of patent applications, patents susceptible to challenge via P.G.R. are just now starting to issue. A P.G.R. must be initiated within nine months of patent issuance, and the U.S.P.T.O. will only grant a P.G.R. if the party who initiates the proceeding establishes that at least one claim in the challenged patent is more likely than not to be deemed ineligible for protection. The of79 Ex-Parte-Pfändung / saisie ex parte dite civile, par opposition à une saisie en tant que sanction pénale / confiscación de propiedad ex parte / sequestro civile ex parte [lit.], sequestro disposto con provvedimento giudiziale emesso “inaudita altera parte”. 80 Streitigkeiten nach der Zulassung / contestation post-délivrance / apelación después del otorgamiento del patente / procedure di opposizione all’avvenuta concessione (del brevetto), impugnazioni successive alla concessione del brevetto. 81 Beschwerdekommission für Patente / commission de première instance et d’appel pour les brevets / comisión de primera instancia para apelar decisiones tomadas por la oficina de patentes / indica un organismo di conciliazione (letteralmente: una “commissione”, con funzioni analoghe a quelle di un tribunale amministrativo) in seno allo U.S.P.T.O., e con competenza a decidere, a seconda dei casi, in primo grado (trial) e in appello (appeal) sulle opposizioni e sui ricorsi contro le decisioni dello U.S.P.T.O. 82 Überprüfung nach Erteilung / révision post-délivrance / apelación después del otorgamiento / riesame sostanziale di un brevetto già concesso, riesame successivo alla concessione (del brevetto) [lit.]. 83 Inter partes Überprüfung / révision inter partes / revisión inter partes / procedura di riesame del brevetto “inter partes”. 84 All figures from Richard W. Goldstein & Donika P. Pentcheva, AIPLA: 2015 Report of the Economic Survey 139, 154 (2015).

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III. Enforcement of Intellectual Property Rights ficial filing cost to request a P.G.R., not inclusive of attorney fees, is $12,000; another $18,000 becomes due and owing post-initiation of the proceeding. In a P.G.R., patent claims may be canceled for failing to meet any condition of patentability. An I.P.R., in contrast, is narrower in focus. In an I.P.R., the U.S.P.T.O. only considers 769 issues of novelty and nonobviousness. I.P.R.’s cannot be initiated in the first nine months after a patent’s issuance, but can be initiated any time after that during the patent’s lifespan. This procedure became available for use on September 16th, 2012. The U.S.P.T.O. will grant a request for an I.P.R. only if an applicant establishes a reasonable likelihood that they will prevail on at least one claim in the challenged patent. The official filing cost to request an I.P.R., not including attorney fees, is $9,000; another $14,000 becomes due and owing post-institution of the proceeding. In June 2016, the U.S. Supreme Court confirmed that the U.S.P.T.O.’s decision whether to grant a request for an I.P.R. is final and not subject to appeal in any court.85 Also, the Court confirmed that the U.S.P.T.O. should review patents in an I.P.R. using a standard that makes it easier to invalidate them (i.e. the claims are given their “broadest reasonable interpretation,” not their plain and ordinary meaning, as they would in federal court litigation). A main feature of these post-grant procedures is that decisions must be rendered by 770 the U.S.P.T.O. within twelve months of the U.S.P.T.O.’s decision to institute the P.G.R. or I.P.R. Because this timeframe is typically quicker than the time-to-resolution in federal court litigation, the P.G.R. and the I.P.R. have emerged as attractive, cost-conscious methods of attacking a patent’s validity outside the federal courtroom, particularly for industries—such as the generic pharmaceutical industry—that have a vested interest in invalidating patents that cover blockbuster products. b) Trademark The Trademark Trial and Appeal Board (T.T.A.B.)86 hears two main types of agency 771 actions: (1) oppositions, and (2) cancellations. Any third-party that believes it will be harmed by the proposed registration of a trademark published in the Official Gazette may file an opposition before the conclusion of the thirty-day opposition period. Several grounds for opposing registration exist, the most common being that the opposer believes that the applicant’s mark is likely to be confused with the opposer’s mark. If the parties do not settle the dispute after initiation of the opposition, the opposition proceeds to discovery and eventually goes to trial, with the T.T.A.B. making a ruling as to whether the applicant’s mark can register. Filing the notice of opposition costs $300 per class. For marks that have already registered, and are valid and subsisting, third parties may 772 seek to cancel these registrations on various grounds. Pursuing this course of action is a common strategy for trademark applicants when a trademark examiner cites an existing registration as grounds for refusal. The applicant files a petition for cancellation in hopes of cancelling the blocking registration. If successful, a path may be cleared to complete the registration of the application. Certain grounds exist for filing a petition for cancellation at any time during the life 773 of the trademark registration. These grounds include that the owner of the registered trademark has abandoned it; the registered trademark is generic; the registered trademark is geographically deceptive; or the registered trademark comprises matter that, as a Cuozzo Speed Technologies, LLC v. Lee, 579 U.S. __ (2016). Beschwerdekommission für Schutzmarken / commission de première instance et d’appel pour les marques / comisión de primera instancia para apelar decisiones tomadas en cuanto al otorgamiento de marcas registradas / indica un organismo di conciliazione come il PTAB (vedi sopra). 85

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Chapter 8 Intellectual Property Protection and Enforcement whole, is functional. Other grounds exist for filing a petition for cancellation, provided that the petition is filed within the first five years of the mark’s registration. These grounds include that a likelihood of confusion exists between the registered mark and another mark; the registered trademark is merely descriptive; and the owner of the registered trademark had no bona fide use of the mark to support registration. Filing a petition for cancellation costs $300 per class.

IV. Conclusion I.P. law is one of the more complex and dynamic areas of the law in the U.S. While certain precepts of U.S. I.P. law follow international norms, others are unique to the U.S. and the influence of the C.A.F.C., the U.S.P.T.O., and judge-made doctrine. Patent law, in particular, is constantly evolving, with many features of the A.I.A. just entering maturity. The U.S. Supreme Court has also taken an interest in I.P. law in recent years, often overturning or recalibrating features of I.P. law that previously were considered settled or resolved. 775 Companies looking to do business in the U.S. market would be wise to familiarize themselves with the basic features of U.S. I.P. law outlined in this chapter. Advanced planning and preparation are bound to prevent surprises and allow companies from outside the U.S. to protect their valuable intangible assets in the U.S. before it is too late. 774

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CHAPTER 9 INCOME TAXATION AND AUDITS Literature: Attorney Audit Technique Guide – Chapter 1, Internal Revenue Service (Mar. 2011), https://www.I.R.S. .gov/pub/I.R.S.-utl/attorneys_atg.pdf. Audit Guide Techniques, Internal Revenue Service, https://www.I.R.S.gov/businesses/small-businessesself-employed/audit-techniques-guides-atgs. Thomas Greenaway, Choice of Forum in Federal Civil Tax Litigation, Vol. 62, No. 2 Tax Lawyer (2009). Robert Haig, Commercial Litigation in New York State Courts (4th ed.) (Thomson Reuters, 2015). Joseph Henchman & Jason Sapia, Local Income Taxes: City and County-Level Income and Wage Taxes Continue to Wane, Fiscal Fact, Tax Foundation. No. 280 (Aug. 31, 2011). I.R.S. Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund, 2 (Sep. 2013). Douglas Morgan, et al. Budgeting for Local Governments and Communities (Routledge, 2015).

I. Introduction–A Horizontal System of Income Taxation This chapter provides an overview of income taxation in the United States. Section II 776 focuses on the substantive law of income taxation, as well as the jurisdictions in the United States that are authorized to levy and collect an income tax. Sections III through VIII focus solely on the federal government’s taxation of income and collection of taxes, with particular emphasis placed on the procedures the Internal Revenue Service (I.R.S.)1 utilizes when it either seeks to further investigate the accuracy of an income tax return or when it determines an error or other deficiency in a taxpayer’s return. Additional discussion will deal with the taxpayer’s appeal rights from a determination made by the I.R.S. Throughout this book, not only will the civil law lawyer have seen many differences 777 between common law thinking and civil law thinking, but more specifically, the nonU.S. lawyer, whether civil law or common law in orientation, will recognize the complexity in all areas of legal practice brought about because of the U.S. federal structure of fully and simultaneously functioning national and state jurisdictions. This remains true for income taxation practice as well. In the United States, the federal government is not the only jurisdiction within the federal structure that is authorized to impose and collect taxes.2 The federal structure of the United States has been referred to as a horizontal federalism.3 This means that the federal government does not always supersede or preempt laws in effect in the states. Consequently, states as separate sovereigns within the union of the United States, are authorized to impose taxes on its citizens alongside of any taxes imposed by the federal government. Thus, income may be taxed at a total of three different jurisdictions of government: federal, state and what is referred to as “local”. Forty-four states currently impose a tax on personal income.4 However, not all coun- 778 ties or cities (local government, municipality or locality) levy taxes on income; in fact most do not. Nevertheless, a significant number of larger cities in the United States levy 1 Bundessteuerbehörde / administration fiscal / administración tributaria / Agenzia delle entrate del governo federale. 2 The United States Congress is authorized by the Sixteenth Amendment to the United States Constitution to levy an income tax. 3 Kirk W. Junker, Legal Culture in the United States–An Introduction 215 (Routledge, 2016). 4 Jared Walczak, State Individual Income Tax Rates and Brackets for 2015, Tax Foundation (Apr. 15, 2015), http://taxfoundation.org/article/state-individual-income-tax-rates-and-brackets-2015.

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Chapter 9 Income Taxation and Audits some sort of tax on income and often impose other types of taxes that are not strictly based on one’s annual level of income, but are tied to one engaging in an occupation within the city’s borders.5 Municipalities derive their taxing power from their respective state legislatures–that is, the respective county, city or other municipality must be authorized by its state legislature in order to be able to levy a particular tax. It is possible, therefore, that a taxpayer could be subject to taxation on the same income from three different jurisdictions within the federal structure of the United States: federal, state and local.

II. State and Local Income Taxation 1. Resident versus Non-Resident Taxation by the States An important feature of horizontal federalism in the U.S. is that according to the U.S. Constitution, all legal power begins with the states and is delegated from the states to the federation. (Even the supremacy clause of the U.S. Constitution, properly characterized, was created by the states only to enshrine a catalogue of limited powers for the federation.) If a power is not delegated to the federation, then it remains with the states. In practice, if a non-U.S. lawyer wants to understand the spirit of law in the U.S., it becomes clear that one cannot speak of the federal-state legal relations in terms of a hierarchy of top-down from federal to state, nor of bottom-up from state to federal. Competencies for legislation and court jurisdiction may be exclusive or shared, but not in a hierarchy and therefore not profitably discussed as “levels”. On the other hand, sub-state legislative or judicial bodies clearly are only in existence and operation at the pleasure of the states, so one can talk about the state-local relationship as a hierarchy in levels. 780 The extent to which a taxpayer must pay tax on its income to a state varies depending on whether the taxpayer is a resident of the state levying the tax. The determination of who is a resident for tax purposes can sometimes be complex. This discussion is meant to provide a general overview of resident and non-resident taxation. The intricacies of residency determinations would extend beyond the scope of this discussion. 781 Residence generally requires that the taxpayer be “domiciled”6 or have its domicile7 within the state levying the tax. The state of New York, for example, subjects the taxpayer to full taxation of income earned anywhere if he or she is a resident and domiciled in the state, maintains a “permanent place of abode”8 in the state and spends more than 183 days of the year in New York.9 Virginia, Pennsylvania and Massachusetts, as further examples, all define resident in much the same manner as New York. The tax law of each of those states refer to permanent place of abode, domicile and spending more than 183 779

5 The city of Pittsburgh, Pennsylvania for example, imposes an occupation privilege tax, which is a yearly flat fee paid by any person working within the city’s borders. 6 ansässig / domicilié / domiciliado / residente. 7 Wohnsitz / domicile / domicilio / residenza. 8 ständiger Aufenthaltsort / résidence habituelle / residencia habitual / residenza abituale. 9 N.Y. Tax L § 605 (2014); see also New York Tax Bulletin TB-IT-690 (Dec. 15, 2011), https://www.tax.ny .gov/pdf/tg_bulletins/pit/b11_690i.pdf.

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II. State and Local Income Taxation days within the state.10 In California, a resident is a person who is, among other things, domiciled in the state.11 With respect to taxation by the states: the Supreme Court ruled rather early on that 782 under the United States Constitution, non-residents may only be required to pay state income tax on income derived from sources connected to the state.12 Furthermore, while non-residents might be required to remit taxes on some of their personal income, such amounts may be subject to offsets against amounts already remitted to their home state. Therefore, whether a taxpayer is classified as a resident or non-resident within the state or local jurisdiction affects the amount of tax the taxpayer is ultimately responsible to pay. With respect to the local jurisdiction, there is generally no obligation on the part of the taxpayer to remit income taxes to the local government unless the taxpayer is classified as a resident. For example, if the taxpayer works in New York City but does not reside there, the taxpayer is not required to pay New York City income tax.13 If one is classified as a resident, one must pay taxes on all income received from any source. Local jurisdictions are mindful of keeping taxes low in order to encourage those who 783 work in the locality to also live in the locality. Many taxpayers–particularly those with large incomes–deliberately make residency decisions based on their potential exposure to state and local taxes. Many taxpayers work in New York City but choose to live, for example, in New Jersey or Connecticut in order to pay less in state and city taxes. The various states consequently shape their tax policy with this in mind. Often the argument is made by state lawmakers that high taxes will force their residents to leave and move to other states where taxes are lower. Large states such as Florida and Texas, therefore, have no income tax with this notion in mind in particular. The extent to which the choice of personal residence is of any import need not be further dealt with here. But it should be noted that as a general matter, states often use tax policy to influence who lives and does business in their states–and, as a result, pays taxes and contributes revenue to their state budgets. Further, individual states often provide special discounted tax rates to businesses, for example, in order to lure them to the state or keep them from moving to another state.14 It is here we see that the states actively compete with one another and do so through their respective tax laws. 784

Practice Tip Both the I.R.S. and many local government tax authorities publish handy guides on taxation that are written in a way that is more “user friendly.” As regards states, for example, the New York Department of

10 Massachusetts law provides: (f) “Resident” [Einwohner / résidant / residente / residente] or “inhabitant” [Bewohner / habitant / habitante / abitante], (1) any natural person domiciled in the commonwealth, or (2) any natural person who is not domiciled in the commonwealth but who maintains a permanent place of abode in the commonwealth and spends in the aggregate more than one hundred eighty-three days of the taxable year in the commonwealth, including days spent partially in and partially out of the commonwealth. Mass. Gen. Laws Ann. ch. 62, § 1. 11 See State of California Franchise Tax Board, FTB Publication 1031, Guidelines for Determining Resident Status – 2018 10 (2018), https://www.ftb.ca.gov/forms/2018/18_1031.pdf (stating: “Domicile is defined for tax purposes as the place where you voluntarily establish yourself and family, not merely for a special or limited purpose, but with a present intention of making it your true, fixed, permanent home and principal establishment. It is the place where, whenever you are absent, you intend to return.”). 12 Shafer v. Carter, 252 U.S. 37 (1920); see also N.Y. Tax L § 631 (2014). 13 This is subject to exceptions. Non-resident employees of the city of New York are required to pay New York City income tax. 14 For more on Connecticut’s efforts to keep Swiss bank UBS from moving to Manhattan, referring to the “price” the Connecticut governor was willing to pay, and the “goodies” being offered by New York, see Part 14: A Desperate Drive to Save UBS, Connecticut Post (Dec. 31, 2011), http://www.newstimes.com /local/article/Part-14-A-desperate-drive-to-save-UBS-2402508.php.

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Chapter 9 Income Taxation and Audits Taxation and Finance–Taxpayer Guidance Division15 publishes tax bulletins16 on various topics, such as “permanent place of abode.” These bulletins often contain useful sample fact scenarios that serve to better explain a particular tax provision or term of art.17 I.R.S. materials will be discussed in more detail below.

2. Income Taxation at the Local Level “Local” is the term referring to levels of government with jurisdictions within states in the U.S. federal system. Local governments depend on powers granted to them from the state in which they are located in order to carry out their functions. They are therefore subordinate to state or federal governments and are generally considered those at the county level and smaller: state, county, city, borough or village, school district. However, one must be aware that the hierarchy of local governments varies from state to state, as well as the various names given to local government entities. As an example, Connecticut has no county-level governments, while counties in most other states have competencies in a number of areas. Moreover, local entities may be called something different depending on the state. For example, Pennsylvania and New Jersey have “townships.”18 Louisiana, being the only civil law-related U.S. jurisdiction, refers to counties as “parishes.” 786 As of 2011, most municipalities in the United States did not impose an income tax. However, 4,943 jurisdictions in 17 states did impose such a tax, encompassing over 23 million persons.19 Taxes on personal income have various designations: earned income tax,20 wage tax,21 personal income tax,22 etc. They are imposed either directly on the taxpayer or are levied on the taxpayer’s employer.23 Like taxes at the state level, the imposition of a local tax generally distinguishes between residents and non-residents. Therefore, non-residents are taxed at a lower rate than residents. The rationale for this is that non-residents do not receive the same amount of local services that residents of the locality do. 787 Local income taxes were introduced around the time of the Great Depression.24 Until that time localities had generally relied on property taxes to finance their budgets. Due to substantial drops in property values around the country at that time, however, many municipalities turned to other sources of income to fund local government and 785

15 Abteilung für Steuerzahlerberatung des New Yorker Steuer- und Finanzamtes / Département des Impôts et des Finances de New York, division du conseil au contribuable / Departamento de Impuestos y de Finanzas, Oficina de Consejo para Contribuyentes / Divisione assistenza per i contribuenti del Dipartimento delle Imposte e delle Finanze dello Stato di New York. 16 Rundschreiben, Merkblatt zur Steuer / équivalent américain du Bulletin officiel des Finances Publiques (BOFiP)/ Boletín de Impuesto / Bollettino fiscale [lit.]. 17 Such bulletins are not themselves binding sources of law; however, they are persuasive insofar as they represent the agency’s interpretation of the law. See e.g., TB-ST-140 (03/10) at 5. See also N.Y.Prac., Com. Litig. in New York State Courts § 117:3 (4th ed.). 18 The U.S. Census Bureau published a very helpful guide describing how local governments are structured within each state. See, Individual State Descriptions: 2012, http://www2.census.gov/govs/cog/2012isd .pdf. 19 Joseph Henchman & Jason Sapia, Local Income Taxes: City and County-Level Income and Wage Taxes Continue to Wane, Fiscal Fact, Tax Foundation. No. 280 (Aug. 31, 2011). 20 Einkommenssteuer / impôt sur le revenu / impuesto sobre la renta / imposta sui redditi da lavoro. 21 Lohnsteuer / impôt sur les salaires / impuesto sobre el salario / imposta sul reddito da lavoro subordinato. 22 persönliche Einkommenssteuer / impôt sur le revenu des particuliers / impuesto sobre la renta individual / imposta sul reddito delle persone fisiche. 23 Id. 24 Weltwirtschaftskrise / grande Dépression / la gran Depresión / la Grande Depressione, la crisi del 1929.

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III. Federal Income Taxation saw the income tax as a solution to increase revenue to their municipalities.25 The local income taxes that were introduced are typically a percentage of the taxpayer’s adjusted gross income26 (A.G.I.). and are withheld each pay period automatically from the taxpayer’s salary or wages. If the taxpayer is a corporation, local income taxes (often called corporation or business taxes) are generally remitted on a quarterly basis as estimated tax payments. The final computation of local income taxes owed is generally included in the taxpayer’s state income tax report to the state authorities, referred to as the income tax “return.”

III. Federal Income Taxation Who pays federal income taxes in the United States? The Internal Revenue Code27 788 casts a fairly wide net with respect to who must file an income tax return with the Internal Revenue Service (“I.R.S.”), the federal agency responsible for collecting taxes owed pursuant to federal law. Citizens of the United States must file an income tax return for earned income regardless of where they earned it. The obligation to pay federal taxes, therefore, is linked to citizenship, in addition to other factors. It is referred to as the “worldwide income” reporting responsibility. An American living and working in France, Italy, or Mexico, for example, must file a return each year with the I.R.S. indicating how much he or she earned while working abroad that year. While the possibility exists that a large percentage of such foreign-earned income will be exempt from taxation in the United States, one must remain aware that there is still an obligation to disclose such income to the federal government. Failure to report income earned abroad results in significant penalties and possible criminal liability on the part of the taxpayer. In addition to United States citizens, all other natural persons, regardless of citizen- 789 ship, who earn income in the United States, as well as corporations doing business in the United States, are required by law to file an income tax return with the I.R.S. The income tax return includes a calculation of what is referred to as the taxpayer’s adjusted gross income. Foreign corporations that derive income from business transacted in the United States must also pay tax on such income.28 The tax due for the year is based on the adjusted gross income that results by reporting income earned by the taxpayer (gross income) and then taking into consideration all the circumstances applicable to the taxpayer, such as deductions, amortization and depreciation, tax credits, etc., and deducting these amounts from gross income, which will be further discussed below. With respect to federal income tax, taxpayers are required generally to prepare an in- 790 come tax return and submit it to the I.R.S. by the 15th of April of each year. U.S. citizens abroad however receive automatic extensions and other circumstances may determine a later filing deadline, so taxpayers should consult the I.R.S. with their particular circumstances to determine their individual deadline. The taxpayer must report to the federal government all income earned during the tax period,29 which corresponds to either the calendar year or a self-determined fiscal year. Thus, a tax return filed with the I.R.S. on April 15th, 2025 would report income earned by the taxpayer between January 1st, 2024 and December 31st, 2024. The taxpayer is responsible for calculating its tax and submit25 Douglas Morgan, et al. Budgeting for Local Governments and Communities 171 (Routledge, 2015). 26 angepasstes Bruttoeinkommen / revenu brut ajusté / ingreso bruto ajustado / reddito lordo rettificato. 27 ähnlich der Bundesabgabenordnung / équivalent du Code Général des Impôts / equivalente al código tributario / Codice tributario statunitense. 28 28 U.S.C. § 882. 29 Veranlagungszeitraum / exercice fiscal / período impositivo / periodo di imposta.

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Chapter 9 Income Taxation and Audits ting the required forms to the I.R.S. (collectively those forms constitute the taxpayer’s income tax return). If the taxpayer fails to do so, the I.R.S. will eventually create a tax return for the taxpayer based on the information that it has received from various sources. This is never advisable for the taxpayer, however, as the information the I.R.S. has is likely to be inaccurate. I.R.S. preparation of a taxpayer’s income tax return will likely result in a higher tax burden for the taxpayer. In addition, the taxpayer could face penalties in the form of a failure-to-file30 or failure-to-pay31 penalty. 791 Practice Tip Filing extensions are generally available to all taxpayers if they apply for an extension in a timely manner. Taxpayers currently living outside of the United States may even be eligible for an additional 2-month extension (December 15 filing date). IMPORTANT: any taxes owed are generally still due on April 15th. In certain cases, an extension of the time to pay the tax owed may be deferred, but until paid, such amount accrues interest at rates determined by the I.R.S.

A majority of taxpayers do not prepare and submit their tax returns, however, without professional assistance. Taxpayers may rely on a number of solutions to help them comply with their federal income tax reporting requirements. Most taxpayers turn to what are referred to generally as tax preparers.32 These include a number of large, private tax preparation providers that operate nationwide, as well as online tax preparation platforms. The preparation of even a fairly simple tax return can be somewhat costly to the taxpayer as there is no statutory fee schedule that governs the fee arrangement between the tax preparer and the client; rather, freedom of contract prevails and the parties are free to negotiate the fee as they wish. Most taxpayers have fairly simple tax situations: they typically work for a single employer who withholds income taxes from the taxpayer’s periodic paycheck and submits the withheld amounts to the respective tax authorities. At the end of the tax period, the employer then sends the taxpayer a statement setting forth the employee’s yearly income and the taxes the employer withheld. The taxpayer or his or her tax preparer uses this form to compute his or her taxes. 793 Tax preparers include certified public accountants33 (C.P.A.) who must be licensed by the state in which they practice. The licensing process includes an examination and the submission of an application in the state the C.P.A. desires to practice. C.P.A. perform a host of services for their clients, including standard bookkeeping and accounting, compliance work with government agencies on behalf of taxpayers and tax return preparation. Among other things, certified public accountants must have a command of generally accepted accounting principles34 (G.A.A.P.). 794 It also must be noted that tax lawyers rarely hold themselves out as tax preparers. While they may advise the taxpayer and work closely with the taxpayer’s accountants, they rarely engage in the rather administrative and ministerial task of completing and submitting tax returns to the I.R.S. on behalf of the taxpayer. Furthermore, unlike some other countries, the rules of professional responsibility applicable to the practice of attorneys in most states generally preclude attorneys from sharing office space or partnering with professionals other than attorneys. The rules discourage multi-disciplinary practice 792

30 Erklärungsversäumnis / absence de déclaration / incumplimiento de la obligación de presentar la declaración fiscal / omessa presentazione della dichiarazione dei redditi. 31 Zahlungsversäumnis / absence de paiement / incumplimiento del pago /mancato o ritardato pagamento delle imposte. 32 Steuerberater / comptables fiscalistes / asesor de impuestos / fiscalista, consulente fiscale. 33 zertifizierter Bilanzbuchhalter / experts-comptables / contador público certificado / revisore dei conti autorizzato, contabile pubblico autorizzato [lit.]. 34 Grundsätze ordnungsgemäßer Buchführung / Plan Comptable Général / Principios de Contabilidad Generalmente Aceptados / principi contabili generalmente accettati.

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V. Internal Revenue Service Examination and Audit of Federal Tax Returns between lawyers and non-lawyers.35 Thus, in the U.S. you will not find tax attorneys and accountants or other tax advisors working together in the same office in the same way one might find this practice in Germany.

IV. “Gross Income” Under the Internal Revenue Code In addition to the wide net the I.R.S. casts with regard to who must pay federal in- 795 come taxes, the Internal Revenue Code casts an equally broad net with respect to what constitutes income and must be reported to the federal government. Internal Revenue Code § 61 broadly defines “gross income” as “all income from whatever source derived.” The United States Supreme Court has further defined gross income by saying that it is “any accession to wealth.”36 This means that as a general rule any manner in which the taxpayer is enriched in some way is subject to taxation by the federal government. We will see below, however, that this is subject to exceptions. The taxpayer must generally at least report to the I.R.S. income it earned during the 796 taxable period. Whether the income is ultimately taxed is another issue. The income reported by the taxpayer could be offset by other deductions, for example. However, in certain cases the taxpayer is not required to even report such income. The most notable exceptions to the reporting requirement include proceeds paid on account of the death of a person to a beneficiary under a life insurance policy,37 the value of property acquired by gift or inheritance,38 interest earned on any state or local bond,39 or compensation awarded due to physical injury or sickness.40 Therefore, all money received by the taxpayer must be reported to the I.R.S. unless there is a specific exception to this requirement.

V. Internal Revenue Service Examination and Audit of Federal Tax Returns A look at the most recent statistics shows that the I.R.S. generally accepts the tax re- 797 turn submitted by the taxpayer without any further investigation. As of 2015, of the 191,857,005 returns filed, the I.R.S. only examined and objected to 0.7 % of them.41 This percentage increases, however, depending on both the type of federal tax return and the amount of income declared, respectively. In the years since the beginning of the Trump administration, the overall number of examined returns has dropped precipitously to only 0.5 % of all returns filed.

See e.g., N.Y. Rules of Prof ’l Conduct R. 5.8(a). See Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 431–33 (1955). 37 26 U.S.C. § 101(a). 38 26 U.S.C. § 102(a). 39 26 U.S.C. § 103(a). 40 26 U.S.C. § 104. 41 Internal Revenue Service Data Book, 2015, 23 (2015). 35

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Chapter 9 Income Taxation and Audits Figure 1: Internal Revenue Service Examinations of Individual Returns by Level of Income (2014–15) Size of adjusted gross income All returns No adjusted gross income $1 under $25,000 $25,000 under $50,000 $50,000 under $75,000 $75,000 under $100,000 $100,000 under $200,000 $200,000 under $500,000 $500,000 under $1,000,000 $1,000,000 under $5,000,000 $5,000,000 under $10,000,000 $10,000,000 or more

Returns filed in Calendar Year 2014 (percent of total) 100.00 1.76 38.51 23.23 13.13 8.42 11.15 3.08 0.48 0.21 0.01 0.01

Examination coverage in Fiscal Year 2015 (percent) 0.84 3.78 1.01 0.50 0.47 0.49 0.64 1.54 3.81 8.42 19.44 34.69

Source: Internal Revenue Service Data Book, 2015 at 27.

Figure 2: Internal Revenue Service Examinations of Individual Tax Returns by Level of Income (2017–18) Size of adjusted gross income All returns No adjusted gross income $1 under $25,000 $25,000 under $50,000 $50,000 under $75,000 $75,000 under $100,000 $100,000 under $200,000 $200,000 under $500,000 $500,000 under $1,000,000 $1,000,000 under $5,000,000 $5,000,000 under $10,000,000 $10,000,000 or more

Returns filed in Calendar Year 2017 (percent of total) 100.00 1.68 35.59 24.65 13.44 8.66 12.41 3.72 0.58 0.25 0.02 0.01

Examination coverage in Fiscal Year 2018 (percent) 0.5 2.04 0.69 0.48 0.48 0.45 0.44 0.53 1.10 2.21 4.21 6.66

Source: Internal Revenue Service Data Book, 2018 at 27.42

42 Charles Rettig, Internal Revenue Service Data Book, 2018, Internal Revenue Service (Sep. 30, 2018), https://www.I.R.S..gov/pub/I.R.S.-pdf/p55b.pdf.

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VI. Criteria for the Selection of Tax Returns for Audit

VI. Criteria for the Selection of Tax Returns for Audit In order to ensure compliance with applicable tax laws, the I.R.S. reviews federal tax 798 returns generally to ensure that information that is provided by the taxpayer matches information received from various sources of income. The I.R.S. engages in what is called document matching43 and compares the taxpayer’s return with information received by sources such as employers, contractors, banks, brokerage firms, pension funds, etc. The information provided by these payors is related to income earned in the form of salaries, bank interest, dividends, capital gains, pension payments, etc. Generally, if a payor pays more than $600 to a recipient within a tax period, it is required to send the taxpayer a form for its records stating the amount paid. The payor must also report to the I.R.S. the amount paid to the taxpayer.44 The I.R.S. uses random sampling and computer screening programs to select tax re- 799 turns on a random basis for further examination.45 With regard to the screening programs, the programs assign each tax return a score based on criteria established by the I.R.S. The higher the score, the more likely the return will be subject to additional examination. Many factors influence what score is given, including information provided in a tax return that may typically raise red flags with the I.R.S., such as a disproportionately high amount of deductions claimed for a person who operates a small business or works freelance,46 reporting a net loss for income derived from a business, or passive income. It should be noted that there is no minimum level of cause required for the I.R.S. to subject a tax return to more intense scrutiny. The I.R.S. may select a tax return for examination based merely on an unfounded suspicion that the tax return may be inaccurate because the taxpayer, for example, engages in a particular profession. Those who work in the food-service industry (waiters, waitresses, bartenders, etc.), for instance, are often subjected to additional scrutiny because in the U.S. they are not guaranteed a minimum wage and often take a sizeable portion of their income in the form of cash tips. The I.R.S. might be more likely to audit the return of someone who works in an industry where transactions are effectuated in cash because in the past the I.R.S. regularly determined that taxpayers working in that particular industry underreported their income. In order to better understand particular industries or occupations, the I.R.S. issues 800 comprehensive publications referred to as Audit Technique Guidelines47 (A.T.G.) that contain instructions to I.R.S. employees regarding when and how they are to conduct audit examinations. These guidelines provide insight into the issues and accounting methods that are unique to specific industries or occupations. As a measure of transparency, guidelines are also consulted by taxpayers and tax professionals alike, to gain an understanding of how the I.R.S. operates.48 The information provided in the guidelines includes how income is received by the taxpayer in a particular industry or occupation, 43 Abgleich von Dokumenten / comparaison de documents / compatibilización de documentos / controllo incrociato dei dati fiscali, incrocio dei documenti fiscali [lit.]. 44 These forms are some variation of the 1099 form. 45 I.R.S. Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund, 2 (Sep. 2013). This process is referred to as Discriminant Index Function. 46 When an individual works as an independent contractor rather than an employee, he or she generally receives compensation where income taxes, social security and Medicare taxes are not withheld by the employer. In addition, the independent contractor is permitted by I.R.S. rules to deduct expenses “business related” expenses. 47 Leitfäden zur Steuerprüfungstechnik / recommandations applicables aux contrôles fiscaux / guía técnica de auditoría fiscal / linee guida tecniche di esecuzione delle attività di revisione e controllo contabile. 48 See e.g., Audit Guide Techniques, Internal Revenue Service, https://www.I.R.S..gov/businesses/sm all-businesses-self-employed/audit-techniques-guides-atgs.

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Chapter 9 Income Taxation and Audits which accounting methods are typically utilized in that industry, the various corporate forms of those in the industry and what sort of internal controls are typical for the occupation or industry. Moreover, for the purpose of making I.R.S. examinations flow more smoothly, the guidelines introduce I.R.S. employees to the terminology typically used in an industry. 801 The A.T.G. of the I.R.S. also discuss “potential issues” that may be prevalent in a particular industry or occupation. For example, with respect to the occupation of attorneys, the I.R.S. has published an A.T.G. in order to give I.R.S. employees guidance regarding the issues they should be aware of when examining the tax returns of practicing attorneys. Among other things, the guideline tells I.R.S. employees how attorneys are compensated (the various fee arrangements with their clients), what their internal record keeping controls are like and how lawyers might underreport their income. The guideline further discusses the attorney/client privilege and its interplay with I.R.S. requests for certain financial documentation, including bookkeeping documentation that discloses a client’s name and payments or expenses received from it. I.R.S. employees consult the guideline to determine how they are to proceed when an attorney objects to turning over documentation to the I.R.S. based on a claim that the requested documentation is privileged. The guideline further includes citations to applicable case law governing the issuance of I.R.S. requests for information claimed to be privileged by an attorney taxpayer. The guideline also outlines how attorneys maintain their bank accounts and what the requirements are of state bar associations with regard to attorney handling of client funds. Because the regulation of attorney conduct is regulated on the state level,49 the guidelines advise I.R.S. employees to take additional steps such as contacting the respective state bar associations in order to gain a better understanding of the various state rules governing attorney bookkeeping and conduct generally. The guidelines direct I.R.S. employees to consider all of the various issues raised therein when requesting documentation from attorneys.50 802 Practice Tip The I.R.S. offers guidance to both taxpayers and tax professionals in a variety of forms. The most common I.R.S. publications are regulations, revenue rulings, revenue procedures, private letter rulings and technical advice memoranda. These various publications can be distinguished as follows: Regulation: This is perhaps the most important I.R.S. guidance. Administrative regulations are issued by the I.R.S. and Treasury Department to provide guidance with respect to tax legislation and are often cited by the courts. Revenue Ruling: An official legal interpretation of the Internal Revenue Code by the I.R.S. Revenue Procedure: An official statement of a procedure that affects the rights or duties of taxpayers under the Internal Revenue Code. Private Letter Ruling: A written response by the I.R.S. to a request from a taxpayer that interprets and applies the law to the taxpayer’s particular situation. Private Letter Rulings do not have precedential effect; however, they are used for guidance by tax professionals to get a sense of how the I.R.S. may view a similar tax situation affecting their client. Technical Advice Memorandum: Guidance provided by the I.R.S. Office of Chief Counsel with regard to procedural questions that arise during an audit proceeding.

803

If the I.R.S. decides to audit a tax return, it conducts audit examinations using any of the following four methods: correspondence examinations, office examinations, field examinations and employment tax audits. The most common audit method used by the I.R.S. is the correspondence examination in which the I.R.S. sends to the taxpayer a auf Ebene der Bundesstaaten / au niveau des Etats fédéraux / al nivel estatal / a livello statale. See generally Attorney Audit Technique Guide – Chapter 1, Internal Revenue Service (Mar. 2011), https://www.I.R.S..gov/pub/I.R.S.-utl/attorneys_atg.pdf. 49

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VII. Client Representation in an Audit Situation written notice indicating it disagrees with a taxpayer tax return. The taxpayer then has the opportunity to respond to I.R.S. requests for information. Correspondence examinations are conducted by mail and are concluded either when the taxpayer agrees with I.R.S. findings or it disagrees, and the I.R.S. moves to the next stage in the process by issuing what is referred to as the “30 Day Letter,” more about which will be discussed below.

VII. Client Representation in an Audit Situation Before discussing the further steps in the audit process, a brief word should be said 804 about client representation before the I.R.S. When the I.R.S. decides to further examine the income tax return of a taxpayer, the taxpayer is well advised to be represented by federally authorized tax practitioners,51 who are authorized to communicate with and practice before the I.R.S.52 Federally authorized tax practitioners include accountants, tax preparers, actuaries, appraisers, attorneys and other professionals who are permitted to represent a client before the I.R.S. and are subject, correspondingly, to the obligations imposed on them by Department of Treasury regulations.53 It goes without saying that these practitioners are better equipped than the majority of lay people, or those without special knowledge of the intricacies of tax law or I.R.S. procedures, to discuss tax related matters with the I.R.S. and to respond to the requests from the I.R.S. Not all tax practitioners are the same, however. When it comes to responding to I.R.S. 805 requests for information, tax preparers and accountants may very well be suitable taxpayer representatives because they are generally familiar with I.R.S. terminology, I.R.S. forms and procedures, as well as the fundamentals of taxation and accounting. Taxpayers can rely on such tax preparers and accountants to provide the I.R.S. with supplemental information or to answer questions regarding the preparation of the income tax return–particularly in the initial stages of an I.R.S. examination of a taxpayer return. But while tax preparers and certified public accountants are versed in accounting methods and the formal preparation of income tax returns, they lack the tax law knowledge required for them to be competent representatives of the taxpayer when more serious disputes arise between the taxpayer and the I.R.S. This is particularly the case in situations where the I.R.S. challenges the taxpayer’s tax return and it becomes apparent that there will be differences between the taxpayer and the I.R.S. regarding the tax treatment under the Internal Revenue Code of particular items in the contested tax return. Tax attorneys, particularly those who specialize in tax litigation, not only have a better understanding of the substantive law of the Internal Revenue Code, they have particular experience utilizing the procedures available to appeal determinations of the I.R.S. They also have a better understanding of the options available to the taxpayer in the event that the direct negotiations with the I.R.S. do not yield the results desired by the taxpayer. When the additional tax demanded by the I.R.S. reaches a level that exceeds more 806 than five to ten percent of the taxpayer’s gross income, reliance on a tax attorney becomes indispensable. And it goes without saying that when the I.R.S. pursues criminal charges against the taxpayer, the taxpayer must engage a competent attorney versed in criminal tax law to defend the taxpayer. Representation by an attorney is particularly 51 bundesweit autorisierte Steuerpraktiker / fiscalistes accrédités au niveau national / profesional de impuestos autorizado federalmente / fiscalisti accreditati a livello federale. 52 See 31 U.S.C. § 330. 53 See e.g., I.R.S. Circular 230, which contains regulations pertaining to the practice of representatives before the I.R.S.

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Chapter 9 Income Taxation and Audits important in criminal tax investigations because the common-law attorney-client privilege applies in full to proceedings appealing I.R.S. tax determinations. The client is not protected to the same extent by the attorney-client privilege if the client chooses to be represented by a federally authorized tax practitioner who is not an attorney.54 807 The American Bar Association Model Rules of Professional Responsibility55 (“model rules”)56 impose limitations on the extent to which attorneys in any field of law may hold themselves out as experts or specialists in that field. The model rules have been adopted by a majority of U.S. states.57 Other states have adopted the model rules but made amendments to them or only adopted certain provisions thereof. Under a majority of state rules of professional responsibility, an attorney may designate himself as an expert or specialist in a particular field of law only if he or she is certified as a specialist by an organization that has been approved by an appropriate state authority or that organization has been accredited by the American Bar Association.58 Attorneys, however, may advertise that they practice in a particular area of the law without characterizing themselves as “experts” in the field. Therefore, when looking for competent counsel in tax matters, it is generally not difficult to find attorneys who hold themselves out as practicing in the area of tax litigation. One should not look for the word “expert.” In addition to being permitted to practice before the I.R.S.–which all attorneys who are active59 members of a state bar are entitled to do–tax attorneys must also be admitted to practice before the U.S. Tax Court, a federal court that deals exclusively with appeals from I.R.S. determinations.

1. The 30 Day Letter 808

If the I.R.S. and the taxpayer cannot reach an agreement during the initial stage of the audit of a tax return with regard to how a particular item or items in a tax return is treated for tax purposes, the I.R.S. will issue to the taxpayer what is referred to as the 30 Day Letter.60 The letter is called a 30 Day Letter because it gives the taxpayer thirty days to respond to the determinations made by the I.R.S. agent who examined the taxpayer’s return. The 30 Day Letter is accompanied by copies of the examination report prepared by I.R.S. agents and requests the taxpayer to take a position with regard to the changes to the tax return(s) proposed by the I.R.S. If the taxpayer agrees with the findings of the 54 See 26 U.S.C. § 7525. Section 7525 provides that, with respect to tax advice, the same common law protections of confidentiality apply to a communication between a taxpayer and any federally authorized tax practitioner to the same extent such communication would be considered privileged under the attorney/client privilege. Such privilege, however, may not be asserted in criminal tax matters or tax proceedings before any federal court. 55 Regelungen für die Berufshaftung / règles de déontologie / reglas modelo de conducta profesional / regole di deontologia professionale. 56 Model rules are promulgated by the American Bar Association (a private but influential organization) as recommendations to the states. Since the licensing, regulation and discipline of attorneys is largely a matter governed at the state level, the purpose of the model rules is to try and make more uniform the law in a particular field – that is, to reduce variations among the states. 57 See American Bar Association, CPR Policy Implementation Committee, Variations of the ABA Model Rules of Professional Conduct – Rule 7.4: Communication of Fields of Practice and Specialization (Nov, 2015), http://www.americanbar.org/content/dam/aba/administrative/professional_responsibility/mrpc_7 _4.authcheckdam.pdf. 58 See Model Rule of Professional Responsibility § 7.4(d)(1). 59 “Active” in this context means that the attorney is in good standing – that is, the attorney is currently in compliance with the requirements of the state bar in which he or she practices and is not under suspension or disbarment. 60 30-Tage-Brief / lettre des 30 jours / un aviso del fiscal, al cuál hay que responder dentro de 30 días / avviso di accertamento preliminare, al quale il contribuente deve rispondere entro trenta giorni.

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VII. Client Representation in an Audit Situation I.R.S., it must notify the I.R.S. of its agreement and remit the additional tax due. If the taxpayer disagrees, it may submit an appeal which will be heard by the Appeals Office61 of the I.R.S. Depending on the amount of tax determined by the I.R.S., the taxpayer may need to submit a written Protest to the I.R.S., which not only includes the taxpayer’s counter proposal, but also must include a discussion of the applicable law in support of the taxpayer’s position. In cases where the amount of additional tax determined by the I.R.S. is less than $25,000, taxpayers are eligible to make a small case request,62 which does not require the submission of a formal Protest. If the taxpayer disagrees with the findings made by the I.R.S. set forth in the 30 Day 809 Letter and properly submits the appropriate documentation setting forth the reasons for its appeal, the issue goes before the Appeals Office of the I.R.S. Here, the taxpayer communicates with the independent Appeals Office and has the opportunity to meet with representatives of the Appeals Office to further discuss disputed issues. It is at this point that taxpayer representation is necessary because the representative has a better understanding of what it is the I.R.S. is requesting from the taxpayer. Typically, most issues can be resolved after the parties have had the opportunity to meet and clarify I.R.S. requests. The I.R.S. generally views disputes with taxpayers as being amendable to settlement. If the taxpayer and the I.R.S. Appeals Office reach an agreement with regard to the disputed issues, the I.R.S. will issue a Notice of the decision of the Internal Revenue Service Office of Appeals (N.O.D.A.), which sets forth the final determination of the case. If there are areas of dispute that have not been resolved by the I.R.S. and the taxpayer, the I.R.S. will issue to the taxpayer a Statutory Notice of Deficiency,63 which is also called a “90 Day Letter.”64

2. The 90 Day Letter and Choice of Venue to Appeal Internal Revenue Service Determinations The 90 Day Letter represents the final determination by the I.R.S. of the amount 810 owed by the taxpayer. It has been referred to by tax practitioners as the taxpayer’s ticket to the Tax Court. This is because only once a 90 Day Letter has been issued can the taxpayer formally appeal the administrative determination of the I.R.S. to the U.S. Tax Court without having first paid the tax liability assessed by the I.R.S. And as the name of the document suggests, the taxpayer has 90 days to submit its appeal to the Tax Court. Many taxpayers receive a 90 Day Letter because they failed to properly respond to earlier I.R.S. requests for information. Thus, even at this stage it is not too late for the taxpayer to engage competent representation and enter into to discussions with the I.R.S. At this stage however, instead of the I.R.S. Office of Appeals, the taxpayer will be dealing with the Office of Chief Counsel of the I.R.S. The Office of Chief Counsel consists of attorneys with significant tax and trial experience. While in discussions with I.R.S. Chief Counsel, an appeal should be submitted to the 811 U.S. Tax Court. It should be noted at this point however, that the U.S. Tax Court is not the only venue where the taxpayer may appeal a tax determination made by the I.R.S. It is an attractive venue because the taxpayer may challenge the decision of the I.R.S. without first having paid the I.R.S. the amount it demands. This option allows taxpayers of lesser means the opportunity to get a hearing before a court without additional financial Berufungsstelle / bureau des appels / Oficina de Apelaciones / Ufficio di appello [lit.], Ufficio ricorsi. Bagatellfall-Antrag [idm.] / requête de litige mineur / asuntos de cuantía menor / istanza di avvio del procedimento per controversie di modesta entità. 63 offizielle Mangelmitteilung / notification officielle de défaut / notificación oficial de deficiencia / avviso di accertamento formale per dichiarazione infedele. 64 26 U.S.C. § 6212. 61

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Chapter 9 Income Taxation and Audits burden upfront. Taxpayers, however, may also simply pay the amount owed, then file a complaint in a Federal District Court65 or the Court of Federal Claims66 seeking reimbursement of the amount it paid to the I.R.S. Thus, tax litigation generally may be divided into two categories:67 prepayment actions68 and refund suits.69 The taxpayer has two choices generally: it can prepay the amount owed, even if it believes the amount determined is erroneous, then sue for a refund. This stops the accrual of interest on the amount owed and ends the appeals process with the I.R.S. The taxpayer can also make its way through the administrative appeals process with the I.R.S. and ultimately file an appeal with the U.S. Tax Court to challenge the I.R.S. determination of additional tax owed. 812 Besides the financial situation of the taxpayer, there are many additional factors that will influence a taxpayer’s decision to appeal an I.R.S. determination to the U.S. Tax Court or file a suit for refund of the amount paid in a Federal District Court. In certain cases, for example, the taxpayer has no choice because the type of tax dispute at issue may only be heard by a particular court.70 However, the taxpayer quite often may weigh the various circumstances involved in its case and choose what it believes to be the most favorable option. These considerations are generally referred to as a choice-of-forum analysis,71 and must be made by a competent tax lawyer. 813 The U.S. Tax Court72 hears the majority of tax cases.73 The U.S. Tax Court is a court of national jurisdiction and holds its proceedings in most states on a rotating basis throughout the year. As a court of national jurisdiction, the cases that are precedent and control the facts at issue in a tax case before the U.S. Tax court will be the same case precedents across the entire United States. A taxpayer in Los Angeles will be subject to the same binding precedent as a taxpayer in rural Alaska. The facts at issue in a trial before a U.S. Tax Court are decided by a judge rather than a jury. This means that the taxpayer can expect the matter to be decided by a judge who is an expert in the intricacies of federal tax law. 814 Compare the above to a suit filed before a Federal District Court. The federal courts in the United States are divided into what are referred to as circuits,74 each of which has a United States Court of Appeals.75 Each circuit is further divided into districts, each of 65 Bezirksgericht erster Instanz auf Bundesebene / tribunal de première instance au sein de l’ordre juridictionnel fédéral / Corte Federal de Distrito / Corte distrettuale federale. 66 Gericht für Klagen auf Bundesebene / cour des contentieux fédéraux / Corte Federal de Reclamos / Corte dei ricorsi federali [lit.]. 67 Thomas Greenaway, Choice of Forum in Federal Civil Tax Litigation, Vol. 62, No. 2 Tax Lawyer 312 (2009). 68 Vorauszahlungsklagen / contestations avant paiement / demanda por pago adelentado / azione di restituzione per errato versamento di acconti. 69 Rückerstattungsprozesse / demandes de remboursement / demanda por reembolso / azione di rimborso. 70 For example, only the U.S. Tax Court has jurisdiction to review an I.R.S. refusal to abate interest. I.R.C. § 6404(h). Wrongful levy actions, on the other hand, may only be brought before a Federal District Court. I.R.C. § 7426. See also Thomas Greenaway, Choice of Forum in Federal Civil Tax Litigation, Vol. 62, No. 2, Tax Lawyer 314–16 (2009). 71 Analyse zur Gerichtsstandswahl / analyse dite du choix du for / análisis sobre el elección del foro / analisi sulla elezione del foro competente. 72 US-Finanzgerichtshof / tribunal fiscal des Etats-Unis /Tribunal Fiscal de los Estados Unidos / Corte tributaria degli Stati Uniti [lit.], Tribunale degli Stati Uniti competente per le controversie tributarie. 73 See Administrative Office of the U.S. Courts, Federal Judicial Caseload Statistics, Appendix, Tables C-2 & C-4, www.uscourts.gov/Statistics/FederalJudicialCaseloadStatistics.aspx. 74 Gerichtsbezirke / circuits / distrito en el cual está ubicado un Tribunal Federal de Apelaciones / circoscrizione giudiziaria assegnata a una ‘court of appeal’ federale. 75 Berufungsgericht der Vereinigten Staaten / cour d’appel au sein de l’ordre juridictionnel fédéral / Tribunal Federal de Apelaciones / Corte d’Appello degli Stati Uniti [lit.],Tribunale di appello nell’ordinamento giudiziario federale.

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VII. Client Representation in an Audit Situation which has a Federal District Court–the trial court of first instance. District courts are socalled Article III courts because their judicial power derives from and is controlled by Congressional legislation, as permitted by Article III of the U.S. Constitution.76 A Federal District Court is bound only by the precedent announced in three courts: The United States Supreme Court, the Court of Appeals in which the Federal District Court is located and by the precedent announced by its own court. Noticeably absent from this list of precedent are the U.S. Tax Courts. If one pursues this path, not only do the specialized precedents of U.S. Tax Court not apply, but the factual questions in a Federal District Court proceeding may be decided by a jury, which is not necessarily composed of experts in tax matters, if the parties allow. The rules of pleading and the discovery process also differ in a Federal District Court 815 insofar as a premium is placed on collaboration between the parties and stipulating to essential facts when litigating in front of the U.S. Tax Court.77 Many of the typical tools of discovery, such as depositions, are used less frequently in U.S. Tax Court proceedings. Checklist With respect to choosing a venue for litigating tax issues, the following considerations should be reviewed by tax counsel: 1. Financial Situation of the Client: This is likely the most important consideration. If the client does not have the means to pay the I.R.S. upfront and then sue for a refund, litigation in the U.S. Tax Court is the only suitable option available to the taxpayer. It must be noted, however, that by paying the determined tax liability, interest stops running on the amount owed. 2. Statute of Limitations: If the taxpayer has not complied with the deadline for responding to the I.R.S. 90 Day Letter, it may have forfeited its right to appeal to the U.S. Tax Court. 3. Favorability of the Forum: Depending on the specific tax issues in the case, counsel should review applicable precedent applicable in each court in order to determine whether litigating in a particular forum offers any advantage over another to his or her client. 4. Settlements and Trial Procedure: Counsel should keep in mind that the Federal Rules of Civil Procedure provide for a more active role for the court in settlement discussions compared to U.S. Tax Court Rules. Proceedings before the U.S. Tax Court are guided by the overarching notion that the parties should stipulate (agree) to the extent possible with respect to the material facts of the case. Judges in the U.S. Tax Court disfavor lengthy trials or the introduction of evidence not stipulated to by the parties. As mentioned above, the Office of Chief Counsel endeavors to settle most tax dis- 816 putes with taxpayers. However, settlement negotiations do not simply consist of whimsical proposals and counter-proposals. I.R.S. attorneys make it clear that settlement negotiations must be based on the law applicable to the tax issues in question. There must be a firm basis for I.R.S. recognition of the particular tax treatment proposed by the taxpayer. The key is that counsel supply the documentation requested by the I.R.S. and respond with valid legal arguments. This might seem like common sense, but practitioners must not proceed on the assumption that I.R.S. counsel will entertain offers to settle a case simply to reduce their litigation burden or ease their work schedules after a lengthy ap76 Thomas Greenaway, Choice of Forum in Federal Civil Tax Litigation, Vol. 62, No. 2, Tax Lawyer 311 (2009). 77 Id. at 323.

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Chapter 9 Income Taxation and Audits peals process. The main consideration in choosing whether to refuse to settle on a particular point of law is what is referred to as a hazard of litigation analysis78–that is, whether the I.R.S. believes it will prevail on the point if the matter is decided by a court. If the I.R.S. does not believe it can win on a particular point, it is generally more likely to try to reach a settlement on the issue. If it believes it is correct on a point, the taxpayer can rest assured, it will not concede the point for the purposes of quick settlement. 817 Therefore, counsel is advised to conduct a thorough interview with the client, thereby collecting all documentation and records from the client that are applicable to the issues in dispute. Counsel must stress to the client that cooperation with requests is critical as swift compliance with I.R.S. requests shortens the appeals process and facilitates goodwill between the taxpayer and the I.R.S. 818 Once the 90 Day Letter is received by the taxpayer, counsel should enter an appearance with the U.S. Tax Court, which notifies the court that counsel is representing the rights and liabilities of the client, and initiate appeals proceedings. During this time, the taxpayer and the Office of Chief Counsel can still meet and engage in discussions regarding the I.R.S. determination of the taxpayer’s tax liability. If the taxpayer and the Office of Chief Counsel are able to reach an agreement, have stipulated to all material facts and are ready to formally enter into a settlement, the Office of Chief Counsel will prepare a stipulation that can be submitted to the U.S. Tax Court. In addition, it will recalculate the liability and send it to the taxpayer. It should be noted that the Office of Chief Counsel will not necessarily recalculate the amount owed based on a settlement for the convenience of the taxpayer. I.R.S. counsel will only do so on the assumption that a settlement has been reached. Counsel should therefore independently compute the new tax liability based on his or her discussions with the I.R.S. in order to secure the client’s authorization to settle the case. If, on the other hand, the taxpayer and the Office of Chief Counsel do not agree to all material issues, the taxpayer and the I.R.S. Office of Chief Counsel generally must submit a pre-trial memorandum to the U.S. Tax Court setting forth the outstanding issues that are to be decided by the court.

VIII. Conclusion: Settlement with the Internal Revenue Service Office of Chief Counsel 819

As in civil litigation generally, the vast majority of disputes between the I.R.S. and taxpayers end in a settlement and do not go to trial before a court.79 Thus, this chapter focused on pre-trial procedures and was not meant to delve into the intricacies of trial practice at either the U.S. Tax Court or any other federal court that resolves tax matters. If and when a dispute between the taxpayer and the I.R.S. settles prior to trial, counsel should arrange a payment plan with the I.R.S. on behalf of the client. Counsel must also advise the taxpayer that it is under an obligation to timely file all tax returns during the period of repayment and must otherwise comply with the terms of the repayment plan. Should the taxpayer fail to do so, the I.R.S. may seek to enforce the settlement by placing a levy on taxpayer property or bank accounts.

78 Prozessrisikoanalyse / analyse dite des aléas du contentieux / análisis sobre el riesgo de litigio / analisi del rischio di contenzioso. 79 See John H. Langbein, The Disappearance of Civil Trial in the United States, 122 Yale L. J. 522, 522 (2012). Since the 1930’s the percentage of civil cases being decided upon conclusion of a trial has dropped to below 2 % in federal courts.

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CHAPTER 10 APPLICATION OF INTERNATIONAL MARITIME LAW: ISSUES UNIQUE TO THE UNITED STATES Literature: Benedict on Admiralty (Matthew Bender ed., 2015). Charles M. Davis, Maritime Law Deskbook (2016). Wharton Poor, Poor on Charter Parties and Ocean Bills of Lading (5th ed.) (Matthew Bender & Co., 2018). David Robertson, Admiralty and Federalism (The Foundation Press, 1970). Thomas J. Schoenbaum, 1 Admiralty & Maritime Law (5th ed., 2011). William Tetley, Maritime Liens and Claims (1998).

I. Introduction to the Maritime Law Regime in the United States Maritime law can be considered the oldest and most universal area of international 820 law. As such, many concepts of maritime law are quite uniform between nations and would be familiar to both civil and common law practitioners. The greatest differences are usually found in court procedures, concepts of jurisdiction and in certain modern aspects of substantive maritime law which were not traditionally found in this area, such as marine environmental laws and vessel safety regulations. Even here, the common interests of maritime nations and the need for uniform regulation and application of laws to international maritime commerce has permitted the creation of a great number of international conventions governing maritime matters. 821

Practice Tip If the reader does not already have a good grasp on U.S. civil procedure, it is recommended that the reader reads Chapter 2, “Federal Civil Litigation,” before proceeding with this chapter.

Traditional core areas include laws for carriage of goods, treatment of seamen, charter 822 of vessels and other areas that would apply as well to ancient sailing vessels as they would to modern container ships and tankers. The earliest substantive laws were codified, with the most noteworthy examples found in the Laws of Oleron1 and the Digest of Justinian2, the latter setting forth a full codification of the ancient Roman law on the subject. Examples are found in medieval law codes which should be familiar to those who have studied in the continental legal systems. The United States inherited many of the traditional concepts of substantive maritime 823 law in these core areas from Great Britain. As the United States became the heir to the English Common Law system it developed a corpus of maritime law that was an admixture of statutory and court-made (case) law.3 As it relates to traditional core areas the maritime law of the United States is perhaps the purest form of English law to have been carried on in the new Republic. In modern U.S. jurisprudence, English maritime case precedent, both predating and subsequent to the independence of the United States, may still be cited as proper precedent in U.S. proceedings dealing with some traditional areas of maritime law, which is not the case in most other areas of substantive law. 1 Sometimes referred to as the Rules or Code of Oleron, the oldest Medieval maritime code in northern Europe. Full text found at: 30 Fed. Cas. 1171–87. 2 The Digest of Justinian 415 (Theodor Mommsen ed.) (Univ. of Pennsylvania Press, 1985) (describing the recodification of the older Greek Rhodian Code, among other related topics). 3 Richterrecht / jurisprudence / jurisprudencia / diritto giurisprudenziale.

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Chapter 10 Application of International Maritime Law A further clarification must be made between the substantive and procedural aspects of maritime law. This author would argue that there is a distinction between the terms “maritime law” and “admiralty law.” Those terms are often used interchangeably today, and sometimes together. Some scholars have held that traditionally the terms were distinct, with “maritime law”4 referring to the entire body of laws, rules, legal concepts and processes that relate to the use of marine resources, ocean commerce and navigation,”5 whereas Admiralty Law refers only to the private law of navigation and shipping.6 With due respect to these learned scholars, this distinction is perhaps not apropos for modern usage. Rather, “Maritime Law” encompasses the entire corpus of the subject, both substantive and procedural, but “Admiralty Law,” while properly referring to the traditional law, both substantive and procedural (in the latter as to unique procedural aspects such as in rem proceedings) inherited from England,7 is best used to refer to the body of procedural law which is distinct in U.S. practice and is separately codified in the U.S. Federal court system. This will become more apparent in the explanations to follow. 825 The penultimate reference to U.S. maritime law is the ten-volume Benedict on Admiralty,8 first published over 161 years ago, with multiple editions following to expand to its present encyclopedic length. It is now supplemented and updated each year and addresses all aspects of Admiralty and maritime law, including several volumes devoted to rules and procedures and more covering all pertinent international treaties. The bibliography and research tools are exhaustive. 824

826 Practice Tip Volume 8 of Benedict is a Desk Reference that summarizes most practical aspects of the practice and is recommended as a good summary of the most active areas of the law. Anyone entering into this area of law should consult this Desk Reference, and Benedict generally, in addition to other sources cited in this chapter.

II. Sources of United States’ Admiralty and Maritime Law 1. The Constitutional Basis In comparison with many national constitutional documents, the Constitution of the United States is the longest surviving and yet one of the most minimalist in coverage, and rarely amended. Its purpose was to provide the framework for what was at its foundation a very limited national government, with the expectation that the individual member states would be responsible for the enactment of most substantive law and the individual state courts would have jurisdiction over most civil matters. Therefore, while the U.S. Constitution is essential for the establishment of the nation’s court systems and procedure, most importantly for jurisdiction, it provides little in the form of foundation for substantive law, including in admiralty practice. 828 The single provision for admiralty and maritime law in the U.S. Constitution is found at Article III, § 2, providing in pertinent part that: “the judicial powers shall extend to all 827

4 Seerecht / droit maritime / derecho de la navegación / diritto marittimo, diritto della navigazione marittima. 5 Thomas J. Schoenbaum, 1 Admiralty & Maritime Law § 1–1 (5th ed., 2011), Charles M. Davis, Maritime Law Deskbook § IA (2016). Both of these texts are comprehensive summaries of U.S. maritime law relied upon by many U.S. practitioners. The latter text serves as a better quick reference. 6 Id. 7 England maintained separate Admiralty courts, and in the United States, even after the Federal Rules amendments of 1966, Federal courts still distinguish the separate “Admiralty court” by designating such cases as “sitting in Admiralty.” The separate body of Admiralty procedure is addressed below in Section G. 8 Benedict on Admiralty (Matthew Bender ed., 2015).

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II. Sources of United States’ Admiralty and Maritime Law cases, in law and equity, arising under this Constitution, the laws of the United States, and treaties made, or which shall be made, under their authority . . . to all cases of admiralty and maritime jurisdiction . . .”.9 This single clause in Article III provides the only reference to admiralty and maritime law, and purely for jurisdictional purposes, referencing the judicial power of the United States (meaning Federal versus the several individual State court systems). Furthermore, by making reference to cases arising under treaties made under the authority of those laws, this provides for jurisdiction over Federal statutes created to give effect to treaties and conventions entered into by the United States, which would encompass the domestication of international maritime law created by treaty. This Constitutional provision only defines the judicial power of the U.S. Supreme 829 Court.10 As such, the early U.S. Congress enacted the Judiciary Act11 of 1789.12 Under the Judiciary Act of 1789, the U.S. Congress conferred on the U.S. District Courts original jurisdiction “of all civil causes of admiralty and maritime jurisdiction, including all seizures . . . where they are made, on waters which are navigable from the sea by vessels of ten or more tons berthen.”13 The Supreme Court followed with a broad interpretation of the limits of the Constitution and the Judiciary Act of 1789 that granted to the Federal District Courts as well as the Supreme Court (in early years there were no intermediate Federal Courts of Appeal) authority to determine all cases of admiralty and maritime law, which allowed the Federal District Courts to issue opinions on maritime matters, expanding upon the inherited English jurisprudence. There have since been both courtmade and statutory exceptions which have allowed limited maritime law to be created at the state level on certain topics. The Judiciary Act of 1789 also established in U.S. jurisprudence one of the two key 830 elements in determining Admiralty jurisdiction. That is the “locality” or “lexus” test for Admiralty tort jurisdiction, that the incident giving rise to the cause of action must take place on “navigable waters.”14 Even here, the U.S. has broadened the traditional concept, applying Admiralty to certain occurrences that take place partly on land through the Admiralty Extension Act.15

2. Federal Statutes Essentially all statutory or “code based” maritime law is Federal in nature. This arises 831 from the interpretation of the Constitutional grant of authority over maritime law to the Federal judiciary as explained above, from the origination of much maritime law through treaty and convention, and from established principles of Federal pre-emption and uniformity over international and interstate commerce. A limited number of state statutes may address maritime law in limited areas of state prerogative where these are not in conflict with Federal law, mostly for environmental regulations and certain personal injury claims.

9 U.S.

Const. art. III, § 2. Schoenbaum, supra note 5 at 2. 11 Justizgesetz / loi judiciaire / ley orgánica del poder judicial / legge sull’ordinamento giudiziario. 12 Act of September 24, 1789 ch. 20, § 9, 1 Stat. 73. The modern amended version is found at 28 U.S.C. § 1333. 13 Id. 14 28 U.S.C. § 1333. 15 46 U.S.C. § 740. 10

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On the substantive side, Federal statutes govern areas including carriage of goods,16 maritime liens,17 injury and death to United States seamen,18 death of persons on the high seas,19 injury and death to longshore and harbor workers,20 vessel safety and regulation,21 marine pollution and environmental damage,22 and a host of other laws. On the procedural side a special set of court rules which will be detailed below govern all Federal court proceedings in admiralty.23 The United States Code contains the body of Federal statutory law created by Congress. Most statutory law authorizes the promulgation of rules and regulations to enforce and carry out the provisions of this statutory law. These rules and regulations are found in the United States Code of Federal Regulations,24 promulgated under the rule-making authority of various Federal agencies as authorized by statute.

3. United States’ Adoption of Treaties and Conventions As many areas of substantive maritime law in the modern era stem from multilateral conventions and treaties, this constitutes a significant source of U.S. maritime law. As will be demonstrated, many of the core areas of maritime law in the United States are based upon Federal statutes promulgated to codify conventions and treaties entered into by the United States. Based upon principles of international law, and as set forth in the Vienna Convention on the Law of Treaties,25 unless a treaty or convention is self-enacting,26 once that convention has been ratified by the United States Senate pursuant to its Constitutional authority, Congress must enact enabling legislation to create enforceable law. An example is the enactment of the Carriage of Goods by Sea Act in 1936 upon adoption of The Hague Rules.27 834 In some cases, an international convention may not have been signed or ratified by the United States, but has still been adopted, in part or in whole, as part of the corpus of maritime law recognized in the United States. One of the most recent examples of this is the United Nations Convention on the Law of the Sea (1982), discussed at Section F, below. Certain provisions may be recognized as principles of jus cogens under international law, due to their wide recognition among maritime states. This is not a common occurrence in U.S. law, and it is more likely that conventions that are not ratified by the United States (for instance the Hamburg Rules amendments to The Hague-Visby Convention on cargo) would not be recognized in U.S. maritime law. 833

4. The General Maritime Law and Federal Common Law 835

The largest source of substantive maritime law is court-made case opinions, known as the General Maritime Law (G.M.L.).28 The G.M.L. has its origins in principles that were customary in nature, gleaned from the early body of maritime law in English opinions, 46 U.S.C. § 30701–30707; 46 U.S.C. § 30701 (formerly 46 U.S.C. § 1301 et. seq.). 46 U.S.C. § 31301 et. seq. 18 46 U.S.C. § 688. 19 46 U.S.C. § 30301 et. seq. 20 33 U.S.C. § 901–950. 21 46 U.S.C. et. seq. 22 See enumerated statutes in Section E of this chapter. 23 See Section G of this chapter. 24 Sammlung für Bundesverordnungen / code des règlements fédéraux des Etats-Unis / código de regulaciones federales de los Estados Unidos / codice dei regolamenti federali degli Stati Uniti. 25 U.N. Doc. A/CONF. 39/27, reprinted in 8 I.L.M. 679 (1969). 26 unmittelbar anwendbar / d’application directe / aplicación directa / immediatamente applicabile. 27 See Section B of this chapter. 28 allgemeines Seerecht / droit maritime general / derecho marítimo general / diritto marittimo generale. 16

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II. Sources of United States’ Admiralty and Maritime Law treatises and even ancient codes. In the U.S. common law system, court-made case opinions usually make up the largest body of substantive law in any area. However, as was discussed in Chapter 1, “U.S. Law as Foreign Law,” as a general principle there is no Federal common law.29 Rather, the courts of the individual states make up the body of substantive common law. When, under Article III of the U.S. Constitution a Federal court has original jurisdiction over a civil controversy because the parties are from different states or a foreign country, known as diversity jurisdiction, the Federal court must usually apply the substantive law of the state in which it sits. An almost unique exception to this basic structure is maritime law. Due to considera- 836 tions of uniformity and Federal preemption, Federal courts follow a body of case law that covers most areas of the maritime law, including but not limited to interpretations of Federal statutes. In areas of maritime law not governed by statutes the Federal courts have issued a plethora of opinions. Even where statutes exist, such as remedies for injured seamen under the Jones Act, there are additional and supplemental remedies available under the developed G.M.L. Courts look to precedent not only from their own Federal jurisdiction (Circuit Court of Appeal or District Court). Opinions from any Federal court may serve as precedent in a maritime case, although the courts need not follow precedent outside of their jurisdiction, and it is common to see conflicts between the opinions of Federal courts in different jurisdictions.30 Furthermore, courts addressing some traditional maritime matters not governed by U.S. statutes may look to authority from decisions in the United Kingdom, Canada, Australia or most other common law jurisdictions that inherited the English maritime law. In limited circumstances the maritime opinions of state courts will also serve as 837 precedent, but usually only within that jurisdiction absent contrary Federal opinion and as to subject-matter not addressed by a Federal court. The best all-inclusive source for maritime case decisions is American Maritime Cases. 838 This reporter, published since 1924, contains not only all cases reported in the standard U.S. Federal and state reporter series, but also many unpublished decisions of Federal and state courts, some arbitration decisions, and even pertinent cases from foreign jurisdictions. It is still published in both book and electronic format, and is searchable in Lexis and Westlaw.

5. The Concepts of Federal Preemption and Uniformity Two of the most critical principles to the understanding of the predominant Federal 839 nature of substantive maritime law in the United States are Federal preemption and uniformity. With Federal preemption, laws concerning subject matter under the purview of the Federal government based upon Constitutional authority are governed exclusively by Federal statutes, regulations and Federal court case law. All laws governing international trade, national defense, interstate commerce and the like are under the exclusive purview of the Federal government. As such, the individual states may not enact laws governing these subjects. This encompasses virtually the entire body of maritime law, in part because most maritime commerce is international or interstate in nature, and all of the navigable waters of the United States are regulated as part of interstate and international commerce. Federal preemption is well illustrated by the prohibition of state laws, statutory, regulatory or judge-made, that attempt to regulate activities in the navigable waters of the U.S., including inland waters within the boundaries of a particular state, Erie Railroad v. Tompkins, 304 U.S. 64 (1938). The standard precedent of any Supreme Court opinion or the opinion of a circuit court of appeal in the same jurisdiction will always apply. 29

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Chapter 10 Application of International Maritime Law where such laws would be in conflict with the Federal laws or Federal law so completely dominates the area as to abrogate the need for the states to supplement it.31 This is the case for instance when a Federal statute such as the Death on the High Seas Act is considered the exclusive remedy and bars application of state law remedies over an area of traditional maritime activity.32 This principle does not prohibit the enactment of state laws in the same area where there is not a clear conflict with the Federal law.33 840 The concept of uniformity dovetails with that of Federal preemption. Case law supports the basic concept that laws governing maritime commerce must be uniform in nature in order to properly govern this vital subject matter and create certainty for those involved therein. The fundamental pronouncement on this subject was made by the Supreme Court in 1916: The general maritime law as accepted by the federal courts constitutes part of our national law applicable to matters within the admiralty and maritime jurisdiction . . .. No such state legislation is valid if it . . . works material prejudice to the characteristic features of the general maritime law or interferes with the proper harmony and uniformity of that law in its international and interstate relations.34

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For instance, it would be impossible for commercial vessels to operate in interstate or international commerce if each state were to promulgate different or even contradictory laws regulating vessel operations, safety, manning, waterways regulation, etc. This concept has been extended to the nature and extent of damages that can be awarded for claims arising under the maritime law.35 United States courts continue to strongly support the concept of uniformity and are quick to strike down attempts through statutory or court decisions to vary from the recognized uniform standards in maritime law.36

III. Additional Issues of Federal Admiralty Jurisdiction: Federal Procedure under Rule 9(h), the “Savings to Suitors Clause” and Federalism 842

The modern statute granting exclusive Admiralty jurisdiction to the Federal courts, stemming from the Judiciary Act of 1789, is 28 USC § 1333. This statute provides: The district courts shall have original jurisdiction, exclusive of the courts of the States, of: (1) Any civil case of admiralty or maritime jurisdiction, saving to suitors in all cases all other remedies to which they are otherwise entitled. (2) Any prize brought into the United States and all proceedings for the condemnation of property taken as prize.

31 See generally California v. ARC America Corp., 490 U.S. 93 (1989); Fidelity Fed. Sav. & Loan Ass’n. v. de la Cuesta, 458 U.S. 141 (1982). 32 Offshore Logistics, Inc. v. Tallentire, 477 U.S. 207 (1986). 33 Askew v. The American Waterways Operators, Inc., 411 U.S. 325 (1973). 34 Southern Pacific Co. v. Jensen, 244 U.S. 205, 215–16 (1916). The opinion in Jensen has been criticized and questioned over the years, and the concept of uniformity is not a bar to state laws addressing some maritime matters (see above). However the fundamental concept of uniformity is still respected. 35 See the seminal decision in Miles v. Apex Marine, 496 U.S. 19 (1990), which held that the Congressional intent in all of the maritime personal injury/death statutes was to limit damages to pecuniary (not punitive or otherwise). Attempts to expand this ruling to encompass damage limits on all types of personal injury claims in admiralty has been the subject of extensive litigation. 36 The Maritime Law Association of the U.S. strongly promotes uniformity in maritime law. It has a standing committee on uniformity and has filed amicus briefs in important appellate cases when principles of uniformity are at issue.

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III. Additional Issues of Federal Court Admiralty Jurisdiction Based upon this grant of exclusive jurisdiction, the Federal Rules of Civil Procedure 843 (F.R.C.P.),37 governing all civil actions, include Rule 9, which governs pleading of special matters. Rule 9(h) is the provision referencing admiralty and maritime claims. The Rule provides as follows: (h) Admiralty or Maritime Claim (1) How designated. If a claim for relief is within the admiralty or maritime jurisdiction and also within the courts’ subject matter jurisdiction on some other ground, the pleading may designate the claim as an admiralty or maritime claim for purposes of Rules 14(c), 38(e), and 82 and the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions. A claim cognizable only in the admiralty or maritime jurisdiction is an admiralty or maritime claim for those purposes, whether or not so designated. (2) Designation for Appeal. A case that includes an admiralty or maritime claim within this subdivision (h) is an admiralty case within 28 U.S.C. § 1292(a)(3).

This rule provides the basis for application of the Supplemental Rules for Certain Ad- 844 miralty and Maritime Claims, which is discussed at Section G, below. This Rule was adopted out of the Constitutional grant of exclusive Admiralty jurisdiction and that of the Judiciary Act of 1789 and its progeny.38 A case brought pursuant to this Rule, and so designated in initial pleadings, will be treated as an Admiralty and Maritime matter for all purposes and with all special rules and concepts explained in this chapter. The Judiciary Act of 1789 established one prong of the two-part Admiralty jurisdic- 845 tion requirement, which is called “locality” or “lexus.”39 (See section I above.) The other prong is “nexus,” meaning that the subject-matter “bears a substantial relationship to traditional maritime activity.”40 Both requirements must be met for a court to be able to exercise Admiralty jurisdiction over most matters. 846

Practice Tip There are several benefits to a matter coming under the admiralty jurisdiction in the Federal courts. These include the use of the Federal Rules of Civil Procedure and the avoidance of a jury trial in most cases (as further explained below). Federal procedures are generally more structured than state procedures, particularly when using discovery,41 which can be a much broader practice than in most legal systems outside the U.S. Federal court motion practice relies much more heavily on written submissions than in state courts, and thus requires a high level of preparation. Federal judges can be more experienced with maritime matters than state trial judges due to the rarity of such cases in state courts. Trials are also more stringent. All of these elements favor a well-prepared and sophisticated party. It is extremely important when bringing an action in admiralty to make sure to plead the application of Rule 9(h), to designate the matter “in admiralty,” and to otherwise make sufficient allegations in a complaint for proper subject-matter jurisdiction in a Federal court. Defending against an attempt to file a maritime case within another jurisdiction, or remove a case from the admiralty jurisdiction, requires a careful study and pleading of all pertinent rules and statutes.

The statutory exception to the exclusivity of Federal jurisdiction over maritime mat- 847 ters is the “Savings to Suitors Clause,” codified at 28 U.S.C. § 1333(1). Under the “Savings to Suitors Clause,” a plaintiff can elect to file a maritime case in any state court that has jurisdiction over the parties and the subject matter, so long as that court is competent to adjudicate the matter. This usually applies to personal injury and death cases, which outside of the maritime arena are usually addressed by state courts applying state laws. This is a purely procedural exception and the issue has been litigated extensively, creating a 37 Bundeszivilprozessordnung / Règles Fédérales de Procédure Civile / Reglas Federales del Procedimiento Civil / Norme Federali di Procedura Civile. 38 28 U.S.C. § 1333. 39 Fully explained in Executive Jet Aviation v. City of Cleveland, 409 U.S. 249 (1972). 40 Sisson v. Ruby, 497 U.S. 358 (1990); Foremost Ins. Co. v. Richardson, 457 U.S. 668 (1982). 41 Offenlegungsverfahren / phase de divulgation / descubrimiento de pruebas / coesibizione delle prove.

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Chapter 10 Application of International Maritime Law tremendous volume of case interpretations on the limits of state court jurisdiction over maritime matters. This is a critical issue, particularly in personal injury and death claims, because, as explained further below, jury trials are not available for most Admiralty matters in Federal court, but state courts hearing what would be a civil action under the common law will allow a right to jury trial. 848 The broader issue of federalism in admiralty, the subject of entire treatises,42 pertains to the limits by which a state may enact laws governing maritime subject matter. From a similar volume of court interpretation, the simplest summary is that states may enact laws, both statutory and court made, governing any aspect of maritime commerce only where those laws do not contradict, override or interfere with Federal law on the subject. This is sometimes referred to as the “maritime but local” principle.43 In many cases, such as laws pertaining to navigation regulations and inspection and regulation of vessels, Federal laws are so complete that any state laws, even if not contradictory, are found to be invalid and a violation of the exclusive jurisdiction of the Federal courts and Congress. In any event, even with the application of the Savings to Suitors Clause, which allows courts of individual states to take jurisdiction of certain maritime related civil actions, those courts are still bound to apply Federal law unless there is no Federal law governing the subject. As such, even where a plaintiff might bring a maritime personal injury action in a state court that under its own rules has jurisdiction over such a case, in all likelihood that state court will apply the uniform laws of maritime personal injury, such as the Jones Act and the General Maritime Law.

1. In Rem and Quasi in Rem Jurisdiction The general rule for determining a proper party in U.S. litigation is that the party must be a legal person, an individual or entity with “personhood” or legal entity status. A corporation or other proper entity, such as a government agency, can be a legal party. In U.S. common law objects or property cannot usually become a legal defendant (with some limited exceptions for civil forfeiture or U.S. Customs proceedings, etc.). However, under the maritime law, vessels, cargo and other maritime related property can in some instances be sued and become a party in litigation. They are sued in rem, as distinguished from an action against a person or corporation, such as the owner or charterer, which are sued in personam. This is most often encountered with enforcement of maritime liens (see Section C, below), where a vessel itself can stand as the obligated party in addition to its owner or charterer. 850 Vessels, cargo and related maritime property can also be utilized as security for maritime litigation or arbitration undertaken in another forum. In this case an action can be brought against them quasi in rem, to either sue the owner when they cannot be found within the jurisdiction or to provide security, wherein normally they will substitute a bond or other financial instrument in exchange for release of the property arrested or seized. Such prejudgment security and actions against “the res,” or property at issue, may be more common in other legal systems but are novel in the U.S. outside of Admiralty. Detailed rules for in rem and quasi in rem actions are outlined at Section G of this Chapter. 849

851 Practice Tip The practicalities of pursuing an in rem or quasi in rem matter mean finding the vessel or property that is to be served or “arrested”. The rules governing this are discussed in Section G of this chapter. In most cases, as with service of an in personam complaint, the defendant does not need to be provided with notice in 42 43

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See David Robertson, Admiralty and Federalism (The Foundation Press, 1970). Wilburn Boat Co. v. Fireman’s Fund Ins. Co., 348 U.S. 310 (1955).

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IV. International Carriage of Goods by Water advance of service of the in rem complaint. That is undertaken after an ex parte hearing before a Federal judge or magistrate who will issue a warrant of arrest or attachment which is then usually served by a United States Marshal. All of this needs to be coordinated by the plaintiff ’s counsel, and sufficient notice is needed in particular when a vessel or other movable property is the subject of the in rem complaint, as those could move out of the jurisdiction before the arrest procedures are perfected. This means that advanced notice must be given to counsel to prepare and undertake the proceedings, as counsel in turn must provide sufficient notice to the District court, U.S. Marshal’s office and others involved.

2. Jury Trials in Admiralty A subject that is probably the least familiar to Continental European counsel is the 852 civil jury trial. The U.S. Constitution provides for a right to trial by jury for “Suits at common law.”44 However, with a few exceptions there is no right to a jury trial in a maritime case.”45 This has been a matter of accepted custom in U.S. jurisprudence, as the maritime law was considered separate from the common law, but is also memorialized in Rule 38(e), Federal Rules of Civil Procedure as follows: “Admiralty and Maritime Claims. These rules shall not be construed to create a right to trial by jury of the issues in an admiralty or maritime claim within the meaning of Rule 9(h).”

There are exceptions to this general concept. The “Savings to Suitors Clause,” ex- 853 plained above, allows certain claimants to seek remedies in state courts under the common law where juries are permitted. Some Federal statutes, such as The Jones Act46 and legislation governing the Great Lakes,47 provides a right to jury trial. A claim brought in Federal court under another form of jurisdiction, such as diversity48 or as a Federal question,49 if proper, will also preserve the right to a jury trial. No such claim will be entitled to a jury if designated under Rule 9(h) (above), so this is an area that is both complex and subject to significant litigation. 854

Practice Tip The vagaries of jury trials in the United States should be well known. This is not unique to maritime matters. From the standpoint of a defendant, particularly in a personal injury or death case, it is usually advisable to avoid a jury trial if at all possible. The quality and reliability of jury panels varies widely from state to state and even city to city. In the maritime world there are some well-known U.S. judicial districts where juries are famous for entering high verdicts in personal injury cases or generally showing sympathy for such claims. One needs not worry about this with cargo, collision or other types of maritime claims where juries are not used. However, the advice of local counsel is the best way to determine whether a jury must be avoided and, if one cannot be avoided, the potential risks and costs associated with a U.S. jury trial.

IV. International Carriage of Goods by Water 1. The Codification of The Hague-Visby Rules A practitioner who has any dealings with international transportation of goods or 855 maritime law should be familiar with the International Convention for the Unification of Certain Rules Relating to Bills of Lading (August 25, 1924), commonly referred to as The Hague Rules.50 The Hague Rules were subsequently updated and modified in 1968

U.S. Const., amend. VII. Craig v. Atlantic Richfield Co., 19 F.3d 472 (9th Cir. 1994). 46 46 U.S.C. § 688. 47 28 U.S.C. § 1873. 48 28 U.S.C. § 1332. 49 28 U.S.C. § 1331. 50 51 Stat. 233; T.S. No. 931; 120 U.N.T.S. 155 (entered into force for U.S. Dec. 29, 1937). 44 45

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Chapter 10 Application of International Maritime Law with the Visby Rules (Brussels Protocol of Amendments to The Hague Rules).51 A third modification, not as uniformly adopted as the first two, is the Hamburg Rules.52 Together, and particularly with the Visby Amendments, The Hague Rules are recognized as a universal regime for the international carriage of goods by water under bills of lading. For all practical purposes, and subject to the prospect for a replacement regime in the twenty-first century (see below), this has been the uniform regime governing the common carriage of goods by water for most of the last hundred years. 856 The United States is a party to this regime, with the significant caveat that the United States only adopted the original Hague Rules of 1924. The Hague Rules became part of United States law through the enactment of the Carriage of Goods by Sea Act (C.O.G.S.A.) in 1936.53 Prior to that, the first and only statutory regime governing common carriage was the Harter Act of 1893.54 The practitioner may at first be confused to learn that the Harter Act of 1893 remains in effect in the United States even after the adoption of The Hague Rules of 1924 and C.O.G.S.A. in 1936. This is because when The Hague Rules were domesticated through C.O.G.S.A., they were made applicable only to international common carriage of cargo to and from U.S. ports, as the Convention intended. The provisions of C.O.G.S.A. (and thus of The Hague Rules) do not apply to coastwise trade and carriage of cargo between various ports in the United States (including U.S. territories such as Puerto Rico, the Virgin Islands and various Pacific islands). 857 This point can be waived or modified, however, if C.O.G.S.A. is adopted in a bill of lading or contract of carriage specifically when it does not apply of its own force to foreign carriage. This distinction is also a product of the protective nature of U.S. legislation for the domestic trade (intra-U.S. port transportation). As also reflected in U.S. cabotage laws enacted through the Jones Act55 a special regime provides for any carriage of cargo between U.S. ports to be restricted to U.S. built and flagged vessels with U.S. crew and ownership. 858 For most practical purposes the substantive effects of C.O.G.S.A. and the Harter Act are virtually identical.56 The aspects of C.O.G.S.A. that should interest foreign counsel will be the differences between this domestication of the original Hague Rules and the laws of carriage which apply under the amended Conventions (see Visby and Hamburg Conventions, and perhaps now Rotterdam Convention, as discussed below) in Germany and most other European countries.

2. A Summary of the Carriage of Goods by Sea Act 859

C.O.G.S.A. applies to common carriers that enter into a contract of carriage with a shipper covered by a bill of lading57 or other contract document. It applies to carriage aboard merchant vessels by sea, and the limits for the carriage covered under the statute are “tackle to tackle,” meaning from the time when the goods are loaded on to the vessel

2 (U.N.) Register of Texts, ch.2. First came into force in eleven countries June 23, 1977. Formally: The United Nations Convention on the Carriage of Goods by Sea, 1978. U.N. Doc. A/ CONF. 89/14 (1978), reprinted in 17 ILM 608 (1978). 53 46 U.S.C. § 30701, formerly 46 U.S.C. § 1301 et. seq. 54 46 U.S.C. § 30701–30707. 55 46 U.S.C. § 55102 et. seq. The same restrictions apply to carriage of passengers. 56 The principle distinctions between C.O.G.S.A. and The Harter Act include some distinctions in the grounds for exculpatory clauses in bills of lading, and The Harter Act contains no statute of limitations or limit of liability for cargo loss. 57 Frachtbrief / connaissement / conocimiento de embarque / polizza di carico (marittima). 51

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IV. International Carriage of Goods by Water until the time they are discharged from the ship on to the pier.58 It should be noted that under U.S. law many parties insert what is known as a “Himalaya Clause” in the bill of lading, by which the terms, conditions and limitations incorporated in the bill of lading, which may also incorporate C.O.G.S.A. by reference, can be extended to other types of carriers or agents of the carrier, such as stevedores, warehouses and truckers, when the bill of lading is applied to intermodal transportation or simply seeks to go beyond the ship itself. Since intermodal bills of lading59 are almost universal now this is a commonly recognized practice (even before the era of Rotterdam). C.O.G.S.A. mandates that the carrier shall be bound, before and at the beginning of 860 the voyage, to exercise due diligence60 to make the ship seaworthy; to properly man, equip and supply the ship; to carefully load, handle, stow, carry, keep and discharge the goods, and to take other actions for which it is liable under the due diligence standard. One of the most important aspects of C.O.G.S.A. is the rights and immunities that it grants to the carrier. This is the aspect of C.O.G.S.A. and The Hague Rules that superseded drastically different national laws governing maritime carriage before 1924. For instance, while English maritime law previously allowed carriers to insert provisions in their bills of lading essentially exculpating themselves from all liability for loss or damage to cargo, U.S. law prior to C.O.G.S.A. made the carrier practically a guarantor or insurer of the cargo. C.O.G.S.A. became a statutory compromise and a move to uniformity in international carriage. Under § 4 of C.O.G.S.A., the carrier is not made liable for loss or damage resulting 861 from unseaworthiness unless caused by lack of due diligence on the part of the carrier to make the vessel seaworthy. This also provides that the burden of proving the exercise of due diligence remains with the carrier. In addition, the carrier will not be liable for the following causes provided it proves its exercise of due diligence: a. b. c. d. e. f. g. h. i. j. k. l. m. n. o.

Act or neglect of the master or crew in the navigation and management of the ship. Fire unless caused by actual fault.61 Perils of the sea. Act of God. Act of war. Act of public enemy. Arrest or restraint of rulers or people or seizure under legal process. Quarantine. Act or omission of the shipper or owner of the goods. Strikes or lockouts except due to carrier’s own acts. Riots and civil commotions. Saving or attempting to save life at sea. Wastage in bulk or any inherent defect or vice of the goods. Insufficiency of packing. Insufficiency of marking.

58 This point is a principle reason for the move to adopt the updated Rotterdam Rules, which in the age of intermodal transportation contracts apply to all aspects of cargo transport, including portions beyond the ship’s tackle. 59 intermodale Frachtbriefe / connaissements intermodaux / conocimiento de embarque intermodal / polizze di carico per trasporto intermodale. 60 Sorgfalt / diligence raisonnable / diligencia debida / ragionevole diligenza. 61 There is also a separate Fire Statute, 46 U.S.C. § 30504, which provides limitations to carriers for cargo losses and supplements the protections of C.O.G.S.A.

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Chapter 10 Application of International Maritime Law p. Latent defects not discoverable by due diligence. q. Any other cause arising without the actual fault and privity of the carrier, its agents or servants.62 C.O.G.S.A. also contains a specific and—at first blush—rather complex shifting of burdens of proof between the carrier and the shipper, where each bears some responsibility before final fault and damages are determined. 863 Another very important aspect of C.O.G.S.A. is that it provides for a five-hundreddollar-per-package or customary freight unit limitation to liability unless the shipper declares a higher value in the bill of lading and pays any required additional fees for insurance. In modern practice many bills of lading are insured bills of lading and shippers routinely declare actual values. What constitutes a “package” for purposes of this fivehundred-dollar limitation has been the subject of voluminous litigation over the years. In the era of full containerization and with insured bills of lading this issue has become less important, and courts have tended to find reasons to decline a carrier’s efforts to seek this limitation, particularly considering that the amount is outdated and is one of the reasons that The Hague Rules were amended several times. 864 Another trap for the unwary in C.O.G.S.A. is that it provides that the statute of limitations for bringing a claim for damage or loss of cargo may not be less than one year. As most cargo carriage contracts are the bills of lading, carriers normally specify the limitations period in that document, whether C.O.G.S.A. is incorporated by reference or applies of its own force. In almost all cases carriers choose the shortest limitations period permitted–one year from the date of the loss or when the loss was known. In the U.S. most limitations periods in civil actions are between three and five years (in both Federal and state systems). Thus, a one-year period is very short and can run quickly. A statute of limitations is jurisdictional, meaning that if it is missed a late action will be dismissed by the court and there is no remedy or appeal. (See also Section G below.) 865 A final and important aspect of C.O.G.S.A. which has become a key factor in the change of the maritime practice in the United States is a provision that permits a choice of forum for resolution of claims for cargo loss. U.S. courts have traditionally been hostile to permitting disputes arising in the United States to be decided by foreign fora, and to a lesser extent in utilizing foreign law to make those decisions. C.O.G.S.A. was interpreted to mandate adjudication of all disputes in U.S. courts and under U.S. law. In recent years U.S. courts have softened their stance in both regards, recognizing the fundamental right of parties to freedom of contract, including freedom of choice of law and choice of forum, at least when the parties appear to be of equal bargaining power. A major breakthrough occurred with the United States Supreme Court decision in the Sky Reefer case.63 In Sky Reefer the Supreme Court recognized the right of parties to choose foreign arbitration (in that instance, London) as a forum for deciding disputes under a bill of lading.64 The effect of the Sky Reefer decision was to reduce substantially the number of cargo disputes heard in United States courts. Due in significant part to the high cost of court litigation in the U.S., many parties are now choosing offshore arbitration fora, which are proliferating, and not merely with regard to international carriage of goods. 862

46 U.S.C. § 30701. Vimar Seguros y Reaseguros v. Sky Reefer, 515 U.S. 528 (1995). 64 Id.

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IV. International Carriage of Goods by Water 3. Other United States’ Law Applicable to International Carriage of Goods by Water In addition to C.O.G.S.A. and the Harter Act, bills of lading are governed by The 866 Pomerene Act.65 This statute in essence follows on the International Convention for Bills of Lading and Waybills, and governs bills of lading issued by common carriers for transportation from the U.S. to a foreign country. Of course, the General Maritime Law is substantively applied to interpret the provisions of these statutes. Where some aspect of international carriage is not covered under the conventions and statutory law the General Maritime Law is always available as a supplement. One should also note that the United States recognizes the international standard terms for commercial cargo shipment known as the “incoterms,” incorporated into most commercial contracts as shipping and delivery terms.66

4. The Rotterdam Rules – Prospects for Replacement of Carriage of Goods by Sea Act Marked by the failure of the United States to adopt the Visby or Hamburg modifica- 867 tions to The Hague Rules, by the 1980s C.O.G.S.A. seemed to many to be out of date and out of synchronization with the laws of most other major maritime nations. Efforts were commenced in the United States by several organizations to substantially amend C.O.G.S.A. This was also driven by the changed nature of international carriage, particularly the containerization revolution that has eliminated most break-bulk cargo, and the adoption of intermodal bills of lading and other types of carriage contracts. While many members of the marine industry were in favor of modifications, compromise on some issues was difficult. Through the 1990s and into the 2000s industry leaders including the Maritime Law Association of the U.S. pushed for action by Congress, but without success. At the same time, debate was ongoing at an international level through 868 U.N.C.I.T.R.A.L. on a replacement for The Hague-Visby Rules. After more than ten years of negotiations and drafting, in 2009 the United Nations adopted the redraft of the old Hague-Visby Rules by U.N.C.I.T.R.A.L., to be known as The Rotterdam Rules. This Convention, formally the Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea,67 provides a new international regime which takes into account not only the containerization of most cargo but also the prevailing use of multimodal transportation and through bills of lading, providing a liability scheme for “door to door”68 carriage rather than the traditional tackle to tackle. While The Rotterdam Rules were adopted by the United Nations General Assembly in September 2009, and promptly signed by the requisite twenty nations, it is still awaiting the deposit of the twentieth instrument of ratification in order to bring them into effect. A number of nations, including the United States, have not yet provided their signature, much less ratification. As such, while there was great hope that the United States would use The Rotterdam Rules as a method to finally amend C.O.G.S.A., as of this date the prognosis for change does not appear imminent.

46 U.S.C. § 80101–80116. See Incoterms 2000: ICC Official Rules for the Interpretation of Trade Terms, Paris: ICC Pub., 1999. 67 U.N. Doc. A/RES/63/122 (Dec. 11, 2008). www.uncitral.org/uncitral/en/uncitral_texts/transport_goo ds/2008rotterdam_rules.html. 68 Tür-zu-Tür / porte à porte / puerta a puerta / trasporto “da porta a porta”. 65

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Chapter 10 Application of International Maritime Law 869

In the event that the U.S. eventually adopts The Rotterdam Rules or succeeds in a legislative amendment to C.O.G.S.A., the major changes that can be expected from the old Hague system are as follows: (1) Coverage of entire intermodal transportation “door to door” rather than “tackle to tackle.” (2) Damage limitation is increased to (currently) eight hundred and seventy-five SDR (about $1,385.00) or three SDRs per kilogram (about $4.75). (3) New provision for damages for delay in delivery. (4) “Error in navigation” defense eliminated. (5) Two-year statute of limitations to bring a suit rather than one. (6) Benefits and limitations extended to all “maritime performing parties” regardless of a Himalaya Clause. (7) Broad choice of forum provision. (8) Broad arbitration venue provision. (9) Coverage for deck cargo. (10) Changes to burdens of proof.69

V. Maritime Contracts and Liens 870

For counsel involved with commercial maritime interests in transportation of cargo, vessel operation, construction, repair and supply, there are several forms of contracts for security claims on vessels or cargo which in some form would be familiar in almost any jurisdiction. However, U.S. law contains elements that are different not only from the laws of civil law countries but even from other common law jurisdictions which have inherited most of their maritime law from the English system. For this reason, it is worth providing a basic overview of these important areas. Furthermore, in recent years the United States has become more open to the application of foreign laws, arbitration as a substitute for court litigation, and the very broad and flexible application of choice of law, choice of forum and choice of arbitration clauses in contracts. There is an extensive body of case law and academic treatises governing two of these topics, charter parties and maritime liens.70 Only a very basic summary of these areas is provided below.71

1. Maritime Contract Jurisdiction 871

Determination of Admiralty jurisdiction over contracts is handled with different parameters from that for torts and casualties. Location on navigable waters is not a consideration. Instead, as set forth in an early court opinion by a renowned maritime judge, “admiralty contract jurisdiction . . . extends over all contracts . . . which relate to the navigation, business or commerce of the sea.”72 The Supreme Court rejected the English rule that limited Admiralty jurisdiction to only contracts made upon the sea and to be executed thereon, and held that the criteria would be the nature and subject matter of the contract, whether it dealt with maritime service or transactions.73 As can be imagined, the issue of whether a contract is “maritime” and subject to Admiralty jurisdiction Id. Seepfandrechte / privilèges maritimes / privilegios maritímos / privilegi marittimi. 71 See Wharton Poor, Poor on Charter Parties and Ocean Bills of lading (5th ed.) (Mathew Bender & Co., 2018). 72 DeLovio v. Boit, 7 Fed. Cas. 418 (C.C.D. Mass. 1815). 73 New England Mutual Marine Ins. Co. v. Dunham, 78 U.S. (11 Wall.) 1, 20 L. Ed. 90 (1871). 69 70

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V. Maritime Contracts and Liens has been heavily litigated, is dependent upon the specific facts of each case, and has produced a large volume of reported case law. In summary, the courts will look to the purpose of each contract, and whether that 872 purpose relates to a vessel and its commerce or operation in navigation on navigable waters. For instance, a contract to supply fuel and provisions to a vessel is clearly maritime, as is a charter party (see below). However, while vessel repair contracts are considered maritime,74 contracts for construction of vessels are not.75 The latter is so as they are considered only preliminary to navigation.76 Courts must often look to case precedent to determine when a contract is considered maritime when the facts are not clear. If it does, the Admiralty jurisdiction will allow application of maritime law with some benefits, such as application of maritime liens (see below) and use of maritime procedures.

2. Choice of Law and Forum, Arbitration Clauses and Forum Non Conveniens Traditionally the United States has been skeptical of the application of foreign law to 873 disputes adjudicated in U.S. courts, although this had become acceptable in recent decades, at least when based upon an agreed contract clause. Similarly, many courts have been reticent to enforce foreign arbitration clauses in contracts and even foreign choice of forum provisions which would remove a case from the United States to a foreign court jurisdiction, against the desire of the plaintiff who chose the U.S. forum, so long as proper personal and subject-matter jurisdiction of the U.S. court are established. This position began to be eroded more than half a century ago, at least with regard to most maritime matters before the Federal court system. a) Forum Selection Clauses Principally, U.S. courts, at least at the Federal level, will enforce both foreign choice of 874 law clauses (applying foreign substantive laws in a U.S. court) and foreign choice of forum clauses when two conditions are met. First, in the case of foreign forums a party moving for transfer to the foreign court must demonstrate that the foreign court or panel is competent to render adequate justice in a manner acceptable to a U.S. court system, and would not be “unjust.” Second, the contract must not be one that was overreaching or overbearing, sometimes known as an “adhesion contract” in U.S. law, nor were the parties of such unequal bargaining power that one party was subjected to the clause against their will. The decision opening enforcement of forum selection clauses in maritime contracts, in that case a towage contract, is Bremen v. Zapata Off-Shore Co.77 The courts follow the U.S. preference to enforce freedom of contract when applying this principle to maritime commercial contracts, as opposed to the tighter scrutiny found over clauses in seamen’s employment contracts, etc. 875

Practice Tip It is very important to carefully and completely draft forum selection clauses in contracts so that they can be enforceable. There are case decisions discussing the nature and extent of wording that is necessary to make a forum selection clause clear, unambiguous and generally enforceable. Simple language such as “jurisdiction over any disputes will rest with the state or Federal courts of New York” is now probably not going to be found by a court to be sufficient. Much more specificity is required when one party challenges

New Bedford Dry Dock Co. v. Purdy, 258 U.S. 96 (1922). People’s Ferry Co. v. Beers, 61 U.S. (20 How.) 393, 15 L. Ed. 961 (1858), holding that the contract was made on land and to be performed on land. 76 J.A.R. Inc. v. Lady Lucille, 963 F. 2d 96 (5th Cir. 1992). 77 407 U.S. 1 (1972). 74

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Chapter 10 Application of International Maritime Law a chosen forum. The same goes when applicable substantive law is chosen which is not that of the chosen or designated forum.

b) Choice of Law 876

U.S. courts, at least Federal, have also become much more open to applying foreign law, particularly in contract situations where the parties have agreed to a specific law in writing. In cases where no law was agreed by contract a party may still move to apply a foreign law to a case where it would be logical to do so, such as a commercial dispute where much of the activity was conducted in a foreign country (but that for other reasons is still subject to the U.S. jurisdiction). The court’s decision will be based upon the facts and merits of each case. As with forum a number of factors must be considered to determine the applicable law if the parties cannot agree.78 The Federal Rules of Civil Procedure used to contain a formal method to prove foreign law, but now foreign law can be proven by a variety of methods as may be permitted by the court, including testimony of foreign legal experts and sometimes simply the briefing of foreign law by U.S. counsel. c) Forum Non Conveniens

877

This fundamental principle for removing or dismissing a case in U.S. courts permits such when the court finds that there is another forum, including in another country, that would be more convenient and better suited to adjudicate the dispute. While this concept is widely and generally accepted in both state and Federal courts for most civil actions, it has been long established under maritime law. The seminal case is Gulf Oil Corp. v. Gilbert.79 The Supreme Court here set out a multi-factor test of interests that had to be balanced to determine (absent a contractual choice of foreign forum not at issue here) whether a case should remain or be removed from a U.S. court. The more important “private” interests of the litigants include: convenience of the forum for the parties involved; relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and cost of obtaining attendance of willing, witnesses; possibility of view of premises if needed; and “all other practical problems that make trial of a case easy, expeditious and inexpensive.”80 The “public” interests include: administrative difficulties for the court and burden on a court with a heavy docket, burden on court in community with no relationship to the litigation, remoteness from persons having an interest in the litigation, and familiarity of the forum with the law to be applied.81 In addition, in cases where there is a motion to dismiss in favor of a foreign forum, the court must analyze whether U.S. or a foreign law will apply to the controversy, which is a full exercise in itself. Application of U.S. law would naturally argue against transfer or dismissal by the U.S. forum. d) Arbitration Clauses

878

A more recent seminal Supreme Court decision is that found in Sky Reefer.82 In this case the U.S. Supreme Court recognized the enforcement of foreign arbitration clauses for the adjudication of maritime contractual disputes. Prior to this decision, bills of lading incorporating C.O.G.S.A., even when they contained a foreign choice of forum Laritzen v. Larsen, 345 U.S. 571 (1953); Hellenic Lines v. Rhoditis, 398 U.S. 306 (1970). 330 U.S. 501 (1947). 80 330 U.S. 501, 508 (1947). 81 Id. at 509. 82 Vimar Seguros y Reaseguros v. M/V Sky Reefer, 515 U.S. 528 (1995). 78

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V. Maritime Contracts and Liens clause, were held to not be enforceable to move a cargo claim out of U.S. jurisdiction, since the courts interpreted C.O.G.S.A. to mandate U.S. jurisdiction over all claims arising under this statute. The Sky Reefer decision changed this. The Court held that an arbitration clause in a bill of lading, whether alone or incorporated from a charter party, is valid whether selecting a domestic or foreign forum.83 This decision was followed by the adoption of arbitration clauses in most bills of lading and many other types of carriage documents which removed most cargo claims from adjudication in U.S. courts. In recent times this has emptied the U.S. courts of cargo claims and all but eliminated maritime cargo claims as a significant segment of the maritime practice in the United States. Furthermore, the Federal Arbitration Act84 supports written arbitration clauses in maritime contracts, and there have not been conflicting prohibitions in other areas outside of C.O.G.S.A. e) Passenger Vessel Tickets A heavily litigated area of maritime law has been the forum selection clauses con- 879 tained in cruise ship tickets. As most of the major cruise lines have operational offices if not headquarters in Miami (the largest cruise ship port in the world), most of these cruise ship ticket clauses have specified the state or Federal courts in Miami as the sole exclusive forum for the resolution of all claims, including personal injury and death claims by passengers. This has been done because the cruise lines could otherwise be subjected to suits in multiple jurisdictions throughout the United States and other parts of the world (subject to forum non conveniens challenge), due to the variety of persons purchasing tickets. Furthermore, many of these large cruise lines are staffed with inhouse counsel to handle the volume of claims that regularly arise. Interestingly, while one would consider a boilerplate cruise ship ticket to be a classic 880 adhesion or overreaching contract under U.S. law, with the inherent unequal bargaining power of a cruise line versus an individual passenger, the courts have consistently upheld enforcement of the exclusive forum selection clauses in these tickets.85

3. Charter Parties Contracts for the charter of vessels are of ancient custom and have been commonly 881 recognized and utilized in the shipping world for hundreds of years. The following forms of charter party contracts are recognized under U.S. law, and have important distinctions for exposure to liabilities and obligations for the vessel owners and charterers under U.S. maritime law. These liabilities may be different from those to which the respective parties may be exposed in other jurisdictions and therefore are important to understand. It must also be recognized that in the modern carriage business the majority of ves- 882 sels are usually operated under a series of charters and subcharters. There can in some instances be a number of layers of charterers, subcharterers, sub-subcharters and even at the end of that, common carriage. The following is a summary and includes types of charters or carriage and the ramifications under U.S. law and jurisdiction.

Id. 9 U.S.C. § 1 et. seq. 85 Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991).

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Chapter 10 Application of International Maritime Law a) Demise Charter This is also termed a “bareboat” charter. The demise or bareboat charterer is known in U.S. legal parlance as the owner pro hac vice. Under a demise charter the charterer takes full possession and control of the vessel and must supply its own crew and all fuel, provisions, etc. The demise charterer also has full control over the operation of the vessel, not only to choose its voyages, routes and commercial activity (which can be done in other types of charters), but also is responsible for the full management and operation of the vessel in all respects, including hiring crew. Practically the only obligation which the registered owner of the vessel has in a demise charter is to provide a seaworthy vessel at the commencement86 of the charter. This means that the registered owner must ensure that all latent conditions known to it are remedied and the vessel is turned over to the demise charterer in what a reasonable and prudent owner knows to be a seaworthy condition. Usually a demise charter party (agreement) will also specify these duties. 884 Once a demise charterer has taken possession of the vessel it undertakes a number of responsibilities in addition to assuming the privileges of an owner. The demise charterer is liable for almost all aspects of the operation of the vessel as if it were the registered owner. This means that it is exposed to liabilities for cargo damage and loss, personal injuries, collisions, allisions and other navigational and operational errors, damages caused to third parties and environmental hazards. The demise charterer can also be liable for most violations of international or U.S. regulations, including but not limited to safety requirements, pollutant handling, or any other regulatory or statutory requirements imposed under Federal or State laws. About the only residual liability that could be imposed upon the registered owner in a demise charter situation is where there is a vessel defect or condition which was pre-existing and latent and was not disclosed by the registered owner. 885 As the demise charterer assumes essentially all responsibilities of a registered owner, the demise charterer does receive certain privileges of a vessel owner. Most notably, under the U.S. Limitation of Liability Act87 demise charterers are entitled to seek limitation of liability based upon the same requirements, such as proving lack of privity and knowledge.88 883

b) Time Charter 886

Under this form of charter, the charterer rents the vessel for a specific period of time. However, under most time charter parties the owner supplies the crew and maintains more control over the vessel than in a demise charter situation. A time charterer may usually specify ports of call and voyage routes of a time chartered vessel as well as supplying fuel, provisions and other necessities for the operation of the vessel. However, the charter party could contain certain limitations. Under these circumstances the registered owner of the vessel can be exposed to liability for its negligent operation as it is the owner’s crew (employees) who are operating the vessel and therefore their negligence may be imputed back to the registered owner. This is a very important distinction in U.S. law due to the extensive tort liability regime in place under both U.S. maritime law and in the general common law of the individual states. The extent and aspects of control on a particular vessel by a time charterer versus the registered owner are important issues in determining which of these entities might be liable in the event of personal injuries to Vertragsbeginn / commencement / inicio del contrato / inizio (del contratto di noleggio). 46 U.S.C. §§ 30501–30512. 88 It is beyond the scope of this chapter to explain the intricacies of the U.S. Limitation of Liability Act, but this law has its antecedents also in the English maritime law. 86

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V. Maritime Contracts and Liens longshoremen, seamen, and third parties such as personnel who are on other vessels, are ashore, or in other situations. As employees of the registered owner versus the time charterer, the seamen employees would have a claim for maintenance and cure and under the Jones Act (see Section D, below) against the registered owner, not the charterer, even though the time charterer is controlling the route of the vessel. There is an abundance of case law that separates these fine distinctions. c) Voyage Charter In most respects the voyage charter is treated very similar with the time charter. Un- 887 der a voyage charter the charterer rents the vessel for a particular voyage between ports. This can be a single voyage or can involve calling at several ports. Once again, in most voyage charters the registered owner employs the crew and in fact maintains even more control over the vessel than in a time charter situation, usually because a voyage charter is for a much shorter period of time. In such a case, more potential liability falls upon the registered owner versus the charterer, who in some respects can be determined to be essentially an entity just “going along for the ride.” Once again, the particular terms of the voyage charter party should always be consulted to determine the nature and extent of the privileges and liabilities. d) Slot Charter As most cargo is now containerized, the slot charter has become a much more com- 888 mon enterprise. While not to be confused with common carriage (see below), the slot charter allows a charterer to rent certain space aboard a container vessel for the use of its containers. This practice can involve multiple voyages and the shipment of multiple containers over a period of time, depending upon the precise terms of the slot charter party. Under such circumstances the charterer would bear almost no liability or responsibility for any aspects of the operation of the vessel apart from something that could arise due to the nature of its cargo (such as in a situation where hazardous cargo causes damage to other cargo or personnel). The only disputes that could be anticipated from a slot charter would usually be of a commercial nature and most often a dispute with the owner over the performance of the charter party agreement. e) Space Charter For all intents and purposes the space charter is similar if not identical to the slot 889 charter. In both circumstances the charterer is renting less than the entire vessel, perhaps a small part of its cargo space, and therefore would bear little of any responsibility for acts or omissions in the operation of the vessel. A point to always consider, of course, is the liability of a cargo owner for hazardous cargo in the event it causes injury to persons or property, particularly when the nature of the hazard was not disclosed or the cargo was not properly packaged for shipment, or violated regulations governing the packaging and handling of such products. f) Common Carriage The term “common carriage” applies to any carriage of cargo by water on a vessel not 890 owned by the cargo owner that does not fall into a category of charter party as described above, and is usually carried under terms of a bill of lading. International carriage of cargo by water calling at U.S. ports, including intermodal carriage, is governed by international conventions and U.S. statutes as described in Section B, above.

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Chapter 10 Application of International Maritime Law 4. Maritime Liens The law of maritime liens is another area inherited from the English maritime law and is of ancient origin. However, once again, the practitioner must be aware that the U.S. maritime law of liens has developed to recognize certain types of liens and, more importantly, an order of precedence for recovery that may vary significantly from the laws of other common law and civil jurisdictions. A maritime lien is a method of gaining both security and jurisdiction over a vessel for various types of claims arising from both the commercial operation and contracts of the vessel and owner and for torts caused by the vessel or its owner. The word “owner” can also include demise charterers (see above) who may have legal standing to incur liens on the vessel as well. There are two principal sources of law establishing maritime liens in the United States. First is the Commercial Instruments and Maritime Lien Act.89 The second source is a body of case law that in some aspects traces its antecedents to English law, which may still govern absent contrary U.S. authority. 892 The United States is not party to the 1926 or 1967 Maritime Lien Conventions and thus has not adopted their priority ranking of maritime liens. The priority of mortgages and liens under U.S. law is subject to U.S. court interpretation and is considered by some authorities to be in a state of confusion.90 The following can be considered a reasonable summary of available liens under U.S. law in their order of priority. It is also important to note that if a U.S. court determines that a foreign claim against a vessel gives rise to a competent maritime lien, that lien will be treated on parity with U.S. liens of the same category.91 Maritime liens cannot be created by a contractual provision (as distinguished from enforcement of a recognized contract-based claim such as for necessaries).92 891

a) List of Common Liens in Potential Order of Priority: Preferred ship’s mortgage93 under the Ship Mortgage Act94–Generally a properly recorded vessel mortgage will stand first in priority for enforcement against a vessel. The preferred mortgage lien includes the principal balance due plus any interest and attorney’s fees specified in the mortgage document. However, the Ship Mortgage Act provides for certain preferred maritime liens which will take precedence even over a preferred mortgage, including most of those concerning crew and custodia legis,95 especially if incurred prior to the mortgage. Expenses of custodia legis–Not a true maritime lien, this includes the costs recoverable for the arrest of a vessel for enforcement of a mortgage or maritime lien but excludes attorney’s fees. Wages of masters and seamen on the vessel. Liens for tort damages for injuries to crew, stevedores employed by the vessel and other personnel. Wages for stevedores employed directly by the owner, operator or agent.

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46 U.S.C. § 31.301–31.343. William Tetley, Maritime Liens and Claims 620–621 (1998). 91 Trinidad Foundry and Fabricating, Ltd v. M/V Cas Camilla, 966 F. 2d 613 (11th Cir. 1992). 92 Newell v. Norton, 70 U.S. 257 (1865). 93 bevorzugte Schiffshypothek / hypothèque maritime privilégiée / hipoteca preferente / ipoteca navale privilegiata. 94 46 U.S.C. § 31301 et. seq. 95 rechtmäßige Beschlagnahme / mise sous sequester / confiscación legal / locuzione latina usata per indicare il sequestro conservativo (nella fattispecie: di navi). 89

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V. Maritime Contracts and Liens Salvage including contract salvage.96 Cargo liens against the ship for general average. Tort claims for property damage including collisions and allisions. Contract claims, written or otherwise, including those for “necessaries”–There is quite a body of case law addressing what is considered a “necessary” for a vessel, thus giving rise to a lien. In general, this includes any services or materials supplied to the vessel to aid in the venture of the vessel. This could include fuel, provisions, equipment, parts, repairs, etc. This is a very common subject giving rise to lien claims and enforcement actions. Again, the necessaries could have been provided by a foreign supplier in a foreign port and the claim will be enforced by U.S. courts through the recognition of a maritime lien on the vessel. Other sources of liens–While the lien for “necessaries” is broadly encompassing, there are cases addressing claims by customs brokers, lock operators, and others which are arguably in or out of the concept of necessaries and nevertheless have been held to create a lien for enforcement against the vessel. The scope of this chapter does not permit a detailed exploration of these other potential lien sources which have been addressed extensively in treatises and case law.97

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Practice Tip It is very important when a claimant, be they a mortgage holder, supplier of necessaries or an injured or aggrieved crewman or contractor, not to delay when they appear to have a claim enforceable by a lien. For commercial claimants, it is safe to say that if a vessel owner has failed to pay for goods or services they are probably failing on their obligations to others as well, and time is of the essence in order to avoid standing in line behind other claimants. While there are certain priorities, this area is subject to confusion and challenges. If one issues a ship’s mortgage to an owner that mortgage, if on a United States-documented vessel, should be immediately recorded on that document in order to preserve its priority and provide notice to other potential lien holders. Crew or others claiming unpaid wages or personal injuries should likewise consider that while they may stand high on the priority list, if an owner defaults on its other obligation and their sole remedy is against a vessel in rem, they may have a limited asset upon which to levy their claim. They will not necessarily know of the existence of other claims until proceedings have commenced. On the practical side, the first lien claimant to file suit will incur the most expenses initially to initiate that suit, as follow-on claimants can merely join in the proceeding. This is a small price to pay, however, if the claim is of a significant amount.

b) Maritime Liens on Cargo The owner of cargo can also see its property subject to maritime liens and enforce- 894 ment in an in rem proceeding in U.S. courts under certain circumstances. A vessel owner or carrier which has contracted with a cargo owner for carriage of the cargo has a lien for failure of the cargo to pay freight owed, and in some circumstances for failure to pay storage, customs duties or other fees owed for the movement of the cargo that causes the cargo to remain on the vessel. For instance, where a cargo owner fails to make proper arrangements for the offloading and delivery of its cargo at the destination port, the vessel owner may be forced to store the cargo at its expense in a local warehouse pending resolution of that dispute, and therefore the vessel owner could assert a lien against the

96

gio.

Bergungsvertrag / contrat de sauvetage maritime / contrato de salvaje maritímo / contratto di salvatag-

97 For a good overview of maritime liens internationally, including in the U.S. (and a comparison of different regimes), see William Tetley, Maritime Liens and Claims (2d ed.) (Montreal: Int’l Shipping Pub., 1998).

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Chapter 10 Application of International Maritime Law cargo for the cost of the warehousing and other incidental expenses, such as demurrage98 (delay).99 Many similar examples can be found in the case law.

VI. Claims and Jurisdiction for Maritime Torts: Foreign Flags, Crew or Passengers 895

The United States is famous, or perhaps notorious, for having one of the most extensive regimes for tort liability100 in the world, both in terms of the potential liability of parties and also the nature and extent of recoverable damages. Those doing business within the U.S. must be aware of their potential liability exposure. The maritime arena is no exception. The jurisprudence in the U.S., particularly court opinions, is voluminous. The following will summarize only those aspects that may impact a foreign flagged and owned vessel and foreign seamen or passengers within the U.S. jurisdiction.

1. Claims by Seamen 896

In the United States the courts have long recognized seamen as “wards of the admiralty,”101 entitled to special protections due to the hazardous nature of their occupation. This goes back to the days of sailing ships and an era before most forms of employment compensation and safety regulations. Generally, seamen have a trilogy of remedies for personal injury and death, plus supplemental rights. These include: (1) The Jones Act102–The Jones Act is an early statute which provides for an action by seamen against their employer, in lieu of a common law negligence claim, in the event of injury or death. This statutory remedy is a much different remedy than other types of employees have against their employers under U.S. law (which is generally a limited workers’ compensation scheme under state statute), and allows a seaman to sue for enumerated damages which go beyond what most U.S. employees can obtain through the statutory limitations of workers’ compensation. Another important aspect of the Jones Act is that it provides for a “featherweight” standard of proof to prove the negligence of the employer for liability.103 This standard is much more favorable to seamen than the “preponderance of the evidence” standard generally applied in non-maritime tort actions in the United States. It is one step away from a strict liability standard and merely requires a seaman to prove that some scintilla of negligence was perpetrated by the ship-owner employer, nothing more. (2) Unseaworthiness Under the General Maritime Law–In addition to the Jones Act claim, a seaman may also sue his or her employer as the shipowner for an unseaworthy condition on the vessel that contributed to the tort. Similar damages can be obtained as under the Jones Act, but the burden of proof here is merely a preponderance of the evidence. A plaintiff seaman may no longer recover punitive damages on a claim for unseaworthiness.104 verzugsbedingte Liegegebühren / surestarie / sobreestadia / controstallie. See Osaka Shosen Kaisha v. Pacific Export Lumber Co., 260 U.S. 490 (1923); Arochem Corp. v. Wilomic, Inc., 962 F. 2d 496 (5th Cir. 1992); California & Eastern S.S. Co. v. 138000 Feet of Lumber, 23 F. 2d 95 (D. MD. 1927). 100 Haftung für unerlaubte Handlungen / responsabilité civile délictuelle / responsabilidad civil por delicto / responsabilità civile per fatto illecito. 101 Robertson v. Baldwin, 165 U.S. 275 (1897). 102 46 U.S.C. § 688. 103 Davis v. Hill Engineering, Inc., 549 F. 2d 314 (5th Cir. 1977). 104 Dutra Group v. Batterton, 139 S. Ct. 2275 (2019). 98

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VI. Claims and Jurisdiction for Maritime Torts (3) Maintenance and Cure–Another important aspect of the maritime law, maintenance and cure105 is a form of court-created law that is a substitute for a workers’ compensation scheme, which was unknown when this early maritime law was developed. Maintenance and cure must be paid by a shipowner employer to its injured or ill seamen regardless of fault. This requires the employer to pay all medical expenses for the injured or ill crewman until the crewman has reached “maximum medical improvement.”106 Maintenance is an amount, sometimes set by labor contract or otherwise determined by a court, that is to provide for housing and subsistence until the seaman has reached maximum medical improvement. This amount is sometimes considered to be a substitute for the cabin and food that the seaman would have been provided had he been able to continue working aboard the vessel. The failure of a seaman’s employer to pay maintenance and cure without fault can lead to an award of punitive damages. This can be a large amount as there are no specific limits to punitive damages. This is also very unusual as punitive damages are almost never available as an element of damages in the maritime law. (4) Seaman’s Wages–U.S. law mandates that the shipowner employer of a seaman pays wages to the conclusion of the voyage when he is injured or becomes ill. The failure to pay these wages can result in an award of treble damages or punitive damages. (5) Action under General Maritime Law Against Third Parties–A seaman can also sue non-employer third parties if they caused the injury or illness. This would be a regular negligence standard under the G.M.L. The above remedies all pertain to U.S. seamen on U.S. vessels. Most of these same 897 rights and remedies can been applied to foreign seamen on foreign flagged vessels, depending upon the circumstances. Some of these rights could be limited by a seaman and his employer who enter into a contract that sets out a foreign forum and law to adjudicate any claims. There is the understandable concern that the U.S. would become a forum of choice for foreign seamen seeking the golden opportunity of its extensive tort system and generous damage awards. This is controlled by defenses of jurisdiction and forum non conveniens, where a seaman or vessel has no relationship to the U.S. forum. When a foreign seaman serving on a foreign flagged vessel is injured and attempts to bring a claim in a U.S. court, the matter is subject to a test for minimum jurisdictional contacts. This was also addressed legislatively to prohibit foreign workers on offshore drilling rigs from bringing claims in the U.S. since, had they been U.S. citizens, they could have brought actions via the Outer Continental Shelf Lands Act.107

2. Forum Selection Clauses in Employment Contracts Most seamen sign employment contracts, commonly referred to as “articles,” for work 898 on a vessel. Many such employment contracts contain forum selection clauses that choose foreign forums or foreign law, or both, for the adjudication of any of the seaman’s claims, both for injuries and employment issues. As explained in Section C, above, the U.S. courts generally enforce properly negotiated forum and choice of law clauses. In the case of contracts involving seamen, the special consideration given to these employees 105 Recht der medizinischen Pflege- und Behandlungskosten / obligation de soigner et subvenir aux besoins des marins blessés ou malades / obligación del armador de pagar los gastos médicos incurridos por un marinero / termine con cui si indica, generalmente, l’obbligo dell’armatore di sostenere le spese di mantenimento e i costi per le cure mediche del lavoratore marittimo in caso di infortunio o malattia. 106 This is defined as where their condition will not further improve, and excludes mere palliative treatment. 107 43 U.S.C. § 1331 et. seq.

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Chapter 10 Application of International Maritime Law makes enforcement of a foreign clause or the application of foreign law much more difficult. The courts in the United States are split on this issue, with some courts enforcing the clauses if deemed to be “reasonable”108 and some denying enforcement of the foreign forum. In the case of both a foreign forum and the choice of a foreign law, the courts will look to important factors such as the ability of the seaman to obtain satisfactory remedies in the foreign forum and under the foreign law and his ability to access that foreign forum. The Doctrine of Forum Non Conveniens will also apply.

3. Remedies of Non-Seaman Workers and Passengers 899

Persons other than seamen, including passengers, longshore and harbor workers and repairmen all have a general maritime law claim for negligence against a vessel in the event of injury and death. This remedy requires only that they have jurisdiction over the vessel in the U.S. and carries with it the standard negligence burden of proof of a preponderance of the evidence. Some special considerations for these types of claimants on a foreign flag vessel include the following: (1) Foreign Workers such as repairmen. These workers can include non-crew members who are performing repairs or modifications to a vessel, often known as a “riding crew.” They are usually subject to a contract which will contain a forum selection clause, a choice of law clause, or both. However, if these personnel perform work within U.S. territorial waters, which may create issues due to their immigration status, they may be able to take advantage of a claim under the general maritime law or even utilize state negligence laws to raise their claim. As their work is usually performed while the vessel is on the high seas (mainly due to U.S. immigration issues) these types of claims are relatively rare. (2) Longshore and Harbor Workers. Longshore and harbor workers are covered by the Longshore and Harbor Workers’ Compensation Act.109 Generally a form of workers’ compensation law as between the worker and his stevedore or repair yard employer, this statute also gives a remedy against non-employer vessel owners, charterers, operators and others under Section 905(b). This is a regular negligence standard but allows a worker covered under this statute to both recover full compensation allowed against his employer and still seek an award of damages against a non-employer party. Effectively this practice is a form of double dipping, although the insurer of the employer that has paid compensation usually asserts a lien against any recovery by the injured worker from the third party. (3) Passengers. Passengers on a foreign flag passenger vessel will be subject to the choice of forum and choice of law provisions in their ticket as explained in Section C, above. Within U.S. territorial waters they may also bring an action under the general maritime law or even state laws that are not in conflict with that law, provided they can obtain personal jurisdiction over the vessel owner.

4. Death on the High Seas Act 900

The Death on the High Seas Act (D.O.H.S.A.)110 provides a cause of action for the death of any person, whether a seaman, passenger or other, that occurs on the high seas 108 angemessen

/ raisonnable / razonable / ragionevole. U.S.C. §§ 901–950. 110 46 U.S.C. §§ 30301–30308. 109 33

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VI. Claims and Jurisdiction for Maritime Torts beyond a marine league from the shore of any state or territory of the United States. The liability scheme is based upon negligence or, in the case of seamen, unseaworthiness. D.O.H.S.A. is exclusive of any state wrongful death statutes and the general maritime law. It is therefore an exclusive remedy for any deaths taking place aboard a vessel on the high seas beyond the U.S. territorial seas (twelve nautical miles).

5. Foreign Workers on Offshore Oil Platforms, Drill Vessels and Fish Processing Vessels These types of maritime employment raise their own distinct issues of applicable law 901 and jurisdiction. Fixed offshore oil platforms have a hybrid legal system that is governed in part by the Outer-Continental Shelf Land’s Act.111 If the platform is fixed this may allow application of state tort remedies to injuries and deaths occurring on platforms on the outer-continental shelf beyond the territorial seas of the United States in addition to other remedies such as D.O.H.S.A. However, in the case of drilling platforms that are considered vessels, and where employees are considered seamen, there is a specific provision in the Jones Act that precludes its application to personnel who are neither U.S. citizens or U.S. residents, but are working on those platforms. Fish processing vessels are another matter, where they are foreign flagged and the 902 personnel, even if U.S. citizens, are subject to a foreign contract. In great measure the courts have found that the U.S. laws and jurisdiction do not apply to these personnel unless they have a substantial connection with the United States and, more importantly, maritime laws will not apply as they are not true seamen if the vessels are stationary platforms.112 903

Practice Tip There are so many types of damages recoverable under the various personal injury and wrongful death schemes, that a full discussion of those damages is beyond the scope of this chapter. The elements of recoverable damages in the maritime law are generally more limited than in the common law of most U.S. states. Nevertheless, even U.S. maritime damages exceed those that are recoverable in most other national jurisdictions. For that reason, it is best to avoid litigation in a United States forum if at all possible. Good contracts with seamen and other foreign workers selecting foreign jurisdictions and foreign laws are always advisable, even if enforcement might be in question. Companies need to guard against unnecessarily maintaining a legal presence within the United States which might defeat a motion to dismiss for forum non conveniens or otherwise impose U.S. jurisdiction over the foreign entity or foreign vessel. In the case of foreign seamen who are brought ashore in the United States for medical attention, while basic humanity dictates that all must be done immediately for an injured or ill person, when that person becomes able to be repatriated to his or her home country or elsewhere where proper and sufficient medical attention can be given, companies and employers want to remove that person from potential exposure to eager plaintiff ’s lawyers in the U.S. This will avoid the great expense and aggravation of having to challenge jurisdiction if a U.S. plaintiff ’s lawyer signs the foreign worker to a contract for legal representation in the U.S.

6. Criminal Jurisdiction and Enforcement Over Foreign Flagged Vessels While this may not seem to directly apply under the issue of maritime torts, the U.S. 904 has vigorously asserted jurisdiction to enforce criminal laws in the event that the person aboard a foreign flagged vessel is injured or killed while on the high seas. Courts have recognized the application of U.S. criminal laws, including prospectively the death penalty, to a person who commits murder aboard a foreign flagged vessel when the vessel calls at a U.S. port. The law here has been longstanding and recognizes U.S. criminal 111 43

U.S.C. § 1331. results depending upon specific facts in Wells v. Arctic Alaska Fisheries Corp., 1991 AMC 449 (W.D. WA. 1990) and The 2R-3, 18 F. 2d 122 (W.D. WA. 1927). 112 Differing

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Chapter 10 Application of International Maritime Law jurisdiction over any vessel entering U.S. waters.113 The same would of course apply to the application of other U.S. criminal laws for such crimes as assault and battery, rape or even drug possession. This includes crimes committed while the vessel is on the high seas114 All criminal jurisdiction extends to the territorial limit of the United States, currently recognized as twelve nautical miles, plus the Economic Enterprise Zone (E.E.Z.) (up to 200 nautical miles) for many crimes. Various criminal statutes extend the enforcement jurisdiction of Federal agencies such as the United States Coast Guard and Customs & Border Protection to enforce fishing, drug and other regulations.

VII. International and Domestic Maritime Pollution Law 905

In the area of maritime environmental law the United States has perhaps gone farther to adopt international conventions and standards than in any other area. As such a number of international conventions have been signed and ratified by the United States, which is rather uncommon for the U.S. Domestic legislation has been enacted to implement some of these conventions, but in addition there exist, at the Federal and state level, a host of statutes governing various areas of marine-related environmental concerns which in some instances go farther than the international requirements. In reviewing the application in the United States of both international conventions and domestic laws, one must keep in mind that under international law some conventions are self-implementing while others require the adoption of domestic legislation for enforcement.

1. The Basic Marine Pollution Legislation–The Federal Water Pollution Prevention and Control Act and the Clean Water Act 906

The first basic comprehensive water pollution statute was enacted by the United States in 1948, well prior to the signing of the International Convention for Prevention of Pollution from Ships (M.A.R.P.O.L.). It was extensively amended in 1961, 1966, 1970, 1972, 1977 and 1987 (and some would say in 1990 with O.P.A. ’90, but see below). For that reason, this legislation is addressed first, as it remains the basis for the comprehensive water pollution law in the United States. The Federal Water Pollution Prevention and Control Act (F.W.P.C.A.)115 was extensively amended and came into its modern version addressing the maritime environment directly in Section 311, enacted in 1970. The F.W.P.C.A. provides a comprehensive Federal legal regime prohibiting the unauthorized or unpermitted discharge of pollutants (as that term is further defined), along with clean-up requirements and significant penalties for violation. This statute applies to all navigable waters of the United States, both inland and in the territorial seas and E.E.Z. In 1977 the F.W.P.C.A. was amended by enactment of the Clean Water Act.116 Together, this legislation is now known as The Clean Water Act.

2. International Convention for the Prevention of Pollution from Ships 73/78 907

M.A.R.P.O.L. 73/78 is the first comprehensive international convention governing marine pollution from vessels. It was signed and went into force in 1973, and was amended with a protocol in 1978. Several smaller protocols came thereafter. In the Unit-

113 Wildenhus’s

114 Id. 115 33

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U.S.C. § 1251 et seq. U.S.C. § 1281 et seq.

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VII. International and Domestic Maritime Pollution Law ed States, M.A.R.P.O.L. was enacted through the Act to Prevent Pollution from Ships.117 As the United States had already enacted The Clean Water Act, which substantially matches the basic requirements of M.A.R.P.O.L., the separate domestication of M.A.R.P.O.L. confirmed its application to all U.S. flag vessels anywhere in the world, plus all vessels, of any state, within both the E.E.Z. and the territorial waters of the United States. Maritime law practitioners throughout the world should be familiar with the terms of M.A.R.P.O.L. that would be enforced in the United States and as to U.S. vessels anywhere, given that the requirements are substantially similar to the previously enacted U.S. legislation.

3. Comprehensive Environmental Response, Compensation and Liability Act Another environmental law statute, the Comprehensive Environmental Response, 908 Compensation and Liability Act (C.E.R.C.L.A.)118 was enacted in 1980. For maritime practitioners C.E.R.C.L.A. is understood to mainly pertain to shore-based pollution and therefore usually has no application to maritime interests outside of its provisions that can be associated with the provisions of The Clean Water Act. C.E.R.C.L.A. is applicable to shore-side facilities such as marine terminals, repair yards and related facilities and owners and operators of such shore-side facilities must be familiar with the additional requirements applicable to land based pollution. Among other concerns, C.E.R.C.L.A. imposes a strict liability standard for remediation of pollution, in many instances even when it was previously existing and caused by a prior property owner. This makes the operation and ownership of shore facilities very risky without proper investigation and due diligence before acquisition, and can impose enormous costs and liabilities requiring good insurance coverage.

4. Oil Pollution Act of 1990 A third domestic U.S. environmental statute that is relevant to maritime law is the Oil 909 Pollution Act of 1990 (O.P.A. ‘90),119 which was enacted following the Exxon Valdez oil spill in Alaska in 1989. O.P.A. ‘90 may be considered in academic literature and legislative history as a supplement to The Clean Water Act, but in legal practice it is viewed as replacement or stand-alone legislation. O.P.A. ‘90 provides an updated legal regime applying to all vessels, marine terminals and other maritime interests and prohibits the discharge of pollutants, as that term is defined, into the “navigable waters” of the United States, including the territorial waters and E.E.Z. For maritime lawyers, O.P.A. ’90 may be considered to be the most important, comprehensive and detailed marine pollution statute of the United States. A summary of some important aspects follows. In O.P.A. ’90, “responsible parties” include the owner, operator or demise charterer of 910 a vessel or other marine structure. O.P.A. ‘90 is effectively a strict liability scheme, imposing liability for costs as well as civil penalties regardless of the fault of the responsible party. The only defenses against full liability under this statute are available if a spill is caused solely by an act of God, act of war, negligence of the United States or proven negligence of a third party.

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U.S.C. § 1901 et seq. U.S.C § 9601 et seq. 119 33 U.S.C. § 2700 et seq.

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Chapter 10 Application of International Maritime Law O.P.A. ‘90 imposes the following obligations and penalties upon a responsible party:

911

a. Removal and cleanup costs–a failure to undertake immediate remediation, removal and cleanup can cause the Federal government to take over those duties, with commensurate increased costs for cleanup as well as additional civil penalties. b. Civil penalty–a penalty per incident of $10,000 or less, plus $25,000 per day or $1,000 per barrel of oil spilled. The process for assessment of civil penalties under O.P.A. ‘90 was comprehensively addressed by a Federal District Court more recently in the Deep Water Horizon Gulf of Mexico spill.120 c. Civil damages–civil damages are recoverable under O.P.A. ‘90 in the following categories: i. Damages to natural resources–this is a complex area usually requiring involvement of marine biologists, chemists and other scientific specialists to compute the value of natural resources impacted, not necessarily resources owned by private entities. The Natural Resource Damage Assessment (N.R.D.A.) is a fairly Byzantine process whereby the United States has established a somewhat pseudo-scientific method of valuing resources such as corals, plant life, fish, etc. This includes the determination of the loss of use of such resources to the public, but also attempts to come up with a value for the resources themselves and the cost of restoring those resources. The United States quite seriously seeks to clean or, if not possible, replace natural features and the cost can be catastrophic. ii. Real and personal property loss and damage–this includes economic damages for loss of use of real and personal property as well as costs to repair, replace or clean such property. iii. Loss of subsistence use. iv. Loss of revenues, taxes, royalties, rents, fees or net profit by Federal, state or local government. v. Loss of profits and earning capacity from real or personal property or natural resources. vi. Costs of additional public services provided by Federal, state or local governments in response to a spill. 912

Under O.P.A. ‘90 the protections of the Limitation of Liability Act121 are specifically precluded. Instead, O.P.A. ‘90 contains a financial limitation provision.122 The financial limits of liability are as follows: –

Tank vessels, single hull: greater than 3000 gross tons equals greater of $3500 per gross ton or $25,845,600.00, less than 3000 gross tons equals greater of $3200 per gross ton or $7,048,800.00. Tank vessels, double hull: greater than 3000 gross tons equals greater of $2200 per gross ton or $18,796,800.00, less than 3000 gross tons equals greater of $2200 per gross ton or $4,699,200.00. Non-tank vessels: greater of $1100 per gross ton or $939,800.00. Deep water port, onshore facility, including motor vehicle, rolling stock or pipeline: $633,850,000.00.

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120 Deep

Water Horizon, 2015 AMC 29 21 (E.D. LA 2015). U.S.C. §§ 30501–30512. 122 33 U.S.C. § 2704(c). 121 46

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VII. International and Domestic Maritime Pollution Law Liability will remain unlimited even under this provision if the spill is caused by the 913 gross negligence of the responsible party or by a violation of any applicable Federal safety, construction or operational regulation. O.P.A. ‘90 also permits the award of punitive damages in cases of gross negligence which are added to any unlimited liability for the enumerated expenses and fines above. O.P.A. ‘90 also imposes financial responsibility requirements on any vessels calling on 914 the United States. This requires the completion of a form filed with the United States that, most importantly, contains proof of insurance adequate to cover potential liabilities under this statute. As most of the world’s ocean going tonnage is entered with one of the International Group of Protection and Indemnity Clubs, those have the financial wherewithal to provide such security. The financial responsibility requirements become an issue for smaller vessels which may not have the standard P&I coverage. It must be remembered that as set forth below individual states also maintain their own laws and regulations that may include financial responsibility requirements greater than those mandated under O.P.A. ‘90. Finally, O.P.A. ‘90 established the Oil Spill Liability Trust Fund. This is funded by fees 915 and particularly by fines and penalties imposed under O.P.A. ‘90. The fund stands to provide for remediation and cleanup of spills where a responsible party is not found or fails to have the resources necessary for complete response to the spill. Of note, if a vessel owner, operator or other undertakes response and cleanup of a spill for which they are not the responsible party, and can later prove that they were not the responsible party, they may seek reimbursement from the fund. This is not an easy procedure, however.

5. International Convention on Civil Liability for Oil Pollution Damage The International Convention on Civil Liability for Oil Pollution Damage (C.L.C.), 916 adopted in 1969 and entering into force in 1975, was extensively amended by a 1992 Protocol (entered into force in 1996), and is joined by the 1971 Fund Convention and I.O.P.C. ’92 Fund Protocol.123 It provides a strict liability regime for pollution damage caused by the discharge of persistent oil from a vessel, with limited defenses. This is one of the few international marine pollution conventions that has not been ratified by the United States. However, the nature of the regime promulgated by this Convention is more than adequately covered by O.P.A. ‘90 and other U.S. domestic legislation, including very limited defenses to liability. Its limits to liability are also in many cases less than those promulgated under O.P.A. ‘90.

6. International Convention Relating to Intervention on the High Seas in Cases of Oil Pollution Casualties This Convention permits coastal states to intervene beyond their territorial limits to 917 prevent, mitigate or eliminate pollution threats to their coastlines. The United States ratified this Convention in 1974.

7. Convention on Pollution of the Seas by the Dumping of Waste and Other Matters As its name implies this Convention prohibits the discharge of debris and pollutants 918 other than oil and was likewise ratified by the United States in 1974. 123 International Convention on Civil Liability for Oil Pollution Damage (C.L.C.), International Maritime Organization, http://www.imo.org/en/About/Conventions/ListOfConventions/Pages/Internation al-Convention-on-Civil-Liability-for-Oil-Pollution-Damage-(CLC).aspx.

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Chapter 10 Application of International Maritime Law 8. The Refuse Act 919

This domestic legislation follows on the anti-dumping convention (above) and covers pollutants and debris other than oil.

9. Ocean Dumping Act 920

This legislation likewise prohibits the dumping of debris, including plastics, on the high seas and is similarly domestic legislation following on the Anti-Dumping Convention.

10. International Convention for the Control and management of Ships’ Ballast Water and Sediments (Ballast Water Convention) 921

This is one of the most important recent international conventions, and has been widely discussed in the maritime community in the past decade. This Convention was designed to address the increasing problem of invasive species being introduced into non-native waters through the discharge of ballast tanks by vessels in global trade. The United States has suffered greatly from the problem of invasive species, particularly in the Great Lakes, and therefore is keen to enforce the provisions of this Convention. The Convention was adopted in 2004 but will not come into force until ratified by thirty states representing 35 % of world shipping. It has extensive provision for actions to control and eventually minimize or eliminate the threat of invasive species.

11. Ballast Water Management Act 922

This legislation, enacted in 2009, went into effect in 2016. This requires the treatment of ballast water by all seagoing vessels entering U.S. waters. This is the effective implementation of the Ballast Water Convention.

12. Annex VI of the International Convention for the Prevention of Pollution from Ships 73/78–Air Pollution from Ships 923

Another new area bringing comprehensive regulation in the United States is air pollution from ships. Interestingly, several U.S. states, including California, were already enacting legislation prior to action by the United States. Annex VI of M.A.R.P.O.L. is the international convention placing emission limits and requirements for scrubbers and other anti-emission equipment and emissions limits on all commercial vessels. The U.S. has likewise signed on to the I.M.O.’s Sulphur emissions cap taking effect on January 1, 2020, although the U.S. supported some other nations in an unsuccessful attempt to obtain a transition period to phase in these substantial new requirements and restrictions mandating a shift to the use of scrubbers or low-sulphur bunker fuel.

13. Clean Air Act 924

The Clean Air Act was enacted in 1963, but substantially amended in 1970, 1977 and 1990. In its modern form it has provisions specifically applicable to emissions from commercial vessels greater than 400 gross tons. This Federal legislation will seek to follow the requirements of Annex VI of M.A.R.P.O.L. However, it must be noted that a number of individual states, most notably California, have enacted state regulations that may contain additional or stricter requirements than those contained in The Clean Air Act or M.A.R.P.O.L. Unlike certain areas of maritime laws and regulations, state environmental

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VIII. United States Application of the Law of the Sea Convention laws are often not preempted by existing Federal legislation where they are not in conflict and may be viewed to supplement Federal law.

14. Other Applicable Maritime Environmental Statutes There are a number of other Federal statutes, not to mention the volume of individual 925 state legislation (which is beyond the scope of this chapter) impacting maritime commerce and the marine environment. Almost all Federal environmental statutes and their commensurate regulations have the potential to impact maritime areas, at least coastwise and inland waters. To give only one example, the Park System Resource Protection Act124 provides a 926 strict liability scheme similar to O.P.A. ‘90 for damage to any park resources. The United States has established a great number of marine parks and sanctuaries along its coasts. Many of these have boundaries that extend beyond the territorial sea of the United States and well into the E.E.Z. These park and sanctuary boundaries bring in the application of the P.S.R.P.A., and a vessel which for instance grounds in a park or sanctuary, causing damage to a coral reef, sea grass, historic shipwrecks or other “resources” in the park is subject to a strict liability scheme for the remediation, repair or replacement of those resources. The vessel can also be heavily fined.125 As with most Federal environmental statutes, this becomes a quasi-strict liability scheme, the Limitation of Liability Act of 1851 will not apply to limit liability,126 and there are few if any defenses. Several of these statutes do not contain their own financial limits on liability such as contained in O.P.A. ‘90, and this raises great concerns about the potential for unlimited strict liability in the case of resource damage. 927

Practice Tip A disturbing trend in the United States is the criminalization of environmental laws. This is not limited to the maritime field, but has become a risk to individuals and businesses in many fields. Even in the case of accidental spills, various statutes and the practice of Federal and state law enforcement and prosecutors can lead to arrest and criminal prosecution of both common workers and senior management of companies, in addition to the extensive civil liabilities and costs. For this reason, in any type of significant environmental incident it is advisable to have competent criminal counsel on standby to advise both the individual employees and the company if it appears that law enforcement and investigators are moving in a criminal direction. This in itself has become problematic, as many U.S. agencies, such as the United States Coast Guard, D.E.P. and Customs and Border Protection routinely undertake “investigations” that are initially regulatory in nature, but can evolve into criminal investigations. Those investigators will not always advise or warn of a change in perspective. This topic warrants a chapter in its own right, so it is best to be prepared to defend both civilly and criminally in the event of an environmental incident.

VIII. United States Application of the Law of the Sea Convention No discussion of the application of international maritime conventions in the United 928 States can be complete without a discussion of the United Nations Convention on the Law of the Sea (1982). The Law of the Sea Convention (U.N.C.L.O.S.) is a comprehensive international legal regime for use of the oceans. While the United States signed U.N.C.L.O.S., this Convention has never been ratified. U.N.C.L.O.S. has been the subject of very heated political debate within the United States for over thirty years. A number of times the Convention has been discussed in the United States Senate with positive expectations that it would be ratified. In fact, over the years most maritime interests, 124 16 125 In

126 Id.

U.S.C. § 19jj et seq. Re: Tug ALLIE-B, 114 F.Supp.2d 1301 (M.D. FL. 2000).

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Chapter 10 Application of International Maritime Law whether they be vessel operators, shoreside facilities, unions, the Maritime Law Association of the United States or others have jointly supported its ratification. It appears that the principal opposition to U.N.C.L.O.S. has been the deep-sea mining provisions, which some U.S. legal scholars and interests feel are an abdication of U.S. sovereignty over its resources. Others are concerned about potential loss of sovereignty due to the perceived “international control” over the use and exploitation of ocean resources. On the other hand, U.N.C.L.O.S. contains strong freedom of navigation provisions that have often been exercised and enforced by the United States in foreign waters, particularly in straits and other restricted international waters. For this reason, most knowledgeable maritime interests are supportive of the ratification of U.N.C.L.O.S. 929 While the U.S. Senate continues to fail to ratify U.N.C.L.O.S., particularly moving away from it in heated political years, in the 1980s the U.S. Administration indicated that it would seek to ratify as soon as possible the U.N.C.L.O.S., once issues with the deep seabed mining provisions had been satisfactorily negotiated. In 1983 President Ronald Reagan issued a Presidential Proclamation establishing an Exclusive Economic Zone for the U.S.,127 in conformance with terms of U.N.C.L.O.S. In 1988 he issued another Presidential Proclamation establishing a new twelve-mile territorial sea128 which likewise follows authority memorialized in U.N.C.L.O.S. In fact, this writer has successfully argued free navigation provisions of U.N.C.L.O.S. in U.S. administrative and court proceedings to take precedence over domestic legislation perceived to infringe upon free navigation. A particularly interesting argument can be made that free navigation should trump the application of environmental regulations which restrict vessel navigation through U.S. marine sanctuaries and parks where boundaries extend beyond the territorial sea, as U.N.C.L.O.S. permits peaceful navigation by non-warships through the territorial waters of foreign states. 930 The Maritime Law Association of the United States continues to closely monitor the potential for ratification of U.N.C.L.O.S. but at this stage it cannot be optimistic that U.N.C.L.O.S. will be ratified by the U.S. Senate in the near future. However, the facts that many free navigation and other provisions of U.N.C.L.O.S. have been recognized and enforced by the U.S., and that U.N.C.L.O.S. has been ratified and enforced by the vast majority of maritime states, seem to make most provisions of U.N.C.L.O.S. effectively a regime of jus cogens and therefore a matter of recognized customary international law which the United States should be bound to accept.

IX. Limitation of Liability 931

The United States is not a party to the Convention on Limitation of Liability (London, 1976, entered into force 1986). Instead, the Limitation of Liability Act of 1851129 is still applicable, which allows vessel owners, including owners pro hac vice, to limit their liability in the event of a marine casualty to the value of the vessel at the end of the voyage,130 provided that they were not in “privity or knowledge” of the negligence, unseaworthiness or fault giving rise to the accident. The Act provides specific procedures that must be followed in order for a vessel owner “petitioner” to assert this privilege, and among important requirements is that any petition to limit liability must be filed (in 127 Proclamation

No. 5030 (Mar. 10 1983). No. 5928 (Dec. 27, 1988). 129 46 U.S.C. § 30501–30512. 130 For commercial vessels there is a minimum value for the vessel based upon tonnage in the event is sunk or a total loss, or heavily damaged, where it would otherwise have de minimus value. 128 Proclamation

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X. Federal Court Procedure for Cases in Admiralty Federal district court) within six months of the date that the petitioner is notified in writing of any claims or potential claims which might have a value in the aggregate in excess of the post-voyage value of the vessel. The filing of a petition for limitation, over which a Federal district court has exclusive jurisdiction, also allows the petitioner owner to seek an injunction against any other claims or actions filed or to be filed in other courts relating to the same incident, and requiring that all claimants must file their claims in the limitation action, known as a “concursus of claims.” This allows for potential large savings in procedural costs and time from defending against multiple court actions, and also permits trial of the matter before a Federal court sitting in Admiralty as a bench trial, as juries are not utilized in such Federal Admiralty proceedings.131

X. Federal Court Procedure for Cases in Admiralty 1. The Supplemental Rules for Certain Admiralty and Maritime Claims In the Federal Rules of Civil Procedure governing all cases brought in United States District Courts,132 there is a special section entitled Supplemental Rules for Certain Admiralty and Maritime Claims.133 These rules govern many types of special Admiralty procedures, especially those involving in rem or quasi in rem jurisdiction over vessels, cargo, materials, bank accounts and other assets or “non-person” parties unique to Admiralty law. Rule A of the Supplemental Rules governs their scope, and is essentially an outline and table of contents for the special maritime rules. Rule B deals with in personam actions for attachment and garnishment, governing forms of prejudgment security which would be well known in many civil law jurisdictions but are relatively limited in general U.S. jurisprudence. This Rule, as with some others, is a special provision provided due to the transitory nature of many maritime parties and the need to obtain prejudgment security and jurisdiction over easily movable property, a concept otherwise sparsely recognized under U.S. law. Rule C pertains to in rem actions, primarily for enforcement of maritime liens (see Section C above). This provides the detailed procedures for actions to enforce maritime liens. Rule D pertains to possessory, petitory and partition actions which are again forms of obtaining security over possession of maritime property and in enforcement of maritime contracts. Rule E provides the strictly procedural aspects for actions in rem and quasi in rem, including the nature of the complaint, process, and seizure and release of property through judicial process. Rule F contains the specific rules applicable to actions for exoneration from or limitation of liability. This pertains to a procedure under U.S. law provided for statutorily in the Limitation of Liability Act of 1851.134 As this concept is known in national law in 131 In the event there is only a single claim, the single claimant is sometimes permitted to return to another forum to try the underlying personal injury claim, provided that the Federal court retains exclusive jurisdiction to hear all matters relating to the limitation. This sometimes can result in what appear to be two similar trials in different courts, although the issues are distinct. 132 Codified at Title 28 of the United States Code. 133 ergänzende Regelungen für bestimmte seerechtliche Ansprüche / règles supplémentaires applicables à des cas particuliers en matière de droit maritime / normas complementarias para determinadas reclamaciones de almirantazgo y marítimas / norme complementari applicabili a determinati crediti marittimi. 134 46 U.S.C. §§ 30501–30512.

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Chapter 10 Application of International Maritime Law many common law countries, and through an international convention,135 it has not been otherwise addressed in this chapter. 939 Practice Tip As explained in the Practice Tip following the section on in rem and quasi in rem jurisdiction (Section A IV), the special admiralty procedures that involve in rem and quasi in rem jurisdiction can be quite involved. The actual undertaking involves several layers of rules and the broad discretion of a Federal District judge. As the in rem defendant vessel or property is movable, sufficient time and information is necessary for local counsel to properly exercise the remedies available under these Rules.

2. District Court Local Rules for Admiralty Matters 940

In addition to the Supplemental Rules addressed above, in many individual U.S. District Courts, mostly those seated in coastal Districts, the courts have enacted special admiralty rules as part of their local rules. Each U.S. District Court in the United States publishes its own set of local rules which are applied in conjunction with and to supplement the Federal Rules of Civil Procedure. In some districts there are very few local admiralty rules to consider, while in others the local admiralty rules can be quite extensive. In almost all cases these rules deal with finite details of local procedure required to follow on the Admiralty Supplemental Rules. They very often address such minutia as the formatting of pleadings or the nature and extent of the publication of notice for in rem arrests, and to that extent do not vary the Supplemental Rules but merely add to the procedural requirements. This illustrates how U.S. courts have many layers of procedure that may govern litigation in Admiralty matters even though the law itself, and particularly the adoption of international maritime conventions, is uniform and nationwide in scope.

3. Maritime Statutes of Limitations and the Doctrine of Laches The time limits for bringing suit to resolve a dispute under U.S. maritime law are different from most statutes governing non-maritime civil matters in the United States. The latter are usually governed by individual state procedural rules based upon the substantive law at issue, and each state may be different. These statutes of limitations generally provide from four to six years depending upon whether a dispute is on a contract, a tort or other matter. 942 The trap that U.S. practitioners unfamiliar with the maritime law often fall into is that maritime statutes of limitations are generally shorter. Some maritime statutes contain specific limitations, or minimum limitations, such as maritime personal injury law and C.O.G.S.A. (addressed above). Note that the personal injury statutes, such as the L.H.W.C.A., usually have three-year statutes of limitations, which are shorter than state or federal limitations for such claims. There is also a Uniform Statute of Limitations for Maritime Torts.136 This statute, applicable to many claims that do not have their own specific limitations period, sets the period at three years. 941

135 Convention on Limitation of Liability for Maritime Claims (1976), International Maritime Organization, www.imo.org/en/about/conventions. 136 46 U.S.C. § 30106.

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X. Federal Court Procedure for Cases in Admiralty Finally, U.S. Admiralty applies the doctrine of laches.137 This is a principal grounded 943 in equity,138 which looks to a reasonable time limit where there is none specified by statute. A party’s claim is barred if they unreasonably delayed in filing it, to the prejudice of the other party.139 The circumstances of the particular case are taken into consideration, but the doctrine also requires that the court look to comparative statutes for guidance on the time limit. Given that most specific limitations periods in maritime law are three years or less, the argument is strongly made that for claims that would fall under the doctrine of laches, three years is probably a maximum period. Some of the equities of the matter include the general transient nature of maritime personnel, and vessels and other considerations that make a long statute of limitations inadvisable where evidence must be gathered to pursue a claim. The practitioner is counseled to be very careful to promptly pursue claims due to these considerations.

137 Doktrin der Verwirkung / doctrine du délai préjudiciable / daños y prejuicios resultando del lapso de tiempo / dottrina che stabilisce il principio per cui, stante il ritardo irragionevole nell’esercizio di un diritto o di un potere, al quale l’ordinamento riconduce, a seconda dei casi, l’effetto della decadenza o della prescrizione, il giudice può stabilire discrezionalmente, di volta in volta, l’applicabilità del termine di decadenza o di prescrizione. 138 Billigkeit / equité / equidad [lit.] / equity (termine intraducibile in italiano, con il quale si indica, nel diritto inglese e nei sistemi che ad esso si ispirano, un insieme di regole giurisprudenziali complementari e integrative del common law, inteso, in senso stretto, come fonte di produzione del diritto). 139 The Key City, 81 U.S. 653 (1871).

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CHAPTER 11 THE CHARITABLE SECTOR: NONPROFIT ORGANIZATIONS Literature: Jody Blazek, Tax Planning and Compliance for Tax-Exempt Organizations: Rules, Checklists, Procedures (5th ed., 2012). Nicholas Cafardi & Jaclyn Fabean Cherry, Tax Exempt Organizations: Cases and Materials (3d ed., 2014). James Fishman & Stephen Schwarz, Taxation of Nonprofit Organizations, Cases and Materials (4th ed., 2014). Bruce Hopkins, The Law of Tax-Exempt Organizations (11th ed., 2015). Bruce Hopkins & Jody Blazek, Private Foundations: Tax Law and Compliance (4th ed., 2014). Michael Worth, Nonprofit Management: Principles and Practice (3d ed., 2016).

I. Introduction When undertaking commercial activities within the United States, a foreign attorney may be surprised when he or she encounters the United States’ third sector, the nonprofit sector.1 It is no overstatement to suggest that nonprofits2 prevail in everyday commerce, charitable giving, relieving the government in the fulfillment of its competencies, and expanding individuals’ personal interests. As a matter of fact, in 2018 charitable giving in the United States rose to an estimated $427.7 billion.3 This chapter introduces the most prevalent forms of nonprofits, their structuring, best practices for their governance, and tips for proper management. 945 As a foreign attorney researching business law in the United States, one must be aware of the high likelihood that this will also include matters in the nonprofit sector. There are already a number of books published on the structuring of U.S. businesses, which this chapter complements by going a step further. This chapter introduces the foreign attorney to the unique regulatory system concerning nonprofit organizations. It will become apparent that despite the term “nonprofit,” these organizations control sizeable assets, hold considerable political influence, and initiate significant scientific and cultural advancements. Their nonprofit designation comes with a number of benefits and detriments, all of which will be covered in some detail. 946 The U.S. Internal Revenue Service4 (hereinafter “I.R.S.”) is introduced to the reader in its structure and functions in Chapter 9, “Income Taxation and Audits.” But the I.R.S. is an administrative, not legislative body. As a preliminary matter, the federal government’s authority to impose an income tax derives from the U.S. Constitution’s Amendment XVI. Generally, most of the federal tax law, created by Congress, can be found in the Internal Revenue Code (hereinafter “I.R.C.”) under Title 26 of the United States Code (26 U.S.C.). Another source of law, Treasury Regulations, such as Title 26 of the Code of Federal Regulations (hereinafter, “C.F.R.”) are referred to as “Federal tax regu944

1 Nonprofit-Sektor / secteur non lucratif / sector no lucrativo / settore non profit, detto anche «terzo settore». 2 gemeinnützige Organisationen / organisations à but non lucratif / organización benéfica / enti senza scopo di lucro. 3 2019 Americans Gave $427.71 Billion to Charity in 2018 amid Complex Year for Charitable Giving: Giving USA, Giving USA, https://givingusa.org/giving-usa-2019-americans-gave-427-71-billion-to-charity-in -2018-amid-complex-year-for-charitable-giving/. 4 Bundessteuerbehörde / administration fiscale / Servicio de Impuestos Internos [lit.] (autoridad tributaria federal) / autorità fiscale statunitense, agenzia delle entrate statunitense.

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II. Distinguishing Between the Types of Nonprofits lations”5 and set out to provide official, legally binding, I.R.C. interpretations from the U.S. Department of the Treasury. Additionally, the I.R.S. regularly publishes through the Internal Revenue Bulletin (hereinafter “I.R.B.”) revenue rulings, revenue procedures, notices, and announcements to offer tax guidance. Beware that these I.R.B. publications do not have the force of law, but, they do serve as citable decisions for legal precedent. Furthermore, case law,6 the common law source of law deriving from judicial decisions, may be helpful but should only be cited as precedent when the facts of a case are substantially the same as the issue in contention in the present case. In addition to the “governmental” and “private” sectors, this third sector of society 947 consists of (1) nonprofit organizations, (2) tax exempt organizations, (3) charitable organizations, and (4) private foundations. The aforementioned groups should be distinguished as to the level at which they are regulated; a nonprofit organization is the most general type, and subject to the broadest rules. All tax exempt organizations, charities and private foundations are more narrowly-defined types of nonprofits, but not all nonprofits are necessarily tax exempt, charitable or formed as foundations. As one studies deeper into tax exempt organizations, charitable organizations, and private foundations, it will become apparent that they, respectively, are subject to increasingly-higher levels of regulation. Nonprofits exist in many different forms, and their forms often come with variations on how they should be governed in accordance with the I.R.C.

II. Distinguishing Between the Types of Nonprofits Typically, turning a “profit” as a business means that a firm has, at the end of a certain 948 period, accumulated more in revenues than in expenses. With normal “for-profit”7 corporations, these excesses would typically be redistributed back to the shareholders. The designation nonprofit8 does not mean that a firm does not have more revenues than expenses. Rather, “nonprofit” means that, instead of giving excess revenues back to shareholders, these organizations are required to retain their excess assets and put them towards their nonprofit activities in the future. This non-distribution constraint9 is discussed later in more detail. A tax exempt organization is one that is exempt from the federal income tax. If the reader 949 has not already read Chapter 9, “Income Taxation,” now would be a good time to take the opportunity to do so, especially to understand the differences between state and federal income taxes, because while an organization may be exempt from one of these taxing authorities, that exemption will have no bearing on the other. The most well-known tax exempt organizations are to be found in § 501 (c)(3) of the I.R.C., § 501 (c)(3), which includes very labyrinthine descriptions of the various types of nonprofits as follows: Corporations, and any community chest,10 fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or ani5 Bundessteuerverordnungen / règlements fiscaux fédéraux / normas tributarias federales / Regolamenti federali in materia tributaria. 6 Fallrecht, Richterrecht / jurisprudence, droit jurisprudentiel / jurisprudencia / diritto giurisprudenziale, giurisprudenza. 7 gewinnorientiert / à but lucrative / ánimo de lucro / (società) a scopo di lucro. 8 gemeinnützig / à but non-lucratif / sin fines de lucro / non profit [lit.], senza scopo di lucro. 9 See Henry B. Hansmann, The Role of Nonprofit Enterprise, 89 Yale L.J. 835 (1980). 10 öffentlicher Wohlfahrtsfonds / caisse de bienfaisance / fondo de la comunidad / fondo di mutuo soccorso di comunità [lit.], cassa di mutuo soccorso, cassa di assistenza.

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Chapter 11 The Charitable Sector: Nonprofit Organizations mals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.11

Generally speaking, § 501 (c) contains most of the I.R.C. exemptions, coming in many different forms, but exemptions may also be found in § 501 (d) (apostolic organizations, § 501 (e) (nonprofit hospital cooperatives), § 501 (f) (nonprofit educational common investment funds), and § 527 (political organizations), § 528 (homeowners’ associations). 951 Another group of tax exempt organizations is available to serve other purposes. Most of the previously mentioned organizational forms are for the public benefit. Organizations such as (§ 501 (c)(2)) Title Holding Companies, (§ 501 (c)(5)) Labor Unions, Agricultural and Horticultural Organizations, (§ 501 (c)(6)) Business Leagues, (§ 501 (c)(7)) Social Clubs, and (§ 501 (c)(8)) Fraternal Benefit Societies12 are examples of mutual benefit organizations.13 These organizations are founded to benefit their members, but receive tax exemption based on the theory that they are relieving the government of the same duties in which they are partaking. 950

952 Practice Tip If a nonprofit is structured so that it has members, it must keep a real and current list of the voting members. A nonprofit must always keep the list updated, because this will aid in legal compliance, especially in the area of membership benefits. The nonprofit must also insure that this update occurs before notice for a board election is sent out.

Note that these statutes and administrative regulations restrict all private inurement, or benefit to shareholders and individuals. And, while these provisions exempt organizations from the federal income tax, the organizations may still be subject to other forms of federal taxation, such as the Unrelated Business Income Tax.14 Tax exempt status is achieved by demonstrating a tax exempt purpose, corresponding with one of the I.R.C. exemptions, in an (I.R.S.) filing. In order to maintain tax exempt status, after it has been obtained, a group must file yearly with the I.R.S. Failing to file yearly statements to the I.R.S., will result in the loss of a group’s tax-exempt status. In many cases, it is only the tax-exempt status that makes it economically possible for an organization to exist, so losing that status is tantamount to ending the organization. 954 Charitable organizations are in yet another subcategory more narrowly construed than the previous. All of the § 501 (c)(3) categories are considered to be charitable organizations, except for public safety testing organizations. The designation “charitable” actually arises through I.R.C. § 170. This section cross-references the § 501 (c)(3) groups, except for public safety testing organizations, and creates an income tax deduction for benefactors who have made charitable contributions. While this creates an exceptional incentive for charitable giving, these groups are restricted in their ability to lobby the 953

26 U.S.C. § 501. brüderliche Leistungsgesellschaft [lit.] / société mutualiste fraternelle / sociedad fraternal de beneficencia / società di mutua assistenza, società di fraterna beneficienza [lit.] (il termine può avere una varietà di accezioni e indicare una vasta pluralità di tipologie associative a scopo mutualistico e solidaristico, talvolta aventi carattere religioso, come le società operaie cattoliche di mutuo soccorso, ma possono anche essere svincolate, in tutto o in parte, da legami di natura confessionale). 13 Organisationen zur gegenseitigen Unterstützung / organisations mutualistes / sociedades mutuales de beneficio / organizzazioni di mutua utilità [lit.], società di mutuo soccorso. 14 26 U.S.C. § 511–14. 11

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III. Nonprofit Structure government, are not permitted to engage in political campaigning, and are, like all nonprofits, subject to the non-distribution constraint. Finally, private foundations, serving the same purposes as other § 501 (c)(3) groups, 955 are controlled by one or very few donors. Springing from historical problems of major donors exercising excessive control and, thus, benefiting themselves, private foundations are subject to the strictest regulation of all nonprofit forms. The I.R.C. sections concerning private foundations can be found in §§ 507–509. An initial presumption in § 508 (b) assumes that every § 501 (c)(3) group is a private foundation unless it demonstrates otherwise. § 509 (a)(1)-(4) list the elements that must be proven to overcome this presumption: (1) the organization fits into a well-established category of publicly supported charity; (2) it receives a large enough level of public support to merit public attention and monitoring; (3) or, it links itself closely enough to a publicly supported charity to qualify as a “supporting organization.” (4) an organization which is organized and operated exclusively for testing for public safety. The fourth subcategory sets public safety testing organizations apart from private 956 foundations because, due to their inability to receive tax deductible donations, they are not charitable in nature. Those groups that cannot overcome this presumption are considered to be private foundations, and, thus, subject to excise taxes on investment income,15 a self-dealing tax concerning insiders’ private benefit,16 a tax for failure to distribute a minimum amount of assets for charitable purposes,17 a tax on excessive ownership of for-profit shares,18 a tax on high-risk investments,19 and a general tax meant to correct abuses of a tax exempt status.20

III. Nonprofit Structure A “founder,” or person creating a nonprofit, will face a number of structuring options 957 when establishing a nonprofit. Ultimately, the nonprofit’s stated mission will be determinative of how its founders choose to structure it. A nonprofit may be registered either as an unincorporated corporation,21 charitable trust,22 or as a nonprofit corporation.23 Every state is subject to having differing regulations on these structures, so a lawyer must be sure to consult the relevant states’ statutes and regulations. Furthermore, just as in the case of for-profit enterprises, the default entity form is a sole proprietorship or partnership, and neither of these can be nonprofit. In order to transform an entity from a profit entity into a nonprofit, all I.R.C. formalities must be fulfilled. 26 U.S.C.§ 4940. 26 U.S.C.§ 4941. 17 26 U.S.C. § 4942. 18 26 U.S.C.§ 4943. 19 26 U.S.C.§ 4944. 20 26 U.S.C.§ 4945. 21 nichtinkorporierte Gesellschaft / corporation non constituée en société / sociedad no incorporada / società non registrata. 22 Treuhandgesellschaft für wohltätige Zwecke / fiducie caritatif / fundación de caridad / trust costituito per scopi caritatevoli, trust di scopo caritatevole [lit.]. 23 gemeinnützige Gesellschaft / société à but non-lucratif / sociedad sin fines de lucro / società senza scopo di lucro, società non profit [lit.]. 15 16

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Chapter 11 The Charitable Sector: Nonprofit Organizations 958 Practice Tip For help in founding or altering a nonprofit organization, most states offer all of the necessary forms and helpful information through state websites. Using the search terms “Department of State” or “Secretary of State” in conjunction with the relevant state’s name should provide a guide to filing procedures. The state’s attorney general’s website may also serve as a valuable resource when looking for information on nonprofit formation and filing requirements.

Unincorporated associations are the least structured form of nonprofit; they also receive a relatively low amount of legal protection. An unincorporated association can be simply just a group of individuals who have not organized themselves in any particular legal structure. Often times, many nonprofit corporations begin in this manner. In the start-up phase, before the associations are interested in investing time and resources into paperwork and legal filings, they often seek to raise interest and participation in their cause. While only being required to have a constitution or set of bylaws to file for a § 501(c)(3) status, meeting this threshold still provides no protection for individual liability. Often, individual members can be subject to personal liability for their association’s debts and they have no means of suing the association. Unincorporated associations may hold and receive property and create contracts, but this is not an automatic right; their states’ laws must allow for them to do so. 960 Charitable trusts are the product of the common law. They are created when a donor24 (settlor or trustor) gives property, the res, to a trustee, who controls the property for the donor’s stated charitable purpose. One may begin from the assumption that for private trusts, the failure to state exactly who are the person(s) receiving the benefit should result in a legal failure of the attempt to create a trust. But charitable trusts have been treated differently in the common law; one may give property to an indefinite group, i.e. “the public,” without the trust failing. The common law requires no written document to establish a trust, but, in order to classify as an I.R.C. § 501(c)(3) tax exempt fund, a charitable trust must file for I.R.S. tax exemption with an I.R.C. recognized charitable purpose. This document, filed with the I.R.S., shall identify the donor, the contents of the property, the trustee, the intended charitable purpose, the guidelines for its administration and disbursement, who the successor trustees may be, how long the trust is intended to exist, and the guidelines for its dissolution. The general § 501(c)(3) prohibitions on private inurements and on certain political activities apply. If the fund is formed as a private foundation, it must follow all of the corresponding formalities. Finally, because “the public” is an indefinite class, they have no legal standing concerning the enforcement of charitable trusts; rather this role is left to the attorney general. 961 Nonprofit corporations have the most common structure among nonprofits. The law of the respective states in which they are to be founded indicate what will be necessary for their founding and subsequent existence. Typically, though, nonprofit corporations share many similarities with for-profit corporations; this also allows for state corporate case law to be lent in some instances to the nonprofit realm. But, as is the case in common law systems, one must distinguish between the purposes for for-profit and nonprofit organizations when arguing whether the borrowed law is, or should be, applicable. 962 Nonprofit corporations face a higher degree of regulation and formalities than do unincorporated associations and charitable trusts. Overcoming this extra layer of “red tape” comes with the benefit of more flexibility in nonprofit corporate operations. Each state specifies the requirements for creation. The articles of incorporation25 must be filed with either the individual state’s Secretary of State, or in some cases Secretary of the 959

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IV. Limitations on Nonprofit Organizations Commonwealth. Included therein are the nonprofit corporation’s name, address, names and addresses of incorporators, date, whether the corporation is to have members, names and address of original board of directors, as well as its purpose. The purpose must be in conformity with a state charitable goal, that is not illegal, and that is noncommercial in nature. A set of bylaws must also be drafted, governing the nonprofit corporation’s internal structure, but, unlike the by-laws of for-profit corporations, the bylaws of nonprofits generally do not need to be filed with the state. Only once a nonprofit corporation has had its articles of incorporation accepted by its filing state, given public notice of its founding, drafted bylaws, and held a meeting with the board of directors to ratify the bylaws, may it file a Form 1023 (§ 501(c)(3) organizations) or Form 1024 (other types of § 501(c) organizations) with the I.R.S. to seek federal tax exemption. 963

Practice Tip Legally, volunteers are agents of the nonprofit organization, and their negligence will be attributed to the corporation. Just because the volunteer was uncompensated does not exonerate the nonprofit. The board should make sure that volunteers are trained and supervised. It may also be useful to check whether the corporation has adequate insurance and whether the insurance covers volunteers.

IV. Limitations on Nonprofit Organizations Despite the similarities between for-profit and nonprofit corporations, they are best 964 distinguished from one another through their notable differences. Nonprofits, being limited from distributing their revenues exceeding expenses, are to dispose of these in ways other than ways used by a for-profit. For example, a for-profit corporation may typically distribute excess revenues to shareholders, members, officers, directors, or trustees in the form of dividends. The nondistribution constraint placed on nonprofits requires instead that excess revenues are utilized to further the organization’s charitable purpose and that those in control may not experience a personal gain.26 Because the states allow for these to become corporations, or legal “persons,” nonprofit corporations, unlike voluntary associations, may be sued, enter into contracts, and have better chances of acquiring credit with lenders. Like ordinary corporations, nonprofit corporate boards of directors function in a fiduciary capacity.27 Also, in contrast to charitable trusts, state attorneys general usually only have standing to confront nonprofit corporations in cases of members behaving with egregious or criminal behavior. Some of the constraints on nonprofits arise from the common law, others from the I.R.C. itself. A major common law, court-imposed, limitation on nonprofits is the prohibition of 965 operating for an illegal purpose or a purpose conflicting with public policy. Illegality is straightforward; activities that violate the law will not receive I.R.S. tax exemption. But, organizations setting out to change the law, in a social way, may receive tax exemption, such is the case with § 501(c)(4) social welfare organizations whose purpose is to lobby the government. Furthermore, even if organizations are deemed only to violate public policy, they will not be able to receive tax exemption and their contributors will not receive § 170 tax deductions. Violations of public policy are not necessarily violations of the law; for example, most cases concerning public policy violations involve private schools who implement segregation, supported by government payment vouchers or direct financing. While it is a breach of public policy to support private segregation, the private segregation, in and of itself, is not a violation of the law. 26 Henry B. Hansmann, The Role of Nonprofit Enterprise, 89 Yale L.J. 835 (1980); Henry B. Hansmann, Reforming Nonprofit Corporation Law, 129 U. Pa. L. Rev. 497 (1981). 27 Fiduciary relationships are explained subsequently in greater detail.

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Chapter 11 The Charitable Sector: Nonprofit Organizations 966 Practice Tip When making charitable donations and calculating one’s permissible tax deduction, § 170 categorizes the types of donations and corresponding percentages as to what may be deducted from a donor’s taxes. An individual donating to a public charity or private operating foundation may receive a deduction up to 50 percent of his adjusted gross income. Donors of long-term capital gain property may receive a 30 percent deduction. Gifts other than cash, such as appreciated securities, may receive a 20 percent deduction. Furthermore, corporations may receive a deduction of up to 10 percent of their pretax income. When gifts exceed the set deduction limits, excess amounts may be “carried over” and claimed for the five subsequent years as deductions.

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While closely related to the Operational Test discussed below, the commerciality doctrine28 is a product of the common law.29 Nowhere in the I.R.C. are nonprofits expressly prohibited from partaking in commercial activities. The closest statutory requirement sprouts from the I.R.C.’s requirement that nonprofits operate exclusively for their stated exempt purpose. Out of this, courts have created a non-uniform commerciality doctrine. The fundamental principle is that they will disfavor a nonprofit having a tax exempt status when its activities are in competition with for-profit enterprises, providing similar products or services. Some courts have taken a quantitative approach deeming twenty percent commercial revenues as being a “substantial non-exempt activity,” while another court found that 10 percent was “not substantial.” Despite their attempts to draw a bright line, the Tax Court rejected the notion that having below ten percent commercial revenues would serve as a safe-harbor. More qualitative approaches have also been developed in other courts focusing on whether a nonprofit has competed with for-profit entities, provided below-cost service, had an excessive amount of profits, engaged in commercial advertising, etc.

V. Internal Revenue Service Tax Exemption Qualifying Tests Beyond the common law requirements for tax exemption, the I.R.C. has created four tests to qualify for federal income tax exemption: the organizational test, the operational test, the private inurement test, and the political activities test. These tests are created in § 501(c)(3) and may be administered by the I.R.S. itself or by the courts. The I.R.S. will contemplate the tests, especially the organizational test, when deliberating whether an entity is qualified to receive tax exemption. On the other hand, once tax exemption is received, were it to be challenged by the I.R.S., then the courts would consider all of the tests. 969 Beginning with the organizational test,30 an organization’s founding document— whether it be articles of incorporation, a charitable trust indenture or articles of association—must establish the organization for a charitable purpose. More specifically, the founding document must specify the organization’s exempt purpose, which must be in conformity with one proscribed by § 501(c)(3). The document must also assert that the organization will only partake in exempt activities and that it shall not engage in any non-exempt activates, except if they are at an insubstantial level. Generally, they must 968

28 Kommerzialitätsdoktrin [lit.] / doctrine de l’activité de nature commerciale [lit.] / doctrina sobre las actividades comerciales [lit.] / dottrina della natura o del carattere «commerciale» delle attività esercitate dall’ente non lucrativo. 29 26 U.S.C.§ 7.01 et seq. 30 organisationsbezogener Test / contrôle de l’organisation interne / verificación del carácter operativo de una organización / verifica della sussistenza o insussistenza di un assetto organizzativo preordinato al perseguimento di scopi fiscalmente non imponibili, di natura assistenziale e solidaristica, test inerente all’organizzazione [lit.].

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V. Internal Revenue Service Tax Exemption Qualifying Tests indicate that there will be no lobbying, except for the case of them making a § 501(h) election to allow some limited lobbying activity. It shall indicate that the organization will not be involved in political campaigning, either for or against a candidate. Private foundations are required to take additional measures as proscribed by § 508(e). And, finally, the document must provide an exempt purpose for which the organization’s assets, in the case of dissolution or termination. Fundamentally, overcoming the organizational test requires including all of the right magic words into an organization’s founding document. Looking outside of a founding document’s “four corners,” the operational test31 re- 970 quires courts to examine a tax exempt organization’s activities. Section 501(c)(3) requires that tax exempt organizations operate “exclusively” for a tax exempt purpose. The I.R.S. has generously interpreted “exclusively” to mean only “primarily.” If any of a tax exempt organization’s primary activities are in furtherance of a non-exempt purpose, then it does not meet the operational test. But, it still may meet the operational test if it were to have “insubstantial” activities in furtherance of non-exempt purposes. If a court were to examine a non-exempt activity and find it to be substantial, it would then revoke the organization’s tax exemption. As previously mentioned, the commerciality doctrine is very much related to the operational test; courts will often consider whether a tax exempt organization’s activities have a certain “commercial hue” or profit making motive and use this as a consideration as to whether it is partaking in non-exempt, for-profit activities. Similarly, courts have inquired as to whether tax exempt organizations have acted “commensurate”32 with their resources, in an exempt manner. If resources are given out too excessively to consultants or fundraisers, for example, and not for its charitable purposes, an organization can also be disqualified under the operational test. And, finally, the operational test requires that a tax exempt organization shall not “privately benefit” anyone. They exist for the good of the general public, and a private benefit to a small or limited group can bring the organization into conflict with the operational test. 971

Practice Tip If a nonprofit expects a substantial change in its expenditure of assets, a lawyer should consult specialist legal in this area. Among other areas requiring special knowledge, some states require prior permission from attorneys general in instances of reallocation, especially when it concerns assets held in a trust.

The third I.R.C. test for tax exemption is called the Private Inurement Test.33 This is 972 not to be confused with the concept of private benefit,34 where an organization fails to benefit a large enough public class. Rather, the private inurement test prohibits inurement of the organization’s assets to private shareholders or individuals. These two groups encompass an organization’s “insiders”—those who may be officers, managers, on the board of directors, or otherwise operating in a control capacity. A violation of this test is best evinced by a showing that there is an overlap of control and benefit within the exempt organization. Private inurement most typically occurs through organizational 31 betriebsbezogener Test / contrôle de l’activité opérationnelle / verificación del carácter operativo de una organización / verifica delle attività operative esercitate dall’ente non lucrativo, test operativo/funzionale [lit.]. 32 angemessen / adéquat / proporcional / commisurato (alle risorse dell’ente). 33 Privatzuwendungstest [lit.] / contrôle de l’attribution de bénéfices privés [lit.] / verificación de quien recibe el beneficio privado /test sulla realizzazione di indebiti interessi privati [lit.] (espressione di difficile traducibilità, in quanto priva di un equivalente esatto e non riconducibile a una fattispecie univoca nell’ordinamento italiano, indica la verifica in ordine all’esistenza o inesistenza di operazioni aventi natura distrattiva delle attività patrimoniali dell’ente non lucrativo, dirette, in quanto tali, a procurare un indebito e illecito vantaggio economico a determinati soggetti privati). 34 privater Nutzen / intérêt privé, en opposition à la notion d’intérêt public / beneficio privado / interesse privato, beneficio privato [lit.].

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Chapter 11 The Charitable Sector: Nonprofit Organizations business deals with officers, members, directors, or their family members. If these individuals were to receive below interest loans or no interest loans from the organization, or were to be excessively overpaid for goods or services, the organization could lose its exemption. This does not prohibit insiders dealing with the organization, however: it just requires that their exchanges are conducted in a reasonable and fair manner, at “arm’slength.”35 973 Practice Tip The I.R.S. puts the burden of keeping proper records on the tax exempt organizations. A failure to keep proper documentation on transactions could result in a legal presumption that the organization cannot demonstrate that it did not partake in private inurement. If the organization cannot overcome this evidentiary burden, it is subject to possibly losing its tax exemption.

Prior to 1996, the only remedy for private inurement, in some cases referred to as excess benefit,36 was for the I.R.S. to revoke an organization’s tax exemption. Excess benefit is defined in the I.R.C. as “any transaction in which an economic benefit is provided by an applicable tax-exempt organization directly or indirectly to or for the use of any disqualified person, if the value of the economic benefit provided exceeds the value of the consideration37 (including the performance of services) received for providing such benefit.”38 This was perceived as being too draconian; therefore I.R.C. § 4958 was created to implement intermediate sanctions, allowing the IRS to punish groups without entirely eliminating their exemption. Intermediate sanctions target organizations that improperly benefit “disqualified persons.” A disqualified person 39 is somebody who exercised substantial control over an organization within the last five years (or one of their family members). While, for example, an officer may be paid an exorbitant amount, a couple of “safe harbor” rules permit this remuneration if it was previously laid out as a fixed contractual payment, or if the executive compensation was preapproved by an internal controlling body. In excess benefit instances, when the subject does not fall under a “safe-harbor,” the disqualified person must pay a tax on 25 % of the excess benefit received. This is essentially a “warning shot” for that person to remedy the excess benefit within the tax period. If the taxpayer fails to do so, he, she or it shall then be taxed an additional 200 % rate on the excess benefit. The organization’s manager may also be subject to a 10 % tax on the excess benefit, unless his or her conduct was not willful and has a reasonable justification. 975 The fourth and final test for tax exemption is the political activities test.40 I.R.C. § 501(c)(3) prohibits organizations from partaking in political activity in the forms of electioneering and lobbying. Electioneering is direct participation in a campaign either to promote or to oppose a particular candidate. One must distinguish between the electioneering and lobbying because electioneering is strictly forbidden, whereas lobbying is 974

35 unter unabhängigen Bedingungen / sous conditions indépendantes / transacción entre partes independientes / in condizioni paritarie, al di fuori dell’influenza personale o del controllo di altri. 36 Überschussertrag [lit.] / bénéfices excessifs [lit.] / beneficio excesivo [lit.] / beneficio eccessivo [lit.]. 37 Gegenleistung / contrepartie / contraprestación / contropartita di scambio (termine intraducibile in quanto privo di corrispondenti nei sistemi di civil law, indica un requisito di esistenza del contratto nel diritto inglese e nei sistemi da esso derivati); Consideration, a common law contractual formation concept, does not exist in the German legal system. The Oxford English Dictionary defines it as “[a]nything regarded as recompense or equivalent for what one does or undertakes for another’s benefit; especially, in the law of contracts, ‘the thing given or done by the promise in exchange for the promise.’ It may itself be a promise. No promise is enforceable without consideration, unless made by a deed.” 38 26 U.S.C.§ 4958(c)(1)(A). 39 untaugliche Person / personne ineligible / persona inelegible / persona inidonea. 40 Test zu politischer Aktivität / contrôle d‘activités politiques / verificación de actividades politicas / verifica/test sull’esistenza o inesistenza ovvero sulla natura delle attività politiche dell’ente.

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V. Internal Revenue Service Tax Exemption Qualifying Tests permissible to an insubstantial degree.41 Lobbying refers to an attempt to influence passage of legislation. Lobbying can occur in two different forms; “direct” and “grassroots” lobbying. Direct lobbying concerns efforts to influence legislation through direct contact with legislators. As a general rule, organizations may publish examinations and discussion of broad social, economic, and similar problems without concern of them being labeled either direct or grassroots lobbying,42 indirect lobbying in other words.43 Grassroots lobbying involves contacting members of the public and urging them to 976 contact their legislators in an attempt to influence legislation. This is otherwise known as a “call to action” type of lobbying. Note that the I.R.S. created a presumption that certain mass media advertisements made within two weeks of a vote on highly politicized pieces of legislation will be deemed grassroots lobbying when: the advertisement presents a particular view of the legislative matter and either specifically refers to the legislation or encourages the public to take action by contacting their legislators. The organization may offer a rebuttal that this was a type of advertisement typically carried on, not specifically placed for timing on a sensitive vote.44 The I.R.C. defines “legislation” as “[a]cts, bills, resolutions, or similar items by the 977 Congress, any State legislature, any local council, or similar governing body, or by the public in a referendum, initiative, constitutional amendment, or similar procedure.”45 Typically, attempts to influence rules promulgated by the executive or judiciary branches will not be considered to be attempts to influence legislation. On the other hand, attempts to influence a legislature’s political appointments of executive officers is lobbying. If organizations publish non-partisan analyses, studies, or research of current or prospective legislation, their activities are not considered lobbying. Furthermore, providing technical advice to governmental bodies, upon request, communications with legislative bodies regarding likely effects on the organization’s legal status, communications to an organization’s bona fide members concerning legislation that will have an impact on the organization are all categories as exceptions to activities influencing legislation. Finally, there is a catch-all category for communications with government officials that are not direct lobbying or with the purpose of influencing legislation. As previously mentioned, lobbying may be permissible when it is done to an insub- 978 stantial degree. This is the standard that organizations may “elect” under I.R.C. § 501(h). This section provides a safe harbor for all I.R.C. § 501(c)(3) organizations, except for churches, their auxiliary organizations, and private foundations, which allows for certain lobbying expenditures. Electing to be covered by I.R.C. § 501(h) requires that a charity file a Form 5768 with the I.R.S. This election comes with a heightened reporting requirement; a charity must then do a Form 990 informational filing annually.46 After the form is filed, the I.R.C. § 501(h) election remains for every subsequent tax year up until when the election is revoked. Upon revocation during any particular tax year, the revocation becomes effective at the beginning of the next tax year.

41 This is the law as of February, 2017. Despite churches being subject to substantially lower reporting requirements and their donors being able to make tax-deductible donations, the Trump administration is strenuously asserting that religious groups’ freedom of speech is unconstitutionally restricted by the prohibition of political activity. This is an indication of the Trump administration’s willingness to issue either an executive order precluding IRS enforcement against religious organizations or to sign into law a congressionally created bill with the same effect. 42 Basis-Lobbyismus / lobbying populaire / cabildeo de base / lobbying “dalla base”. 43 26 C.F.R. § 56.4911 – 2(c)(2). 44 26 C.F.R. § 56.4911 – 2(b)(5)(ii). 45 26 C.F.R. § 1.501(c)(3)-1. 46 See I.R.S. Form 990.

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The I.R.C. provides a sliding scale; it disallows an organization’s lobbying expenditures to exceed 20 % of the first $500,000 of expenditures that should be used for exempt purposes. The next $500,000 is permitted 15 % lobbying expenditures and ten percent for the third $500,000. When going beyond these amounts, only 5 % lobbying expenditures, relative to money used for exempt purposes, may be made. As an absolute cap on lobbying, these expenditures may never exceed $1,000,000 and grassroots lobbying cannot exceed 25 % of total lobbying expenditures.47 If a charity’s lobbying expenditures exceed their permissible amounts, they must then pay a 25 % excise tax on the excess amount. If there lobbying expenditures are in excess of 50 % of their permissible amount over a four year period, this will be considered substantial lobbying and the organization will lose its tax exemption.48

980 Practice Tip In order to analyze these percentages, an organization’s exempt purpose expenditures shall be calculated by determining the amounts paid and costs incurred in order to accomplish its exempt purpose. One should include salaries, overhead, straight-line depreciation expenses and lobbying costs. Internal fundraising costs, i.e. paying employees for fundraising are included, but fundraising expenses to third parties and capital expenditures are not be included as exempt purpose expenditures.49

As previously mentioned, electioneering is strictly forbidden for I.R.C. § 501(c)(3) organizations. Any participation in an electoral campaign, for or against a candidate, will be a violation of the political activities test. The most common electioneering violations come in the form of attempts at “voter education” where published information is not neutral and can impermissibly influence an electoral campaign. To clarify matters, the I.R.S. released the following Revenue Ruling in 2007, giving 21 examples in which IRC § 501(c)(3) organizations involved themselves in electioneering. 982 Examples: Voter Participation Activities The first two examples of electioneering concern voter participation activities,50 which, if done in a non-partisan way, may be permissible: 981

983 Example 1: B is a § 501(c)(3) organization that promotes community involvement, sets up a booth at the

state fair51 where citizens can register to vote. The signs and banners in and around the booth give only the name of the organization, the date of the next upcoming statewide election, and notice of the opportunity to register. No reference to any candidate or political party is made by the volunteers staffing the booth or in the materials available at the booth, other than the official voter registration forms which allow registrants to select a party affiliation. Conclusion: B is not engaged in political campaign intervention when it operates this voter registration booth.

984 Example 2: C is a § 501(c)(3) organization that educates the public on environmental issues. Candidate G

is running for the state legislature and an important element of her platform is challenging the environmental policies of the incumbent. Shortly before the election, C sets up a telephone bank to call registered voters in the district in which Candidate G is seeking election. In the phone conversations, C's representative tells the voter about the importance of environmental issues and asks questions about the voter's views on these issues. If the voter appears to agree with the incumbent's position, C's representative thanks the voter and ends the call. If the voter appears to agree with Candidate G's position, C's representative reminds the voter about the upcoming election, stresses the importance of voting in the election and offers to provide transportation to the polls.

26 U.S.C.§ 4911(c)(2). Even after losing tax exempt status, an organization shall be required to pay a 5 percent excise tax upon its lobby expenses within the tax year that its tax exemption was revoked. 49 I.R.C. § 4911(e); 26 C.F.R. § 56.4911 – 4. 50 Tätigkeiten im Zusammenhang mit der Wahlbeteiligung / activités en lien avec la participation électorale / actividades de participación de votantes / attività correlate alla partecipazione elettorale. 51 Staatsmesse [lit.] / foire d’Etat [lit.] / feria estatal [lit.] / Fiera di Stato [lit.], fiera statale (grande fiera che si celebra ogni anno in ciascuno degli Stati della Federazione statunitense). 47

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V. Internal Revenue Service Tax Exemption Qualifying Tests Conclusion: C is engaged in political campaign intervention when it conducts this get-out-the-vote drive.

985 Examples: Individual Leadership Activities The next four examples s concern an organizations’ individual leadership activities:52 Example 3: President A is the Chief Executive Officer of Hospital J, a § 501(c)(3) organization, and is well known in the community. With the permission of five prominent healthcare industry leaders, including President A, who have personally endorsed Candidate T, Candidate T publishes a full page advertisement in the local newspaper listing the names of the five leaders. President A is identified in the advertisement as the CEO of Hospital J. The ad states, “Titles and affiliations of each individual are provided for identification purposes only.” The advertisement is paid for by Candidate T's campaign committee. Conclusion: Because the advertisement was not paid for by Hospital J, the advertisement is not otherwise in an official publication of Hospital J, and the endorsement is made by President A in a personal capacity, the ad does not constitute campaign intervention by Hospital J.

986

Example 4: President B is the president of University K, a § 501(c)(3) organization. University K publishes a monthly alumni newsletter that is distributed to all alumni of the university. In each issue, President B has a column titled “My Views.” The month before the election, President B states in the “My Views” column, “It is my personal opinion that Candidate U should be reelected.” For that one issue, President B pays from his personal funds the portion of the cost of the newsletter attributable to the “My Views” column. Even though he paid part of the cost of the newsletter, the newsletter is an official publication of the university. Conclusion: Because the endorsement appeared in an official publication of University K, it constitutes campaign intervention by University K.

987

Example 5: Minister C is the minister of Church L, a § 501(c)(3) organization and Minister C is well known in the community. Three weeks before the election, he attends a press conference at Candidate V's campaign headquarters and states that Candidate V should be reelected. Minister C does not say he is speaking on behalf of Church L. His endorsement is reported on the front page of the local newspaper and he is identified in the article as the minister of Church L. Conclusion: Because Minister C did not make the endorsement at an official church function, in an official church publication or otherwise use the church's assets, and did not state that he was speaking as a representative of Church L, his actions do not constitute campaign intervention by Church L.

988

Example 6: Chairman D is the chairman of the Board of Directors of M, a § 501(c)(3) organization that educates the public on conservation issues. During a regular meeting of M shortly before the election, Chairman D spoke on a number of issues, including the importance of voting in the upcoming election, and concluded by stating, “It is important that you all do your duty in the election and vote for Candidate W.” Conclusion: Because Chairman D's remarks indicating support for Candidate W were made during an official organization meeting, they constitute political campaign intervention by M.

989

990 Examples: Charity Fora The following three examples regard a candidate for public office appearing and speaking at charity fora: Example 7: President E is the president of Society N, a historical society that is a § 501(c)(3) organization. In the month prior to the election, President E invites the three Congressional candidates for the district in which Society N is located to address the members, one each at a regular meeting held on three successive weeks. Each candidate is given an equal opportunity to address and field questions on a wide variety of topics from the members. Society N's publicity announcing the dates for each of the candidate's speeches and President E's introduction of each candidate include no comments on their qualifications or any indication of a preference for any candidate. Conclusion: Society N's actions do not constitute political campaign intervention.

991

Example 8: The facts are the same as in Example 7 except that there are four candidates in the race rather than three, and one of the candidates declines the invitation to speak. In the publicity announcing the dates for each of the candidate's speeches, Society N includes a statement that the order of the speakers

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52 individuelle Führungstätigkeiten / activités individuelles des dirigeants / actividades individuales de liderazgo / attività compiute da dirigenti a titolo individuale o personale.

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Chapter 11 The Charitable Sector: Nonprofit Organizations was determined at random and the fourth candidate declined the Society's invitation to speak. President E makes the same statement in his opening remarks at each of the meetings where one of the candidates is speaking. Conclusion: Society N's actions do not constitute political campaign intervention.

993 Example 9: Minister F is the minister of Church O, a § 501(c)(3) organization. The Sunday before the November election, Minister F invites Senate Candidate X to preach to her congregation during worship services. During his remarks, Candidate X states, “I am asking not only for your votes, but for your enthusiasm and dedication, for your willingness to go the extra mile to get a very large turnout on Tuesday.” Minister F invites no other candidate to address her congregation during the Senatorial campaign. Conclusion: Because these activities take place during official church services, they are attributed to Church O. By selectively providing church facilities to allow Candidate X to speak in support of his campaign, Church O's actions constitute political campaign intervention.

994

Examples: The next four situations concern candidates for public office appearing at charitable events as public figures:

995 Example 10: Historical society P is a § 501(c)(3) organization. Society P is located in the state capital.

President G is the president of Society P and customarily acknowledges the presence of any public officials present during meetings. During the state gubernatorial race, Lieutenant Governor Y, a candidate, attends a meeting of the historical society. President G acknowledges the Lieutenant Governor's presence in his customary manner, saying, “We are happy to have joining us this evening Lieutenant Governor Y.” President G makes no reference in his welcome to the Lieutenant Governor's candidacy or the election. Conclusion: Society P has not engaged in political campaign intervention as a result of President G's actions.

996 Example 11: Chairman H is the chairman of the Board of Hospital Q, a § 501(c)(3) organization. Hospital

Q is building a new wing. Chairman H invites Congressman Z, the representative for the district containing Hospital Q, to attend the groundbreaking ceremony for the new wing. Congressman Z is running for reelection at the time. Chairman H makes no reference in her introduction to Congressman Z's candidacy or the election. Congressman Z also makes no reference to his candidacy or the election and does not do any political campaign fundraising while at Hospital Q. Conclusion: Hospital Q has not intervened in a political campaign.

997 Example 12: University X is a § 501(c)(3) organization. X publishes an alumni newsletter on a regular ba-

sis. Individual alumni are invited to send in updates about themselves which are printed in each edition of the newsletter. After receiving an update letter from Alumnus Q, X prints the following: “Alumnus Q, who completed university education in (year) is running for mayor of Metropolis.” Conclusion: The newsletter does not contain any reference to this election or to Alumnus Q’ s candidacy other than this statement of fact. University X has not intervened in a political campaign.

998 Example 13: Mayor G attends a concert performed by Symphony S, a § 501(c)(3) organization, in City

Park. The concert is free and open to the public. Mayor G is a candidate for reelection, and the concert takes place after the primary and before the general election. During the concert, the chairman of S's board addresses the crowd and says, “I am pleased to see Mayor G here tonight. Without his support, these free concerts in City Park would not be possible. We will need his help if we want these concerts to continue next year so please support Mayor G in November as he has supported us.” Conclusion: As a result of these remarks, Symphony S has engaged in political campaign intervention.

999 Practice Tip Public statements, on behalf of a nonprofit, should be made according to an internal procedure guaranteeing that their content and timing will not be detrimental to the nonprofit.

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Examples: The following three situations distinguish between permissible issue advocacy statements53 and impermissible electioneering: 53 unterstützende Stellungnahme / plaidoyer en faveur de certaines causes / declaraciones de apoyo / rilasciare dichiarazioni in favore di qualcuno o di qualcosa o al fine di perorare una determinata causa.

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V. Internal Revenue Service Tax Exemption Qualifying Tests Example 14: University O, a § 501(c)(3) organization, prepares and finances a full page newspaper advertisement that is published in several large circulation newspapers in State V shortly before an election in which Senator C is a candidate for nomination in a party primary. Senator C represents State V in the United States Senate. The advertisement states that S. 24, a pending bill in the United States Senate, would provide additional opportunities for State V residents to attend college, but Senator C has opposed similar measures in the past. The advertisement ends with the statement “Call or write Senator C to tell him to vote for S. 24.” Educational issues have not been raised as an issue distinguishing Senator C from any opponent. S. 24 is scheduled for a vote in the United States Senate before the election, soon after the date that the advertisement is published in the newspapers. Conclusion: Even though the advertisement appears shortly before the election and identifies Senator C's position on the issue as contrary to O's position, University O has not violated the political campaign intervention prohibition because the advertisement does not mention the election or the candidacy of Senator C, education issues have not been raised as distinguishing Senator C from any opponent, and the timing of the advertisement and the identification of Senator C are directly related to the specifically identified legislation University O is supporting and appears immediately before the United States Senate is scheduled to vote on that particular legislation. The candidate identified, Senator C, is an officeholder who is in a position to vote on the legislation.

1001

Example 15: Organization R, a § 501(c)(3) organization that educates the public about the need for improved public education, prepares and finances a radio advertisement urging an increase in state funding for public education in State X, which requires a legislative appropriation. Governor E is the governor of State X. The radio advertisement is first broadcast on several radio stations in State X beginning shortly before an election in which Governor E is a candidate for re-election. The advertisement is not part of an ongoing series of substantially similar advocacy communications by Organization R on the same issue. The advertisement cites numerous statistics indicating that public education in State X is underfunded. While the advertisement does not say anything about Governor E's position on funding for public education, it ends with “Tell Governor E what you think about our under-funded schools.” In public appearances and campaign literature, Governor E's opponent has made funding of public education an issue in the campaign by focusing on Governor E' s veto of an income tax increase the previous year to increase funding of public education. At the time the advertisement is broadcast, no legislative vote or other major legislative activity is scheduled in the State X legislature on state funding of public education. Conclusion: Organization R has violated the political campaign prohibition because the advertisement identifies Governor E, appears shortly before an election in which Governor E is a candidate, is not part of an ongoing series of substantially similar advocacy communications by Organization R on the same issue, is not timed to coincide with a non-election event such as a legislative vote or other major legislative action on that issue, and takes a position on an issue that the opponent has used to distinguish himself from Governor E.

1002

Example 16: Candidate A and Candidate B are candidates for the state senate in District W of State X. The issue of State X funding for a new mass transit project in District W is a prominent issue in the campaign. Both candidates have spoken out on the issue. Candidate A supports funding the new mass transit project. Candidate B opposes the project and supports State X funding for highway improvements instead. P is the executive director of C, a § 501(c)(3) organization that promotes community development in District W. At C' s annual fundraising dinner in District W, which takes place in the month before the election in State X, P gives a lengthy speech about community development issues including the transportation issues. P does not mention the name of any candidate or any political party. However, at the conclusion of the speech, P makes the following statement, “For those of you who care about quality of life in District W and the growing traffic congestion, there is a very important choice coming up next month. We need new mass transit. More highway funding will not make a difference. You have the power to relieve the congestion and improve your quality of life in District W. Use that power when you go to the polls and cast your vote in the election for your state senator.” Conclusion: C has violated the political campaign intervention as a result of P's remarks at C's official function shortly before the election, in which P referred to the upcoming election after stating a position on an issue that is a prominent issue in a campaign that distinguishes the candidates.

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Chapter 11 The Charitable Sector: Nonprofit Organizations 1004

Examples: Examples 17 and 18 concern the equal provision of goods and services to political campaigns:

1005 Example 17: Museum K is a § 501(c)(3) organization. It owns an historic building that has a large hall

suitable for hosting dinners and receptions. For several years, Museum K has made the hall available for rent to members of the public. Standard fees are set for renting the hall based on the number of people in attendance, and a number of different organizations have rented the hall. Museum K rents the hall on a first come, first served basis. Candidate P rents Museum K's social hall for a fundraising dinner. Candidate P' s campaign pays the standard fee for the dinner. Conclusion: Museum K is not involved in political campaign intervention as a result of renting the hall to Candidate P for use as the site of a campaign fundraising dinner.

1006 Example 18: Theater L is a § 501(c)(3) organization. It maintains a mailing list of all of its subscribers and

contributors. Theater L has never rented its mailing list to a third party. Theater L is approached by the campaign committee of Candidate Q, who supports increased funding for the arts. Candidate Q's campaign committee offers to rent Theater L's mailing list for a fee that is comparable to fees charged by other similar organizations. Theater L rents its mailing list to Candidate Q's campaign committee. Theater L declines similar requests from campaign committees of other candidates. Conclusion: Theater L has intervened in a political campaign.

1007

Examples Finally, the remaining examples concern charity usage of websites for political purposes:

1008 Example 19: M, a § 501(c)(3) organization, maintains a web site and posts an unbiased, nonpartisan voter

guide that is prepared consistent with the principles discussed in Rev. Rul. 78–248. For each candidate covered in the voter guide, M includes a link to that candidate's official campaign web site. The links to the candidate web sites are presented on a consistent neutral basis for each candidate, with text saying “For more information on Candidate X, you may consult [website].” Conclusion: M has not intervened in a political campaign because the links are provided for the exempt purpose of educating voters and are presented in a neutral, unbiased manner that includes all candidates for a particular office.

1009 Example 20: Hospital N, a § 501(c)(3) organization, maintains a web site that includes such information

as medical staff listings, directions to Hospital N, and descriptions of its specialty health programs, major research projects, and other community outreach programs. On one page of the web site, Hospital N describes its treatment program for a particular disease. At the end of the page, it includes a section of links to other web sites entitled “More Information.” These links include links to other hospitals that have treatment programs for this disease, research organizations seeking cures for that disease, and articles about treatment programs. This section includes a link to an article on the web site of O, a major national newspaper, praising Hospital N's treatment program for the disease. The page containing the article on O's web site contains no reference to any candidate or election and has no direct links to candidate or election information. Elsewhere on O's web site, there is a page displaying editorials that O has published. Several of the editorials endorse candidates in an election that has not yet occurred. Conclusion: Hospital N has not intervened in a political campaign by maintaining the link to the article on O's web site because the link is provided for the exempt purpose of educating the public about Hospital N's programs and neither the context for the link, nor the relationship between Hospital N and O nor the arrangement of the links going from Hospital N's web site to the endorsement on O's web site indicate that Hospital N was favoring or opposing any candidate.

1010 Example 21: Church P, a § 501(c)(3) organization, maintains a web site that includes such information as

biographies of its ministers, times of services, details of community outreach programs, and activities of members of its congregation. B, a member of the congregation of Church P, is running for a seat on the town council. Shortly before the election, Church P posts the following message on its web site, “Lend your support to B, your fellow parishioner, in Tuesday's election for town council.” Conclusion: Church P has intervened in a political campaign on behalf of B.54

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VII. Unrelated Business Income Tax 1011

Practice Tip While undertaking a particular activity that may fall into a state law or I.R.C. “grey area,” lawyers should advise directors to seek specialist legal advice to ensure that their tax exempt status will not be disturbed.

As a remedy to electioneering, § 4955 excise taxes will be levied on improper political 1012 expenditures. The excise tax is levied initially against the organization at a rate of 10 % for the political expenditures and 2.5 % against the organization’s controlling manager who willingly approved such expenditures. When the organization fails to correct the improper expenditures within that tax period, it shall then be additionally taxed at a rate of 100 % and the management at a rate of 50 %.55 In cases of “flagrant” political expenditures, the I.R.S. may bring a civil legal action in front of a United States District Court to get an injunction preventing ongoing and future political involvement.56 Furthermore, in these flagrant cases, the I.R.S. may immediately end the organization’s tax year and demand immediate payment on excise taxes.57 In more extreme cases, the I.R.S. may revoke a charity’s tax exempt status.

VI. Internal Revenue Code § 527 Political “Action” Groups The term “superpac” has become well-known and synonymous with elections in the 1013 United States. Superpacs are organizations created under I.R.C. § 527. Their primary tax exempt function is to “influence the selection, nomination, election, or appointment of any individual to any Federal, State, or local public office or office in a political organization, or the election of Presidential or Vice-Presidential electors.”58 It may be surprising to see these as “tax exempt” functions after the previous discussion concerning prohibitions on lobbying and electioneering, but there are also certain disadvantages to § 527 organizations. While it must not pay a federal income tax on income for political contributions, membership dues, proceeds from fundraising, and proceeds from bingo games, it must still pay federal income tax on its gross income from alternative sources. Furthermore, and most importantly, individuals who wish to make contributions to superpacs will not receive a personal tax deduction for such a donation.59 Due to the highly volatile and politicized nature of superpacs, a lawyer must research current case law on the section to determine the status of the law.

VII. Unrelated Business Income Tax In the course of conducting tax exempt activities, it is not unprecedented that organi- 1014 zations would, from time to time, involve themselves in what would typically be considered for-profit activities. For this reason, Congress created the Unrelated Business Income Tax (“U.B.I.T.”)60 to tax “any trade or business the conduct of which is not substantially related to the exercise or performance by such organization of its charitable, educational, or other purpose or function constituting the basis for its exemption under

26 U.S.C. § 4955. 26 U.S.C. § 7409. 57 26 U.S.C. § 6852. 58 26 U.S.C § 527 (e)(2). 59 26 U.S.C § 527 (d)(3). 60 Einkommenssteuer auf nicht-gemeinnützige Fremdgeschäfte / impôt sur les activités commerciales détachables du caractère caritatif / impuesto sobre ingresos que no son relacionados a los fines propios de la organización / imposta sul reddito da affair o da operazioni non correlate allo scopo mutualistico dell’ente. 55

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Chapter 11 The Charitable Sector: Nonprofit Organizations § 501.”61 This is a remedy for infractions that are considered to be substantial business activities, but not frivolous enough to warrant revocation of the organization’s tax exemption. Instead, the unrelated activities will be fragmented away from the remainder of the income, thus only subjecting the fragmented part to the excess U.B.I.T. tax.

VIII. Dissolving Nonprofits There are many potential reasons as to why a nonprofit may dissolve. For instance, if it has outlived or already achieved its purpose, this would be a reason to voluntarily dissolve or merge with another nonprofit. Alternatively, they may run into financial difficulties and be forced into dissolution. The state’s law in which the nonprofit is located will lay out specific guidelines for dissolution. As previously mentioned under the requirements of the organizational test, the organization must already have had filed a plan for distribution of its assets along with its articles of organization. If the nonprofit is filing for voluntary liquidation under the bankruptcy code, the majority of states require that the board of directors vote for dissolution by a formal resolution, a dissolution plan be approved by members and the board, creditors be notified with enough time to recover liabilities, and, after dissolution, the organization’s only activities will be those that are required to wind up its affairs.62 1016 The type of organization, whether it is for the public benefit or mutual benefit, will also play a role in determining where residual assets go to. If it is a public benefit organization, then residual assets must be transferred to other similar, charitable organizations. Mutual benefit organizations, upon dissolution, may distribute assets to members, as is proscribed in the organization’s founding documents.63 When determining successor, recipient charities, the courts have predominantly used the standard that the successor “engage in activities substantially similar to those of the dissolved corporation.”64 Furthermore, for charitable trusts, the courts are most likely to apply the “cy-près doctrine” when an original purpose becomes impossible or impractical. The term “cy-près,” taken from the law French that was the language of common law after the Norman conquest, is a doctrine that is used to reallocate assets for a usage that is “as close as possible” with an original intention when the original intention is not precisely limited to that listed in the trust’s written instrument.65 1017 As an alternative to dissolution, an organization may undertake a conversion. There are four potential nonprofit to for-profit conversion methods, allowing much more leniency for investors and shareholders to take part in its activity. First, the “conversion in place,” which is permissible in a handful of jurisdictions, consists of a nonprofit organization simply amending its articles of incorporation to become for-profit and have the ability to issue stock. Second, a nonprofit can sell its assets to a for-profit enterprise for fair market value. This sell-off results in full ownership by the for-profit entity. The resulting revenues to the nonprofit must be used for charitable purposes; typically foundations are created in these instances. Third, a nonprofit can merge with another entity. And finally, the nonprofit may make a “drop-down conversion” in which it transfers all of its assets and liabilities into one of its wholly-owned subsidiaries in exchange for 1015

26 U.S.C § 513 (a). See generally 11 U.S.C. § 303(a). 63 In re Los Angeles County Pioneer Soc., 257 P. 2d 1, 13 (CAL. 1953). 64 Matter of Multiple Sclerosis Service Organization of New York, Inc., 68 N.Y. 2d 32, 43–44 (N.Y. 1986). 65 Restatement (Second) of Trusts § 381 (1959). 61

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IX. Managing Nonprofits stock. This results in the formation of either a new for-profit organization, private foundation, or I.R.C. § 501 (c)(4) organization.66

IX. Managing Nonprofits An unincorporated association’s governance structure is a product of its bylaws, or 1018 other founding documents. The legal relationship between the members and the group’s management is primarily governed by agency law.67 A trust’s legal authority vests in a trustee through the trust legal instrument or by statute.68 The trustee’s standard of care owed to a beneficiary is relatively higher than that owed by a nonprofit corporation’s board member to the organization or the public. Nonprofit corporations are governed by their boards of directors. The law governing this relationship arises primarily from state statutes and case law. Board members owe fiduciary duties while fulfilling their roles in overseeing the corporation. Fiduciary duties require that fiduciaries, and in the case of nonprofit corporations, 1019 board members, act solely in the interests of their principals, or organizations. Fiduciaries are required to have prior consent from their principals if they are to recognize any personal gain from their transactions. Fiduciaries must abstain from any conflicts of interest between themselves and their principals.69 More specifically, fiduciaries owe a duty of care, loyalty and obedience to their principals. A director’s “duty of care” requires that he or she be reasonably informed, participate 1020 in decisions, and act in good faith while doing so. While informing oneself, a director is not expected to have imputed knowledge of everything, rather, the director may rely on information coming from reliable and competent organization members. Blind reliance on others is not in line with keeping oneself reasonably informed.70 A well-known case, Smith v. Van Gorkom,71 elaborated on what is known as the “business judgment rule.” The business judgment rule requires that board members decide issues with proper deliberation, have proper preparation before making important decisions, participate in pre-decision discussions, maintain written records of these discussions, request expert guidance on major transactions, and ensure the quality of in-house information. This rule allows for leaders to take informed and reasonable risks while leading their organizations.

66 Bradford Gray, Conversions of Nonprofit Health Plans & Hospitals, in An Overview of The Issues and the Evidence in Conversion Transactions: Changing Between Nonprofit and For-Profit Form 53 (National Center on Philanthropy & the Law 1996); Thomas Silk, Conversions of Tax-Exempt Nonprofit Organizations: Federal Tax Law and State Charitable Law Issues, 13 Exempt Org. Tax Rev. 745, 746 (1996). 67 Stellvertretungsrecht / contrat de mandat / derecho de agencia / norme in materia di rappresentanza; Henry B. Hansmann, Reforming Nonprofit Corporation Law, 129 U. Pa. L. Rev. 479, 509–38 (1981); see The Free Dictionary http://legal-dictionary.thefreedictionary.com/agency (defining agency as “a consensual relationship created by contract or by law where one party, the principal, grants authority for another party, the agent, to act on behalf of and under the control of the principal to deal with a third party. An agency relationship is fiduciary in nature, and the actions and words of an agent exchanged with a third party bind the principal.”). 68 3 Austin Wakeman Scott et al., Scott and Scher on Trusts § 18.1, at 1266 (5th ed. 2006 & Supp. 2009). 69 Eugene Temchenko, Cornell University Law School Legal Information Institute, Fiduciary Duty, (2016). 70 Daniel L. Kurtz, Board Liability: Guide for Nonprofit Directors 29 (1988). 71 488 A. 2d 858, 874–75 (Del. 1985).

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Chapter 11 The Charitable Sector: Nonprofit Organizations 1021 Practice Tip When a board member is seeking to make informed decisions consistent with the business judgment rule, he or she should be advised to create a “paper trail” of these activities. To get the protection of the rule, well-advised boards insist on receiving written reports and professional advice before making important decisions.

1022 Practice Tip Board members and officers should store a hard copy of the following records: • • • • • •

calendars of nonprofit meetings and events; the articles of incorporation and bylaws; the nonprofit’s mission statement; a list of board members (including chairs and committees) and other important contacts with addresses, phone numbers, and email addresses; the nonprofit’s conflict of interest policy; and any written disclosures that a director may have made in connection to the conflict-of-interest policy.

The duty of loyalty owed to an organization generally requires that directors act in the organization’s best interests, as opposed to their own or the interests of another entity.72 Under the duty of loyalty, conflicts of interest are not per se prohibited, it is only required that when a conflict exists between a director and the organization, he or she must disclose the conflict to the board, in writing, and subject it to a disinterested board review.73 Directors, upon receiving privileged organization-related information may not engage in a conflicting personal transaction to benefit from this “corporate opportunity.”74 Directors are thus required to disclose any of their personal transactions that could perceptively come into conflict with their duty of loyalty.75 1024 Finally, the duty of obedience requires all directors to act according to the organization’s founding documents and its mission, and to assure that the allocation of donated funds goes towards this mission. This duty revisits the organizational test and its requirement that the organization has a proper charitable purpose listed in its founding documents. The board must be aware of the charitable mission, as well as the obligation to undertake all necessary tasks required in maintaining a nonprofit or tax exempt status. Also, the board of directors is charged with the task of setting amounts for executive compensation under a “prudent person” standard.76 Because the beneficiaries of these organizations are often times the public, the state attorneys general are responsible for the legal enforcement of these duties.77 1023

X. Conclusion 1025

After having completed this chapter, one should be acquainted with the relevant sources of law concerning nonprofits, their structures, how they are differentiated from 72 Section of Business Law, Guidebook for Directors of Nonprofit Corporations 19, 29 (George W, Overton & Jeannie Carmedelle Frey, eds., 2003). 73 Jordan v. Duff & Phelps, Inc., 815 F.2d 429, 440 (7th Cir. 1987). 74 unternehmensgebundene Gelegenheit / opportunité appartenant à la société / oportunidad para la empresa / opportunità sottese a operazioni in cui la società ha un interesse o aspettativa qualificata e che risultino essenziali per la sua attività, opportunità «corporate» [lit.]. 75 Section of Business Law, Guidebook for Directors of Nonprofit Corporations 19, 34 (George W, Overton & Jeannie Carmedelle Frey, eds., 2003). 76 Grundsatz der unternehmerischen Vorsicht / principe du “bon père de famille” / persona prudente / parametro del “buon padre di famiglia”, parametro astratto per la nozione di diligenza media, regola dell’uomo “prudente” [lit.]; Restatement (Third) Trusts § 90. 77 Rob Atkinson, Unsettled Standing: Who (Else) Should Enforce the Duties of Charitable Fiduciaries? 23 Iowa J. Corp. L. 655 (1988).

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X. Conclusion for-profits, and the tests to which they are subject. This is only a concise acquaintance, intended to be generally informative. This chapter has not been an all-encompassing treatise on nonprofit organizations, but was rather an introduction to the issues faced when establishing, maintaining and dissolving nonprofits. Seen that way, this chapter is a resource for further research and exploration into the specific issues. In closing, it should be recognized that the United States’ third sector continues to 1026 expand. Charitable giving and volunteerism are deeply embedded in the United States’ culture and U.S. legal culture reflects those cultural values. Beginning in the early days of the country’s industrialization and continuing into the modern era, the laws have been continuously evolving to provide legal structures for charity and volunteerism. Compared to other states of the world, the U.S. values individualism and also places more burden and responsibility on the individual that might be carried by the state in other cultures.

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CHAPTER 12 IMMIGRATION LAW: A VIEW FROM THE INSIDE Literature: Abed Ayoub & Khaled Beydoun, Executive Disorder: The Muslim Ban, Emergency Advocacy, and the Fires Next Time, 22 Mich. J. Race & L. 215 (2017). Anne M. Burr & Howard Bromberg, U.S. Legal Practice Skills for International Law Students (2014). Ira J. Kurzban, Immigration Law Sourcebook (14th ed. 2014). Stephen H. Legomsky, Immigration and Refugee Law and Policy (4th ed. 2005). U.S. Dep’t of Health and Hum. Serv., The U.S. Refugee Resettlement Program – an Overview (Sept. 14, 2015), http://www.acf.hhs.gov/orr/resource/the-us-refugee-resettlement-program-an-overview. U.S. Dep’t of Just., Attorney General and BIA Precedent Decisions, https://www.justice.gov/eoir/ ag-bia-decisions. Eric K. Yamamoto & Rachel Oyama, Masquerading Behind a Façade of National Security, 128 Yale L.J. F. 688 (2019).

I. Introduction U.S. immigration law practice is characterized by strict procedures, complicated regulations that have the full force and effect of law, long lines and waiting periods, and unpredictability. Few areas of U.S. law are as complex, contradictory, emotional, or as difficult as U.S. immigration law. Even the federal courts recognize that U.S. immigration law is “second only to the Internal Revenue Code in complexity.”1 U.S. immigration laws are the product of decades of political compromises based on perceived interests and fears. There is a constant tension between those persons who believe that the ease of immigration will support the economy and will promote security and cultural vibrancy and those who believe that easier immigration threatens those same values. 1028 This chapter begins by discussing the end of an individual’s immigration history: the process of becoming a U.S. citizen. Next, this chapter provides a brief history of U.S. immigration law and an introduction to the agencies that are involved in the current U.S. immigration system. Then, this chapter introduces the concept of “Administrative Law” and discusses the binding authorities involved in U.S. immigration law. The actors in the immigration law court system are also introduced. 1029 Against this background, this chapter next explores some of the concrete pieces of U.S. immigration and provides a summary of some of the visas that are available to people seeking to enter the U.S. Since the Immigration and Nationality Act (“I.N.A.”)2 differentiates between “immigrant” and “non-immigrant” visas,3 depending on whether a non-citizen wishes to remain permanently in the U.S. or whether he or she only needs a temporary stay for a specific purpose, this section is divided into “immigrant” and “nonimmigrant” categories. This chapter also discusses the procedures and goals involved in the U.S.’s identification and protection of refugees and asylees. 1030 Having shown that each year, despite the complexity and unpredictability of U.S. immigration law, hundreds of thousands of people decide to become U.S. citizens and 1027

1 Castro-O’Ryan

v. I.N.S., 847 F. 2d 1307, 1312 (9th Cir. 1987). zur Einwanderung und Staatsangehörigkeit in den USA / loi fédérale sur l’immigration et la nationalité aux États-Unis / ley de inmigración y naturalización / legge statunitense sull’immigrazione e la nazionalità. 3 8 U.S.C. § 1151. 2 Bundesgesetz

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II. Citizenship: Why Become a Citizen of the United States? many more are admitted to the U.S. with the express goal of remaining permanently, this chapter concludes. Although this chapter provides practice tips and general notes about immigration 1031 law, nothing contained in this chapter should be understood as legal advice, nor does it replace in-depth analysis of a specific immigration issue. Experienced immigration legal counsel should be consulted before discussing any specific immigration matter.

II. Citizenship: Why Become a Citizen of the United States? The U.S. prides itself on being a country of immigrants. The trend of immigration to 1032 the U.S. continues. From 2001–2015, an average of approximately 630,000 people naturalized4–i.e. became a U.S. citizen–each year. Although naturalization applications have increased in recent years, the acceptance rate has remained about the same, at 90 %. In 2018, 756,000 people naturalized.5 The legislation related to naturalization are contained in Title III of the I.N.A.6 In order to naturalize, one must be a lawful permanent resident aged 18 or older who has lived in the U.S. for a certain amount of time. The applicant for naturalization must demonstrate his or her “good moral character”7 and his or her attachment to the principles of the U.S. Constitution and the good order and happiness of the U.S., as well as a basic knowledge of the English language, and U.S. history and government.8 He or she must be willing to bear arms or perform work of national importance, if called upon to do so.9 The naturalization process is complete when the applicant takes an oath of allegiance to the U.S.10 The U.S. disfavors but does not prohibit dual nationality.11 When taking the oath of 1033 naturalization, the individual makes the following statement: “I hereby declare, on oath, that I absolutely and entirely renounce and abjure all allegiance and fidelity to any foreign prince, potentate, state, or sovereignty, of whom or which I have heretofore been a subject or citizen [. . .].”12 People who naturalize are not required to abandon their prior nationality in any way beyond taking the oath of naturalization. Whether the oath has, as its consequence, the result that one no longer has citizenship of the other state is a consequence of the rules of the other state, not of the U.S. There is no requirement from the U.S. for a dual national to choose only one statehood upon becoming an adult.13

4 eingebürgert

/ naturalisé / naturalizado / naturalizzati. Citizenship & Immigr. Serv., Naturalization Fact Sheet (Nov. 6, 2015), https://www.uscis. gov/news/fact-sheets/naturalization-fact-sheet. (last accessed, April 1, 2020.). 6 See generally Immigration and Nationality Act (I.N.A.), tit. III, 8 U.S.C. §§ 1401–1504 (2014). 7 guter sittlicher Charakter / bonne moralité / buen carácter moral / buona levatura morale. 8 8 U.S.C. § 1423. 9 8 U.S.C. § 1427. 10 8 U.S.C. § 1448. 11 doppelte Staatsangehörigkeit / double nationalité / doble nacionalidad / doppia nazionalità [lit.], doppia cittadinanza. 12 U.S. Citizenship & Immigr. Serv., Naturalization Oath of Allegiance to the United States of America (June 5, 2014), https://www.uscis.gov/us-citizenship/naturalization-test/naturalization-oathallegiance-united-states-america. 13 Ira J. Kurzban, Immigration Law Sourcebook 1816–17 (14th ed. 2014). 5 U.S.

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III. History and Purpose(s) of the Immigration Law and Policy in the United States For the first 100 years of the U.S., there were no laws restricting immigration. To the contrary, some states and even the federal Congress passed legislation aimed at promoting and encouraging immigration!14 Immigrants brought new capital and innovation to the U.S. and the U.S. continues to benefit from the generations of immigrants who arrived and remained in the U.S. The early Supreme Court found that state efforts to restrict immigration were unconstitutional,15 and confirmed that immigration law is a federal competency.16 1035 It was not until 1875 that a federal statute sought to restrict immigration by barring convicted criminals and prostitutes from entering the U.S.17 These exclusion grounds were expanded to include anyone likely to become a public charge18–i.e., someone who could only survive by receiving money from the state.19 In 1882, in response to the large number of Chinese immigrants living in the western part of the U.S., the Chinese Exclusion Act went into effect–where it remained until 1943.20 1036 These first restrictions on immigrants excluded people from entering the U.S. based on their national origin, health, skills, or political habits, among other grounds. In response to then-current events or perceived public needs, further immigration laws sought to exclude low-skilled workers, people with contagious disease, and anarchists from the U.S.21 Regulation of the number of immigrants to enter the U.S. was first enacted in 1921 when, in response to fears that the U.S. would become inundated with European immigrants after World War I, the U.S. enacted its first system of limiting the number of immigrants it received from one country. Although called a “quota,”22 it is rather a system of ceilings.23 The U.S. made ceilings a permanent national policy beginning in 1924, when it created a firm ceiling of only accepting 150,000 people per year from any particular country.24 Although the National Origin Quota Act is no longer law, there are still ceilings based on national origin. The current statute–the I.N.A.–was first enacted in 1952. Although it has undergone numerous amendments and revisions, it continues to support policies that have their roots in the prior legislation, including many grounds for exclusion and the ceilings.25 1034

14 Stephen H. Legomsky, Immigration and Refugee Law and Policy 15 (4th ed. 2005); See e.g., An Act to Encourage Immigration, ch. 246, 13 Stat. 385 (38th Cong.) (1864). 15 See e.g., Passenger Cases, Smith v. Turner, 48 U.S. 283 (1849). 16 Chy Lung v. Freeman, 92 U.S. 275 (1876) (holding that Congress has the exclusive authority to make laws pertaining to immigration); see also Kurzban, supra note 13, at 33–48. 17 Act of March 3, 1875, 18 Stat. 477 (1875). 18 This continues to be a ground for exclusion from the U.S. See Immigration and Nationality Act (“I.N.A.”) § 212(a)(4), 8 U.S.C. § 1182 (2014). 19 Immigration Act of 1882, 22 Stat. 214 (1882). 20 Chinese Exclusion Act of 1882, 22 Stat. 58 (1882). 21 1903 Amendments to the Immigration Act of 1882, 32 Stat. 1213 (1903). 22 Quote / taux / cuota / quota, quota di immigrazione. 23 Although called a “quota,” i.e. a minimum number that one state would receive, it is actually a ceiling – a cap or upward limit on the number of people that would be accepted. Quota Act of 1921, 42 Stat. 5 (1921). 24 National Origins Act, 43 Stat. 153 (1924). 25 See Kurzban, supra note 13, at 4; Telephone Interview with Mark Shmueli, Immigration Attorney, Law Office of Mark J. Shmueli (Aug. 3, 2016) and (Jan. 15, 2020).

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IV. The Federal Agencies Involved in Immigration Law and Policy

IV. The Federal Agencies Involved in Immigration Law and Policy In response to the terrorist attacks of September 11, 2001, the federal government restructured how it administers U.S. immigration law enforcement. The Immigration and Naturalization Service26 (“I.N.S.”) closed and its functions were transferred to the newly created Department of Homeland Security27 (“D.H.S.”).28 Two immigration enforcement bureaus were created and operate out of the D.H.S.: The Bureau of Customs and Border Protection (“C.B.P.”) is responsible for external border enforcement and the Bureau of Immigration and Customs Enforcement (“I.C.E.”) is responsible for internal enforcement. Other immigration services, like the adjudication of most visa petitions, are performed by the U.S. Citizenship and Immigration Service (“U.S.C.I.S.”) or the U.S. Department of State (“U.S.D.O.S.”). Other agencies that perform services related to immigration include the U.S. Department of Labor (“D.O.L.”) and the U.S. Department of Health and Human Services (“H.H.S.”). U.S. companies seeking to hire a foreign worker approach the D.O.L. to complete a labor certification,29 which is a test to establish that the immigrant worker will not displace a U.S. citizen or lawful permanent resident worker and that the proposed immigrant worker’s presence would not depress wages or lead to other negative conditions in the labor market.30 Some non-immigrant visas require completion of a labor certification and, once the labor certification is approved, the employer–as the Petitioner–will submit a petition for a visa with the U.S.C.I.S.31 The H.H.S. is relevant because it publishes regulations of what the U.S. considers to be a communicable or other disease that may prevent a would-be immigrant from entering or remaining in the U.S.32 The H.H.S. also administers the Office of Refugee Resettlement and, with the D.H.S. and other government entities, operates the U.S. Resettlement Program.33 The United States Department of Justice (“U.S.D.O.J.”) is separate from the D.H.S. and has an office called the Executive Office for Immigration Review (“E.O.I.R.”), more commonly known as “Immigration Court.”34 E.O.I.R.’s Office of the Chief Immigration Judge (“O.C.I.J.”) conducts removal hearings in cases in which D.H.S. charges non-citizens with violating the law. Appeals from the O.C.I.J. are heard before the Board of Im-

26 Einwanderungs- und Einbürgerungsdienst [lit.] / service de l’immigration et de la naturalisation [lit. ]/ servicio de inmigración y naturalización / servizio immigrazione e naturalizzazione [lit.]. 27 Heimatschutzministerium [lit.] / ministère de sécurité intérieure [lit.] / departamento de seguridad nacional / dipartimento per la sicurezza nazionale (traducibile anche come: “dipartimento per la sicurezza interna”). 28 Homeland Security Act of 2002 § 471(a), 107 P.L. 296, 116 Stat. 2135 (2002). 29 Arbeitsgenehmigung / certificat de travail / certificación laboral / certificato di lavoro (certificazione rilasciata dal dipartimento statunitense del lavoro, che consente a un imprenditore/datore di lavoro di assumere, temporaneamente o permanentemente, un lavoratore straniero). 30 20 C.F.R. § 656.2(c) (2014); Telephone Interview with Mark Shmueli, Immigration Attorney, Law Office of Mark J. Shmueli (Aug. 3, 2016). 31 U.S. Dep’t of Lab., Foreign Labor Certification (May 19, 2014), https://www.foreignlaborcert.d oleta.gov/about.cfm. 32 See e.g., I.N.A. § 212(a)(1), 8 U.S.C. § 1182. 33 Umsiedlungsprogramm / programme de réinstallation / programa de reasentamiento / programma statunitense di reinsediamento [lit.]; U.S. Dep’t of Health and Hum. Serv., The U.S. Refugee Resettlement Program – an Overview (Sept. 14, 2015), http://www.acf.hhs.gov/orr/resource/the-us-refugee -resettlement-program-an-overview. Other agencies involved include U.S.C.I.S. and the Office of Refugee Resettlement (“O.R.R.”). 34 Einwanderungsgericht [lit.] / tribunal de l’immigration / corte de inmigración / Corte per l’immigrazione [lit.], tribunale competente in materia di immigrazione.

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Chapter 12 Immigration Law: A View from the Inside migration Appeals (“B.I.A.”).35 The B.I.A. has the final word over appeals from D.H.S. and O.C.I.J., and its decisions may only be changed by the U.S. Attorney General or a federal court.36

V. The Immigration Law System Immigration legislation, regulations, and procedures change almost daily. Although most of these changes will be slight, lawyers practicing immigration law develop their own internal systems for staying current on changes in legislation, regulations, procedures, and the legally binding factual determinations that could affect clients. 1042 In part, these rapid changes reflect immigration law’s status as “administrative law.”37 As such, changes in immigration law must comply with the Administrative Procedures Act (“A.P.A.”).38 Rulemaking under the A.P.A. happens quickly and involves only those agencies interested in the rule. For administrative rulemaking, Congressional debate is not required.39 1043 At the same time, immigration law is federal law, grounded in the U.S. Constitution.40 Immigration attorneys, therefore, need to be comfortable working with the six sources of legally binding immigration authority, including the factual determinations of the U.S.D.O.S. and other competent federal agencies, and the procedures adopted by federal agencies that administer U.S. immigration law, in order to accurately assist their clients. 1041

1. The Letter of the Law 1044

The sources of binding authority in U.S. immigration law are listed below in the order that one might consult them in practice: (1) The U.S. Constitution,41 the highest authority of law in the country, governs the relationship between the citizens of the U.S. and their government and between the U.S. and the rest of the world. Article I, Section 8 of the Constitution stipulates that Congress has the power to “establish a uniform Rule of Naturalization.” That power, along with the power to declare war, to regulate trade with foreign nations, form the backbone of Congress’s power to create and regulate immigration.42

35 The B.I.A. is the highest administrative court regarding immigration law but its decisions can be appealed to federal courts, see U.S. Dep’t of Just., Executive Office for Immigration Review: An Agency Guide (Dec. 2017), https://www.justice.gov/eoir/page/file/eoir_an_agency_guide/download. The B.I.A. rarely hears oral arguments and has jurisdiction over appeals both from O.C.I.J. and D.H.S., see U.S. Dep’t of Just., Board of Immigration Appeals (Oct. 15, 2018), https://www.justice.gov/eoir/board-ofimmigration-appeals. 36 Id. 37 Verwaltungsrecht / droit administratif / derecho administrativo / diritto amministrativo. 38 Bundesgesetz zu Verwaltungsverfahren [lit.] / loi sur la procédure administrative / ley sobre el procedimiento administrativo / legge statunitense sui procedimenti amministrativi; 5 U.S.C. §§ 551–59 (2014); The A.P.A. applies to agencies, which are generally members of the executive branch of the U.S. federal government, and include such bodies as the Food and Drug Administration, the Department of Agriculture, and the Department of Energy. 39 5 U.S.C. § 553 (2014); N.L.R.B. v. Bell Aerospace Co. Div. of Textron, Inc., 416 U.S. 267, 294 (1974) (explaining that in administrative law, the decision to create new rules through rulemaking or adjudication lies with the agency in the first instance). 40 U.S. Const., art. I § 8; see also Arizona v. United States, 132 S. Ct. 2492, 2498 (2012). 41 Verfassung der Vereinigten Staaten / constitution des États-Unis/ constitución de los Estados Unidos / Costituzione degli Stati Uniti d’America. 42 See e.g., U.S. Const. art. I, § 8, cl. 4, 8, 11; id. art. I, § 9, cl. 1.

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V. The Immigration Law System (2) The Immigration and Nationality Act (“I.N.A.”),43 first created in 1952, organized all of the immigration laws in the U.S. into one statute. The I.N.A., originally passed as the Hart Cellar Act, is contained within the United States Code (U.S.C.) and contains provisions governing diplomatic officers, immigration and nationality requirements and procedures, and procedures related to refugees.44 Thus, when reading the I.N.A., one will see parallel references to the corresponding U.S.C. citation. (3) Title 8 of the Code of Federal Regulations.45 The Code of Federal Regulations (“C.F.R.”) contains the interpretations of the I.N.A., as implemented by the C.B.P., I.C.E., and U.S.C.I.S.46 An immigration attorney should consult Title 8 of the Code of Federal Regulations to obtain information about procedures under the I.N.A. as many immigration procedures are implemented via regulation.47 (3A) Decisions48 from the Board of Immigration Appeals (“B.I.A.”).49 The B.I.A. is the appellate body within the E.O.I.R. The B.I.A. publishes the decisions that it considers to be precedential on its website and in bound paper volumes.50 Published B.I.A. decisions are binding. (3B) Decisions from the Administrative Appeals Office (“A.A.O.”).51 The A.A.O. is part of U.S.C.I.S. and has jurisdiction over appeals of U.S.C.I.S. decisions.52 The A.A.O. issues non-precedential as well as precedential decisions.53 (4) Decisions from the U.S. Courts of Appeals.54 There are thirteen U.S. Courts of Appeals–one for each federal circuit. The case law produced by the U.S. Court of Appeals55 for the particular federal circuit in where the client’s immigration court is located will be binding in his or her immigration case. Decisions made in other circuits will have persuasive value and, therefore, should not be ignored.56 (5) Decisions by the U.S. Supreme Court57 are final and thus govern practices throughout the U.S. 43 Einwanderungs- und Staatsbürgerschaftsgesetz / loi sur l’immigration et la nationalité / ley de inmigración y nacionalidad / legge statunitense sull’immigrazione e la nazionalità; Immigration and Nationality Act, 82 P.L. 414, 66 Stat. 163 (1952). 44 8 U.S.C. §§ 1101–1537. 45 Titel 8 der Sammlung der Bundesverordnungen / titre 8 des règlements fédéraux / título 8 del código de regulaciones federales / titolo 8 del codice dei regolamenti federali degli Stati Uniti. 46 8 C.F.R. §§ 100.1 – 1337.10 (2016). 47 Id. at § 100.5. 48 Entscheidungen / décisions / decisiones / decisioni. 49 Beschwerdekammer in Einwanderungssachen / commission d’appel de l'immigration des États-Unis / junta de apelaciones de inmigración / commissione per i ricorsi in materia di immigrazione. 50 U.S. Dep’t of Just., Attorney General and B.I.A. Precedent Decisions, https://www.justice.go v/eoir/ag-bia-decisions. 51 Amt für Verwaltungsbeschwerden / bureau d’appels administratifs / oficina de apelcaciones administrativas / Ufficio ricorsi amministrativi [lit.]. 52 U.S. Citizenship & Immigr. Serv., The Administrative Appeals Office (A.A.O.), https://www.u scis.gov/about-us/directorates-and-program-offices/administrative-appeals-office-aao/administrative-ap peals-office-aao. 53 Id.; U.S. Citizenship & Immigr. Serv., A.A.O. Decision Data, https://www.uscis.gov/about-us/dire ctorates-and-program-offices/administrative-appeals-office-aao/aao-decision-data (containing information about appeals, as well as statistics regarding appeals). 54 Berufungsgerichte der Vereinigten Staaten / cours d’appel fédérales / tribunal de Apelaciones / corte d’appello degli Stati Uniti. 55 Rechtsprechung der Berufungsgerichte / jurisprudence des cours d’appel / jurisprudencia del tribunal de apelaciones / giurisprudenza della corte d’appello degli Stati Uniti. 56 Anne M. Burr & Howard Bromberg, U.S. Legal Practice Skills for International Law Students 48–50 (2014). 57 Entscheidungen des obersten Gerichtshofs [lit.] / décisions de la cour suprême des États-Unis [lit. / decisiones de la Corte Suprema / sentenze della Corte Suprema degli Stati Uniti, decisioni [lit.].

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Chapter 12 Immigration Law: A View from the Inside (6) Some matters in immigration law are resolved or addressed in Executive Orders58 and Agency Determinations,59 which are typically published in the Federal Register.60 These are often controversial, and the President’s authority to issue Executive Orders has been subject of a recent, non-precedential ruling by the U.S. Supreme Court.61 An Executive Order, in the U.S. tripartite system of government, is not legislation. The President is the chief law enforcement officer, but not a law maker. In addition, Executive Actions 62 have also addressed and changed immigration law.63 These Executive Orders, Agency Determinations, and Executive Actions may be relevant to a potential client, depending on his or her circumstances. 1045 Example U.S. cooperative federalism creates a complex system of precedent for cases involving immigration law. The Baltimore Immigration Court, for example, is bound by the immigration law decisions of the U.S. Court of Appeals for the Fourth Circuit, but it is not bound by decisions issued by the U.S. Court of Appeals for the Third Circuit. Attorneys may reference such authority, but it will be treated as persuasive, rather than mandatory.

1046 Practice Tip The E.O.I.R. maintains a Virtual Law Library that is accessible for use by the general public: https://www.j ustice.gov/eoir/virtual-law-library. The Virtual Law Library is updated daily and contains cases from the B.I.A., Executive Orders and the binding factual determinations by the U.S.D.O.S. that may be relevant in immigration matters.

2. The Immigration Court System 1047

The immigration court system is a branch of administrative law and, as such, has its own specialized courts to adjudicate immigration cases. The E.O.I.R.64 is an office in the U.S.D.O.J. that provides the specialized immigration courts. Approximately 465 Immigration Judges serving in more than 60 Immigration Courts to adjudicate the removal cases involving any one of the tens of millions of aliens living in the U.S.65 58 Durchführungsverordnungen [lit.] / ordres exécutifs [lit.] / órdenes ejecutivos / ordini esecutivi [lit.], provvedimenti esecutivi. 59 Behördenentscheidung / décision d’un organisme étatique / determinaciones / determinazioni [lit.], decisioni di una agenzia governativa. 60 Bundesregister / registre federal / registro federal / equiparabile a una “Gazzetta Ufficiale” in cui sono pubblicati gli atti del Governo degli Stati Uniti; Some relevant Agency Determinations, such as “Country Reports on Human Rights Practices”, are not published in the Federal Register and can instead be found through the relevant agency or in the Virtual Law Library. See generally U.S. Dep’t of Just., Virtual Law Library, https://www.justice.gov/eoir/virtual-law-library. 61 United States v. Texas, 579 U.S. ____, 136 S. Ct. 2271 (2016). 62 Maßnahmen zur Umsetzung / actions exécutives / acción ejecutiva / azioni esecutive [lit.]. 63 U.S. Citizenship & Immigr. Serv., Executive Actions on Immigration, https://www.uscis.gov/i mmigrationaction. 64 Bundesbehörde des Justizministeriums für Einwanderungsfälle / bureau exécutif de la révision de l’immigration [lit.] / oficina ejecutiva para la revisión migratoria / acronimo dell’”ufficio esecutivo per la revisione dell‘immigrazione” [lit.], ufficio del dipartimento di giustizia statunitense che gestisce i tribunali per l’immigrazione. 65 Statistics on the number of non-citizens in the U.S. varies. U.S. Dep’t of Just., Immigration Court Practice Manual 4 (2016), https://www.justice.gov/sites/default/files/pages/attachments/2016/02/04/pr actice_manual_-_02-08-2016_update.pdf#page=2. The number of immigration judges changes with each administration; in 2017, U.S. Dep’t of Just. reported 350 Immigration Judges, see U.S. Dep’t of Just., Executive Office for Immigration Review: An Agency Guide, https://www.justice.gov/eoir/page/fil e/eoir_an_agency_guide/download (Dec. 2017). That number rose to 465 two years later, see Press Release, Dep’t of Just., Executive Office for Immigration Review to Swear in 28 Immigration Judges, Bringing Judge Corps to Highest Level in History (Dec. 20, 2019), https://www.justice.gov/opa/pr/executi ve-office-immigration-review-swear-28-immigration-judges-bringing-judge-corps-highest.

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V. The Immigration Law System The first instance of the E.O.I.R. court system is the Immigration Court. There, an Immigration Judge will hear cases involving aliens66 (otherwise called “non-citizens” throughout this chapter) who may be removable,67 including (1) aliens who have been detained, (2) so-called “criminal aliens,”68 or (3) asylum seekers.69 In Immigration Court proceedings, I.C.E. represents the Government. In Immigration Court, the noncitizen “Respondent” may be represented by an attorney, but one will not be appointed to assist the non-citizen.70 The Courts have considered whether, in a removal proceeding, “the assistance of counsel would be necessary to provide ‘fundamental fairness–the touchstone of due process.’”71 In criminal court proceedings, the Sixth Amendment of the U.S. Constitution guarantees even indigent defendants the right to counsel. Immigration proceedings, however, are considered to be civil proceedings. Moreover, the courts have concluded that the Fifth Amendment right to due process does not require that indigent Respondents in immigration proceedings be provided counsel at the government’s expense.72 The alien must be advised of his or her right to counsel at no expense to the Government, and the officer who examines the non-citizen must provide him or her with a list of available free legal services providers and attorneys qualified to represent persons in immigration proceedings.73 The Immigration Judge will also provide the Respondent a list of individuals and organizations providing pro bono legal services, leaving it up to the Respondent to find legal counsel. The jurisdiction of the Immigration Judge is limited to making determinations regarding an alien’s removability from the U.S. Immigration Judges can also revoke someone’s status as a lawful permanent resident.74 Immigration Judges have no authority to adjudicate common immigration matters, including those related to visa petitions, work authorization, or naturalization related matters.75 Immigration Judges do have discretionary authority and grant may other forms of relief from removal. An Immigration Judge’s decision is final unless it is appealed by either Party to the B.I.A., which has jurisdiction to hear appeals from decisions rendered by Immigration Judges and family-based petitions with U.S.C.I.S. This 17-member administrative body requires written argument and on rare occasions will hear oral arguments. For some cases, the B.I.A. will invite interested members of the public to file amicus petitions.76 Ausländer / étrangers / extranjeros / stranieri (“non cittadini”). abschiebefähig / possible d’être déporté / deportación de extranjeros / passibili di espulsione o respingimento. 68 straffällige Ausländer / étrangers délinquants / extranjeros criminales / stranieri responsabili di reati, a qualunque titolo, stranieri criminali [lit.]; This includes not only people who have been convicted of a crime, but also people who have admitted to committing a crime (such as, during a plea bargain for a reduced sentence) or have admitted to acts that constitute the essential elements of a crime. Importantly – a conviction of a crime is not required for one to be considered a “criminal alien” and, thus, inadmissible. I.N.A. § 212(a)(2)(A)(i)(I), 8 U.S.C. § 1182(a)(2)(A)(i). 69 Asylsuchende / demandeur d’asyle / solicitante de asilo / richiedenti asilo. 70 I.N.A. §§ 240(b)(4)(A), 292, 8 U.S.C. §§ 1229(a)(1)(E) and 1362 (2014). 71 Aguilera-Enriquez v. INS, 516 F. 2d 565, 568 (6th Cir. 1975) (applying Gagnon v. Scarpelli, 411 U.S. 788, 790 (1973)). 72 See e.g., Orantes-Hernandez v. Thornburgh, 919 F.2d 549, 554 (9th Cir. 1990). 73 Einwanderungsverfahren / procédures d’immigration / procedimiento de inmigración / contenzioso in materia di immigrazione; 8 C.F.R. § 287.3(c). The Executive Office for Immigration Review also provides a list of pro bono legal services providers, see U.S. Dep’t of Just., List of Pro Bono Legal Service Providers, https://www.justice.gov/eoir/list-pro-bono-legal-service-providers. 74 8 C.F.R. §§ 1240.1(a), 1240.31, and 1240.41. 75 8 C.F.R. § 103.2, 1003.42(h); 28 CFR § 68.26. 76 U.S. Dep’t of Just., Agency Invitations to File Amicus Briefs, https://www.justice.gov/eoir/ami cus-briefs. 66

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If the non-citizen loses his or her case at the B.I.A., he or she may file an appeal at the U.S. Court of Appeals in the circuit governing the immigration court that issued the decision.77 This is where the Immigration Court system meets the federal court system! If the Respondent is unsatisfied with the decision of the relevant U.S. Court of Appeals, he or she can file a writ of certiorari78 to request that the U.S. Supreme Court accept and decide an appeal.

VI. Admission and the Grounds for Exclusion of Immigrants 1053

Many people have stood in line at an airport to get their passport stamped before moving on to something more exciting. Admission to the U.S.–or admissibility into the U.S.–seems rather mundane or maybe even annoying. This mundane, boring, or even annoying step, however, is one of the most important steps in a non-citizen’s journey toward having lawful status in the U.S.

1. Admission to the United States In the usual course of events, admission79 is straightforward. With his or her visa in hand (if required), the non-citizen presents him or herself at an authorized point of entry into the U.S.–typically, an airport–and applies for admission. An agent from the C.B.P. inspects the non-citizen. The non-citizen is fingerprinted and the C.B.P. officer makes a digital photograph of the non-citizen. The non-citizen’s travel documents are scanned.80 1055 The C.B.P. officer performs an initial check to see if the non-citizen’s name appears on any watch-lists. The C.B.P. asks the non-citizen questions about (1) why he or she is seeking admission to the U.S., (2) the individual’s intended length of stay, (3) the individual’s intention to remain permanently and to become a U.S. citizen, and (4) questions related to the non-citizens admissibility, among others. Once the C.B.P. officer is convinced that none of the grounds for exclusion apply, he or she admits the non-citizen into the U.S.81 C.B.P. formally registers the non-citizen into C.B.P.’s records system and the officer may even stamp the non-immigrant’s passport.82 1056 The above is the usual manner of proceeding. To further expedite the process, the U.S. created a voluntary trusted traveler program–the Trusted Traveler/Global Entry Program.83 Through this program, individuals who are at low risk of being excluded from the U.S. (such as U.S. citizens and lawful permanent residents, and people from 1054

77 See Kurzban, supra note 13, at 4; Telephone Interview with Mark Shmueli, Immigration Attorney, Law Office of Mark J. Shmueli (Aug. 3, 2016) and (Jan. 15, 2020). 78 Berufungszulassung durch den obersten Gerichtshof / admission de la révision de la cour suprême d’une décision d’un tribunal inférieur / orden emitido por la corte suprema que le permite revisar una decisión de un tribunal inferior / ordine di revisione (ordine con cui si dispone l’annullamento della decisione di una corte inferiore per vizio di giurisdizione o errore di diritto). 79 Einreise / l’entrée dans le pays / entrada al país / ammissione. 80 This procedure is regulated in Section 235 of the I.N.A. I.N.A. § 235; 8 U.S.C. § 1225 (2014). See also 8 C.F.R. § 235.1. 81 Id. 82 U.S. Customs & Border Protection, Arrival/Departure Forms: I-94 and I-94W, www.cbp.gov /I94 (last updated Apr. 30, 2019) (visiting this website will provide more information on receiving the paper and electronic Form I-94). 83 Programm „Vertrauenswürdiger Reisender oder umfassende Einreise” / programme “voyageur confiable ou entrée globale” / programa “Viajero Confiable” y “Entrada Global” / programma di ingresso per “viaggiatori fidati” o programma di “global entry”; 8 C.F.R. § 235.12 (2016); 78 F.R. 48706 (Aug. 9, 2013); U.S. Customs & Border Protection, Global Entry, www.globalentry.gov (last updated Dec. 13, 2019).

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VI. Admission and the Grounds for Exclusion of Immigrants countries that have reciprocal programs–like those countries that participate in the Automated Biometrics Supported Border Control) are screened prior to physically presenting themselves at the U.S. border. Airlines are careful not to accept passengers who might be excluded from the U.S., as they may face fines and the additional burden of returning the excluded passenger back to the country of origin.84 Still, airline approval and even a valid visa are no guarantee that one will be admitted into the U.S. at the port of entry. Thus, the questions remain: what happens if the C.B.P. officer decides not to admit 1057 someone to the U.S.? What if someone’s name appears on a watch list or is similar to that of someone on a watch list? Typically, that non-citizen will be referred to a secondary screening where his or her application for admission will be more intensely scrutinized. If this does not resolve the matter and the individual is not clearly eligible for admission, that individual will either be detained pending a removal proceeding or will be refused admission and returned home. Only three categories of those refused admission have a right to a hearing before the Immigration Court, above–returning lawful permanent residents, those who claim to be U.S. citizens, and those who seek asylum.85 Pursuant to I.N.A. Section 235.1(b), if the C.B.P. officer determines that the non-citizen has made a misrepresentation or if the non-citizen lacks the required documentation to enter the U.S., that officer may order the non-citizen to be removed, without a hearing.86

2. Grounds for Exclusion Regardless of their other positive qualities or eligibility for admission to the U.S., the 1058 U.S. categorically excludes some non-citizens from admission. Section 212(a) of the I.N.A. contains the following grounds for exclusion87 from the U.S., among others: (1) Health-Related grounds.88 Non-citizens who have not been vaccinated against certain diseases or who have a communicable disease, a threatening mental or behavior disorder, or a drug addiction are inadmissible to the U.S. Other conditions that are significant enough to prevent a person from caring for him or herself, or could put the person at risk of becoming a public charge can also lead to an inadmissibility determination.89 (2) Criminal and related grounds.90 Non-citizens who have been convicted of or have committed or admitted to actions that constitute the essential elements of certain crimes are inadmissible to the U.S.91 (3) National security and related grounds.92 Non-citizens who the U.S. believes to be at risk for engaging in espionage, terrorism, or any other unlawful activity are inadmissible to the U.S. Also excludable under this ground are all “Participants in Nazi Persecution, genocide, or the commission of any act of torture or extrajudicial 84 I.N.A. § 217(e)(1)(C), 8 U.S.C. § 1187(e)(1)(C) (2014); I.N.A. § 273(a)(1), 8 U.S.C. § 1323(a)(1) (2014); see Kurzban, supra note 13, at 1112, 1208. 85 I.N.A. § 235(b)(2)(A), 8 U.S.C. § 1225(b)(2)(A). 86 I.N.A. § 235(b)(1)(A)(i), 8 U.S.C. § 1225(b)(1)(A)(i). 87 Ausweisung / exclusion des États-Unis / prevención de la entrada / espulsione o respingimento. 88 Gesundheitsgründe / raisons de santé / por motivos de salud / motivi di salute, motivi inerenti allo stato di salute. 89 I.N.A. § 212(a)(1), 8 U.S.C. § 1182(a)(1). 90 strafrechtliche und ähnliche Gründe / raisons relatives à la délinquance / por motivos de criminalidad y afines / motivi attinenti a pregressa attività criminale. 91 I.N.A. § 212(a)(2)(A)(i)(I), 8 U.S.C. § 1182(a)(2)(A)(i)(I). 92 Staatssicherheitsgründe und Ähnliche / raisons rélatives à la sécurité nationale / por motivos de la seguridad nacional y motivos afines / motivi attinenti alla pubblica sicurezza.

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Chapter 12 Immigration Law: A View from the Inside killing.”93 Although some courts have concluded that this ground only relates to people who actively participated in persecution, the provision broadly renders excludable any alien who, from March 23, 1933 until May 8, 1945 assisted or participated in persecution of any person because of race, religion, national origin, or political opinion.94 Non-citizens who were alive and able to participate in the conflict at that time must be prepared to demonstrate their non-involvement in Nazi persecution in order to enter the U.S. (4) Financial grounds.95 Any non-citizen who is at risk of becoming a public charge, for any reason, considered under the totality of the circumstances, is inadmissible to the U.S.96 (5) Grounds related to immigration law enforcement.97 Any non-citizen who has entered or has attempted to enter the U.S. unlawfully or has violated the terms of his or her immigration status is excludable. In addition, anyone who has made a material misrepresentation of fact in his or her visa application or admission interview cannot enter the U.S.98 (6) Grounds related to documentation.99 A non-citizen who is not in possession of valid identification is inadmissible to the U.S.100 1059

These grounds for inadmissibility can also affect non-citizens who are already in the U.S. For example, when a non-citizen seeks to change his or her status in the U.S. by applying for citizenship, the non-citizen must prove that he or she is admissible to the U.S. and that, upon the prior entry into the U.S., the non-citizen was in fact properly admitted.

1060 Example In 2017, the U.S. President issued Executive Order 13,769, which suspended entry into the U.S. for citizens from certain enumerated countries: Iraq, Syria, and “any other country of concern.”101 The Trump administration argued that such a ban was required as a matter of national security, to “ensure that those admitted to this country do not bear hostile attitudes toward it and its founding principles” and barred the “immigrant and nonimmigrant entry into the United States of aliens from [selected countries].” Popularly called the “Muslim Ban,” the order was widely criticized as a manifestation of Islamophobia, and sparked protests and counter-movements across the country.102 The Order, along with two subsequent orders, was soon challenged in federal court, but the U.S. Supreme Court upheld the travel ban.103

See I.N.A. § 212(a)(3)(E)(i). Id. 95 finanzielle Gründe / raisons financières / por motivos financieros / motivi legati alla mancanza di mezzi finanziari sufficienti. 96 I.N.A. § 212(a)(4), 8 U.S.C. § 1182(a)(4). 97 Gründe der Durchsetzung des Einwanderungsrechts / raisons relatives à l’application de la loi de l’immigration/ por motivos relacionados con la aplicación de la ley de inmigración / motivi attinenti all’applicazione della normativa in materia di immigrazione. 98 I.N.A. § 212(a)(6), 8 U.S.C. § 1182(a)(6). 99 Gründe bezüglich der Ausweisdokumente / raisons relatives à la documentation / por motivos relaciones a la documentación / motivi attinenti alla documentazione. 100 I.N.A. § 212(a)(7), 8 U.S.C. § 1182(a)(7). 101 Exec. Order No. 13,769 (Jan. 27, 2017); 8 U.S.C. § 1187(a)(12). 102 See e.g., Abed Ayoub & Khaled Beydoun, Executive Disorder: The Muslim Ban, Emergency Advocacy, and the Fires Next Time, 22 Mich. J. Race & L. 215 (2017). 103 Trump v. Hawaii, 138 S. Ct. 2392 (2018). See also Eric K. Yamamoto & Rachel Oyama, Masquerading Behind a Façade of National Security, 128 Yale L.J. F. 688 (2019) (comparing this decision to Korematsu v. United States, 323 U.S. 214 (1944), which upheld U.S. internment camps for Japanese citizens in World War II). 93

94

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VII. WELCOME: Visas to Enter the United States 1061

Practice Tip The U.S. also keeps records of all applications that a non-citizen makes and all forms that a non-citizen submits to it. To obtain a copy of the Government’s record for a client, one can file a Freedom of Information Act (F.O.I.A.) Request with the appropriate agency. To access a client’s travel history in and out of the U.S., one may file a F.O.I.A. Request with the C.B.P.

VII. WELCOME: Visas to Enter the United States U.S. law distinguishes immigrants from non-immigrants and issues different visas for 1062 each. The difference between the two kinds of visas is that non-immigrant visas are issued for temporary stays in the U.S., whereas immigrant visas are issued to people who wish to remain permanently in the U.S. and may even intend to later apply for U.S. citizenship. Thus, while the processes for applying to receive such visas are largely the same, those applying for immigrant visas are typically required to submit more documentation and the wait for receiving such a visa is longer.

1. Priorities of United States’ Immigrant Visas a) Family Based Visas Family based petitions are filed by the U.S. citizen or permanent resident to unify his 1063 or her family in the U.S. The petitioning relative will be legally bound to ensure that the beneficiary does not become a public charge for forty quarters (ten years) at the permanent resident stage and, thus, assumes a large responsibility.104 As the table below demonstrates, applications for an immigrant visa can be subject to long wait times and ceilings. 1064 Table 1 was published in the January 2020 Visa Bulletin105 Table 1: Application Final Action Dates for Filing Family-Sponsored Preference Cases: FamilySponsored F1 F2A F2B F3 F4

All Chargeability Areas Except Those Listed 15JUL13 C 08AUG14 15NOV07 01FEB07

CHINA mainlandborn

INDIA

MEXICO

PHILIPPINES

15JUL13 C 08AUG14 15NOV07 01FEB07

15JUL13 C 08AUG14 15NOV07 08NOV04

08AUG97 C 22AUG98 01MAR96 08JAN98

15JAN09 C 01FEB09 01JAN99 01MAR99

Thus, according to this table, the Filipino brother of a U.S. citizen for whom an I-130 1065 Petition for an Alien Relative was filed on 1 March 1999 would only be able to file his

104 U.S. Citizenship & Immigr. Serv., I-864, Affidavit of Support Under Section 213A of the INA, https://www.uscis.gov/i-864 (The instructions for Form I-864 can be found on the page and are downloadable as a PDF). See also Telephone Interview with Mark Shmueli, Immigration Attorney, Law Office of Mark J. Shmueli (Aug. 3, 2016). 105 U.S. Dep’t of State, Visa Bulletin for January 2020: Employment-Based Preferences (Dec. 9, 2019), https://travel.state.gov/content/travel/en/legal/visa-law0/visa-bulletin/2020/visa-bulletin-for-jan uary-2020.html.

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Chapter 12 Immigration Law: A View from the Inside Form I-485 Application to Register Permanent Residence or Adjust Status after nearly ten years. 1066 Immediate relatives106 of U.S. citizens include the spouse of a U.S. citizen, the parents of a U.S. citizen who is over the age of 21, and the unmarried children under the age of 21 of a U.S. citizen.107 There is no ceiling on the number of immediate relatives that can be issued a visa in any given year. The immigrant and petitioner need not wait for a priority date.108 Other immigrants are subject to strict ceilings each year. The intending immigrant and petitioner (the U.S. citizen or lawful permanent resident spouse) file the immigrant visa petition and then wait for the priority date to be called.109 1067 For family-based petitions, the priority date is the date on which the U.S. citizen or lawful permanent resident spouse filed the immigrant visa petition. When that date appears in the U.S.C.I.S. Visa Bulletin, it means that the U.S.C.I.S. is now adjudicating all visa petitions filed on that priority date or sooner. Due to the large number of visa applications received involving China, India, Mexico, and the Philippines, those countries’ priority dates are listed separately.110 Looking at these charts, one can get an impression of how long one might wait for one’s priority date to arrive, but there are no guarantees: the clock can also work backwards! Table 2: The Four Preference Categories Elaborated in Immigration and Nationality Act § 2013(a) for Family-Based Immigrants First preference (“F1”):

Unmarried sons and unmarried daughters of U.S. citizens, not to exceed 23,400, plus visas not required under F4.

Second preference A (“F2A”):

Spouses and children of lawful permanent residents

Second preference B (“F2B”):

Unmarried sons and unmarried daughters of lawful permanent residents, who are not children

Third preference (“F3”):

Married sons and married daughters of U.S. citizens

Fourth preference (“F4”):

Brothers and sisters of U.S. citizens

b) Priorities of the United States’ Immigrant Visas: Employment-Based 1068

People wishing to immigrate to the U.S. for employment purposes are also subject to strict ceilings in each year. For employment-based petitions, the priority date is the date on which the labor certification was filed with the D.O.L. or, if no labor certification was necessary, the date that the petition was filed. Labor certifications are typically required in the second and third categories.

106 direkte

Verwandte / famille immédiate / parientes inmediatos / familiari più stretti, familiari prossimi. § 101(b)(1); INA § 201(b)(2)(A)(i). 108 Prioritätsdatum [lit.] / date de priorité [lit.] / fecha de prioridad / data di priorità [lit.], data alla quale risale la priorità su cui si basa una domanda o istanza. 109 This has been compared to sitting in a diner and waiting for the waitress to say, “Now serving table 6!” Telephone Interview with Mark Shmueli, Immigration Attorney, Law Office of Mark J. Shmueli (Aug. 3, 2016). 110 U.S. Citizenship & Immigr. Serv., Visa Bulletin For January 2020, (Dec. 9, 2019), https://travel .state.gov/content/travel/en/legal/visa-law0/visa-bulletin/2020/visa-bulletin-for-january-2020.html. 107 INA

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VII. WELCOME: Visas to Enter the United States Table 3: The Preference Categories Elaborated in Immigration and Nationality Act § 203(B)111 for Employment-Based Immigrants First:

Priority Workers, including aliens with extraordinary ability, outstanding professors and researchers, and certain executives and managers of multinational companies.

Second:

Aliens who are members of the professions holding advanced degrees or aliens of exceptional ability.

Third:

Aliens who are skilled workers, professionals, and other workers and for whom a labor certification is required.

Fourth:

A special immigrant as defined by I.N.A. § 101(a)(27).

Fifth:

An alien who was invested or will invest not less than U.S.D. $1,000,000 and will create full-time employment for at least ten U.S. Citizens or lawful permanent residents in a specific area.

CHINA mainland-born

EL SALVADOR GUATEMALA HONDURAS

INDIA

MEXICO

PHILIPPINES

VIETNAM

1st

01OCT18

22MAY17

01OCT18

01JAN15

01OCT18

01OCT18

01OCT18

2nd

C

01JUL15

C

18MAY09

C

C

C

3rd

C

01DEC15

C

01JAN09

C

15MAR18

C

Other Workers

C

01APR08

C

01JAN09

C

15MAR18

C

Employmentbased

All Chargeability Areas Except Those Listed

Table 4: Application Final Action Dates For Employment-Based Preference Cases:112

4th

C

C

01JUL16

C

08AUG17

C

C

Certain Religious Workers

U

U

U

U

U

U

U

5th NonRegional Center (C5 and T5)

C

22NOV14

C

01MAY18

C

C

08DEC16

5th Regional Center (I5 and R5)

U

U

U

U

U

U

U

In Table 4, the “C” means that the priority date is current and that the adjustment of 1069 status application (form I-485) may be filed. In such situations the I-485 application can be filed simultaneously with the I-140 application. An I-140 application is similar to the I-130 Application described above and is filed to legally determine someone’s authorization to work in the U.S. 111 8

U.S.C. § 1153(b). published in the January 2020 Visa Bulletin) U.S. Dep’t of State, Visa Bulletin for January 2020: Employment-Based Preferences (Dec. 9, 2019), https://travel.state.gov/content/travel/en/legal/vi sa-law0/visa-bulletin/2020/visa-bulletin-for-january-2020.html. 112 (As

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Chapter 12 Immigration Law: A View from the Inside c) Priorities of the United States’ Immigrant Visas: Diversity The U.S. has used its immigration laws to promote or influence the issuance of immigrant visas according to national origin. The charts above demonstrate not only the high demand for immigrant visas, but also the U.S.’s continuing commitment to diversity. For example, the applicant number for the named countries is overwhelmingly higher than those received from other countries. This is due to these countries’ proximity to the U.S. as well as to the economic conditions in each country. The separation of these petitions from the rest ensures that immigrant visas are issued to people from all countries, rather than only these four. 1071 In addition, under I.N.A. § 203(c) the U.S. makes between 50,000–55,000 visas available for so-called “diversity immigrants” in the Diversity Visa Program.113 This program is administered by the Department of State.114 1072 In the Diversity Visa Program, also known as the “green card lottery,”115 the world is divided into regions and each region is designated as either a high admission region (responsible for more than 1/6 of all visas issued) or a low admission region (all other regions).116 Each year, each region is allotted a prescribed share of available visas. The U.S.D.O.S. designates how and when applicants may file a petition under this program.117 Winners of these visas are selected at random118 and must have at least a high school education or its equivalent or, within five years of the application for the visa, at least two years of work experience in an occupation that requires at least two years of training or experience.119 1073 In maintaining the principle of diversity, no more than seven percent of the visas so issued (i.e. up to 3,500 persons), may go to applicants from one single country. The diversity visa must be processed in the fiscal year in which it is won.120 Although processing delays often keep many lottery winners from actually receiving visas, the green card lottery is one way that intending immigrants can come to the U.S.121 1070

1074 Practice Tip Winners who live outside of the U.S. are processed through the U.S.D.O.S. using form DS-260, which at present is over 70 pages long. It is important to prepare these forms with honesty and precision – the U.S. keeps a record of all forms submitted to it and that which a client writes today could be harmful or helpful 113 Programm des vielfältigen Visums [lit.] / programme du visa de diversité [lit.] / visas de diversidad / Programma statunitense per visti di immigrazione, detto “Programma Diversity Visa” [lit.]. 114 See Kurzban, supra note 13, at 1117. See also U.S. Citizenship & Immigration Services, Green Card Through the Diversity Immigrant Visa Program, https://www.uscis.gov/greencard/diversityvisa. 115 Green-Card-Lotterie / loterie de la “carte verte” / lotería de residencia permanente / lotteria per la „Green Card“ [lit.], estrazione annuale che consente a circa 50.000 stranieri di ottenere un permesso di soggiorno permanente negli Stati Uniti. 116 Kurzban, supra note 13, at 1117. 117 See e.g., U.S. Dep’t of State, Instructions for the 2021 Diversity Immigrant Visa Program (DV-2021), https://travel.state.gov/content/dam/visas/Diversity-Visa/DV-Instructions-Translations/DV2021-Instructions-Translations/DV-2021-%20Instructions-English.pdf (last accessed Jan. 22, 2020). For 2021, natives of eighteen countries were ineligible to apply due to the high number of immigrants from those countries to the U.S. in the previous five years (including Canada, the Dominican Republic, Guatemala, India, Mexico, and Vietnam). 118 Smirnov. v. Clinton, 487 Fed. Appx. 582 (D.C. Cir. 2012) (upholding the Department of State’s action when it voided the results of the first lottery which had been drawn due to a computer error, which had selected “winners” in the order applications were submitted, rather than at random). See also DV-2021, supra note 117, at 2, 5. 119 I.N.A. § 203(c) (2014), 8 U.S.C. § 1153(c); DV-2021. 120 22 C.F.R. § 42.33(a)(1) (2016); 8 U.S.C. § 1154(a)(1)(I)(ii)(II) (2014). 121 U.S. Dep’t of State, Diversity Visa Program (2016–18), https://travel.state.gov/content/dam/vis as/Diversity-Visa/DVStatistics/DV%20AES%20statistics%20by%20FSC%202016-2018.pdf.

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VII. WELCOME: Visas to Enter the United States tomorrow. For best results, an applicant should prepare these forms with the assistance of an attorney who regularly practices U.S. immigration law.

2. Priorities of United States’ Non-Immigrant Visas Non-immigrants are admitted to the U.S. for a specific purpose for a specific period of time. Non-immigrant visas are available for dozens of activities and timeframes. Most non-immigrant visas are enumerated under I.N.A. § 101(a) (15).122 These visas can be conceptually divided into five categories, as listed and summarized below. The first category is commercial.123 Using a non-immigrant visa, business visitors, temporary workers, investors, treaty traders, as well as athletes, entertainers and specialists can enter the U.S.124 The second category is educational.125 There are three visas available to assist international students in studying in the U.S. The first is the “F” visa, which is available for non-citizen students who wish to temporarily visit the U.S. in order to pursue a course of study at an established educational institution.126 The “M” visa is available to non-citizens who wish to pursue a course of study at a vocational or nonacademic program in the U.S.127 Exchange visitors who are part of a mutual exchange program, a cultural exchange program, or who are coming to the U.S. to receive graduate medical education or training use a “J” visa.128 The third category is tourism.129 Tourists enter the U.S. states either under the Visa Waiver Program,130 or as non-immigrants visiting the U.S. for business or for pleasure. Under the Visa Waiver Program, people from certain countries seeking to remain in the U.S. for less than ninety days may, under certain conditions, enter the U.S. without obtaining a B1 or B2 visa ahead of time.131 The B2 visa, however, is not a non-immigrant category that was intended to serve as a “catch all” for all temporary visitors.132 Thus, if a non-immigrant visa exists for a specific purpose (such as education, employment, etc.), the non-immigrant must enter using one of those visas to pursue that purpose and may not use the B2 visitor for business or pleasure visa, instead. The fourth category is family related133–fiancés and fiancées. Often, engaged couples will be separated by an international border. Recognizing that it might be difficult for the U.S. citizen family to attend a wedding abroad and that there is no guarantee that the

122 8

U.S.C. § 1101. / commercial / comercial / (visto) commerciale [lit.], visto per affari, visto per svolgere attività commerciali o professionali. 124 8 U.S.C. § 1101(a)(15)(H)(i)(b). 125 Visa für Studien- und Ausbildungszwecke / visa éducatif / visa educativo / visto di istruzione. 126 I.N.A. § 101(a)(15)(F); 8 U.S.C. § 1101(a)(15)(F). 127 Id. at § 101(a)(15)(M). See also U.S. Dep’t of State, Student Visa, https://travel.state.gov/content/ travel/en/us-visas/study/student-visa.html. 128 I.N.A. § 101(a)(15)(J). 129 Tourismusvisum / visa de toursime / visa de turista / visto per turismo, visto turistico. 130 Programm zur Befreiung von der Visumspflicht / programme d'exemption de visa / programa de exención de visa / programma di viaggio senza visto. 131 Id. at § 217, 8 U.S.C. § 1187; 8 C.F.R.§ 217.1 – 217.7 (2016); 22 C.F.R. § 41.2(l) (2016). See also U.S. Dep’t of State, Visa Waiver Program, https://travel.state.gov/content/travel/en/us-visas/tourism-visit /visa-waiver-program.html. 132 Matter of Healy and Goodchild, 17 I. & N. Dec. 22 (B.I.A. 1979) (rejecting the applicant’s theory that the B-2 visa could be used to admit someone whose primary intention was to pursue a course of study). 133 familiäre Gründe / raisons familiales / por motivos familiares / (visto per) motivi familiari, per motivi attinenti alla famiglia [lit.]. 123 geschäftlich

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1075

1076

1077

1078

1079

Chapter 12 Immigration Law: A View from the Inside

1080

1081

1082

1083

1084

foreign country would allow the U.S. citizen to enter, Congress created this so-called “Fiancé Visa.”134 Finally, there is an “other”135 category that contains further visas. Among them are visas that are designed to assist the government in prosecuting crime. The “S” or aptly named “snitch” visa, is available to a non-citizen who “is in possession of critical reliable information” concerning either a criminal or terrorist organization, and is willing to assist the government with that information.136 Two hundred “S” visas are available per year, and permit the holder to remain in the U.S. for up to three years.137 Similarly, the “T” visa is available to a victim of human trafficking who is able to assist the government in prosecuting the crime of human trafficking. 138 Up to 5,000 such visas are available per year.139 There are three recurring problems among those who have non-immigrant visas. Recalling that non-immigrants are admitted for a specific purpose for a limited period of time, problems arise when either (1) the non-immigrant forms the intent to remain permanently in the U.S., (2) the non-immigrant wishes to change his or her status, or (3) the non-immigrant overstays his or her visa. The first problem indeed has the look and feel of a thought crime! Generally speaking, if someone is admitted to the U.S. on a non-immigrant visa, but has the intention of remaining in the U.S. permanently in violation of that visa, that non-citizen has committed a criminal offense.140 If, after admission, I.C.E. discovers that the person originally had the intent to remain permanently, I.C.E. may initiate removal proceedings against that individual, pursuant to I.N.A. § 237(a)(1)(A). This is where the issue of “dual intent”141–the intention to abide by the terms of one’s non-immigrant visa but, should the opportunity lawfully present itself, to permanently remain in the U.S.–arises. In a court case called Matter of Hosseinpour, the B.I.A. held that having this dual intent is not necessarily inconsistent with lawful non-immigrant status.142 Non-immigrants are, therefore, not in violation of the law when they enter with the intention to remain only temporarily but with the hope of later becoming a lawful permanent resident. Regarding the second problem–namely, the non-immigrant who wishes to change his or her status–there are several options available if one is eligible for the change. Recognizing the expense, time, distance, and inconvenience that may be involved if a non-immigrant who is already in the U.S. were forced to return to his or her home country to apply for a new non-immigrant visa, Congress enacted I.N.A. § 248, under which some non-immigrants can switch to other non-immigrant categories without leaving the U.S.

134 I.N.A. § 101(a)(15)(K) (2014); Telephone Interview with Mark Shmueli, Immigration Attorney, Law Office of Mark J. Shmueli (Aug. 3, 2016). 135 “sonstige” / “autres” / “otro” categoría / “altro” (categoria residuale che include motivi e finalità non rientranti nelle tipologie precedenti). 136 I.N.A. § 101(a)(15)(S), 8 U.S.C. § 1101(a)(15)(S) (2014). 137 See Kurzban, supra note 13, at 1043. 138 I.N.A. § 101(a)(15)(T), 8 U.S.C. 1101(a)(15)(T) (2014). 139 See Kurzban, supra note 13, at 1044. 140 I.N.A. § 235. 141 doppelter Vorsatz [lit.] / double intention [lit.] / doble intento / intento duplice [lit.], tipologia di visto che consente a uno straniero di entrare negli Stati Uniti con un duplice intento (di “immigrante” e di “non immigrante”): in altre parole, lo straniero ottiene prima lo status temporaneo di “non immigrante” pur con l’intento di restare negli Stati Uniti e acquisire, così, lo status di “immigrante”. 142 Matter of Hosseinpour, 15 I. & N. Dec. 191, 192 (B.I.A. 1975).

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VIII. Refugees, Asylees, and the Asylum Procedure 1085

Practice Tip A non-immigrant “changes” status from one non-immigrant status to another, pursuant to I.N.A. § 248. A non-U.S. citizen “adjusts” his or her status to that of a lawful permanent resident under I.N.A. § 245.

The third problem occurs when a non-immigrant overstays143 his or her period of 1086 admission. Overstaying creates tremendous problems for those who overstay. One accrues unlawful presence time and, when one finally exits the U.S., one does so not as a non-immigrant, but as an overstay–effecting at least a bar on re-entering the U.S. for a period of time.144 Absent “extraordinary circumstances beyond the control of the applicant”, U.S.C.I.S. cannot issue an extension of a visa to someone who has overstayed or violated the terms of his or her visa.145

VIII. Refugees, Asylees, and the Asylum Procedure There is no other area where the link between compassion and self-interest is more 1087 profound than in a country’s refugee and asylum policy.146 The needs of refugees are pitted against political and societal willingness to accept the ethnic and linguistic diversity, economic costs, or national security risks associated with accepting refugees. Refugees147 are those who are outside of their home country fleeing persecution or 1088 who have been persecuted on account of race, religion, nationality, membership in a particular social group, or political opinion.148 They are not guilty of any crime involving the persecution of others.149 Consistent with the terms of the 1951 Convention Relating to the Status of Refugees, the definition of “refugee” does not include someone who is unable to return to his or her home state due to war, famine, natural or other disaster, or any other condition that would likely–or even undoubtedly–lead to the individual’s death, should he or she return.150 While the U.S. is geographically shielded from many refugee crises,151 this does not 1089 prevent the U.S. from accepting refugees. Rather than wait for refugees to arrive in the U.S., the D.H.S., H.H.S., U.S.C.I.S., and the U.S.D.O.S. Bureau for Population, Refugees and Migration coordinate efforts to go to where the refugees are and to bring them to the U.S. in a safe and organized fashion. After the United Nations and U.S. Embassies 143 Überschreitung der Dauer der Aufenthaltsgenehmigung / rester après l’expiration du visa / permanecer después de la expiración de la visa / trattenersi oltre il limite consentito, trattenersi oltre la scadenza del permesso di soggiorno. 144 I.N.A. § 212(a)(9)(B), 8 U.S.C. § 1182(a)(9)(B). 145 I.N.A. § 214.1(c)(4) (2014). 146 Legomsky, supra note 14, at 915. 147 Flüchtling / réfugié / refugiado / rifugiati, profughi. 148 I.N.A. § 101(a)(42) (2014). In some circumstances, however, the President may specify that a person who is still within his or her country of nationality, who is being persecuted based on one of the five grounds elaborated above is a “refugee” under U.S. law. I.N.A. § 101(a)(42)(B). Compare Convention Relating to the Status of Refugees, July 28, 1951, 189 U.N.T.S. 137. 149 I.N.A. § 101(a)(42). 150 For individuals from certain countries who find themselves in the U.S. when such situations occur, the U.S. has a separate status called “Temporary Protected Status,” for which a purported beneficiary may apply. See INA § 244 (2014). See also Jill H. Wilson, Cong. Research Serv. RS20844: Temporary Protected Status: Overview and Current Issues (Mar. 29, 2019), https://fas.org/sgp/crs/homesec/RS20844.pdf. 151 See e.g., Megan Specia, The Five Conflicts Driving the Bulk of the World’s Refugee Crisis, N.Y. Times (June 19, 2018), https://www.nytimes.com/2018/06/19/world/five-conflicts-driving-refugees.html (listing South Sudan, Syria, Afghanistan, Myanmar, and Somalia as “the main conflicts feeding the refugee crisis”); UNHCR, Forced displacement above 68m in 2017, new global deal on refugees critical (June 19, 2018), https://www.unhcr.org/en-us/news/press/2018/6/5b27c2434/forced-displacement-above-68m-2017-newglobal-deal-refugees-critical.html.

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285

Chapter 12 Immigration Law: A View from the Inside identify potential refugees for resettlement consideration, the U.S.C.I.S. conducts prescreening, security clearance, and interviews of the purported refugee to ensure that he or she meets the legal qualification of “refugee.” If the U.S.C.I.S. determines that the individual is a genuine refugee and is admissible to the U.S., the U.S.D.O.S. works with other government agencies and voluntary organizations to resettle the refugee and his or her family in the U.S. This process takes 30–90 days.152 1090 After the refugee arrives in the U.S., the H.H.S. provides the refugee and his or her family short-term monetary and medical assistance, English language courses, and job readiness and employment services in an effort to facilitate the refugee’s transition into the U.S. and to help the individual attain self-sufficiency. The H.H.S. continues to offer services beyond the first eight months after the refugee arrives, and provides services related to enterprise development, ethnic community self-help, agricultural partnerships and services for survivors of torture.153 One year after being admitted to the U.S. as a refugee, the refugee is required to apply for permanent resident status, and there is no fee for the application.154 1091 Despite the geographic isolation of the U.S., there are people who arrive in the U.S. and apply for asylum. Absent extraordinary circumstances or a change in circumstances that materially affects a person’s eligibility for asylum, the applicant must file the application for asylum within one year of arriving in the U.S. The determination as to whether these individuals meet the definition of “refugee” and, therefore, are entitled to protection in the U.S. is made by the Immigration Court. In court, the non-immigrant (as “Respondent”) will present evidence and legal argument in support of all aspects of his or her application. A typical court-based asylum case takes years and, after the case has been pending for a certain amount of time the applicant is typically eligible for authorization to work in the U.S.155 Applicants for asylum may be detained, but in most circumstances the alien has the right to a bond hearing to be released from prison.156 The controversial practice of detaining even families in jails while their asylum applications are adjudicated, however, continues. 1092 Example Family separation policies caused a great deal of public outrage during the early years of the Trump administration. Despite the Flores Settlement, which required the government to release children from detention in immigration facilities to their parents without unnecessary delay,157 the administration routinely separated children from their families and kept them apart. Multiple news outlets reported that the administration did not even know how many families it kept apart,158 and the practice of separating children

152 The

153 Id.

U.S. Refugee Resettlement Program – an Overview, supra note 33.

154 Id.; See also U.S. Citizenship & Immigration Services, I am a refugee or asylee: How do I become a U.S. permanent resident? (Oct. 2013), https://www.uscis.gov/sites/default/files/USCIS/Resources/D3en. pdf. 155 8 C.F.R. § 208.7(a)(1) (2016). 156 Kurzban, supra note 13, at 720–21. 157 Reno v. Flores, Stipulated Settlement Agreement, Case No. CV 85–4544-RJK (Jan. 13, 1997) (C.D. Cal.), available at https://www.aclu.org/sites/default/files/assets/flores_settlement_final_plus_extension_o f_settlement011797.pdf. 158 See e.g., Jasmine Aguilera, Here’s What to Know About the Status of Family Separation at the U.S. Border, Which Isn’t Nearly Over, Time (Oct. 25, 2019), https://time.com/5678313/trump-administration-famil y-separation-lawsuits/; John Washington, The Government Has Taken At Least 1,100 Children From Their Parents Since Family Separations Officially Ended, The Intercept (Dec. 9, 2019, 10:56 am), https://theinte rcept.com/2019/12/09/family-separation-policy-lawsuit/; Johnathan Blitzer, A New Report on Family Separations Shows the Depth of Trump’s Negligence (Dec. 6, 2019), https://www.newyorker.com/news/news -desk/a-new-report-on-family-separations-shows-the-depths-of-trumps-negligence.

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IX. Conclusions from their parents resulted in widespread outrage.159 Both immigration advocates and courts fought against the practice, with some courts ordering the federal government to reunite children with their families.160

IX. Conclusions Although immigration has been central to the history and development of the U.S., 1093 immigration law and the immigration legal system remain one of the most complex and most rapidly changing areas of U.S. law. Finding an attorney who is experienced and knowledgeable in U.S. immigration law 1094 is difficult. Immigration law is not an area of basic education or training. Some law schools do not even offer courses in immigration law and immigration law is not tested on the bar examination in any state. Demand for competent, qualified, and knowledgeable immigration attorneys is high, and every year thousands of people are victims of fraud or of ineffective assistance of counsel. Not all licensed attorneys have the training or experience to provide effective assis- 1095 tance, even though they may seem to be competent from a title they carry. “Notarios” and so-called “Immigration Consultants” and “Immigration Specialists” are not attorneys and are not qualified to assist people in U.S. immigration matters, yet they are prevalent in low income and underserved areas. To give one’s clients the best representation possible, work with an attorney who is licensed in the U.S. and is a member of the American Immigration Lawyers Association (“A.I.L.A.”) or who has the experience and knowledge necessary to achieve the best possible outcome for one’s client. Disposition Table: United States Code and Immigration and Nationality Act Section of Title 8 of the United States Code

Section of the Immigration and Nationality Act

8 U.S.C. § 1101*

I.N.A. § 101

8 U.S.C. § 1102*

I.N.A. § 102

8 U.S.C. § 1103*

I.N.A. § 103

8 U.S.C. § 1104*

I.N.A. § 104

8 U.S.C. § 1105*

I.N.A. § 105

8 U.S.C. § 1105a*

I.N.A. § 106

8 U.S.C. § 1151

I.N.A. § 201

8 U.S.C. § 1152*

I.N.A. § 202

8 U.S.C.§ 1153*

I.N.A. § 203

8 U.S.C. § 1154

I.N.A. § 204

8 U.S.C. § 1155*

I.N.A. § 205

Section of Title 8 of the Code of Federal Regulations

8 C.F.R. § 201

8 C.F.R. § 204

159 See e.g., Aaron Korthuis, Detention and Deterrence: Insights from the Early Years of Immigration Detention at the Border, 129 Yale L.J. F. 238, 240–41 (2019); Eisha Jain, The Interior Structure of Immigration Enforcement, 167 U. Pa. L. Rev. 1463, 1480–81 (2019). 160 See e.g., Ms. L. v. ICE, Order Granting Plaintiffs’ Motion for Classwide Preliminary Injunction, 18CV-0428 (S.D. Cal. June 26, 2018) (available at https://www.aclu.org/legal-document/ms-l-v-ice-order-gra nting-plaintiffs-motion-classwide-preliminary-injunction).

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287

Chapter 12 Immigration Law: A View from the Inside Section of Title 8 of the United States Code

Section of the Immigration and Nationality Act

8 U.S.C. § 1156*

I.N.A. § 206

8 U.S.C. § 1181

I.N.A. § 211

Section of Title 8 of the Code of Federal Regulations

8 C.F.R. § 211

8 U.S.C. § 1182

I.N.A. § 212

8 C.F.R. § 212

8 U.S.C. § 1183

I.N.A. § 213

8 C.F.R. § 213

8 U.S.C. § 1184

I.N.A. § 214

8 C.F.R. § 214

8 U.S.C. § 1185

I.N.A. § 215

8 C.F.R. § 215

8 U.S.C. § 1201

I.N.A. § 221

8 C.F.R. § 221

8 U.S.C. § 1202*

I.N.A. § 222

8 U.S.C. § 1203

I.N.A. § 223

8 C.F.R. § 223

8 U.S.C. § 1204*

I.N.A. § 224

8 U.S.C. § 1221

I.N.A. § 231

8 C.F.R. § 231

8 U.S.C. § 1222

I.N.A. § 232

8 C.F.R. § 232

8 U.S.C. § 1223

I.N.A. § 233

8 C.F.R. § 233

8 U.S.C. § 1224

I.N.A. § 234

8 C.F.R. § 234

8 U.S.C. § 1225

I.N.A. § 235

8 C.F.R. § 235

8 U.S.C. § 1226

I.N.A. § 236

8 C.F.R. § 236

8 U.S.C. § 1227

I.N.A. § 237

8 C.F.R. § 237

8 U.S.C. § 1228

I.N.A. § 238

8 C.F.R. § 238 8 C.F.R. § 239

8 U.S.C. § 1229

I.N.A. § 239

8 U.S.C. § 1230*

I.N.A. § 240

8 U.S.C. § 1251

I.N.A. § 241

8 C.F.R. § 241

8 U.S.C. § 1252

I.N.A. § 242

8 C.F.R. § 242

8 U.S.C. § 1253

I.N.A. § 243

8 C.F.R. § 243

8 U.S.C. § 1254

I.N.A. § 244

8 C.F.R. § 244

8 U.S.C. § 1255

I.N.A. § 245

8 C.F.R. § 245

8 U.S.C. § 1256

I.N.A. § 246

8 C.F.R. § 246

8 U.S.C. § 1257

I.N.A. § 247

8 C.F.R. § 247

8 U.S.C. § 1258

I.N.A. § 248

8 C.F.R. § 248

8 U.S.C. § 1259

I.N.A. § 249

8 C.F.R. § 249

8 U.S.C. § 1260

I.N.A. § 250

8 C.F.R. § 250

8 U.S.C. § 1281

I.N.A. § 251

8 C.F.R. § 251

8 U.S.C. § 1282

I.N.A. § 252

8 C.F.R. § 252

8 U.S.C. § 1283

I.N.A. § 253

8 C.F.R. § 253

8 U.S.C. § 1284*

I.N.A. § 254

8 U.S.C. § 1285*

I.N.A. § 255

8 U.S.C. § 1286*

I.N.A. § 256

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IX. Conclusions Section of Title 8 of the United States Code

Section of the Immigration and Nationality Act

8 U.S.C. § 1287*

I.N.A. § 257

8 U.S.C. § 1301*

I.N.A. § 261

Section of Title 8 of the Code of Federal Regulations

8 U.S.C. § 1302*

I.N.A. § 262

8 U.S.C. § 1303*

I.N.A. § 263

8 U.S.C. § 1304

I.N.A. § 264

8 C.F.R. § 264 8 C.F.R. § 265

8 U.S.C. § 1305

I.N.A. § 265

8 U.S.C. § 1306*

I.N.A. § 266

8 U.S.C. § 1321*

I.N.A. § 271

8 U.S.C. § 1322*

I.N.A. § 272

8 U.S.C. § 1323*

I.N.A. § 273

8 U.S.C. § 1324

I.N.A. § 274

8 U.S.C. § 1325*

I.N.A. § 275

8 U.S.C. § 1326*

I.N.A. § 276

8 U.S.C. § 1327*

I.N.A. § 277

8 U.S.C. § 1328*

I.N.A. § 278

8 U.S.C. § 1329*

I.N.A. § 279

8 U.S.C. § 1330

I.N.A. § 280

8 U.S.C. § 1351*

I.N.A. § 281

8 U.S.C. § 1352

I.N.A. § 282

8 U.S.C. § 1353*

I.N.A. § 283

8 U.S.C. § 1354*

I.N.A. § 284

8 U.S.C. § 1355*

I.N.A. § 285

8 U.S.C. § 1356*

I.N.A. § 286

8 U.S.C. § 1357

I.N.A. § 287

8 U.S.C. § 1358*

I.N.A. § 288

8 U.S.C. § 1359

I.N.A. § 289

8 U.S.C. § 1360*

I.N.A. § 290

8 U.S.C. § 1361*

I.N.A. § 291

8 U.S.C. § 1362

I.N.A. § 292

8 U.S.C. § 1401*

I.N.A. § 301

8 U.S.C. § 1402*

I.N.A. § 302

8 U.S.C. § 1403*

I.N.A. § 303

8 U.S.C. § 1404*

I.N.A. § 304

8 U.S.C. § 1405*

I.N.A. § 305

8 U.S.C. § 1406

I.N.A. § 306

8 U.S.C. § 1407*

I.N.A. § 307 Katherine M. Simpson

8 C.F.R. § 274

8 C.F.R. § 280 8 C.F.R. § 282

8 C.F.R. § 287 8 C.F.R. § 289

8 C.F.R. § 292

8 C.F.R. § 306

289

Chapter 12 Immigration Law: A View from the Inside Section of Title 8 of the United States Code

Section of the Immigration and Nationality Act

8 U.S.C. § 1408*

I.N.A. § 308

8 U.S.C. § 1409*

I.N.A. § 309

8 U.S.C. § 1421*

I.N.A. § 310

8 U.S.C. § 1422*

I.N.A. § 311

8 U.S.C. § 1423

I.N.A. § 312

8 U.S.C. § 1424*

I.N.A. § 313

8 U.S.C. § 1425*

I.N.A. § 314

8 U.S.C. § 1426*

I.N.A. § 315

8 U.S.C. § 1427

I.N.A. § 316

Section of Title 8 of the Code of Federal Regulations

8 C.F.R. § 312

8 C.F.R. § 316

8 U.S.C. § 1428*

I.N.A. § 317

8 U.S.C. § 1429

I.N.A. § 318

8 C.F.R. § 318

8 U.S.C. § 1430

I.N.A. § 319

8 C.F.R. § 319

8 U.S.C. § 1431*

I.N.A. § 320

8 U.S.C. § 1432*

I.N.A. § 321

8 U.S.C. § 1433

I.N.A. § 322

8 C.F.R. § 322

8 U.S.C. § 1434

I.N.A. § 323

8 C.F.R. § 323

8 U.S.C. § 1435

I.N.A. § 324

8 C.F.R. § 324

8 U.S.C. § 1436*

I.N.A. § 325

8 U.S.C. § 1437

I.N.A. § 326

8 C.F.R. § 326

8 U.S.C. § 1438

I.N.A. § 327

8 C.F.R. § 327

8 U.S.C. § 1439

I.N.A. § 328

8 C.F.R. § 328

8 U.S.C. § 1440

I.N.A. § 329

8 C.F.R. § 329

8 U.S.C. § 1441

I.N.A. § 330

8 C.F.R. § 330

8 U.S.C. § 1442*

I.N.A. § 331

8 U.S.C. § 1443

I.N.A. § 332

8 C.F.R. § 332

8 U.S.C. § 1444

I.N.A. § 333

8 C.F.R. § 333

8 U.S.C. § 1445

I.N.A. § 334

8 C.F.R. § 334

8 U.S.C. § 1446

I.N.A. § 335

8 C.F.R. § 335

8 U.S.C. § 1447

I.N.A. § 336

8 C.F.R. § 336

8 U.S.C. § 1448

I.N.A. § 337

8 C.F.R. § 337

8 U.S.C. § 1449

I.N.A. § 338

8 C.F.R. § 338

8 U.S.C. § 1450

I.N.A. § 339

8 C.F.R. § 339

8 U.S.C. § 1451

I.N.A. § 340

8 C.F.R. § 340

8 U.S.C. § 1452

I.N.A. § 341

8 C.F.R. § 341

8 U.S.C. § 1453

I.N.A. § 342

8 C.F.R. § 342

8 U.S.C. § 1454

I.N.A. § 343

8 C.F.R. § 343

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IX. Conclusions Section of Title 8 of the United States Code

Section of the Immigration and Nationality Act

Section of Title 8 of the Code of Federal Regulations

8 U.S.C. § 1455

I.N.A. § 344

8 C.F.R. § 344

8 U.S.C. § 1457*

I.N.A. § 346

8 U.S.C. § 1458*

I.N.A. § 347

8 U.S.C. § 1459*

I.N.A. § 348

8 U.S.C. § 1481

I.N.A. § 349

8 U.S.C. § 1482*

I.N.A. § 350

8 U.S.C. § 1483*

I.N.A. § 351

8 U.S.C. § 1484*

I.N.A. § 352

8 U.S.C. § 1485*

I.N.A. § 353

8 U.S.C. § 1486*

I.N.A. § 354

8 U.S.C. § 1487*

I.N.A. § 355

8 U.S.C. § 1488*

I.N.A. § 356

8 U.S.C. § 1489*

I.N.A. § 357

8 U.S.C. § 1501*

I.N.A. § 358

8 U.S.C. § 1502*

I.N.A. § 359

8 U.S.C. § 1503*

I.N.A. § 360

Katherine M. Simpson

8 C.F.R. § 349

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CHAPTER 13 WHITE COLLAR CRIME Literature: David Friedrichs, Trusted Criminals: White Collar Crime in Contemporary Society (Wadsworth, 2003). G. Geis & R. Meier, White Collar Crime: Classic & Contemporary Views (Free Press, 1995). Terry Leap, Dishonest Dollars: The Dynamics of White-Collar Crime (Cornell University Press, 2007). Graeme Newman & Ronald Clarke, Superhighway Robbery: Preventing E-commerce Crime (Willan Publishing, 2003). H. Pontell & R. Tillman, Profit Without Honor: White-collar Crime and the Looting of America (Prentice Hall, 1998). U.S. Department of Justice, Federal Bureau of Investigation, White Collar Crime: A Report to the Public (Government Printing Office, 1989). U.S. Department of Justice, United States Attorneys’ Manual: Criminal Resource Manual C.R.M. §§ 500–999 (1997).

I. Criminal Jurisdiction in the United States In the U.S. legal system of cooperative federalism, the individual states retain jurisdiction over most types of crime, such as murder, rape, arson and burglary. While it is of course possible that civil lawyer will need to know something about the prosecution of these crimes in the U.S., we are assuming that most often a civil lawyer would be concerned more with what are known as “white collar” crimes; that is, the crimes committed in business and industry not by the workers who wear blue collared shirts, but by the persons working in offices who wear white collared shirts. With the more limited to such persons and the crimes they are likely to commit, the jurisdictional focus changes as well. Therefore, this chapter discusses the jurisdiction the federal courts in the U.S. have over various types of crime, and in particular mail fraud. Given the explanatory section of the federal court system by in Chapter 2, “Federal Civil Litigation,” this chapter will forego such explanation since federal courts, whether exercising criminal or civil jurisdiction, operate in the same manner as previously explained 1097 It remains important to remember that the federal courts have overlapping jurisdiction for various crimes with the state courts, including white collar crime. Consistent with the U.S. Constitutional principle that the U.S., and not the states, has jurisdiction over any matter affecting interstate commerce,1 many crimes require the element of interstate commerce,2 that is, the crime must involve two or more states, “territories, or possessions of the U.S.” It is generally not difficult for the federal prosecutor to establish interstate commerce. For example, a gun used in the robbery of a bank, may have been manufactured in one state and sold to the defendant in another state where the crime was committed. 1098 Some crimes may be prosecuted in either state court or federal court, with the most prominent example being drug cases. If there are multiple defendants from several jurisdictions and the amount of drugs is large, the prosecution most likely will occur in federal courts. On occasion, the assistant district attorney from a state may be designated as 1096

1 U.S.

Const. art. 1, § 8, Cl. 3. Jury Instruction–Affecting Interstate or Foreign Commerce, The United States Department of Justice (Sep. 19 2018), https://www.justice.gov/jm/criminal-resource-manual-2180-jury-instruction-affe cting-interstate-or-foreign-commerce. 2 2180.

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II. Prevalent Types of “White Collar” Crimes a “Special” Assistant U.S. Attorney in a federal case and the case may be prosecuted jointly. This is perhaps the most literal sense of “cooperative” federalism one will find in civil or criminal matters. 1099

Practice Tip Most criminal defense attorneys would prefer to see their clients prosecuted in state courts as opposed to federal courts. The penalties for drug offenses, for example, are generally more severe in federal court. As a custom, federal prosecutors do not prosecute drug users but those persons . . . (who) possess with intent to manufacture, distribute, or dispense, a controlled substance . . . 21 U.S.C. § 841. As each state has different penalties for these crimes, one would need to consult each state’s criminal procedure and substance to ascertain the range of penalties for those who violate state controlled substance laws.

II. Prevalent Types of “White Collar” Crimes 1. Mail Fraud A noted criminal lawyer once said that there was only one statute that was needed in 1100 the U.S.: the mail fraud statute,3 18 U.S.C. § 1341.4 In order to prove this crime the prosecutor must establish that there was a scheme to defraud and that the U.S. mail or a private carrier was used to execute the scheme; that is, the accused either deposited or caused to be deposited some document or other item in furtherance of the scheme in the U.S. mail or private carrier. The original statute required that the U.S. mail was used, but once schemers realized that if they used a private carrier, it was not a federal crime, the U.S. Congress amended the statute to cover private carriers, such as Federal Express or United Parcel Service. The elements of the wire fraud statute56 are similar to these of the mail fraud statute, differing only in the way the scheme is perpetrated using communication by wires in interstate commerce, i.e., telephone or fax. The statute of limitations for both mail and wire fraud is five years, except if a financial institution is involved, it is ten years. 18 U.S.C. § 3293. 1101

Practice Tip Although the sentence for each crime is cited in the statute, it is the Federal Sentencing Guidelines, adopted in 1987, which assist the court in determining the sentence. There is the U.S.S.C. Helpline which “assists practitioners in applying the Guidelines.” Telephone 202–502–4545. The Sentencing Guidelines are no longer mandatory but advisory.

3 Postbetrugsgesetz [lit.] / loi sur la fraude postale / ley federal sobre el fraude postal / legge federale statunitense sulla frode postale. 4 18 U.S.C. § 1341; U.S. Attorneys’ Manual, Title 9–4300 Mail Fraud and Wire Fraud: “Whoever, having devised . . . any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations or promises . . . for the purpose of executing such scheme . . . places in any post office or deposits or causes to be deposited any matter . . . to be sent or delivered by any private or commercial interstate carrier, or takes or receives therefrom . . . or knowingly causes to be delivered by mail or such carrier . . .”. 5 Telekommunikationsbetrugsgesetz / loi sur la fraude éléctronique / ley federal de telecomunicaciones / legge federale statunitense sulla frode telematica. 6 18 U.S.C. § 1343: “Fraud by wire, radio, or television. Whoever, having devised . . . for obtaining money or property by means of false or fraudulent pretenses . . . transmits or causes to be transmitted by means of wire, radio or television communication in interstate commerce, any writings . . . for the purpose of executing such scheme or artifice, shall be fined under the title or imprisoned not more than 20 years, or both. If the violation occurs in relation to . . . a presidentially declared major disaster or emergency . . . or affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.” The enhanced fines and increased terms of imprisonment involving a disaster, emergency or financial institution applies also to the mail fraud statute.”

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Chapter 13 White Collar Crime 2. A Ponzi Scheme 1102

The most well-known example of mail fraud or wire fraud is a Ponzi scheme, also known as a pyramid scheme,7 in which initial investors are promised a high rate of return, paid by the schemer from funds acquired through a series of subsequent investors, and not from profits from any legitimate enterprise and whose investments are crucial to maintaining the scheme.

1103 Example One of the more notorious Ponzi schemes prosecuted in the U.S. was that of Bernie Madoff, who attracted a number of well-known people before the scheme was discovered and dismantled by federal investigators from the F.B.I.8 Pursuant to the Federal Sentencing Guidelines, which were mandatory but are now advisory, a sentence is increased according to the amount of money obtained by the schemer. After pleading guilty, Madoff is now serving a 150 year prison sentence, which the sentencing judge in the case acknowledged to be symbolic. Madoff forfeited all but $2,500,000 in assets.

III. Forms of Criminal Liability 1104

There are various forms of criminal liability: individual, conspiracy,9 aider and abettor. Conspiracy is not recognized as a crime in many civil law countries, but it is routinely used in Federal cases in the U.S. where the evidence warrants such, according to 18 U.S.C. § 371. The crime in conspiracy is the agreement of two or more persons to commit a crime. Conspiracy alone, however, is rarely charged. Instead, “conspiracy to commit mail fraud”10 is charged, and then the crimes of mail fraud, wire fraud or bank fraud, if appropriate based on the evidence, are also included in the criminal charge. In addition to the agreement to commit a crime, one of the conspirators must have taken an overt step in furtherance of the plan, including a simple non-criminal act, such as opening an office or getting a telephone line.

1105 Practice Tip An extraordinary feature of conspiracy law is that a conspiracy is a continuing offense, which means that the statute of limitations runs from the last day of the last overt act. See U.S. Attorneys’ Manual, Criminal Resource Manual, C.R.M. 500–999. In essence that means if there is a conspiracy to commit mail fraud, which consists of a mailing offering bogus bonds for sale, the date of the last mailing is when the statute of limitations begins to run. If it is established that an individual is a member of the conspiracy, that individual may be liable for all criminal acts committed as part of the conspiracy, even though that individual was not aware of that particular act and did not participate in it. Co-conspirators are criminally liable for any reasonably foreseeable criminal acts committed by their co-conspirators in furtherance of the conspiracy.

7 Schneeballsystem / système pyramidale / esquema piramidal / schema piramidale, detto anche “schema di Ponzi / schema Ponzi” o piramide finanziaria. 8 bundesstaatliche Ermittlungsbehörde [lit.] / bureau fédéral d’investigation [lit.] / Oficina Federal de Investigación / sigla del “Federal Bureau of Investigation”, corpo di polizia federale investigativa degli Stati Uniti. 9 Mittäterschaft / association de malfaiteurs / conspiración / compartecipazione criminosa (assimilabile al concorso di persone nel reato, è, tuttavia, un termine privo di un equivalente esatto nel sistema italiano: indica l’accordo tra due o più persone per commettere un illecito civile o penale, accordo che costituisce reato indipendentemente dal fatto che ad esso segua o meno l’esecuzione materiale dell’illecito). 10 mittäterschaftliche Begehung eines Postbetrugs / association de malfaiteurs en vue de commettre une fraude postale / conspiración para cometer fraude postal / concorso in frode postale.

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IV. Pre-Trial Investigation, Procedure and Evidence

IV. Pre-Trial Investigation, Procedure and Evidence Unlike many civil law systems, a U.S. federal criminal investigation is headed by the 1106 Assistant U.S. Attorney, aided by federal agents, such as the U.S. Postal Inspectors, the Federal Bureau of Investigation (F.B.I.), the Drug Enforcement Administration (D.E.A.) and others.

1. Obtaining Evidence of Federal Crime in the United States During the investigation, the prosecutor has a number of tools that can be used to 1107 gather evidence in any given case, e.g., a grand jury11 subpoenas, search warrants, hand writing analysis, interviewing witnesses, and others. The “grand jury,” a term left over from the period of law French in England, is not to be confused with a petit jury at trial, to which one simply refers as “the jury.” The grand jury, comprised of citizens, functions before trial to determine whether there was probable cause for arrest of the defendant and therefore, whether the case should proceed to prosecution at trial. If the grand jury finds probable cause, then it will provide a written statement of the crimes to be charged called an “indictment.” In a white collar crime case, the emphasis is on obtaining documents via grand jury 1108 subpoenas for records: bank, credit card, computer, telephone, and any other source discovered during the investigation. The federal agents also use “garbage runs” by obtaining records via the garbage left on the street to be picked up by refuse collectors. A search warrant or subpoena is not required to do this since it becomes public material once it is discarded by the previous owner.

2. Obtaining Evidence of Federal Crimes from Outside the United States If a U.S. federal prosecutor needs evidence from abroad, he or she can do so through 1109 the Department of Justice, Office of International Affairs (O.I.A.).12 Authorization must be obtained by the prosecutor before pursuing any type of evidence from a foreign country so as not to violate the sovereignty of any state. With O.I.A. approval foreign evidence may be obtained via mutual legal assistance treaties (M.L.A.T.s)13 or if there is no treaty, then through letters rogatory. One may wish to compare how evidence is obtained in the U.S. from foreign countries in private civil matters, as described in Chapter 2, “Federal Civil Litigation,” and in arbitration, as described in Chapter 4, “U.S. International Arbitration Law and Practice,“ with this process for obtaining evidence in criminal matters in the U.S. This office also assists foreign countries in obtaining U.S. evidence to be used in foreign prosecution. U.S. prosecutors may encounter difficulty in acquiring foreign evidence particularly 1110 from a country that does not have a central justice authority that is willing or able to handle such requests. Letters rogatory prepared by the prosecutor detail the evidence required, such as bank records, providing the name of the bank, the account holder, the bank account number, and any other data which would be helpful in locating the evidence. If some of the evidence needed by the prosecution is in a foreign country, then, as 1111 previously mentioned, the prosecutor will seek the assistance of O.I.A. Multilateral con“Grand” Jury [lit.] / grand jury [lit.] / gran jurado / gran giurì [lit.], giuria speciale. Abteilung für Internationales / bureau des affaires internationales / Oficina de Asuntos Internacionales / ufficio per gli affari internazionali. 13 bilaterale Rechtshilfe-Abkommen / traités d’assistance judiciaire mutuelle / tratado de asistencia judicial mutua / trattati di mutua assistenza giudiziaria. 11

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Chapter 13 White Collar Crime ventions can help in the process. The U.S. is a party to the 2000 U.N. Convention Against Transnational Organized Crime and its two Protocols: (trafficking in persons and smuggling of migrants) which provides that “each State party shall empower its courts or other competent authorities to order that bank, financial or commercial records be made available or seized.”14 Bilateral conventions are also applicable. For example, attorneys may also refer to their central judicial authority to obtain documents and other evidence through the Mutual Legal Assistance Treaty between the U.S. and Germany signed October 14, 2003, and entered into force on October 18, 2009. The treaty allows for “the widest measure of mutual assistance in criminal investigations and proceedings . . ..” Requests are made to the Attorney General or “a person designated by the Attorney General,” which in the U.S. is the O.I.A. and for Germany it is the Federal Minister of Justice.

3. Other Investigative Tools: Injunctions and Search Warrants A very effective tool available to the prosecutor is to seek injunctive relief15 pursuant to Title 18 U.S.C. § 1345. Before the indictment is returned by the grand jury, an injunction order seeking to stop an ongoing fraud and to freeze assets may be obtained by the prosecutor, and under certain conditions ex parte, in which only one party is before the court. In order to prevent many additional persons from becoming victims, the court may grant injunctive relief so that the perpetrators are forbidden to dispose of any property related to the scheme and are restrained from moving funds or property. In other words, the funds of the schemers are frozen. The schemers are thus prevented from continuing their scheme and from disposing of any assets resulting from the scheme. A hearing may follow to determine whether the order should stand. If an indictment has not been returned then the hearing is governed by the Rules of Civil Procedure.16 If an indictment has been returned, then discovery17 is governed by the Criminal Rules of Procedure.18 Although this rule has been around for a very long time and used effectively, it is unexplainably seldom used. 1113 It should be noted that during the course of the investigation, the accused is most likely aware that such investigation is ongoing, because, for example, if his bank records have been subpoenaed, the bank will inform him since he is their customer. The telecommunications provider will do the same unless it has received a non-disclosure order, which may happen in the early part of the investigation. This is why a civil forfeiture order or a Title 18 § 1345 injunction is necessary to preserve assets for the victims. 1114 Telephone records are equally important to the prosecution since it is possible to use them to show the relationship between conspirators or that the accused contacted victims in this manner. This method of gathering evidence becomes much more difficult with the constant growth in telecommunication methods and use, however. 1115 In order to get a search warrant, the prosecutor with a federal agent prepares an affidavit19 that describes the place to be searched, including a photograph of the site, if pos1112

14 United Nations Convention Against Transnational Organized Crime, Nov. 15, 2000, 2225 U.N.T.S. art. 12, 6. 15 einstweilige Anordnung / mesure injonctive / medida cautelar / provvedimento inibitorio. 16 Zivilprozessordnung / règles de procédure civile / reglas del procedimiento civil / norme di procedura civile. 17 Offenlegungsverfahren / phase de divulgation / descubrimiento de pruebas / esibizione delle prove, esibizione probatoria. 18 Discovery: the process which enables each side, particularly, the defendant in either a civil or criminal case to obtain documents which may be relevant to the defendant’s case. 19 eidesstattliche Erklärung / affidavit / declaración jurada / dichiarazione giurata.

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IV. Pre-Trial Investigation, Procedure and Evidence sible, and the address of the place in question. The affidavit must establish for the magistrate judge that there are sufficient grounds to issue the warrant.20 In order to obtain the warrant, the federal agent must establish in his affidavit that there is probable cause,21 which means it is more likely than not, that there is evidence of a crime in such place and that the search warrant is being sought to obtain evidence of that crime. The search is to be conducted between 6:00 a.m. and 10:00 p.m. and within 14 days. Night time searches are rarely given and require statements that such search could only be successful at night. 1116

Practice Tip A “Sneak and Peak” Warrant (or a Delayed Notice Warrant) is a search warrant different from that of an ordinary search warrant since it allows federal investigators to enter a premise unannounced and search the premise. As a result, the owners of the premise are not usually aware that a federal search has occurred, in comparison to a regularly executed search warrant, which is executed between 6:00 a.m. and 10:00 p.m. and the owners of the premise are aware that a search warrant is being executed.

After the warrant has been executed, the agent must present to the magistrate judge 1117 an inventory of the items seized and stating the date and the time it was executed. Such items are labeled and stored in a safe place within the agency in order to maintain the chain of custody.22 Together with the inventory of the items seized, the document attached to such evidence will be signed by anyone within the law force agency who had a need to see or review that evidence, thus maintaining the chain of custody. During the course of the investigation the federal agents may approach individuals 1118 who are possible defendants in the case. The federal agents identify themselves as such, advising the suspects that they wish to question them about certain activities. If the suspects refuse to discuss the issues involved and request a lawyer, the federal agents must cease questioning them. If the suspects are in custody, the federal agents must advise them of their Miranda rights.23 Once the grand jury subpoenas have been issued, the search warrants completed, wit- 1119 nesses have been interviewed, the prosecutor is now in a position to determine what charges are legally valid, that is, what charges are justified by the evidence, who the proposed defendants are, whether there is individual or group liability (conspiracy) or both, and most importantly, is the evidence likely to end in a conviction.

4. The Indictment After the investigation is completed, the prosecutor drafts the indictment, setting 1120 forth the names of the defendant or defendants and the charges against them, with references to the criminal statutes they are alleged to have violated.

20 Fed. R. Crim. P. 41(c) 9 Search and Seizures (c) Persons or Property Subject to search or Seizure. A warrant may be issued for any of the following: 1.) evidence of a crime; 2.) contraband, fruits of crime or other illegally possessed; 3.) property designed for use, intended use or used in committing a crime; or 4.) a person to be arrested or who is unlawfully restrained. 21 hinreichender Verdacht / cause d’action probable / causa probable / causa ragionevole [lit.] (nel senso di apparente sussistenza di elementi che giustificano l’accusa, l’arresto o la perquisizione). 22 Legitimationskette / chaîne de responsabilité / cadena de custodia / catena di custodia [lit.], tracciabilità ovvero relazione cronologica dei passaggi subiti da beni o reperti dalla scena di un crimine o dalla loro ablazione fino al processo. 23 Miranda v. Arizona, 384 U.S. 436 (1966) stated that statements made by a defendant in custody will only be admissible at trial if the defendant was informed that he had the right to counsel and what he said could be used against him, and above all, he had the right to remain silent.

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Chapter 13 White Collar Crime 1121 Special Practice Tip on Forfeiture Inside and Outside the United S A section of the indictment may include charges for asset forfeiture in which assets that are alleged to have been obtained as a result of criminal activity will be separately listed and presented to the grand jury, which in turn returns the indictment to the federal magistrate judge24 on duty.25 If there are assets in a foreign country and there is concern that the assets may disappear or be destroyed, the prosecution through O.I.A. may ask the foreign government to preserve the property. As well, the foreign government may ask the U.S. to preserve assets that may be the fruits of crime. Assets subject to forfeiture are those assets which have been involved in criminal activity or are the proceeds of crime. The types of assets that can be forfeited is broad, and could include the house where a drug transaction has occurred, the yacht bought with proceeds of the crime, the bank account itself or even thoroughbred horses. The U.S. government tends not to forfeit property that costs more to maintain than it is worth, i.e., polluted land which requires clean-up because of environmental concerns. If the forfeited property contains items that are perishable, such as milk from a forfeited dairy farm, the property (milk) is sold and the money is put into an interest-bearing account. Should the forfeiture prove to be unwarranted and the government ordered to return the property, then the money in that account is returned to the owner. In the U.S. the asset forfeiture program is operated by the U.S. Marshals.

1122

Presenting the indictment to the grand jury, the prosecutor names the individuals who are charged, explains the crimes that are cited in the indictment, including the elements of those crimes, i.e., knowingly, intentionally, use of the mail, or wire so that the grand jurors have some knowledge of the crime charged. The presentation must include the requirement that the grand jury must find that there is probable cause that the person/s charged in the indictment more likely than not26 have committed those crimes. The standard before the grand jury is a much lower standard than that required to convict a person in a jury trial, which is “beyond reasonable doubt.”27

5. Arraignment 1123

Once the grand jury returns an indictment, which it does via the chairperson of the grand jury before the magistrate judge, a copy of the indictment is sent by registered mail to the defendants and a date is set for the arraignment28 (a hearing in which the defendant is told of the charges against him before the magistrate judge). Generally, defendants on the advice of counsel, decline to hear the indictment read. At this stage, the magistrate judge asks the prosecutor if he or she has given documents and other evidence to the defense attorney, including whether there was a wiretap order.29 It is generally the prosecutor who conducts the arraignment hearing, asking such questions as: is the defendant the person named in the indictment; if he has received a copy of the indictment; whether he read it; whether he understood it; and whether he wants the indictment read.

24 Bundesrichter / juge federal / juez federal / giudice federale “minore” (che si occupa di questioni procedurali, attività istruttorie ma può anche giudicare casi penali, in genere di minore gravità, presso una District Court). 25 Magistrate Judge: Pursuant to 28 U.S.C. 631 magistrate judges are appointed to assist federal judges in the course of their duties. They handle such matters as authorizing search warrants, presiding over detention hearings, arraignments, and extradition hearings and are appointed for a renewable eight-year term. 26 hinreichender Tatverdacht / plus probable qu’improbable / mas probable que no / (regola probatoria ispirata al) criterio del “più probabile che non” [lit.]. 27 mit an Sicherheit grenzender Wahrscheinlichkeit / hors de tout doute raisonnable / más allá de toda duda razonable / “al di là di ogni ragionevole dubbio”. 28 Verlesung der Anklage / lecture de l’acte d’accusation / instrucción formal de cargos / contestazione formale dell’atto di accusa all’imputato all’inizio del processo. 29 Befehl zur Überwachung der Telekommunikation / ordonnance de mise sur écoute / orden de interceptar llamadas telefónicas / provvedimento che dispone o autorizza intercettazioni telefoniche (nell’ordinamento italiano è adottato, in genere, con “decreto motivato” del g.i.p. su impulso del pubblico ministero).

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IV. Pre-Trial Investigation, Procedure and Evidence 1124

Practice Tip When are wiretap orders used? It would be rare for a prosecutor to seek a wiretap order in a fraud case, for example. Such orders are usually reserved for more serious crimes: drug trafficking, Racketeer Influence and Corrupt Organizations Act (R.I.C.O.). See 18 U.S.C. § 2518.

If not, the magistrate judge asks the attorneys to confer with each other and set a date 1125 for the defense attorney to review the evidence. Once the prosecutor has complied with the defense attorney’s requests, then the prosecutor asks for the documents and other evidence that the defense attorney will use at trial. This may be a lengthy process, particularly in a white collar crime case, since there most likely will be hundreds of documents. At this stage, the magistrate judge asks the defendant how he pleads, and the usual 1126 answer is that he or she says “not guilty.” However, if the defendant decides that he will plead, then that requires a procedure before an Article III judge30 since a magistrate judge cannot accept a guilty plea in a felony case. Prior to trial, the prosecutor is required to give defense counsel a list of all the wit- 1127 nesses, he or she will call to testify. In addition, the prosecutor is required to provide copies of the witnesses’ statements so that the defense will have ample time to review this material for cross examination. If the prosecutor provides a copy of his witnesses’ statements immediately before trial, defense counsel will normally ask for a recess since he or she did not have adequate time to review the statements. This usually provokes a rebuke from the judge to the prosecutor because delays in trials are frowned upon by the judiciary, and the jury will have to be adjourned while this process is taking place.

6. Plea Agreements In the majority of criminal cases filed in the U.S. approximately 90 % of such cases are 1128 resolved through a plea agreement.31 The 10 % of cases which go to trial, end up with a 90 % conviction rate. Practitioners in other countries sometimes have difficulty in dealing with the concept of “plea bargaining”32 considered in some cases to be immoral. Even where formal plea bargaining does not exist, however, less formal practices often do. Germany, for example, does not have plea agreements per se, but prosecutors and defense counsel may engage in informal plea agreements.33 Given the number of cases filed in the U.S., it would be virtually impossible to try them all without increasing the federal system by overwhelming numbers. If the accused in consultation with his defense lawyer decides that he wants to plead 1129 guilty to the offenses charged in the indictment, he authorizes his lawyer to consult with the Assistant U.S. Attorney, the prosecutor in the case. Some of the issues not subject to negotiation are that the defendant must plead to the most serious charge and most agree to forfeit what has been obtained criminally. In an indictment for a financial crime case in which there may be hundreds of victims, the most serious charge may not be any individual count if there were hundreds of victims who lost $100.00 each. In that case the defendant will be asked to plead guilty to fraud charges in the total amount of the scheme. Also, the defendant will be asked to forfeit the fruits of his crime, which will be included in the guilty plea document which the prosecutor and the defense counsel have 30 An Article III judge is one who is appointed pursuant to Article III of the U.S. Constitution and is appointed for life during good behavior. 31 Vergleichsvereinbarung / transaction judiciaire / acuerdo sobre de los cargos y la sentencia entre el fiscal y el acusado / accordo di patteggiamento (accordo in virtù del quale l’imputato in un processo penale si riconosce colpevole dei crimini a lui ascritti, mentre gli inquirenti riducono la portata dell’atto d’accusa). 32 verhandeln um einen Vergleich im Strafverfahren / négociation de peine / negociación de los cargos / patteggiamento della pena. 33 Cf., Zivilprozessordnung [StPO][Code of Civil Procedure], § 153 (a)(Ger.).

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Chapter 13 White Collar Crime agreed upon. The plea agreement letter is basically a contract between the defendant and the government, in which each side promises to do certain things. This letter will be presented to the judge in the case who will preside over the change of plea, and then engage in the guilty plea colloquy.

7. Sentencing After Guilty Pleas Furthermore, both prosecutor and defense counsel will review the Sentencing Guidelines which are now advisory, having been mandatory in the past, and decide at which level in the Sentencing Guidelines the crime which the defendant has committed falls. The Sentencing Guidelines were introduced to adopt a uniform code of sentencing throughout the federal system. Prior to their adoption, it was up to individual judges to decide upon the sentence. Under the Sentencing Guidelines, the judge considers the severity of the crime, i.e. how much money the victims lost and the defendant’s prior criminal history. 1131 Because the defendant is pleading guilty, he is entitled to a reduction in the guideline level for pleading guilty. In addition a defendant may have his sentence reduced if he provided substantial assistance,34 that is information that helps prosecutors in the case at hand or other cases, which warrants the prosecutor to file what is called a “5K” motion, which outlines for the court the substantial assistance provided by the defendant. Such a motion could possibly reduce a defendant’s sentence by half. See § 5K1.1 of the U.S. Sentencing Guidelines.35 1132 Prior to sentencing, the judge in the case will hold a hearing to determine if the defendant is truly pleading guilty of his own volition. This is called the guilty plea colloquy during which the judge asks the defendant a number of questions after the defendant is sworn in. The questions put forth to the defendant include questions about his education, his ability to read, write and understand the English language, the type of medications he takes and what effect that may have on his ability to answer the questions put forth by the judge. The prosecutor is then asked to give a summary of the evidence the government has in the case. Then the judge asks the defendant if he agrees with what the prosecutor has said. The defendant is also presented a list of his rights that he is giving up, i.e., right to a jury trial, right to participate in jury selection. If the defendant answers that he understands all of this, then the judge will say that he accepts the guilty plea. At this point, the judge sets the date for sentencing and asks the probation office to prepare a Sentencing Report,36 which will be used by the court in determining the sentence. Both lawyers in the case will get a chance to review the Sentencing Report and file objections to it prior to the time of sentencing. At the sentencing hearing, the victims are entitled to be heard, and the judge will decide how many may testify. 1130

34 wesentliche Hilfe / aide substantielle / asistencia sustancial / contributo essenziale (collaborazione da parte dell’imputato in un procedimento penale a suo carico, tale da concretare un contributo efficace e determinante alle indagini). 35 Leitlinien für Strafurteile / recommandations pour le prononcer d’une condamnation / directrices federales sobre el dictado de sentencias / Linee guida statunitensi per la commisurazione e irrogazione della pena. 36 Strafzumessungsbericht / rapport de condamnation / informe previo al dictado de la sentencia / verbale o rapporto di determinazione della pena.

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V. The Federal Criminal Trial

V. The Federal Criminal Trial If plea bargaining has not resolved the case, it will then proceed to trial, with the bur- 1133 den of proof on the government or the prosecutor. Unlike civil law countries, in the U.S., the trial begins after jury selection, its pool of potential jurors selected from voting lists and drivers’ licenses lists. The defendant with his lawyer sits through the process of selecting jurors. The defendant has 10 preemptory challenges, and the prosecutor has six. This means that either side in exercising its peremptory challenges may decide against a prospective juror and provide no reason for not selecting such juror. Twelve jurors are selected and generally four alternate jurors, as well. The alternate jurors are there in the event that one of the jurors falls ill in which case an alternate juror steps in so that the trial may continue. During the selection process, jurors are asked such questions as: have you or any member of your family been a victim of a crime; would you believe the testimony of a policeman more than the testimony of other witnesses. As with a plea agreement, prior to trial, the prosecutor is required to give defense 1134 counsel a list of all the witnesses, he or she will call to testify. In addition, the prosecutor is required to provide copies of the witnesses’ statements so that the defense will have ample time to review this material for cross examination.

1. Part I: Prosecution to Obtain a Conviction for the Crime(s) Charged Once the trial begins, the judge gives the jury a brief summary of what the case is about and then calls the prosecutor to give an opening statement, which is a road map for the jury. Although a prosecutor may wish to present witnesses in the proper order, that does not work in real life, as witnesses have schedules which may not allow them to testify on the exact date that they are needed. The defendant’s attorney may give an opening statement immediately after the prosecutor’s or wait until the prosecutor has rested his case. However, in most cases, defense counsel may wish to make an opening statement immediately after the prosecutor makes his or her statement in order to get the defendant’s version of the case before the jury. Throughout the trial, the prosecutor has the burden of proof. The only time that changes is if the defendant is presenting such a defense as an alibi, and for which he must advise the court before the trial begins. The notifications to the court and to opposing counsel exist so that there are no surprises at the trial and both sides have adequate time to prepare a defense or rebuttal. If each side is going to present an expert witness, then the expert’s report must be presented to the other side before trial. As the trial begins the prosecutor begins its case by direct examination37 of his witnesses who may be cross-examined38 by defense counsel. If the direct examination does not harm his case, defense counsel may forego cross examination. Throughout the trial, the federal agent on the case sits with the prosecutor at counsel table and closest to the jury. The agent will usually be the last witness and a summary witness. All other witnesses are sequestered,39 that is, such witness may not be in the courtroom until such time as he or she testifies. After testifying, a witness may remain in the courtroom. White collar crimes are generally about documents which could involve hundreds if not thousands of documents; bank records, telephone records, credit card statements, 37 Verhör der Zeugen durch den Staatsanwalt / interrogatoire direct [lit.] / interrogatorio directo / interrogatorio diretto, esame diretto [lit.] da parte della pubblica accusa. 38 ins Kreuzverhör nehmen / contre-interroger / contrainterrogatorio / controinterrogati. 39 isoliert / isolé / la corte pone a los testigos en aislamiento durante el proceso (tipicamente en un hotel donde tienen accesso limitado a los medios de comunicación) / messi in isolamento (durante un processo).

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Chapter 13 White Collar Crime flight tickets. Where there are many such documents of similar nature, the prosecutor will generally confer with defense counsel to determine if the prosecutor may introduce such documents in summary form. Generally this presents no problem for either side, thus paving the way for less time spent on hundreds of records, such as bank statements, which will be introduced into evidence in summary form but with all documents in evidence. 1139 If a defendant becomes the subject of an investigation, he or she needs to decide at an early stage which route to take: wait until the investigation is completed and decide to plead guilty or go to trial. If he or she is one among a number of defendants, does he provide substantial assistance,40 thereby reducing his sentence, simply plead guilty for a reduced sentence or go to trial hoping that twelve jurors will find him not guilty.

2. Part II: Sentencing Upon Conviction at Trial 1140

After both sides have presented their evidence and each rests his or her case, the judge provides jury instructions which give the jurors a basis on which to decide guilt or innocence. The jurors do not decide the sentence if they find the defendant is guilty. As previously mentioned, that determination will be made by the judge reviewing the PreSentence Report,41 the Sentencing Guidelines and any other matter which the judge finds pertinent. Other matters could include such things as the welfare of a child. In a case in which a mother should have gone to prison, a judge may sentence her only to probation, if for instance she had an autistic four-year old child who was deeply attached to her. Being separated from her mother would have had a very serious effect upon the child and may be considered by the judge.

VI. The Evidentiary and Procedural Challenges of Proving Fraud 1141

Different types of criminal prosecutions present different types of problems. The following section uses the example of prosecuting a federal criminal fraud case to illustrate these problems. For example, at the stage of the proceedings just mentioned at which the prosecutor provides defense counsel with a list of all witnesses, the procedure may take longer in a fraud case with multiple victims, perhaps hundreds in a Ponzi scheme. If such is the case, defense counsel may ask for a continuance of the trial date, which is seventy days from the date the indictment was made public or the date when the defendant appeared before the magistrate judge.42

1. The Challenges for Procedure When Obtaining Evidence of Fraud Outside the United States 1142

In prosecuting a criminal fraud case, one of the most difficult areas is dealing with hundreds of victims and deciding which ones will be included in the indictment and therefore, be called upon to testify. As many, if not most of the victims are senior citizens, deciding which of them will be grounded sufficiently to testify and which will not, can be a laborious process. Sadly, most of the senior citizens are women who are either widows or unmarried. In many instances, victims attempt to take over the case, each umfassende Unterstützung / aide substantielle / asistencia sustancial / contributo essenziale. Protokoll vor der Verurteilung / rapport avant condamnation / informe previo al dictado de la sentencia / relazione pre-sentenza di condanna [lit.], relazione prima della condanna (documento redatto dal “Probation Service” per fornire ai giudici informazioni sulla situazione sociale e personale dell’imputato e suggerire il tipo di pena che sembra più opportuno comminare nel caso di specie. 42 See 18 U.S.C. § 3161—Time Limits and Exchanges. 40

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VI. The Evidentiary and Procedural Challenges of Proving Fraud wanting to testify, each wanting retribution for the wrong they have suffered. In the U.S., if the schemers have targeted vulnerable victims, they are subject to an enhanced level under the Federal Sentencing Guidelines. 1143

Example What constitutes a vulnerable victim? A victim who has Alzheimer problems does not make a good witness, because of the inability of that witness to recall what was said and done prior to the trial, but is nonetheless a vulnerable victim. The prosecutor is faced with a Hobson’s choice, where he or she has no real choice in dealing with a vulnerable victim.

Another item of importance is that there is greed on both sides, which is something 1144 rarely recognized. A victim who believes that a company or group can provide 10 % for 10 years has to have some idea that this is “pie in the sky.” When jurors review this, many are inclined to subscribe to a notion of caveat emptor--let the buyer beware. One of the important elements of a fraud case is that of the endorser,43 those individ- 1145 uals who allegedly bought into the program and are reaping fantastic financial results. These “endorsers” are generally individuals who agree to have their names, telephone numbers and email addresses provided to prospective customers in return for financial rewards for every successful customer brought into the scheme as a result of the endorser’s efforts. In some instances, the schemers even get members of the clergy to write a letter of recommendation for their scheme, stating that he, the clergyman, looked at the program, that it was a good investment and that he recommended buying the project. 1146

Example What are the types of “products” sold by schemers? The scheme could be a “subordinated debenture bond” or private pay telephones, which came upon the scene when American Telephone & Telegraph (A.T.&T.) was ordered to split its operation into separate companies thus opening the door to profiteers who gathered a sales force to promote “private pay phones” that could be placed on a bar counter, in beauty shops, grocery stores.

With the flooding of the market with cell phones, at least one aspect of white collar 1147 crimes has been put out of business. Victims were given names and telephone numbers of the purported buyers or “endorsers” in a particular program and told to call them. These endorsers have never bought into the program and were given a fixed amount of money for every client that they brought into the fold. An important aspect of the case is for the prosecutor to find assets which are derived 1148 from the fraud. When the prosecutor discovers such assets, it is important that he moves expeditiously after he or she has determined that the assets are subject to forfeiture. The mantra of the prosecutor in these cases is “Find, Freeze and Forfeit.”44 The asset forfeiture program in the U.S. had been criticized because some prosecutors have been overzealous in seeking assets, particularly when assets are seized prior to the indictment as part of a civil forfeiture case. Another tool available to prosecutors is to engage an Internal Revenue Service 1149 (I.R.S.)45 Agent who usually works in conjunction with other federal agents such as U.S. Postal Inspectors or F.B.I. Agents. I.R.S. Agents conduct a net worth investigation,46 re43 Indossant / approbateur / endosante / garante (chi si rende “garante” della credibilità, qualità e sicurezza di un progetto o di una proposta). 44 finden, einfrieren und beschlagnahmen / trouver, geler et confisquer / localizar, congelar y confiscar / scoprire, congelare e confiscare. 45 Bundesfinanzamt / administration fiscale / adminstración tributaria federal / amministrazione tributaria federale, Agenzia delle Entrate statunitense. 46 Überprüfung des Nettovermögens / enquête sur le patrimoine net / investigación del valor neto / accertamento del patrimonio netto, indagine svolta sul “valore netto”[lit.] dichiarato dal contribuente.

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Chapter 13 White Collar Crime viewing financial documents, obtained during the investigation to establish that the defendant, based on his alleged income, could not possibly support the life style he has. If for example, the defendant alleges that he makes $100,000 per year from his business, yet owns luxurious homes, yachts and expensive cars, the net worth analysis will establish that this is mathematically impossible.

2. Procedural Challenges to Obtaining Evidence Outside the United States Many countries enter into agreements that allow countries to cooperate with each other to recover assets derived from criminal activity, including E.U. and U.N. Conventions. Tracing assets can be a difficult and arduous task job, but effective search warrants often expose the vanity of criminals, who have photographs of their yachts, their homes, their mistresses. One must always remember to consider the X files; ex-wives, ex-employees, ex-partners, etc. who provide a wealth of information. Federal judges are reluctant to forfeit a home in which a family is living, which is a line of defense for attorneys representing the perpetrators. 1151 As is common with most cases of fraud in the U.S., the question for the criminals becomes: where do we put the money so as not to raise suspicion? It used to be in pizza parlors, but that has become a rather hackneyed approach to hiding money since the prosecutors have long-discovered that a pizza parlor selling a few pizzas a day does not generate the amount of money claimed by the perpetrators. As a result, criminals moved their ill-gotten gains to other businesses which purport to be legitimate. Problems for the prosecutors occur when trying to trace criminal proceeds to offshore accounts or to countries that have bank-secrecy laws. However, that may not be the safe-haven for criminals that it once was. Off-shore accounts attempt to escape investigation from all state authorities. As a result, the notorious “Panama Papers” first saw the light of day when given to the International Consortium of Investigative Journalists, which was a leak of over eleven million documents revealing questionable transactions involving individuals from all over the world. 1152 If the law in a country outside of the U.S. allows for domestic forfeiture and various Conventions allow for assistance in forfeiting assets, prosecutors are provided with a powerful tool. In a defense mounted against forfeiture, the burden will be on the persons whose assets have been frozen or confiscated to prove that such assets were not the result of criminal activity. A challenge to the forfeiture can be based upon the fact that the assets seized were not tied to crimes and that the assets were legally obtained. 1150

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CHAPTER 14 UNITED STATES’ ENVIRONMENTAL LAW AS FOREIGN LAW Literature: Todd Aagard, David Owen and Justin Pidot, Practicing Environmental Law (Foundation Press, 2017). Jerry L. Anderson & Dennis D. Hirsch, Environmental Law Practice (3d ed.) (Carolina Academic Press, 2010). Environmental Law Institute, A Citizen’s Guide to Using Federal Environmental Laws to Secure Environmental Justice (2002). Environmental Law Institute, Environmental Law Reporter's Environmental Law Deskbook (8th ed., 2007). Michael Kloepfer, Umweltrecht (3d ed.) (Beck, 2004). William H. Rodgers, Environmental Law Hornbook (2d ed.) (West, 1999). U.S. E.P.A., Incentives for Self- Policing: Discovery, Disclosure, Correction and Prevention of Violations, 65 FR 19, 618 (2000).

I. Introduction: How Is Environmental Law an “American Thing”? Frequently, if one tells jurists in Europe that our area of research is environmental law 1153 or our area of practice is environmental law, the response is “environmental law—that’s an American thing, isn’t it?”1 Why is there a perception that environmental law is an “American thing”?2 It may be because perceptions of U.S. environmental law from outside of the U.S.,3 like perceptions of common law in general, tend to be oriented toward 1 Despite this popular attitude, one finds however that at least thirty-four of the law faculties in Germany do include one or more professors, chairs or even institutes of environmental law, and many law firms around Germany include environmental law as a practice area, with at least one law firm in each of the twenty largest cities claiming to be devoted extensively to environmental practice. The eight German regional consulate offices, as well as the German embassy in Washington, D.C. do provide lists of law firms in those regions (some of which employ German lawyers along with their areas of practice, including environmental law and criminal environmental law. This can at least help one to get started in finding a lawyer in the appropriate U.S. state. See German Missions in the United States, http://www.german y.info/contentblob/3473886/Daten/6621529/Anwaltsliste_DD.pdf If one were to look further, one would also find German conferences, journals, legal practice and legal research organizations dedicated to environmental law. Likewise, in France environmental law is featured by numerous different institutions like specific research centers, at least sixteen university master programs in environmental law and the société francaise pour le droit de l’environnement, the French society for environmental law, existing since 1974. More than thirty-five notable international law firms offer services in French environmental law by their expert lawyers. In 2005 the protection of the environment was given constitutional value by integrating the Charte de l’environnement into French constitutional law. In Italy, environmental law as a separate field of law evolved much later than it did in the U.S. or France. Most of Italy’s environmental law development, like that of some other European Union countries like Ireland, is rooted in recent guidelines and regulations of the E.U. With the increasing relevancy of environmental issues also on a national level, several international law firms are offering their services in environmental law by their Italian offices. Academic education in environmental law however is not yet widely available in Italy. Only a few degrees or programs in environmental law are offered throughout the country. 2 Notwithstanding, compare for example this statement from a leading German environmental law text already in 1987: „Umweltrecht hat sich zu einem wichtigen Teil der Rechtswissenschaft und der Rechtspraxis entwickelt.“ [“Environmental law has developed into an important part of legal science and legal practice.”] Otto Kimminich, et al. Handwörterbuch des Umweltrechts (Otto Kimminich, Heinrich von Lersner & Peter-Christoph Storm, eds) (Erich Schmidt, 1987). 3 For the reasons explained in footnote 1 to Chapter 1, “U.S. Law as Foreign Law,” we will refer to the United States as such or as the “U.S.” throughout, and not to “America.” The reasons are provided in that footnote to Chapter 1.

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Chapter 14 United States’ Environmental Law as Foreign Law the perspective of litigation.4 The laissez-faire attitude in U.S. culture is not limited to the economic relationship between the state to the private sector. Compared to civil law cultures, that attitude lends itself also to things like correcting a problem after the fact rather than planning before the fact. Even if it is true that when legal practice is analyzed empirically, it turns out that a judge does not ultimately resolve many of the disputes, the question of “what happens if this goes to court?” and the threat of “I’ll see you in court!” are common in the culture. By comparison, the perception from inside civil law culture is that “environmental” issues in civil law cultures are more often discussed as being resolved through planning and permitting before the fact and thus are often just a subpart of administrative law, not a category of their own.5

1. The Spirit of Litigation Viewed from the Spirit of Legislation Litigation, or at least the threat of litigation, is so fundamental to the spirit of U.S. law,6 including in the area of environmental law, that a popular reference book, Environmental Law in a Nutshell, begins with the sentence “Environmental litigation often involves disputes with government agencies rather than between private parties.”7 A U.S. lawyer or student reading that book would likely focus upon the parties named—government agencies—as being the subject of the sentence, but one must also take note of the assumption that environmental “law” is introduced as environmental litigation. Taken out of context, of course the sentence is true, but when the sentence is placed into context as the opening of the book, then a reader must ask why the authors begin by talking about any litigation at all, rather than administrative law or the permitting process, or even constitutional powers or statutory norms,8 as a civil law lawyer might expect, or even about the permitting process, which is where many lawyers enter environmental law, preceding much of the litigation. 1155 The answer to this question seems to lie not so much in practices as it does in attitude or what Harvard Law School Dean Roscoe Pound called the “spirit” of the law.9 This spirit or attitude taken by U.S. legal culture toward litigation consequently colors the perception of environmental law as litigation. In this vein, it has been noted that “It is to civil litigation that Americans frequently turn for redress of social ills; and it is a rightsbased culture that has shaped and is reshaped by the process of litigation.”10 Does this mean that the U.S. culture is, in some measurable way, more litigious generally than other cultures? Not necessarily. As was discussed in Chapter 1, “U.S. Law as Foreign Law,” “litigiousness” is a very difficult concept to measure, and even if measured, the statistics alone might not answer the question that is really being asked, which is whether the emphasis on litigation exceeds the expectations from within that culture, not what other cultures expect of their own legal system. That said, even within the practice of law, the threat of litigation guides the transaction lawyer and the permit applicant, even if they 1154

4 Rechtsstreit

/ contentieux / pleito / contenzioso. Michael Cronin, Eco-Translation: Translation and Ecology in the Age of the Anthropocene. (Routledge, 2017). 6 See Litigation section in Chapter 1, “U.S. Law as Foreign Law”. 7 Daniel A. Farber, Environmental Law in a Nutshell 1 (10th ed.) (West Academic Publishing, 2019). 8 Ralf Michaels, Law as the Study of Norms—Foundational Subjects and Interdisciplinarity in Germany and the United States, Verfassungsblog On Matters Constitutional 19 February 2014, https://verfas sungsblog.de/law-as-the-study-of-norms-foundational-subjects-and-interdisciplinarity-in-germany-and-t he-united-states-2/ (accessed April 9, 2020). 9 Roscoe Pound, The Spirit of the Common Law (Marshall Jones Co., 1921). 10 Stephen N. Subrin and Margaret Y.K. Woo, Litigating in America: Civil Procedure in Context 7 (Aspen Publishers, 2006). 5 See

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I. Introduction: How Is Environmental Law an “American Thing”? rarely go to litigation. Similarly, the U.S. Federal Rules of Civil Procedure Advisory Notes tell the lawyer that when interpreting the meaning of the rules, the lawyer should be guided by the idea that the rules are written for practice before a jury, even when a jury is not present in the case. Statistics show that juries are present only in a small minority of cases, but the guiding principle remains. And so it might well be that the reputation of environmental law as an “American thing,” is due to a perception about litigation, but the litigiousness perception is based not on empirical evidence, but upon the attitude of practice that even when one prepares a permit application one keeps the idea in mind, “what happens if this goes to litigation?” By comparison, using Germany as an example of a civil law perspective, one finds 1156 that many books begin with a type of disclaimer in which the authors nearly apologize to the reader for the fact that “there is no German Environmental Code.”11 Having said that first, the authors nevertheless then go on to discuss all the public law statutes that do exist regarding air, water, waste and other environmental matters. Thus, one sees that statutory law exists and addresses the issues, but it is regarded as lacking because it has not been codified into one book, such as a Gesetzbuch in Germany. What are we losing by not having all these norms in one code? It certainly does not mean there are no environmental statutes, nor that the norms found in the legislation are any less valid because they are not in a code. It also does not mean that the state will not enforce them. The non-existent code is not a legal distinction, but a cultural assumption. One can find counter examples to that cultural assumption in areas of the law that are even more common than environmental law. For example, in Germany the “legally approved factual flexibility of relationships has, among other things, had the consequence that many contracts which are of central commercial importance receive no mention in the law of obligations of the Civil Code. Examples are leasing, factoring, and franchising agreements.”12 As mentioned above, it is important for lawyers from a civil law culture to consider 1157 the spirit of the common law based upon its history in litigation. The spirit of litigation begins to manifest itself when one compares the way in which environmental law is taught in various law countries. In the common law U.S., for example, although there are state and federal environmental statutes, regulations and permits, environmental law is still taught through the case method, which consequently characterizes environmental law as dispute resolved through litigation. In addition, as compared to civil law, the historical English attitude toward the law, which has clearly been transferred to the U.S. through common law norms and practices, is more one of personal independence and laissez-faire civic behavior. This attitude may have changed over the years, but the consequence of the historical attitude in the common law is still present. As a result, although practicing environmental lawyers spend most of their time counselling clients on compliance and permit applications in the administrative system before building a source, emitting to the air or discharging to the water, the foundation of environmental law is still often taught through dispute resolution in the courts, after the source is operating, emitting to the air and discharging to the water. By comparison, in the past, France environmental litigation represented only a small 1158 part of legal disputes in general, with the disputes being between private parties in the majority of the cases, without the state taking the public’s position to engage in public law litigation. More recently, the increase in litigation has meant that the French justice department has been facing criticism on time-consuming environmental trial procedure 11 12

See e.g., Michael Kloepfer, Umweltrecht (3d ed.) (Beck, 2004). Gerhard Robbers, An Introduction to German Law 162 (5th ed.) (Nomos, 2012).

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Chapter 14 United States’ Environmental Law as Foreign Law and a lack of appropriate reparation and compensational measures. The government is now undergoing reforms that will expand the judicial organization to three jurisdictional levels including expert judges for environmental issues.13 One might expect that with a dedicated environmental court, there will be more litigation recognized as “environmental.” It remains to be seen whether this phenomenon will be more a matter of enabling and encouraging additional litigation where none had before existed, or whether it will be a matter of re-labelling litigation that previously was not called “environmental,” but focus on the courts means a growing focus on litigation, whatever the label given. 1159 If one then compares something like the German university law curriculum, one finds environmental law taught not as dispute resolution, but as a part of administrative law. As a consequence of seeing environmental law through public law dispute resolution, the U.S. needs far more state-employed lawyers to counsel administrative practices and to litigate disputes. These lawyers work directly for the state as trial lawyers who prosecute its cases on behalf of the state, whereas in Germany, municipal subdivisions like cities might have only one environmental lawyer, and his or her job is more legal analysis, policy and planning. In Germany, if a municipal subdivision does take a legal action, it is likely to hire private outside legal counsel to do the work. In short, where environmental law in the U.S. is taught as dispute resolution and practiced largely as direct state enforcement, using its own lawyers to counsel the administrative practices and try cases, environmental law in Germany is taught as administrative law and practiced as such, with the fallback position that if the state does need to litigate, it hires legal counsel from the outside.

2. Is Environmental Law a Matter of Public Law or Private Law? 1160

A further insight into the status of environmental law in U.S. legal culture stems from the way in which the U.S. divides conceptual areas of the law. U.S. legal education and practice do not divide discussions of substantive law into private law and public law and might well write about public and private law issues in the same paragraph,14 or comfortably insert questions of constitutionality and states’ rights into the discussion of a private dispute.15 The litigation of which the U.S. lawyer speaks in environmental law is typified by public state action against private parties for violation of public environmental statutes, regulations or permits. Statutory law sources that enable the state to address problems through public law that were previously addressed through private law are said to create or recognize the “police powers” of the state. When the police powers are exercised in public law, the legal tools that address the problems carry the moniker “environmental” in their causes of action or sources of law, and primarily seek to protect or improve the public interests of general health or the quality of the environment. In addition, one often hears about an attitude of individualism or independence from the state, as expressed by certain social groups and political factions. As a result, when compared to many civil law countries, the environmental law culture in the U.S. may speak more often about dispute resolution and litigation. Beyond how people inside and outside the legal community talk about the law, there is the statistical reality of its practices. Planning and permitting play a big role in environmental law in the U.S., even if a measure of 13 une nouvelle justice pour l’environnement, Ministere de la Justice, http://www.justice.gouv.fr/publi cations-10047/rapports-thematiques-10049/une-nouvelle-justice-pour-lenvironnement-32905.html. 14 See Keith E. Wilder, The “Public Business” Conundrum, Vol. 3, Kölner Schrift zum Wirtschaftsrecht 232–235 (Apr., 2012). 15 See Robert Barker, Constitutional Comparisons between the Law of the U.S.A. and Costa Rica, 27 Latin American Law Review 234 (1992).

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I. Introduction: How Is Environmental Law an “American Thing”? litigation coupled with the general legal culture’s spirit of dispute resolution result in the reputation of litigiousness.16 But when conceptualizing U.S. environmental law, it is important to remember that 1161 before there were such things as police power exercise through explicit environmental statutes and regulations, the common law provided remedies through such things as actions for trespass17 and actions for nuisance.18 These are characterized as common law remedies because they are remedies for which there has not been created a statute, but rather a body of binding case decisions.19 The law of nuisance provides perhaps the best conceptual bridge between private law and public law. Causes of action for both private nuisance and public nuisance were possible, and are some of the oldest private causes of action in common law. A plaintiff could bring a claim for private nuisance if the plaintiff had an interest in property or land and suffered substantial damage due to someone interfering with the plaintiff ’s reasonable use and enjoyment of his or her own land or property. The relief requested in a private nuisance action would benefit the plaintiff, not the public. Like private nuisance, public nuisance was a tort, but it was also a crime. Public nui- 1162 sance actions were brought by a group of plaintiffs or a class of plaintiffs, and they needed to have proven that the defendant’s behavior resulted in a loss to these plaintiffs beyond what is suffered by the rest of the public. Moreover, in public nuisance actions, the plaintiff was not required to have an interest in the land or property and in fact, the suit might not even concern land or property. The relief requested in a public nuisance actions must have benefitted the public. Nuisance actions are still possible today,20 even though there are many public law environmental statutes. While environmental statutes often incorporate the normative concept of public nuisance in the United Kingdom (U.K.)21 and the U.S., compared to private actions in common law, the public law statutes use a burden of proof that is much easier to meet. Those actions that remain in private tort law tend to resist being expressed in statute and are often still based on case

16 Using Pennsylvania as just one state sample, for instance, one finds that in 2018, in one regional state office of environmental protection, the air quality program alone took 328 actions including permit reviews, plan approvals, general permit authorizations and requests for determination. Of those actions, fewer than two percent were challenged to the administrative tribunal and none proceeded to final adjudication by the tribunal. 17 In the infamous case of the U.S. E.P.A. and California Air Resources v. Volkswagen, Case No: MDL No. 2672 CRB (JSC) (2016), the E.P.A. and California, in addition to statutory violations, alleged that Volkswagen had created a common law nuisance and Volkswagen has admitted to the nuisance in the Consent Decree that partially settles the case. 18 Klage auf Unterlassung von Belästigung / action en responsabilité civile délictuelle pour nuisance / demanda para detener molestias / azione inibitoria di molestie o turbative in generale. 19 The best place to find an explanation of tort law, including the law of nuisance and toxic torts, is the American Law Institute, Restatement (Third) of Torts (2011). Restatements are the closest functional equivalent that U.S. legal culture has to the commentaries in civil law countries, such as Palandt in Germany or the annotations published along with the French Code civil or such commentaries of the Italian Codice civile as Scialoja-Branca or Schlesinger-Busnelli in Italy. Restatements exist in many areas of the law, and are authored by the American Law Institute, which is itself comprised of law professors, judges and lawyers who undertake to summarize and comment upon areas of the law in an authoritative manner. While the Restatements are not binding, lawyers often quote them in briefs and judges often quote them in binding case opinions. There is to date no Restatement of environmental law. See Dan Tarlock, Why There Should Be No Restatement of Environmental Law, 79 Brooklyn L. Rev. 663 (2014). 20 See Bell v. Cheswick Generating Station, 734 F. 3d 188 (3d Cir. 2013), 903 F. Supp. 2d 314 (W.D. Pa. 2012). 21 See e.g., 1990 Environmental Protection Act. Part III (U.K.).

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Chapter 14 United States’ Environmental Law as Foreign Law decisions in common law. A representative example is toxic tort litigation,22 which tends to be a case-based area of norms, even though it is somewhat technical. 1163 The introduction of public environmental law statutes did not halt the use of private litigation as a tool to bring relief to individual plaintiffs. In the 1970 New York state case of Boomer v. Atlantic Cement Company, the court reminded us however, that private law will not solve some problems, and that public law must do so. In Boomer, the judge wrote from the position that although earlier, one would have expected to solve an air pollution dispute as a private problem, it was now recognized as a public problem to be solved by public law. The judge in the Boomer opinion reminded the reader that private resolution of an air pollution dispute fails, and says therefore that the problem must be pursued as one of public law and government enforcement.23 Writing for the court, Judge Bergan said: It seems apparent that the amelioration of air pollution will depend on technical research in great depth; on a carefully balanced consideration of the economic impact of close regulation; and of the actual effect on public health. It is likely to require massive public expenditure and to demand more than any local community can accomplish and to depend on regional and interstate controls. A court should not try to do this on its own as a by-product of private litigation and it seems manifest that the judicial establishment is neither equipped in the limited nature of any judgment it can pronounce nor prepared to lay down and implement an effective policy for the elimination of air pollution. This is an area beyond the circumference of one private lawsuit. It is a direct responsibility for government and should not thus be undertaken as an incident to solving a dispute between property owners and a single cement plant . . ..24

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Most recently, it seems that we have come full circle from private to public and now in some ways, back to private. One can witness that in the U.S. and other countries, citizens are dissatisfied with state action or perhaps more accurately characterized, state inaction, especially on the issue of climate change. Therefore, they are again taking private actions. Some of the private actions follow the traditional pattern of suing the entity identified as causing their harm, as did the plaintiffs who sued Boomer cement all those years ago. But others are instead taking actions against the state for its failure to exercise public trusteeship or police powers, or both, to stop the sources of harm.25

22 Rechtsstreit wegen Schäden durch toxische Emissionen / contentieux des dommages causés par des émissions toxiques / demanda para detener actividades que producen emisiones tóxicas / contenzioso relativo a illeciti nei quali il danno è causato dall’esposizione a sostanze tossiche. 23 Consequently, when the state does decide to take action, the violations are most often the more serious ones, and the state will feel that its legal position must reflect the severity of the situation. This helps to explain the penalty that the U.S. E.P.A. sought in the 2016 litigation against Volkswagen. The German media seemed to believe that as a foreign corporation, Volkswagen was being penalized outside the normal realm of penalties. That suspicion might have made sense in a civil law planning-and-administration legal culture as is Germany, but in a litigation legal culture like the U.S., the penalty sought was within litigation standards for E.P.A. action, such as the U.S. E.P.A. and California Air Resources v. Volkswagen, Case No: MDL No. 2672 CRB (JSC) (2016). Further, the fact that the U.S. does begin with expecting individuals to sort out wrongs before the state gets involved, means that in addition to the E.P.A. action against Volkswagen, defrauded car owners took a private, collective “class action” against Volkswagen. 24 Boomer v. Atlantic Cement Company, 26 N.Y. 2d 219, 223 (N.Y. 1970); see also Sullivan v. Jones & Laughlin Steel Co., 57 A. 1065 (Pa. 1904). 25 See e.g., on climate change issues alone, Inuit Circumpolar Conference Human Rights Commission Petition To The Inter-American Commission on Human Rights Seeking Relief From Violations Resulting from Global Warming Caused By Acts and Omissions of the United States (2005), Sinnock et al. v. State of Alaska, et al., S17297 (Alaska, 2018) and most recently, Juliana, et al. v. United States of America, et al.,18–36082 (9th Cir., 2020). The Columbia Law School Sabin Center for Climate Change Law tracks U.S. climate change litigation, including against government and state entities, at U.S. Climate Change Litigation, http://climatecasechart.com/us-climate-change-litigation/.

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II. Jurisdictional Differences 3. Organizing Environmental Law Statutes A final point should be made in this introduction concerning the use of language; 1165 specifically the word “code.” U.S. legal culture does not use the term “code” in the way that lawyers from civil law cultures might expect when speaking English and referring to statutory law in civil law jurisdictions. First, in the U.S. the word may be used when discussing model “codes” like that of the Model Rules of Professional Conduct26 or the Uniform Commercial Code (U.C.C.)27 but these function mostly only as models, since each state adopts different versions of the U.C.C. through its own statutory law. Second, in the U.S., federal statutory law is organized into one large body that is entitled the “U.S. Code.” The individual topic areas within the U.S. Code, which a civil practitioner might expect to label as “codes,” are instead labelled “titles” within the U.S. Code. For example, many of the statutes that one would call “environmental” in the U.S. federal system are found together in the U.S. Code under Title 42, “The Public Health and Welfare.” Third, the U.S. Code should not be confused with the Code of Federal Regulations, which is the body of administrative regulations of the U.S. federal government, but also uses the word “code” in its title. And finally, to give just one state example, many of the state environmental statutes in Pennsylvania are found in Title 35 of the Pennsylvania Consolidated Statutes, entitled “Health and Safety,” reserving the use of the word “code” for the state administrative regulations (The Pennsylvania Code), in which most environmental regulations are found in Title 25, entitled “Environment.” Nevertheless, there is an expectation by practicing lawyers and citizens alike in the 1166 common law culture of the U.S., just as one would find in civil law cultures, that law be organized in such a way as to be knowable and researchable. The spirit that leads German environmental lawyers to apologize for the fact that an Environmental Legal Code28 does not yet exist in Germany, is the same spirit that leads U.S. lawyers to complain that even for common law understanding, in which most statutes are not organized into codes, environmental law is especially multi-faceted, with norms and procedures scattered among various statutes, regulations and binding case decisions, many of which do not include the word “environment” and could be labelled as coming from contract, property or even the law of business organizations. With the above distinctions in mind, the number and type of topics that I have select- 1167 ed in environmental law for this chapter are meant only to be representative of the differences between environmental law as conceptualized and practiced in the U.S., and environmental law as conceptualized and practiced in civil law countries. It is not intended to be a comprehensive study. The order in which the topics is presented, as well as the proportion of space devoted to each topic, are intended to address the needs of civil lawyers. Of course, if one finds that his or her client involved in environmental litigation in the U.S., one would be advised to contact a lawyer licensed to practice in the relevant U.S. state for help and representation on the matter.

II. Jurisdictional Differences One of the things that makes comparative environmental law possible across various 1168 legal cultures is that it is inextricably bound with natural sciences, both basic and ap26 Mustervorschriften für die Berufsausübung / règles de déontologie / reglas de conducto profesional de los abogados / norme deontologiche degli avvocati statunitensi. 27 einheitliches Handelsgesetzbuch der Vereinigten Staaten / code de commerce uniforme des Etats-Unis / código comercial Uniforme / codice commerciale uniforme degli Stati Uniti. 28 Umweltgesetzbuch / code de l’environnement / código ambiental / codice dell’ambiente.

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Chapter 14 United States’ Environmental Law as Foreign Law plied. One might even go so far as to say that environmental law is based upon the descriptions of the world that the natural sciences present and the solutions to the problems that they offer.29 In turn, natural science bases much of its foundation on the orthodox notion that it produces truths regardless of time or place. There are noteworthy critiques of that posturing by natural science, but the orthodoxy continues to function in scientific practice as well as in legal practices that are intertwined with natural science, such as environmental law. What a legal system, as a function of culture, does in response to natural scientific knowledge differs considerably however. One need look no further than the climate crisis to see the same natural science across cultures, but different political wills and therefore different attitudes and practices in making and implementing environmental law.30 In addition, even if the political will in several cultures were the same, legal cultures themselves differ in their ideologies, methods, norms and procedures. Thus, one can say that when we look at environmental law, we are both looking at norms and practices that are steered by natural sciences in varying degrees, as mediated by political will, and we are looking at the capacity and will of the law itself, as a social product of its culture, to receive natural sciences, as mediated through political will. An obvious example would be state action in the face of the climate crisis.

1. Federal or State? Cooperative Federalism Along with the growth of industrialism it became apparent that environmental matters such as air pollution were a public problem in the U.S. Consistent with the fact that the organization of the U.S. federation began with the states, it was local regulation and state law that first addressed the public problem of pollution. When it comes to environmental law practice in the United States, one is therefore immediately confronted with the practical implications of the unique conceptualization of federalism that the U.S. calls “cooperative federalism.”31 With cooperative federalism, there is not vertical hierarchy of the state-federal relationship, but rather a horizontal side-by-side power balance. 1170 In general, the U.S. Constitution creates only a limited catalogue of competencies in the U.S. Congress and leaves many rights and duties with the fifty States that a unitary state like France would centralize. Among the catalogue of limited competencies, of course the notion of “environment” could not have been originally included in the U.S. Constitution because the word was not even talked about in the eighteenth century. To exacerbate the omission of “environment” from the original U.S. Constitution, one would encounter significant difficulties trying to amend the U.S. Constitution to include the word “environment” among federal Congressional competencies. By comparison to other constitutions in the world, the U.S. Constitution is a particularly difficult constitution to amend. Rather than amend the Constitution, the greater tendency would be to advocate that the U.S. Supreme Court, which operates as both the highest court of ap1169

29 See Kirk W. Junker, Can Courts “Force” Technological Discovery to Occur? in Conference Proceedings of the 7th International Symposium on Technology and Society (Institute of Electrical and Electronics Engineers, 1997). 30 See Tsegai Berhane Ghebretekle & Marek Prityi, Interfaces Between Law and Politics, in Environmental Law Across Cultures: Comparisons for Legal Practice 140–56 (Kirk W. Junker, ed.) (Routledge, 2020). 31 The United States has been said to possess “perhaps the most complicated legal structure that has ever been devised and made effective in man’s effort to govern himself. The point of this observation becomes clear when one sees the problems which have arisen in the United States from the complexities of the concurrence of federal and state law, and from the fact that both the United States and the several states possess fully equipped courts systems.” Konrad Zweigert und Hein Kötz, Einführung in der Rechtsvergleichung 249–50 (3d ed.) (C.H. Beck, 1996) (citing Erwin N. Griswold, Law and Lawyers in the United States: The Common Law Under Stress 3 (Stevens and Sons, 1964)).

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II. Jurisdictional Differences peal and the highest U.S. federal constitutional court, to interpret the relatively short and flexible U.S. Constitution to apply to problems concerning the natural environment. If an area of the law is not explicitly named and numbered in the U.S. Constitution (thus called a Congressional “enumerated” power32 or competency), the courts may still find one of the more other clauses of the constitution to “imply” that the U.S. Congress (and therefore, not the states) has the power. Thus, the U.S. Supreme Court has determined that the U.S. Constitution assigns envi- 1171 ronmental regulatory power not to the States, but to the federation through the power to regulate interstate commerce, the power to tax and spend, the power to enter into treaties and the power to regulate the use of public lands. Aside from the legal mechanics of constitutional law, there are several other factors that speak in favor of at least having a national “floor” of environmental standards. First is the simple fact that emissions, degradation and pollution do not recognize state boundaries in air, water and soil. Thus, national standards are consistent with the “interstate” that is operative in the “interstate commerce” reasoning. In addition, national standards function to keep states from racing to the bottom by reducing environmental standards to attract industries from other states. Nevertheless, under the U.S. Constitution, the U.S. Congress may also delegate tasks 1172 to implement law to the States, and that is precisely what it has done when it comes to the environment. First, the U.S. delegates implementation at the federal level to the executive administrative environmental agency, the U.S. Environmental Protection Agency33 (E.P.A.). Through the E.P.A., the federal government may, one enforcement area at a time (air, water, waste, mining, et cetera) additionally delegate law making, compliance and enforcement to the states. After an area of compliance and enforcement is delegated to a state, one says the state has “primacy” in that area. In many cases, the states have the primary enforcement authority of environmental 1173 statutes, even of federal statutes. In an E.P.A. review of the fifty states for enforcement of three main environmental statutes—the Clean Air Act,34 the Clean Water Act,35 and the Resource Conservation and Recovery Act36—the E.P.A. had primacy in only 5 of the 150 possibilities.37 (This chapter will use these three statutes as representative statutes of federal environmental law.) States are the primary agent for compliance and enforcement in the other 145 possibilities. Why is this so? Because the relationship of the states to the central federation in the U.S. is one of cooperative federalism. 1174

Practice Tip In U.S. environmental law, regardless of whether one is working from the perspective of compliance or enforcement, one’s first step should be to determine whether the issue is local, state or federal. Due to the flexible nature of cooperative federalism, the answer as to whether a given area of environmental law is controlled by the state or the federation differs from locality to locality and state to state. 32 in der Verfassung aufgezählte Kompetenz des Kongresses / compétence conferée au Congrès énumérée dans la constitution / los poderes asignados al Congreso por la constitución / poteri enumerati del Congresso [lit.], (poteri conferiti dalla Costituzione degli Stati Uniti al Congresso federale). 33 U.S.-Umweltministerium / ministère de l’environnement des Etats-Unis / agencia de protección del medio ambiente / agenzia statunitense per la protezione dell’ambiente. 34 Bundesgesetz zur Reinhaltung der Luft / loi fédérale sur la qualité de l’air / ley federal de aire limpio / legge federale degli Stati Uniti sulla qualità dell’aria. 35 Bundesgesetz zur Reinhaltung des Wassers / loi fédérale sur la qualité de l’eau / ley federal de agua limpia / legge federale degli Stati Uniti sulla qualità dell’acqua. 36 Bundesgesetz zu umweltschädigenden Stoffen und Abfällen / loi fédérale sur les déchets et substances dangeureuses pour l’environnemnt / ley federal de conservación y recuperación de recursos / legge federale sulla conservazione e il recupero di risorse [lit.]. 37 See U.S. E.P.A. State Review Framework for Compliance and Enforcement Performance, E.P.A., https:// www.epa.gov/compliance/state-review-framework-compliance-and-enforcement-performance.

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Chapter 14 United States’ Environmental Law as Foreign Law While the network of intertwined sources of environmental law is complicated, understanding U.S. environmental law is made even more complicated by the nature of U.S. federalism, which I refer to as “horizontal” federalism, compared to the “vertical” or “integrated” federalism of Austria or Germany. The balance of competencies between the U.S. federation on the one hand, and the fifty states on the other hand, is more like the balance of competencies between the European Union and its member states. This form of horizontal federalism in the U.S. is officially known as “cooperative federalism,” and it is acutely expressed in the area of environmental law. A discussion of U.S. environmental federalism is in the following section. 1176 In the field of environmental law, the notion of cooperative federalism means that while courts have interpreted the U.S. Constitution to give competency in environmental matters to the federal government largely through the commerce clause and federal lands, in practice, a domestic or foreign citizen is far more often going to hear from state government and local government, not the federal government if an environmental problem occurs. In fact, the federal government’s Environmental Protection Agency (E.P.A.) has too few persons in the field to inspect pollution sites and enforce the law. Instead, the states do most of this work under delegated authority38 for implementation through such legal instruments as the state implementation plans (S.I.P.)39 in the field of air pollution, submitted by the states to the federal government for agreement and approval. 1177 As an independent executive agency, the U.S. E.P.A. has the authority to make federal administrative regulations, adjudicate federal administrative matters before it and execute the federal regulations and associated federal statutes.40 Each state has an administrative body to achieve all the same functions, such as the Department of Environmental Protection41 in Pennsylvania.42 Because a citizen is most likely to encounter compliance and enforcement of environmental matters in the U.S. from the states and local governments, and not the federal government, this chapter must discuss state compliance and enforcement in order to be practically helpful. This chapter features only one state—Pennsylvania—as an example state, but similar institutions and sources of law can be found in all fifty states. However, under cooperative federalism, although a citizen might first be contacted by one of the States, compliance and enforcement can also extend to the federation as well, so the federation’s institutions such as the U.S. E.P.A. and federal sources of law must also be discussed. 1178 In any given environmental problem in the U.S. in which a civil lawyer is consulted, he or she will always need to be aware of the federal-state relation, as it exists with the particular state in which the problem occurs. Furthermore, just as the U.S. Congress may delegate environmental implementation authority to the states, the states may further delegate implementation authority to governmental subdivisions within the state. For example, Pennsylvania has delegated the state powers of compliance and enforcement in matters of air pollution to the counties43 in which its two largest cities—Pitts1175

übertragene Kompetenz / délégation d’autorité / delegación de autoridad / delega di potere. Umsetzungsplan eines Bundesstaats / plan d’intervention des Etats fédérés / plan de implementación estatal / progetto di implementazione dello Stato federale. 40 See U.S. Environmental Protection Agency, https://www3.epa.gov/. 41 Amt für Umweltschutz / office pour la protection de l’environnement / departamento de protección ambiental / dipartimento per la protezione dell’ambiente [lit.]. 42 See Department of Environmental Protection, http://www.dep.pa.gov/Pages/default.aspx. 43 Landkreis / comté / condado / contea. 38

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II. Jurisdictional Differences burgh44 and Philadelphia—are located. Not all states delegate competencies to counties or parishes, and within states that do delegate competencies, they do not delegate competencies to all counties, as in the case of Pennsylvania. Therefore, if one is presented with a client’s problem, one must examine that very specific problem to determine whether the competency for law-making or law-enforcing lies with the federal, state or local government. 1179

Example One can consider the cooperative federalism process in the area of air pollution, for example. States are authorized by the federal government to legislate, enforce and adjudicate in matters of air pollution, but may only do so if they have submitted a S.I.P. in advance and demonstrate to the satisfaction of the federal government that the S.I.P. is being followed.45 In Title 40, Part 52 of the Code of Federal Regulations (C.F.R.),46 the E.P.A. identifies the S.I.P. provision that it has approved for each state. The full S.I.P. that states must file with the federation, according to the federal Clean Air Act, in order to keep primary authority over environmental law in the respective state are however not compiled or easy to find in any one place. When a state has submitted a S.I.P. to the E.P.A., and the E.P.A. has approved it, a private party’s legal obligations are to comply with the state S.I.P., which includes state statutes, regulations and administrative decisions. The S.I.P. is however the floor, not the ceiling. States can also be more stringent and regulate things with no federal antecedent. Therefore, industries sometimes go directly to the state legislature to request changes to requirements, but could also simply request that a S.I.P. be revised.

After obtaining primacy, a state program most often takes compliance and enforce- 1180 ment actions on its own. But sometimes a state will work together in a collective statefederal compliance and enforcement action. A third, and less commonly-used possibility takes place when the U.S. E.P.A. feels that a state is not enforcing the law sufficiently in a particular case. Then the E.P.A. may exercise its power to “overfile.” Overfiling is the process through which the E.P.A. uses its authority to take legal action for additional penalties when the state has already taken an enforcement action, but the E.P.A. feels that the state should have demanded a stronger penalty. So for example it would be possible that if a foreign manufacturer located in the U.S. was polluting the air, it would find itself first in contact with the environmental enforcement agency of the state where the pollution is occurring. But in addition, it would be possible that if the federal government felt the state was not enforcing the law sufficiently, that same manufacturer could find itself facing penalties for air pollution violations from the federal government through the overfiling procedure. Additional actions in which a polluter might be subjected to enforcement from both the state and federal authorities occur when an environmental problem extends to many states and the E.P.A. functions to harmonize the enforcement or when the problem originated from outside the U.S., as in the infamous case of U.S. v. Volkswagen (2016).47 44 The City of Pittsburgh lies in the administrative political subdivision known as “Allegheny County,” for example. While it is most often the case that counties and parishes are only administrative units of one of the fifty states, they often do enjoy making and enforcing administrative regulations. To see the powers that Allegheny County exercises, as an example see Health Department, Allegheny County, http://www. achd.net/regs.html. The choice to include Allegheny County is not arbitrary. It is the site of the largest coke-making facility in the U.S., which is an exceptionally large source of air pollution. In 2019, the Allegheny County Health Department settled on going violations with the coke plant for $2.7 million plus $200 million in improvement to the facility toward bringing it into compliance with air quality regulations and statutes. State Impact Pennsylvania, https://stateimpact.npr.org/pennsylvania/2019/06/28/us-steel -allegheny-county-have-a-draft-agreement-on-pollution-violations/. 45 For a catalogue of state implementation plans, see United States Environmental Protection Agency, https://www.epa.gov/air-quality-implementation-plans/sip-status-reports. 46 Sammlung für Bundesverordnungen / code des règlements fédéraux / código de regulaciones federales / codice dei regolamenti federali. 47 U.S. E.P.A. and California Air Resources v. Volkswagen, Case No: MDL No. 2672 CRB (J.S.C., 2016). The case was partially settled through separate Consent Decrees for 2.0 and 3.0 liter engines. A copy of the

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In looking for uniformity in the federal environmental regime, one should be aware that some states have environmental problems that not all states have, such as pollution from mineral extraction. So in those situations, even though only the affected states need state law concerning the issue, there may be federal authority on the issue that has been delegated to states, such as with coal extraction. It is also true; however, that some state environmental laws cover areas in which there is no equivalent federal law.

1182 Example In 1945, the Pennsylvania legislature, known as its “General Assembly,”48 enacted the Pennsylvania Surface Mining Conservation and Reclamation Act, found now in Pennsylvania law at 52 P. S. §§ 1396.1— 1396.31. In 1977, the U.S. Congress enacted the federal Surface Mining and Reclamation Act,49 30 U.S.C.A. § 120 et seq. In order to obtain primacy in the regulation of surface mining, Pennsylvania thereafter amended its statute to be accepted by the U.S. Some federal statutes, like the federal Surface Mining and Reclamation Act, recognize that because of different conditions in different areas, primacy regulation will be different to address local needs, topography, climate et cetera.

In summary, when environmental enforcement action is taken in the U.S., a party should be aware that the enforcement lawyers could be from the state, federal or local government, and from various departments of the government at the same time. Based on internal government policies between the state and federal governments, sometimes the environmental agency lawyer alone will bring the enforcement action, but sometimes bring the action along with the Department of Justice in a federal case or along with the state attorney general’s office in a state case. 1184 And finally, if the federal government is not satisfied with a state’s enforcement of environmental law not just in one case, but continuously in an entire program area, such as air pollution, the federal government has several options. Most often, it will withhold funding from the state in any program in which the federal government provides funding to the state. This withholding need not be environmental funding and in fact, most often is not—it is highway funding. In addition, the federal government may take the step of removing approval of the state’ S.I.P., thus returning jurisdiction to the federal government for compliance and enforcement of the air pollution program in that state. In other areas of pollution control S.I.P. are not used, but instead the states enact a package of statutes and promulgate regulations without a S.I.P. When the federal government does enforce compliance, by rejecting a state’s package of statutes and regulations or revoking a S.I.P. that a state has failed to enforce (neither of which occur very often), the federal authority does so only in one program area at a time, not simultaneously for all fields of environmental protection. Finally, if the federal government is not satisfied with a state’s enforcement of environmental law in an entire program area, it may revoke the primacy for compliance and enforcement that was granted to the state. 1183

1185 Example In 1978, the U.S. E.P.A. determined that the state of Tennessee was unable or unwilling to regulate coal mining, so it revoked the approval for Tennessee’s own program of compliance and enforcement in the area of coal mining. Coal mining did not have a S.I.P., but rather a set of statutes and regulations that were meant to be as strict as or stricter than the federal statutes and regulations. As a result, Tennessee lost federal money to carry out compliance and enforcement and the U.S. E.P.A. took over all roles of compliance

criminal guilty plea can be found at: Plea Agreement, https://www.justice.gov/usao-edmi/page/file/1121 171/download. 48 Generalversammlung [lit.] / assemblée générale [lit.] / asamblea legislativa al nivel estatal / assemblea legislativa dello Stato della Pennsylvania. 49 Gesetz über Tagebau und Rohstoffgewinnung / loi pour le contrôle et la réhabilitation des mines / ley federal sobre la mineriía superficial y recuperación de tierras / legge federale degli Stati Uniti sull’attività mineraria di superficie e sul recupero dei siti minerari.

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II. Jurisdictional Differences and enforcement in the Tennessee coal mining program. One might believe the federal government is reluctant to take over state programs for reasons of public law or politics, but there are also very practical administrative reasons—the federal government does not maintain a sufficient number of staff or offices in any given state to enforce statutes and regulations. So the big step of removing approval of state compliance and enforcement is not a decision that is enthusiastically met by either the state or the federal government when it happens. While clearly anticipated in theory as a legal possibility in cooperative federalism, the Tennessee mining program takeover by the U.S. E.P.A was extremely difficult to carry out in practice.

2. Distinguishing Law50 from Equity51 In English legal history, too many disputes could not be resolved through the formal 1186 legal pleading system of law, nor did the king or his judges have sufficient time to personally hear all the disputes that were occurring. For these reasons, the office of the Chancellor52 was created and the Chancellor was given jurisdiction over matters that did not fit the legal pleading system, known as the writ53 system and were assigned instead to “equity” jurisdiction. That distinction is manifested across a wide spectrum of practices in U.S. courts today. On one end of the spectrum, the pleadings, decision-makers and rooms fully separate law from equity. At the other end of the spectrum, law and equity may appear to be the same except the procedure followed and relief requested. Many environmental laws at both the state and federal level give the government the authority to direct action or abate action by a polluter, similar to private civil remedies in equity. Indeed, the government may even use its statutory authority to require a party to pay money that is termed a “civil penalty,”54 not a “fine.”

3. Civil, Administrative or Criminal? Culturally Dividing the Norms Even with civil penalties, the state is acting to execute the law through its agencies 1187 and so it is acting not in equity, but under its police power through law enforcement when it orders a polluter to stop polluting or orders a polluter to clean water, air or soil that has been polluted. The statutes also give the state the authority to bring actions for civil and criminal penalties. Criminal penalties are rather self-explanatory. Civil penalties are public law penalties, paid to the state, but not classified as being criminal in nature. Civil penalties may be as much as twenty-five thousand dollars per day per offence under the U.S. Clean Air Act, Clean Water Act and Resource Conservation and Recovery Act. In most settlement documents with the E.P.A., as in the Consent Decrees with Volk- 1188 swagen mentioned above, the polluter need not admit the facts necessary for the U.S. to prove criminal intent, nor that the behavior in question broke the law. As a consequence, the U.S. and the polluter can agree on the facts that occurred and agree on a civil penalty to be paid without agreeing that the facts mean there was any intent or that those facts

Recht / droit / derecho / diritto. Recht der Gerechtigkeit / equité / equidad (conjunto de normas creadas por el Court of Chancery) / regole dell “equity” [lit.], laddove il termine inglese “equity” non è traducibile con “equità” ed è privo di un equivalente esatto nei sistemi di civil law, in quanto indica, nel sistema inglese e negli ordinamenti da esso derivati, un insieme di regole di origine giurisprudenziale nate a integrazione del common law in senso stretto e preordinate a mitigarne la rigidità. 52 Justizkanzler [idm.] / chancelier de la justice / el canciller / cancelliere [lit.], nella storia del diritto inglese, indica l’ufficio della Cancelleria, cui era preposto il Chancellor, ufficio che con il tempo divenne un organo giudiziario denominato Court of Chancery, nota per aver creato un corpus di regole integrative e complementari del common law che furono indicate con il termine di “equity”. 53 gerichtliche Anordnung / assignation / orden judicial / ordine giudiziale. 54 Zivilstrafe / amende civile / sanción civil / sanzione civile [lit.]. 50

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Chapter 14 United States’ Environmental Law as Foreign Law constitute a violation of law. States do not necessarily follow that model. Pennsylvania, for example, requires admission of facts and violations of law. 1189 Example If a steel mill is discharging liquid waste into a river at three different locations on a daily basis in violation of its permit or in violation of the regulations under the Clean Water Act, after one month of penalties accruing at 75 thousand dollars per day, legal action could be taken seeking a penalty against the steel mill of 2.25 million dollars. Sometimes litigation has been necessary to determine such sub-issues as whether a continuous violation is one violation or, over a number of samples or days, whether State evidence of twenty-five days in a thirty-day period can imply violation in the other five days too.

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The state or federal authority might also exercise the criminal penalty authority that is usually found in the same environmental statutes for air, water and waste,55 or sometimes found in criminal statutes. Consequently, if criminal penalties are involved, either alone or together with civil penalties or directed action, the internal operating agreement between branches of the same government can allow either the federal or state criminal prosecutor or the federal or state civil environmental lawyer to bring criminal charges. Individuals and artificial persons, such as corporations, may be charged with environmental crimes.

4. When Can Citizens Take Over State Competency? The Citizen Suit When it comes to U.S. federalism and the reception of the natural sciences as mediated through political will, there are indeed a few mechanic’s56 tools in the U.S. environmental toolbox that differ from the tools with which the civil law practitioner may be aware. These tools included the exercise of state power by private citizens known as citizen suit57 provisions. 1192 In the twenty-first century, one often thinks of crimes as a public law matter, prosecuted by the state. However, in the common law, the state’s role has historically not been so wholly discrete from the role of the citizen. The area of law that today’s civil law practitioner would know as the private, non-contract law of obligations would be known to the common law lawyer as the law of “tort.” Tort law was, however, for much of history inextricably connected to criminal law and thus today is not inextricably tied together with contracts as an integrated treatment of the private law of obligations. So much so was this the case that in 1974, Grant Gilmore, who was one of the principal drafters of the Uniform Commercial Code, became notorious among U.S. legal academics for daring to suggest that in fact contracts were inextricably part of torts.58 From this historical development, it is not as difficult therefore to understand the opposite side of the coin in the common law today, where private persons can prosecute crimes. Both in the U.K.59 1191

55 Clean Air Act, 42 U.S.C. § 7413(1); Clean Water Act § 309(c) (33 U.S.C. § 1319(c)); R.C.R.A. § 3008 (e) (42 U.S.C. § 6928(e)). 56 Etymology provides an insight to legal practice. Legal analysis that looks largely at law as tools of practice is mechanical, from μηχανή (mekhane), meaning “device, means.” Mechanical legal analysis most often omits any cultural context and uses law to look at law in a self-referential manner. 57 Bürgerklage / recours ouverts aux citoyens / demanda presentada por un ciudadano / causa intentata dal cittadino (relativa, in genere, all’accertamento di illeciti o reati ambientali). 58 Grant Gilmore, The Death of Contract (The Ohio State University Press, 1974). Given the translationalism method of comparative law in this book, it is more than trivia to note that Gilmore earned his Ph.D. in romance languages and taught French at Yale University, as well as being a Professor of Law. 59 See Prosecution of Offences Act 1985 (c. 23).

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II. Jurisdictional Differences and in the U.S,60 it is permitted and still practiced, albeit infrequently, that private citizens in fact enforce norms of criminal conduct. From this background of private criminal prosecutions, it becomes easier for one to 1193 see the development and context of the citizen suit today, which is far more frequently practiced. When environmental law was developed in the U.S., it was recognized that by allowing the government to take environmental actions on behalf of the public, through the legal relationship of trustee for the citizens, the citizens were nevertheless losing some of their own powers. To ensure that citizens could continue to participate in the legal process, as well as to ensure that the government did in fact exercise the powers granted to it by environmental statutes, many environmental statutes both in state61 and federal62 jurisdictions create what are known as citizen suit provisions. The typical mechanism for a citizen suit provision requires an injured citizen first to write to the appropriate enforcement authority and explain how he, she, or it has been injured, by whom and what law was violated. Then, if the government does not respond, the enforcement powers given to the state revert back to the citizen who can then enforce the state law. As discussed above with the example of climate change litigation, citizens are of course also free to take direct private actions against polluters or take direct actions against their own state for its failure to legislate according to international agreements, for example, without relying upon environmental statute citizen suit provisions. 1194

Practice Tip To learn the information necessary for the basis of a citizen suit, a citizen can use public information about persons, places and facilities found on the federal system at Envirofacts,63 an information website of the U.S. E.P.A., or its Enforcement and Compliance History Online,64 or S.T.O.R.E.T.,65 an E.P.A. database that collects water quality monitoring data from a variety of sources, including state agencies. A citizen can review Discharge Monitoring Reports (D.M.R.s) that are required to be filed from any facility with a National Pollutant Discharge Elimination System (N.P.D.E.S.) Permit, and simply look for exceedances of limits that are reported. Then, if the government takes no action after a period of time set by statute— usually between thirty and ninety days—the citizen may bring the legal action through the authority of the same statute upon which the government typically bases the authority of its own legal actions.

Rather than enforce statutes, regulations or a permit against the polluter, the citizen 1195 may also bring an action against a federal or state agency for its failure to enforce statutes, regulations or permits against the polluter. These types of actions are often brought by citizens when a legislature, through statute, has required an administrative agency to promulgate new regulations in an area of environmental protection, but the agency has failed to do so,66 thereby litigating the issue whether the authority was mandatory or discretionary. Unless otherwise provided by statute, in the U.S. all parties pay their own respective 1196 attorneys’ fees, regardless of who wins the legal action. Through a citizen suit, a citizen 60 Most criminal law in the U.S. is a matter of state jurisdiction, not federal jurisdiction, unless organized crime is prosecuted. (See Chapter 13, “White Collar Crime.”) In twenty-one U.S. states, some form of private criminal prosecution is still possible. In most common law states some form is also still possible, although as time progresses, it is less frequently used. And once again we can also trace a French influence through Norman law to England insofar as the citation directe may still be privately prosecuted in France today. 61 See Pennsylvania’s Clean Streams Law, 35 P.S. §§ 601(e), 691.601(e). 62 See U.S. Clean Water Act, § 505 (33 U.S.C. § 1365); U.S. Clean Air Act § 304 (42 U.S.C. § 7604); U.S. Resource Conservation and Recovery Act § 7002 (42 U.S.C. § 6972). 63 Envirofacts, U.S. E.P.A., www.epa.gov/enviro. 64 Enforcement and Compliance History Online, U.S. E.P.A., www.epa-echo.gov. 65 U.S. E.P.A. Storage and Retrieval of Water-Related Data, U.S. E.P.A., www.epa.gov/storet/. 66 See e.g., Clean Water Act, § 505(d) (33 U.S.C. § 1365); Pennsylvania Clean Streams Law, 35 Pa Stat. §§ 601(c), 691.601(c).

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Chapter 14 United States’ Environmental Law as Foreign Law may not recover money for himself or herself, however, outside of litigation costs and attorneys’ fees. (See Chapter 1, “U.S. Law as Foreign Law,” for more on attorneys’ fees.) Similar to a private criminal prosecution, in a citizen suit, any civil penalty paid by the polluter will go to the government. And a final condition is that those alleged to be in violation of the law must be in current violation—past violations are not actionable by citizens.67

III. Sources of Law 1197

This section on sources of law begins by addressing a civil lawyer’s division of the legal world into public law,68 civil law,69 and criminal law.70 From that perspective, in the world of U.S. environmental law, one is most often working in public law. Although most of the law that is practiced in the U.S. under the banner of “environmental law” involves a private operator as one party and the state’s environmental agent as the other party, there is also a significant role for non-governmental organizations and other third parties, either to bring citizen suits, as described above, or by “intervening” in litigation begun between the state and a private party. In this way, one can see a similarity to German legal culture’s locating environmental law as a subcategory of administrative law.71 As was illustrated by the 1970 Boomer Cement case mentioned earlier, at a certain point in time the state not only established environmental law as a separate body of norms, but also, on behalf of the people, took over the primary role of environmental enforcement. With that background in mind, one may then consider the norms in an informed manner, as found in constitutions, statutes, regulations and binding case decisions.

1. Constitutions As previously mentioned, the U.S. Constitution does not explicitly mention “environment,” but U.S. Courts have decided that the competencies to legislate and enforce in environmental matters are competencies that the U.S. Constitution implies for the federal government through the Commerce Clause (Article 1, § 8), the Property Clause (Article IV, § 3, Clause 2) and the Supremacy Clause (Article VI, Clause 2) of the U.S. Constitution. By comparison to the U.S. Constitution, the legally powerful and independent U.S. states can often more easily amend their constitutions. For example, even though the Pennsylvania Constitution is older than the U.S. Constitution, the Pennsylvania Constitution was amended in the 1971 to include the environment, guaranteeing that the people of Pennsylvania have a right to clean air, pure water, and to the preservation of the natural, scenic, historic and esthetic values of the environment. Pennsylvania's public natural resources are the common property of all the people, including generations yet to come. As trustee of these resources, the Commonwealth shall conserve and maintain them for the benefit of all the people.72 1199 This provision has been ruled by the Pennsylvania Supreme Court73 to be self-executing and therefore not to need legislation in order to give it what European law would call 1198

See Gwaltney v. Chesapeake Bay Foundation, 484 U.S. 49 (1987). öffentliches Recht / droit public / derecho público / diritto pubblico. 69 Zivilrecht / droit civil / derecho civil / diritto civile. 70 Strafrecht / droit penal / derecho penal / diritto penale. 71 In many of the States of Germany, when a law student takes his or her first Staatsexamen, it turns out that Verwaltungsrecht is tested through questions on Umweltrecht. 72 P.a. Const., art. I, § 27. 73 Commonwealth v. National Gettysburg Battlefield Tower, Inc., 454 Pa. 193 (1973). 67

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III. Sources of Law “direct effect.”74 This provision of the Pennsylvania Constitution has at least five separately-identifiable legal functions. First, it provides a catalogue of individual substantive rights concerning Pennsylvania’s natural environment. Second, it is notable that in this catalogue, one finds not only the usual concerns that one might customarily call “environmental”—air, water and natural values, but also, in this constitutional catalogue of environmental rights one finds less-frequently mentioned values of scenic, historic and esthetic.75 Third, this constitutional provision states that the environment is owned by all the people, including future generations of people. Fourth, the provision names the form of the ownership to be “common property.” And fifth, it makes clear that the state functions as the trustee.

2. Statutes When it comes to statutes and regulations, there are of course explicitly “environ- 1200 mental” bodies of law, largely divided by the natural world’s media into programs of regulating air, water and soil. In addition to constitutions, statutes and regulations as sources of U.S. law, as a common law state, the U.S. also uses cases of binding precedent that interpret all other sources of law, federal and state. In practice, the U.S. Supreme Court’s interpretation of the U.S. Constitution is needed so as to imply that the U.S. Congress has competency to legislate in environmental matters has resulted in the U.S. Congress legislating in most, but not all, areas of concern that one might call “environment.” In order to keep this chapter concise and helpful, it will generally follow only three principal U.S. statutes throughout—the Clean Air Act, the Clean Water Act, and the Resource Conservation and Recovery Act In addition, because state law is as important (some would say more important) than federal law on the issues, this chapter also refers to a set of state statutes for one state—Pennsylvania—which are the Pennsylvania Air Pollution Control Act, the Pennsylvania Clean Streams Law, and the Pennsylvania Solid Waste Resource Recovery Development Act. This is only one example, and a lawyer counselling or litigating environmental matters in the U.S. will need to consult the statutes of the particular state in which the problem occurs. The U.S. Congress has delegated to the E.P.A. most of the authority to promulgate administrative regulations, enforce the statutes and regulations, and conduct administrative hearings in which the statutes and regulations are the operative sources of law. Environmental statutes in the U.S. identify the types of parties that are liable for environmental harm, the parties who have authority to take action when environmental harm occurs, establish the norms and standards of environmental practice that cannot be violated as well as the potential administrative penalties, and provide the authority to delegate functions to administrative agencies. The parameters of an area in which the E.P.A. may regulate are determined by the relevant statutes that the U.S. Congress has passed in the area, such as the Clean Air Act, the Clean Water Act or the Resource Conservation and Recovery Act. All federal statutes are found in the United States Code Annotated (U.S.C.A.). The 1201 name “code” should not however be confused with a thematic compilation of all statutory law in a related field. The U.S.C.A. includes all U.S. statutes from every area of the federal law. The volumes are generally thematically organized, but are not so tightly organized and ordered as a German Gesetzbuch (code) would be. The word “Annotated”76 means that after each section of a statute, notes are included in which binding case law unmittelbare Anwendbarkeit / effet direct / aplicación directa / efficacia diretta. See Franklin L. Kury, The Environmental Amendment to the Pennsylvania Constitution: Twenty Years Later and Largely Untested, 1 Vill. Envtl. L.J. 123 (1991). 76 kommentiert / annoté / anotado / annotato. 74

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Chapter 14 United States’ Environmental Law as Foreign Law interprets the statute, as are the Historical and Statutory Notes for help in interpreting the statute. This is the first step for a practicing lawyer to learn how the courts have in fact interpreted the statute in question. Those cases must then be cited in subsequent actions of the same nature in order for a lawyer to have provided all relevant law on the matter to the court. And if this information is not sufficient to give the lawyer a background understanding of how one should interpret the law, one can turn to the U.S. Code Congressional and Administrative News for the original form of the legislation. Finally, one may consult the Congressional Record to see what the actual arguments were on the floor of the House of Representatives77 or the U.S. Senate, when a new statute was being proposed and negotiated for passing into law. Statutory authorization for the Congressional Record is found in Chapter 9 of Title 44 of the United States Code.78 1202 Practice Tip There are commercial on-line services for legal research in the U.S., such as Westlaw, HeinOnline and Lexis. However, since most primary sources of law, as well as legislative histories and Federal Register notices are public documents, one may also consult, free of charge, the U.S. Government Printing Office online79 at www.gpoaccess.gov. For free of charge U.S. legal research generally, see Dittakavi Rao, A Short and Quick Guide to No-Cost and/or Low-Cost Legal Research Using the Internet, Duquesne University Center for Legal Information and Allegheny County Law Library (2015).

3. Regulations 1203

To understand the practices of environmental law in the U.S., one might begin with the most specific and concrete bodies of law that applies to citizens generally—the regulations. The Administrative Procedure Act (A.P.A.),80 a federal statute, requires that when an agency such as the E.P.A. develops a regulation, it must publish two documents in the Federal Register.81 The Federal Register is a daily publication of the U.S. government, found at https://www.federalregister.gov/, which also publishes legal notices, proposed rules and many other documents. First, according to the A.P.A., new regulation proposals must be published and made available for public comment. (Most state systems have a parallel equivalent requirement for state regulations.) An environmental lawyer who is providing counsel for environmental problems in the U.S., even from abroad, can monitor new federal and state regulations on line as they are announced. In addition to the E.P.A., other federal agencies who could propose regulations that do important work in environmental areas such as endangered species protection (U.S. Fish and Wildlife Service)82 in the Department of the Interior,83 or dredge and fill permits (the U.S. Army Corps of Engineers).84 It is through these notices in the Federal Register (or its state equivalent) that environmental lawyers from anywhere in the world can be 77 Abgeordnetenhaus / Chambre des Représentants / Cámara de Representantes / Camera dei Rappresentanti. 78 Comparable to the Bundestagsdrucksachen in Germany; to the dossiers législatifs, l’ensemble des travaux parlementaires in France; or the dossier di documentazione in Italy. 79 Webseite der Bundesdruckerei / site internet du bureau d’impression du gouvernement des Etats-Unis / oficina de publicaciones del gobierno / sito dell’ufficio stampa del governo degli Stati Uniti. 80 Verwaltungsverfahrensgesetz / loi sur la procédure administrative / ley sobre el procedimiento administrativo / legge sulla procedura amministrativa. 81 Bundesregister / registre fédéral, équivalent du JORF français / registro federal / registro federale. 82 Fisch- und Wildtierdienst des Bundes / service de la pêche et de la fauyne sauvage des Etats-Unis / servicio de pesca y fauna silvestre de los Estados Unidos / servizio della pesca e della fauna selvatica degli Stati Uniti. 83 Innenministerium / Ministère de l’Intérieur / Ministro de Interior / Dipartimento degli Interni [lit.], Ministero degli Interni. 84 Ingenieurcorps der amerikanischen Armee / corps des ingénieurs de l’armée des Etats-Unis / cuerpo de ingenieros del ejercito de los Estados Unidos / corpo dei genieri dell’esercito degli Stati Uniti.

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III. Sources of Law on notice that their clients in the U.S. might have new obligations or liabilities coming. The environmental law in the federal system is found in the administrative Code of Federal Regulations, the electronic version of which is available at http://www.ecfr.gov/cgi-b in/ECFR?page=browse. Second, after the publication of the proposed new regulation occurs, the public then 1204 has sixty days to comment in writing on the proposed regulation. In practice, one should not think of the public as only random, individual citizens. Individual citizens do frequently comment on regulations, permits and policy documents, but the “public” often means environmental organizations, non-governmental organizations, industries, trade groups and citizen groups. Whereas individual citizens may not have the time or energy to monitor and comment on proposed new regulations, affected industry groups and organized citizen groups do. All who are aware of the regulatory comment process can make the types of comments that can change regulators’ positions between proposed and final regulations. The chance to comment on new regulations is an extremely important opportunity to maintain the social goals of transparency and accountability in the legal system. After having published proposed regulations, the government must also publish the public’s comments to those proposed regulations and publish the government’s responses to those comments. Only after publication of the proposal, comments, and responses, may the government make new regulations final. Final E.P.A. regulations are found in Title 40, Chapter I of the C.F.R., Section 553.85 The E.P.A. (or any other agency that proposes a regulation) must publish the final 1205 regulation in the Federal Register (or its state equivalent). The E.P.A. regulations alone are more than twenty-five books in their paper form, located in volume 40 of the C.F.R. If a lawyer cannot ascertain the answer to an environmental problem and the final regulations on their face do not provide a clear answer to a lawyer’s environmental law question, the lawyer can return to the Federal Register and examine the explanations for the proposed rule and the responses to the public comments. In addition, one does have access to guidance documents, opinion letters, “frequently asked question” websites and of course, case law. If the public is not satisfied with the government’s reaction to public comments, it may appeal from final rule and regulation-making.86 Pre-enforcement review varies greatly from jurisdiction to jurisdiction, and is generally regarded as being more available in the federal system than in most state systems. The general process that is outlined above for the federal system is in place for the 1206 states as well, although there are large differences between federal administrative law and that among the states. Parallel to the U.S. Federal Register, one finds for example, one can find announcements of proposed legislation, consent decrees of case settlement and administrative actions in the Pennsylvania Bulletin.87 And parallel to the C.F.R., one finds the Pennsylvania Code, containing 246 chapters or “titles” of administrative regulations. Environmental protection is found in Title 2588 of the Pennsylvania Code. The governor of each state is the state’s chief executive, just as the president of the U.S. is the chief executive of the federal system in the U.S. legal structure. Neither the U.S. President nor the governors can legislate or otherwise “make law,” but to enforce legislation, they instead invent tools such as the executive order, presidential memorandum, proclamation, presidential determination, presidential notice and presidential decree. The executive orders of presidents are published in the Federal Register and similar inAdministrative Procedure Act, 5 U.S.C. § 553 (2006). Federal Administrative Procedure Act, 5 U.S.C. §§ 702, 704. 87 Pennsylvania Code and Bulletin, Commonwealth of Pennsylvania, http://www.pacode.com/secur e/data/025/025toc.html. 88 Id. 85 86

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Chapter 14 United States’ Environmental Law as Foreign Law struments from governors can also be found. For example, in Pennsylvania, the executive orders of the governor can be found on line at: http://www.portal.state.pa.us/portal/ server.pt/community/executive_orders/708

4. Binding Decisions of the Courts Even though one can well understand the practical usefulness of courts’ advisory opinions,89 they run against the common law’s spirit of providing a remedy to every wrong, but only to provide remedies when there is an actual wrong. Unlike the referral system made possible by Article 267 of the Treaty on the Functioning of the European Union (T.F.E.U.), many civil court systems, and some common law systems, the federal courts in the U.S. may not provide advisory opinions. In fact, quite the opposite is true. Article III of the U.S. Constitution makes clear that only actual cases or controversies may be brought before U.S. courts. The U.S. Supreme Court, which functions both as the highest court of federal appellate jurisdiction and the U.S. federal Constitutional Court, has interpreted Article III to require that a plaintiff have locus standi (“standing”)90 in order to be able to commence a lawsuit against another juridical person. Applied to environmental law, the Supreme Court created a three-part “test” to determine whether a plaintiff has standing. First the plaintiff must have sustained an injury in fact, which means an invasion of a legally-protected interest which is (a) concrete and particularized, and (b) actual not hypothetical. Second, as with tort law generally, there must be an injury that is fairly traceable to the challenged action of the defendant. Third, it must be likely that a court’s favorable decision is capable of redressing the plaintiff ’s injury.91 Of particular relevance to the interests of readers of this book, one finds that in the case that developed this three-part test, Lujan v. Defenders of Wildlife,92 the plaintiffs alleged that harm to endangered species in a foreign country harmed the plaintiffs, even though the plaintiffs did not introduce any evidence to demonstrate that they planned to visit that foreign country. 1208 Although advisory court opinions cannot be obtained to aid a lawyer with a U.S. federal environmental law problem, the U.S. environmental law system is not without opportunities for advice from the government prior to litigation. Parties may write to the E.P.A. and request not an advisory court opinion, but rather the agency’s view on what the law requires for a particular party. In addition, the E.P.A. and other administrative agencies do publish guidelines and guidance documents, which in a manner, replace advisory opinions from courts. Like most advisory court opinions, the guidance provided in guidelines and guidance documents is not legally binding, but the process forces the E.P.A. to think about the particular application of law to facts and makes the E.P.A. politically susceptible were it not to follow its own guidance. 1209 The E.P.A.’s own guidance is also particularly noteworthy because the U.S. Supreme Court has ruled that the federal courts are required to defer to the E.P.A.’s own interpretation of statutes that it is required to administer in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. (1984)93 and to the E.P.A.’s interpretation of its own administrative regulations in Auer et al. v. Robbins (1997).94 Many appeals have challenged these precedents and if accepted, may enable courts to exercise their own discretion in 1207

Gutachten / avis consultatifs / opiniónes consultivas / pareri consultivi. Klagebefugnis / intérêt à agir / derecho a ejercitar una acción de reclamación de derechos ante un tribunal / legittimazione o interesse a proporre un’azione giudiziaria. 91 Lujan v. Defenders of Wildlife, 505 U.S. 555, 560–61 (1992). 92 Id. 93 467 U.S. 837 (1984). 94 519 U.S. 452 (1997). 89

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III. Sources of Law interpreting statutes and regulations, but no challenge has successfully reversed these case decisions. Most recently, in the U.S. Supreme Court decision of Kisor v. Wilkie (2019),95 the Court again upheld the Auer decision, but limited the types of regulatory interpretations that qualify for deference. The topic of advisory opinions from courts reminds one once again that individual 1210 U.S. states have considerable legal autonomy and authority. The spectrum of state law on advisory opinions runs from a prohibition, such as that of the federal system, to a permission not practiced (Pennsylvania), to permission for the governor to “certify” questions of constitutionality to the state supreme court (Rhode Island), to an absolute requirement that a state supreme court give advisory opinions, often on constitutional questions (Colorado, Florida, Maine, Massachusetts, Michigan, New Hampshire, Rhode Island and South Dakota).96 Checklist: Finding Agency Guidance97 The U.S. E.P.A. publishes a general collection of federal guidance documents, organized by topic or E.P.A. geographical region at E.P.A. Significant Guidance Documents, http:// www.epa.gov/lawsregs/guidance/index.html. In addition, the E.P.A. publishes special collections of guidance documents, with each site being dedicated to a particular issue, for example: Federal: Air New Source Review Policy and Guidance Database, https://www.epa.gov/nsr/newsource-review-policy-and-guidance-document-index E.P.A. Office of Air and Radiation Policy and Guidance Information https://www .epa.gov/technical-air-pollution-resources Water Office of Water Laws, Policy, Guidance and Legislation, https://www.epa.gov/lawsregulations/significant-guidance-documents-water Waste Superfund Policies and Guidance, http://www.epa.gov/superfund/policy/guidance. htm R.C.R.A. Online, https://rcrapublic.epa.gov/rcraonline/ State: A listing of state administrative codes is available from the Law Librarian’s Society of Washington D.C. site at www.lsdc.org. Example from just one state: Pennsylvania Technical Guidance Documents for environmental issues can be found at http://www.elibrary.dep.state.pa.us/dsweb/View/Collectio n-10327 The Administrative Codes and Registers site, http://www.administrativerules.org provides links to state administrative codes, bulletins, manuals et cetera. The site also provides links to various Rules Review links under the tab “Resources.” For example, one can find the Independent Regulatory Review Commission for Pennsylvania under http:/ /www.irrc.state.pa.us/. No. 18–15, 588 U.S. ___ (2019). Mel A. Topf, A Doubtful and Perilous Experiment: Advisory Opinions, State Constitutions, and Judicial Supremacy (Oxford University Press, 2011). 97 See Dittakavi Rao, A Short and Quick Guide to No-Cost and/or Low-Cost Legal Research Using the Internet (Duquesne University Center for Legal Information and Allegheny County Law Library, 2015). 95

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Chapter 14 United States’ Environmental Law as Foreign Law Checklist: Live Guidance Federal and state authorities offer telephone hotlines from which one can pose specific questions without identifying one’s client by name and get helpful, though non-legallybinding responses. In the federal system of the U.S. E.P.A., one can telephone: Air Acid Rain Hotline +1 202 343 9620 Water Safe Drinking Water Hotline +1 800 426 4791 Wetlands Help Hotline +1 832 7828 Waste Toxic Substances Control Act (T.S.C.A.) Hotline +1 202 554 1404 R.C.R.A., Superfund and Emergency Planning and Community Right-to-Know Act (E.P.C.R.A.), +1 800 424 9346 In just one state system as an example—Pennsylvania—one can telephone: Air Radon Hotline: +1 800–237–2366. Water The Safe Drinking Water Hotline +1 800–426–4791. Waste Recycling Hotline: +1–800–346–4242.

IV. Compliance and Enforcement Tools of the State 1211

“Compliance”98 and “enforcement”99 are often said together and indeed they are two sides of one coin. There are important differences however. Typically by “compliance” one means that a juridical person—corporate or natural—is aware of his, her or its duties under the law and behaves in a way that is consistent with the law, whereas the word “enforcement” means the juridical or natural person cannot or will not comply with the law, so the state must force the person to comply with the law, using tools from civil, administrative or even criminal law. Lawyers worldwide practice the dual roles of helping clients to understand the law and thereby comply with the law through regulation or permits, and helping clients work through dispute when parties disagree. One could begin a discussion with either compliance or enforcement, depending upon one’s priorities. We assume that readers of this book will be trying to help clients with contacts to the U.S. to comply with law in the U.S., rather than taking the state’s role to enforce environmental law. Most areas of environmental compliance are delegated by the federation to the governments100 of states.

Einhaltung / conformité / cumplimiento / conformità, ottemperanza. Vollzug / exécution / ejecución / esecuzione. 100 When the word “government” is used in the U.S., it does not mean what “Regierung” typically means in Germany, “gouvernement” means in French or “governo” means in Italian, nor even what “government” means in the U.K. For usage in the U.S., due in part to the fifty states being called “states,” the federation is usually called the “U.S. Government,” in reference to all parts of federal administration, not just the political party in control of the legislature, as it would be in the U.K. Were people in the U.S. to call that same entity “the state,” it would confuse the listener as to whether the speaker meant the U.S., or one of the fifty states. 98

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IV. Compliance and Enforcement Tools of the State 1. Compliance One might expect to read a chapter on environmental law talking first about princi- 1212 ples and then perhaps reading about an incorporation of those principles into sources of law from top to bottom; that is, from constitution to permit application. However, because this is a practitioner’s reference book, and because the common law is practiceoriented in all cases anyway, one should feature the permit101 as the source of legal requirements that is most likely to be a civil lawyer’s first contact point with environmental law. Permits are not a source of law per se, but are authorized and required by law, and form the basis for so much of environmental compliance and litigation. Although the theory of environmental law might begin with constitutional authorization, from which legislatures make laws and delegate duties to agencies, which in turn make regulations and issue permits in practice, a citizen or lawyer is likely to encounter environmental law in the reverse order. Whether a permit is required or even available for activity that may degrade public air, public water or public soil, can only be known by consulting state statutes, or, if a state does not have primacy in that area, then consulting the federal counterpart such as the Clean Air Act, Clean Water Act or Resource Conservation and Recovery Act. It is often the case that a team that couples lawyers with chemists, geologists, hydrogeologists, or engineers is necessary to make that determination.102 Regardless of whether an activity is planned or already in practice, if it requires a per- 1213 mit, the citizen will be required to follow the permit’s requirements, as soon as a permit application is approved by the state. Briefly stated, in theory, one might discuss sources of law from constitution to statute to regulation to permit, but a practitioner will first encounter the permit then the regulations then the statute and only on rare occasions, a constitution. In practice, permits are the most common regulatory tool for environmental agencies in the U.S. The permit thus serves well as a bridge topic between the above section on sources of law and the following section on compliance and enforcement. If it is determined that law does require a permit for a proposed activity, the owner or 1214 operator of the activity, depending on the language of the statute, must make the appropriate application, usually found on the internet, based upon regulations and statutes. As with proposed new regulations, new permit applications are subject to a process of review designed to be transparent to the citizens. A party must submit the application for review to the environmental agency and as with proposed regulations, the public may comment on the permit application. After a legally pre-determined period of time for reviewing the permit, the agency must either grant the permit or deny the permit. On the one hand, if the agency grants the permit, it is often the case that members of the public, including other industries or citizen groups, will file an administrative appeal, alleging the agency has not conducted its permit review according to the law, or raising other objections. In practice, very few decisions, including the granting or denying of permit applications, are challenged by anyone, including third parties and applicants. If a party does file an administrative appeal, the agency may notify the public and permittee that there will be a hearing on the permit application review, and since the agency believes its action was proper, the agency may notify the permittee that it will be the job of the permittee to defend the permit at the hearing. On the other hand, if the agency 101 Genehmigungen

/ permis / permisos / permessi. worthwhile research exercise yet to be done, would be for someone to construct a catalogue of the activities for which one needs an environmental permit in the U.S. and compare it to a catalogue of the activities for which one needs an environmental permit in one’s own country. The hypothesis to test is whether a common law country, relying more upon litigation than administration and planning, allows more activity to be regulated directly by administrative regulations compared to a civil law country that more often requires planning and permitting with the goal of avoiding litigation. 102 A

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Chapter 14 United States’ Environmental Law as Foreign Law denies the permit, the reverse is likely—the denied applicant will appeal and the agency will defend its denial as having been the correct legal action. 1215 In the permit application and appeal process, the state is very often put in the position not of siding with the public, but rather of defending its own actions as being a proper use of authority and exercise of discretion, thus putting three different interests in the hearing room—the public who does not want the permit to be issued, the permittee who does want the permit to be issued, and the state, who needs to demonstrate that whatever the outcome, it properly did its job in reviewing the permit application for its compliance with administrative regulations, environmental statutes, case law and even the constitution. 1216 When it comes to environmental matters, compliance can require the technical expertise of an engineer, geologist, chemist or other person versed in the natural sciences to work together with a lawyer in order to help a client achieve what the law requires. A phenomenon that has been introduced to aid persons in effecting their desire to comply with complex and technical regulations is the environmental impact assessment (E.I.A.),103 which the U.S. calls an environmental impact “statement” (E.I.S.). Although the U.S. does not explicitly name or enshrine the precautionary principle in the law the way that some other countries do, the notion of the environmental impact assessment puts the precautionary principle in practice. The great legal limitation of the E.I.S. is that the government in the U.S. has imposed the requirement only on itself and its contractors through the National Environmental Policy Act (N.E.P.A.)104—private entities need not file an E.I.S. Furthermore, N.E.P.A. is only enforced on anyone, including one of the fifty states themselves as contractors, if they accept federal funds for projects. Always mindful of cooperative federalism, one should note that some states, such as New York, have their own state statutes on environmental policy. Other states, such as Pennsylvania, do not. 1217 There is an underlying notion that an E.I.S. or E.I.A. protects the environment by forcing a person to consider all environmental impacts before taking action, assuming that without having gone through the exercise of completing an E.I.S. or E.I.A., the person might not have recognized the environmental ramifications of the proposed project or process, whether it is the construction of a new facility or operation, or augmentation of an existing facility or operation. The E.I.A. follows the theory that the environment would be better protected when potential operators are first required to demonstrate that their projects will not break the law with excessive emissions or discharges, for example. In addition, there are at least two legal advantages to requiring an E.I.A. before beginning or changing a structure or process. First, the great legal disadvantage of the precautionary principle and E.I.A. for the practicing lawyer is that it shifts the burden of proof from the state, which would need to prove that a person has violated the law after the fact, to the pollution source owner or operator, which must prove before the fact that anticipated projects or processes will not pollute. This is largely an evidentiary matter, but in an adversarial system such as that of the U.S., it is extremely important for the parties. The second legal disadvantage for the client is that the E.I.A. requires an operator to articulate and project actual operational results. Thereafter, it is easier for discussion to occur among citizens, the operator and the state when the object of discussion has been described in a standardized fashion.

103 Prüfung der Umweltverträglichkeit / étude d’impact environnemental / evaluación del impacto ambiental / valutazione di impatto ambientale. 104 Bundesumweltgesetz / loi nationale sur l’environnement / ley sobre la política nacional medioambiental / legge nazionale di politica ambientale [lit.], legge statunitense per la tutela dell’ambiente.

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IV. Compliance and Enforcement Tools of the State A party is expected to know its obligations under most environmental law, whether 1218 the law is local, state or federal. Those obligations arise without the need for a permit and can, even in situations where no permit is needed, require an entity to monitor and report its pollution of the air, water or soil.105 As a positive incentive to persons to monitor and report their pollution problems, the U.S. E.P.A. offers a conditional and limited official policy to reward a party that volunteers information regarding its own environmental violations by substantially reducing penalties and granting immunity from criminal prosecution.106 Whether information is volunteered or not, the U.S. E.P.A. and state agencies have le- 1219 gal authority to enter private property for inspection purposes. In comparison to other countries’107 sensitivity to data security,108 legal culture in the U.S. tends to be more open with sharing information. Once a party’s information becomes part of the U.S. E.P.A.’s file, it is subject to disclosure under the federal Freedom of Information Act,109 5 U.S.C. § 552, or under specific environmental statutes, such as the Clean Water Act.110 The same is true in states. See for example, Pennsylvania’s Right to Know Law and Clean Streams Law.111

2. Enforcement A civil lawyer should remember that if compliance efforts fail, one may well find 1220 himself or herself the subject of enforcement litigation of the government. Regardless of whether state enforcement action is administrative or in a court of general jurisdiction, and regardless of whether it is state or federal, once litigation commences, the uniquely U.S. process of discovery112 begins and all parties, including citizens, may formally request information113 according to the rules of civil procedure.114 Some states modify or limit discovery before administrative tribunals. When discovery is undertaken, the court of that jurisdiction will ensure, if asked, that the discovery rules are obeyed and that interrogatories are answered, just as with requests for depositions, admissions, the production of documents and site visits. One must remember here that because it is an adversarial system, if an opposing party does nto comply with discovery requests, the issuing party must ask a court to enforce rules of discovery—the court will not do so of its own 105 The U.S. E.P.A. has developed “Protocols for Conducting Compliance Audits” for a number of different statutes and industries at Audit Protocols, E.P.A., https://www.epa.gov/compliance/audit-protocols. One of the few places one can access U.S. E.P.A. documents in the German language is TechDirekt Technologischer Auskunfstdienst. See TechDirect, E.P.A., http://clu-in.org/techdrct. There one can subscribe to a monthly newsletter or just read that which has been published already on file. 106 U.S. E.P.A., Incentives for Self- Policing: Discovery, Disclosure, Correction and Prevention of Violations, 65 FR 19, 618 (April 11, 2000), https://www.gpo.gov/fdsys/pkg/FR-2000-04-11/pdf/00-8954.pdf. 107 Cf., for example, the European General Data Protection Regulation (E.U.) 2016/679 and the fact that the inextricable relationship of the U.S. to Europe has required U.S. entities all to become more restrictive on their standards so as to comply with E.U. data protection. 108 Datenschutz / protection des données / seguridad de datos / sicurezza dei dati. 109 Gesetz über die Auskunftspflicht öffentlicher Einrichtungen / loi sur l’accès à l’information / ley sobre la libertad de información / legge sulla libertà di informazione. 110 Clean Water Act, 33 U.S.C. § 1318(b). 111 Right to Know Law, 65 P.S. §§ 67.101 – 67.3104. Anyone may wish also to subscribe to the Pennsylvania enotice subscription site and receive email notices of Permit Applications, Notices of Intent to Remediate and Regulations updates (daily) as well as Draft Technical Document, http://www.ahs.dep.pa .gov/eNOTICEweb/. 112 Offenlegungsverfahren / procédure de divulgation / descubrimiento de pruebas / esibizione o divulgazione di prove. 113 See e.g., Federal Rule of Civil Procedure 34. 114 Zivilprozessordnung / règles de procédure civile / reglas de procedimiento civil / norme di procedura civile.

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Chapter 14 United States’ Environmental Law as Foreign Law volition. (See Chapter 2, “Federal Civil Litigation” for a discussion of the tools of discovery.) Further, one should keep in mind that administrative procedure varies from state to state and legal topic to legal topic. While states vary, lawyers from outside the U.S. would be best prepared to encounter a relatively formal procedure before an Environmental Hearing Board.115 1221 Citizens and other parties may fear taking legal action against a polluter because the polluter will use the legal system offensively to try to stop other parties from taking action. These sorts of law suits are called “Strategic Lawsuits against Public Participation,”116 known most often by the abbreviation S.L.A.P.P. More than half of U.S. states have passed anti-S.L.A.P.P. legislation,117 including the example state for this chapter, Pennsylvania.118 However, even if a S.L.A.P.P. suit is eventually dismissed due to violation of a statute, constitution or case precedent, it will often have succeeded in its goal of silencing a citizen because the litigation costs run so high that the citizen or citizen’s group must stop a citizen’s suit.119 Moreover, even the threat of filing a lawsuit, regardless of the statistical or meritorious likelihood of an actual suit, is sufficient to have a chilling effect on citizens. 1222 Three related procedural hurdles must be cleared in order for a party to successfully appeal from state administrative action. A common enforcement process in which a private party finds that he, she or it must have legal counsel is when a federal or a state environmental agency denies an application for a permit for discharges, emissions or degradation, issues a notice of violation120 (N.O.V.)121 or issues an administrative compliance order. If a party receives an N.O.V., the party should take the matter seriously. Some states treat the N.O.V. as final legal action and it must be appealed to preserve a party’s rights to challenge the violation alleged, while other states treat the N.O.V. as a non-final action until a civil penalty is issued to the party for the violation. Administrative finality is an important threshold concept to achieve because if one attempts to appeal an action before it is final, the administrative tribunal or court will dismiss the action because it is not yet “ripe.”122 If on the other hand, a state action is considered to be final, and a party fails to file an appeal within the required time, the party will have waived the right to appeal and the state action will be considered to be final and unassailable. Often, this means that when a party receives an N.O.V., to preserve its rights to 115 Komitee für Umweltsachen / comité d’audience environnemental / junta de asuntos medioambientales / commissione d’udienza ambientale [lit.], commissione di prima istanza per controversie amministrative in materia ambientale. 116 strategische Rechtsstreite gegen die Beteiligung der Öffentlichkeit / poursuites stratégiques contre la mobilisation du public / litigio estratégico contra la participación pública / querele strategiche contro la partecipazione pubblica. 117 State Anti-S.L.A.P.P. Laws, Public Participation Project, http://www.anti-slapp.org/your-states-f ree-speech-protection/. As this book goes to print, no federal legislation yet exists, but the Speak Free Act has been introduced for discussion in the U.S. House of Representatives. See Speak Free Act of 2015 (H.R. 2304). 118 27 Pa. Con. Stat. § 7707 & §§ 8301–8303. (2000). 119 See Mrinalini Shinde, et al., Public Participation, in Environmental Law Across Cultures: Comparisons for Legal Practice 167–72 (Kirk W. Junker, ed.) (Routledge, 2020). 120 Benachrichtigung über den Verstoß gegen eine Umweltvorschrift / procès-verbal de violation / aviso de violación / avviso di violazione [lit.], avviso di segnalazione di una trasgressione. 121 The Environmental Council of States (ECOS) estimates that state and federal environmental agencies issue at least 42,000 notices of violation (NOV) annually, a statistic that shows that the NOV is the most common enforcement tool used. 122 spruchreif / en état d’être jugée / estado de una controversia o conflicto, tal que existe una cuestión concreta a ser decidida judicialmente, en contraposición a las que solo implican cuestiones abstractas o no listas para ser objeto de decisión / maturo, pronto per la decisione (valutazione inerente all’effettività di una controversia giudiziaria, volta a evitare pronunce giudiziali su questioni puramente astratte).

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IV. Compliance and Enforcement Tools of the State appeal, it must appeal from the N.O.V. even before a penalty is assessed. The party alleged to be in violation cannot wait to see what the amount of the penalty before determining whether to appeal. Some environmental statutes create exceptions to this principle of administrative finality, such as the Pennsylvania Surface Mining Conservation and Reclamation Act, so the practitioner needs not only to consult the law of the particular state in which the problem is occurring, but also to consult the governing statute for the type of violation alleged. One often encounters the doctrine of finality when a party attempts to appeal from an administrative action that is not considered final, like issuing a N.O.V. without assessing a penalty. In most U.S. jurisdictions, a party is not deemed to have suffered damages until an agency follows a notice of violation with an issuance of a civil penalty, and therefore the party may not yet appeal. Once penalized, the individual has suffered damages and may appeal the agency’s penalty, based upon the underlying violations. Both state administrative law and federal administrative law in the U.S. typically follow the doctrines of ripeness and finality. The last hurdle is that of exhausting administrative remedies before one can access the courts. Because the U.S. Congress, like many state legislatures, has delegated its rulemaking authority to administrative agencies, which typically includes a tribunal and enforcement body, all aggrieved parties must first make use of the administrative system and exhaust the administrative remedies possible before trying to get relief from a court of general jurisdiction. If a party has exhausted all administrative remedies and is still dissatisfied with the result, then the party can file a complaint with a court of general jurisdiction, state or federal, depending on the agency involved. If an appeal is taken from the enforcement action, an administrative hearing will be held. In the U.S. federal system, that process begins with an administrative law judge (A.L.J.) within the E.P.A.123 If a party is not satisfied with the findings of the A.L.J., the party may appeal124 to the Environmental Appeals Board.125 One must keep in mind that the federal process, unified by the requirements of the A.P.A. is separate from the states. Administrative process and procedure has many different flavors in the states and among local governments. If a party fails to take corrective or remedial action within a reasonable period of specified time to the state’s satisfaction upon receiving an N.O.V., the state will likely then take the additional step of issuing an administrative penalty. At that point, a party cannot re-open the underlying facts of the violation, but can only argue against the amount of the penalty. Under some federal statutes, such as R.C.R.A.,126 the U.S. E.P.A. together with the Department of Justice may choose to take a civil penalty action directly in federal court, rather than in the administrative system. This choice may take advantage of the stronger powers of a court over an administrative tribunal, but the U.S. E.P.A. loses its independent control from the government side over the litigation if it joins the Department of Justice in prosecuting its case in federal court. The relationship between the U.S. E.P.A. and state agencies is not one of mutual exclusion. The U.S. E.P.A. can initiate an enforcement action if it determines that the state enforcement action taken is inadequate. Before initiating such an action, however, the U.S. E.P.A. will allow a state that has primacy in the area in question (air or waste, for 123 Verwaltungsrichter

/ juge administratif / juez administrativo / giudice amministrativo. Environmental Appeals Board Practice Manual, U.S. E.P.A. (2013), https://yosemite.epa.gov/oa/E AB_Web_Docket.nsf/General+Information/Practice+Manual?OpenDocument. 125 Berufungskomitee für Umweltangelegenheiten / comité d’appel environnemental / junta de apelaciones ambientales / commissione o collegio d’appello in materia ambientale. 126 42 U.S.C. 6928. 124 See

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Chapter 14 United States’ Environmental Law as Foreign Law example) an opportunity to correct its deficiency. If the state does not enforce the law to the U.S. E.P.A.’s satisfaction the U.S. E.P.A. may file an additional enforcement action of its own, through the overfiling process that was discussed as a demonstration of the complicated practices of cooperative federalism. The execution of oversight by the U.S. over states that have achieved primacy varies from statute to statute. Overfiling has been upheld by courts as a proper interpretation of federal statutory provisions for R.C.R.A.127 and the Clean Air Act,128 but possibly not the Clean Water Act.129 Because the notion that the U.S. E.P.A. may overfile differs from statute to statute, a civil lawyer would be well-advised to check the statute in question and the courts’ interpretations of that statute. It may be the case that a second enforcement action from the U.S. E.P.A. might still be coming, even after a state has taken its action. And finally, if a civil penalty action has been filed by a state or federal authority, it does not prevent another government authority from filing a criminal action,130 nor does it prevent an agency from referring the matter to criminal prosecutors. 1228 As with all civil litigation in the U.S., the filing of a legal action does not mean the action will result in a trial. The vast majority of civil litigation in administrative matters as well as federal and state courts is settled before trial. A U.S. Department of Justice report shows that in state trial courts (where most civil trials take place) only approximately four percent of all tort cases that were begun are concluded in trials.131 The document that is typically used to settle cases, once litigation has begun, but without completing a trial, is known as a Consent Decree,132 whereby the state or federal enforcement agency uses its statutory power to agree with a polluter on some combination of civil penalty, remediation work, and a schedule for bringing a polluting site into compliance. If the violator does not comply with a term of the Consent Decree, the responsible environmental agency can go back to court to enforce the Consent Decree, the underlying statutory violations, or both. Once litigation is commenced, court or tribunal has jurisdiction over the matter, so settlements, including a Consent Decree, must be approved by the court or tribunal. If a moving party chooses first to withdraw the litigation from the court’s docket, then the matter could be settled “out of court” by the parties privately, without court approval. 1229 Before concluding this chapter, a special area of enforcement needs to be separately mentioned. A “legacy” of industrialism in many places in the U.S. is the abandoned sites of heavy pollution in need of expensive remediation. There are approximately forty thousand sites in need of remediation in the U.S. federal system alone. To address these sites, both the U.S. E.P.A. and many states133 enacted so-called “superfund” statutes.134 Under these statutes, the government may seek to compel potentially responsible par127 United States v Power Engineering, 303 F. 3d 1232 (10th Cir. 2002) (cert. denied, 538 U.S. 1012 (2003)). 128 United States v. LTV Steel Co., 118 F. Supp. 2d 827 (N.D. Ohio 2000). 129 United States v. City of Rock Island, 182 F. Supp. 2d 690, 694 (C.D. Ill. 2001). 130 United States v. Hudson, 522 U.S. 93 (1997); see Mrinalini Shinde, Environmental Crime and Enforcement, in Environmental Law Across Cultures: Comparisons for Legal Practice 255–58 (Kirk W. Junker, ed.) (Routledge, 2020). 131 Thomas H. Cohen, Tort Bench and Jury Trials in State Courts, 2005, U.S. Department of Justice, Office of Justice Programs, Bureau of Justice Statistics (Nov. 2009), NCJ 228129; see also Marc Galanter, A World Without Trials, 2006 J. Disp. Resol. 7 (2006). 132 Anerkenntnisurteil / ordonnance sur consentement / decreto de consentimiento / accordo transattivo, provvedimento decisorio inerente alla transazione di una controversia giudiziaria. 133 See Pennsylvania Land Recycling and Environmental Remediation Standards Act, 35 Pa. Stat. §§ 6026.101 et seq. 134 See Federal Comprehensive Environmental Response, Compensation and Liability Act (C.E.R.C.L.A.), enacted in 1980 and found at 42 U.S.C. §§ 9601 et seq.

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IV. Compliance and Enforcement Tools of the State ties (P.R.P.)135 to conduct a clean-up, or use money from the superfund trust to clean-up a site first, and then take an action against the potentially responsible parties for compensation. Litigation brought under the federal Comprehensive Environmental Response, Compensation and Liability Act (C.E.R.C.L.A.) goes through eight formalized steps of remediation process to assure that parties comply with the National Contingency Plan, among other things. Under the C.E.R.C.L.A., P.R.P. fall into four categories: current owners or operators of the site, under Section 107 (a)(1); owners or operators of the site at the time of disposal of the polluting substances under Section 107(a)(2), those who arranged for the disposal of the hazardous substances, including those who generated the waste, under Section 107(a)(3) and transporters of the waste to the site if they themselves selected the site, under Section 107(a)(4). Any of the parties may be held strictly liable, retroactively liable and jointly and sev- 1230 erally liable. Strict liability is a tort standard that is used outside of superfund liability in the U.S. as well, as for instance with manufacturers of hazardous materials. A standard of strict liability means that no recklessness or negligence needs to be proven by the environmental enforcement agency. Superfund liability may also be applied retroactively to various acts such as hazardous waste generation, disposal and transportation committed before C.E.R.C.L.A. was enacted in 1980. And finally, superfund liability is usually interpreted to be joint and several, meaning one P.R.P. can be liable to pay the costs for all P.R.P.s, especially in situations where the other P.R.P.s are dead, bankrupt or no longer are in business and assets cannot be found. These cases may have dozens or hundreds of parties and concern themselves with remediation programs that cost on average between twenty-five and thirty million dollars per site. If someone becomes involved in superfund litigation, one will need not only to obtain the services of a U.S. lawyer, but will need a U.S. lawyer who is experienced in superfund litigation. 1231

E.P.A. Enforcement Statistics Perhaps due to the litigation emphasis of environmental law in the United States, when one looks to just the U.S. E.P.A.’s annual report,136 which does not include enforcement activities of the fifty individual states, one finds annual statistics such as the following:137 Civil Enforcement Results Results Pollution Reduced, Treated or Eliminated (Pounds) Hazardous Waste Treated, Minimized, or Properly Disposed of (by Weight in Pounds) Stream Miles Restored or Created (Linear Feet) Civil Enforcement Monetary Commitments Monetary Commitments from Concluded Cases Estimated Value of Complying Actions to be Taken in Response to E.P.A.'s Enforcement Actions (Injunctive Relief) Estimated Investments in Projects that Benefit the Environment and Public Health (Environmental Projects) Administrative Penalties Assessed Judicial Penalties Assessed

Concluded Cases 533,000,000 535,000,000 37,870 Commitment $7,300,000,000 $39,000,000 $42,000,000 $163,000,000

135 potentiell verantwortliche Parteien / parties potentiellement responsables / posibles partes responsables / parti potenzialmente responsabili. 136 EPA-Jahresbericht / rapport annuel de l’EPA / informe anual de la Agencia de Protección del Medio Ambiente / rapporto annuale dell’agenzia per la protezione dell’ambiente (EPA). 137 U.S. E.P.A. Annual Report, https://www.epa.gov/enforcement/enforcement-annual-results-numbersglance-fiscal-year-fy-2015. The E.P.A. site has since been changed, and now only includes https://www.epa .gov/planandbudget/results or this: https://www.epa.gov/research/impact-reports.

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Chapter 14 United States’ Environmental Law as Foreign Law Civil Enforcement Monetary Commitments Monetary Commitments from Concluded Cases State/Local Judicial Penalties Assessed From Joint Federal-State/Local Enforcement Actions Stipulated Penalties Paid

Commitment $32,000,000 $7,000,000

Civil Enforcement and Compliance Activities Activities Civil Judicial Enforcement Case Conclusions Administrative Penalty Order Complaints Final Administrative Penalty Orders Administrative Compliance Orders Inspections/Evaluations Civil Investigations

Results 132 1,400 1,394 833 15,400 216

Criminal Enforcement Program Activities Environmental Crime Cases Opened Defendants Charged Years of Incarceration Fines and Restitution Value of Court Ordered Environmental Projects

Results 213 185 129 $200,000,000 $4,000,000,000

V. Conclusions 1232

The practice of environmental law is both informed and formed by the theory and practices of the natural sciences, basic and applied. The sciences describe the effects of social practices that are harmful or unsustainable and the problems that result from these practices. Law is one tool among others that can help to correct the imbalances and extremes of our social practices to make them again sustainable in the natural world. U.S. environmental law has at least two features that distinguish it from some of the environmental law cultures of other countries. The first is the unique concept of U.S. federalism, known as cooperative federalism, which requires a lawyer always to be aware of state and federal agencies and sources of law. Due to most states having obtained primacy in most statutory regimes, most persons—natural and artificial—encounter environmental law as state law, regardless of the complex nuances of U.S. federal-state relations that a practicing lawyer must know. The second feature that a civil law practitioner will encounter is the attitude toward litigation. The reputation of U.S. culture as being litigious may not be supported empirically in the statistics of environmental legal practice, but the laissez faire attitude of U.S. culture toward the law generally will likely be a notably different spirit of law practice for the civil law lawyer.

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CHAPTER 15 FOOD LAW: IMPLEMENTING FOOD SOVEREIGNTY IN SUSTAINABLE FOOD SYSTEMS1 Literature: Nick Hanley, Jason Shogren & Ben White, Environmental Economics in Theory and Practice (2d ed.) (Palgrave Macmillan, 2007). Renée Johnson, Randy Alison Aussenberg & Tadlock Cowan, The Role of Local Food Systems in U.S. Farm Policy, Congressional Research Service (Mar. 12, 2013), https://www.fas.org/sgp/crs/misc/R42155. pdf. Christopher Kaltsas, Harmony at the Farm: “Rediscovering the "Community” in Community Supported Agriculture, 56 Wm. & Mary L. Rev. 961 (2015). Jesse Richardson & L. Leon Geyer, Ten Limitations to Ponder on Farm Limited Liability Companies, 4 Drake J. Agric. L. 197 (1999). Laurie Ristino & Gabriela Steier, Losing Ground: A Clarion Call for Farm Bill Reform to Ensure a Food Secure Future, 42 Colum. J. Envtl. L. 59 (2016). Michael Roberts, Food Law in The United States (Cambridge University Press, 2016). Gabriela Steier & Kiran Patel (eds.), International Food Law And Policy (2016). Gabriela Steier, Gabriela & Kiran Patel (eds.), International Farm Animal, Wildlife And Food Safety Law (2016).

I. Introduction 1. Food Law in the United States Through the proliferation of genetically modified organisms (G.M.O.),2 food safety 1233 outbreaks, such as E.coli, salmonella or mad cow disease, and the much-discussed TransAtlantic Trade Partnership (T.T.I.P.), food law has gained unprecedented popularity in the U.S. Consumers from outside the U.S. become aware of food policy concerns in the U.S. and legal practitioners are drawn into the whirlwind of media attention over food law issues. “Food law,” as it has been coined, however, does not exist as one single body of law. Although there is a Federal Food, Drug and Cosmetics Act (F.F.D.C.A.),3 food law actually spans across a multitude of legal disciplines, such as environmental, administrative, corporate, intellectual property, and international law. Food law exists in all three branches of government. In the legislature, under federal 1234 law alone, there are at least five major statutes that dominate food related subject matter, the Endangered Species Act (E.S.A.),4 the Federal Insecticide, Fungicide, and Roden-

1 The author thanks Professor Elizabeth Boepple of Vermont Law School for her guidance and generous support. All opinions on this chapter are the author’s and this chapter is intended for educational use only. 2 genetisch modifizierte Organismen / organismes génétiquement modifiés (O.G.M.) / organismos genéticamente modificados / organismi geneticamente modificati (O.G.M.). 3 Bundesgesetze über Lebensmittel, Arzneimittel und Kosmetika / loi fédérale sur les produits alimentaires, pharmaceutiques et cosmétiques / ley federal de alimentos, drogas y cosméticos / legge federale statunitense sugli alimenti, i farmaci e i cosmetici. 4 Gesetz über gefährdete Tierarten / loi sur les espèces en danger / ley federal de especies en peligro de extinción / legge federale statunitense per la tutela delle specie in pericolo di estinzione.

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ticide Act (F.I.F.R.A.),5 the Clean Water Act (C.W.A.),6 the Clean Air Act (C.A.A.),7 and the Administrative Procedure Act (A.P.A.).8 Adding to these acts, each of the fifty states has some type of statutory food code, labeling requirements and other rules that practitioners in those locales should be aware of. In the executive branch, federal and state agencies enforce the aforementioned federal and state statutes. For instance, the U.S. Environmental Protection Agency (E.P.A.) determines which foods can be safely grown, the U.S. Department of Agriculture (U.S.D.A.) examines whether farmers can safely grow certain crops, such as G.M.O., and the Food and Drug Administration (F.D.A.) addresses the safety of eating foods. Although these agencies are further subdivided and matters are far more complex than this simple outline shows, with shared regulatory space among the agencies and unbelievably inefficient redundancies in the system, a discussion of these complexities is beyond the scope of this chapter. Instead, one should be aware that states also have agencies, such as departments of health that enforce an array of food-related laws. In the judicial branch, case law,9 i.e. precedent, establishes how the above-mentioned statutes and regulations, as well as the constitutions, are to be read. Through litigation,10 lawyers advocate to clarify how food law statutes are to be read and understood, thereby guiding enforcement. The jurisprudence of precedent can come from any court and a growing body of food law cases has established this relatively new field of law. In this new field of law, there are many and diverging interests that need the counsel of lawyers. In short, the food industry, on the one hand, is dominating the globalized market and reshaping range- and pastureland into industrialized agricultural vastness. On the other hand, a few Northeastern and Northwestern states are increasingly resisting the corporate take-over of American soil. As such, the local food movement11 is responding to the G.M.O. push from the industry. Much-criticized G.M.O. are usually cultivated on enormous plots of land in monocultures that rely heavily upon pesticides, fertilizers, herbicides, artificial irrigation and resource-intensive farming– where only one type of crop is planted—usually corn, soy, or wheat. These practices have proven to contribute to global warming, greenhouse gas emissions, soil erosion, and fresh water depletion, but also economic instability, food insecurity, and urbanization. The spectrum of interests stretches from relatively few large corporations, who are responsible for centralizing agriculture and dominating food systems through unsustainable agricultural practices, to local food producers who reclaim food sovereignty and encourage smallscale farmers to plant organic and diverse crops that support agrobiodiversity. At every step of the way across the spectrum, from “farm to fork,” lawyers are involved.12 When lawyers understand their roles in the legal structures of all three branches of government spread across this spectrum, they can of course better represent their 5 Bundesgesetz für Insektizide, Fungizide und Rodentizide / loi fédérale sur les insecticides, fongicides et rodenticides / ley federal de insecticidas, fungicidas y rodenticidas / legge federale sugli insetticidi, i fungicidi e i rodenticidi. 6 Wasserschutzgesetz / loi sur la qualité de l’eau / ley federal de aguas limpias / legge federale statunitense contro l’inquinamento idrico, detta anche “legge sulle acque pulite” o “legge sull’acqua” [lit.]. 7 Bundesimmissionsschutzgesetz / loi sur la qualité de l’air / ley federal de aire limpio / legge federale statunitense contro l’inquinamento atmosferico, detta anche legge sulla qualità dell’aria o “sull’aria pulita” [lit.]. 8 Verwaltungsverfahrengesetz / loi sur la procédure administrative / ley federal sobre el procedimiento administrativo / legge federale sul procedimento amministrativo, legge sulla procedura amministrativa [lit.]. 9 Fallrecht / jurisprudence / jurisprudencia / diritto giurisprudenziale, giurisprudenza. 10 Rechtsstreit / contentieux / litigio / contenzioso. 11 Bewegung zur Förderung regionaler Lebensmittel / locavorisme, ou movement locavore / movimiento alimentos sostenibles / movimento “del cibo locale” o locavore. 12 Laurie Ristino and Gabriela Steier, Beyond Drought: A Clarion Call to Manage for Agriculture Systems Resilience and Ecological Health, U. Oregon School of Law, J. Env. L. & Litig. (2016).

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I. Introduction clients. One angle of approach is food sovereignty, which creates a progressive mind set for those lawyers who wish to use the legal tools available to them to not only help their clients but also to further larger societal interests, such as environmental protection, biodiversity conservation, food safety, and economic stability. From the perspective of food sovereignty, the following illustrates one of many starting points from which to make creative use of food law in the U.S. In some ways, this approach further exemplifies how a culture of individualism places opportunity and responsibility upon the individual, as discussed regarding nonprofit entities in Chapter 11, “The Charitable Sector in the U.S.: Nonprofit Organizations.” Thus, for those lawyers for whom statutes are the floor, rather than the ceiling, the following analysis will exemplify how U.S. food law may play out in practice. Through this example, one can see how a new area of the law emerges from other disciplines and societal needs.

2. What is Food Sovereignty and How Does it Relate to Law in the United States? For legal scholars, “‘food sovereignty’ was coined to give legal recognition to political 1239 and economic power inherent in food and agriculture interests, and to take a pro-active stance by naming it.”13 The international farmers organization, La Via Campesina, further defines the term “as the right of nations and peoples to control their own food systems, including their own markets, production modes, food cultures and environments, has emerged as a critical alternative to the dominant neoliberal model for agriculture and trade.”14 Internationally, since 1996, food sovereignty has been a focus area at the World Food 1240 Summit15 and in World Trade Organization (W.T.O.) negotiations.16 In 2007, approximately 500 delegates from more than 80 countries adopted the “Declaration of Nyéléni” while convening at the Forum for Food Sovereignty in Sélingué, Mali. Similar in form to the United Nations’ 2015 Sustainable Development Goals, the Declaration of Nyéléni presented a list of goals for a world with better food sovereignty. The Declaration has become a guidepost for local food systems. Checklist The delegates negotiating the text of Declaration of Nyéléni listed their goals as a world where: • • • •

All peoples, nations and states are able to determine their own food producing systems and policies that provide every one of us with good quality, adequate, affordable, healthy and culturally appropriate food; . . . there is recognition and respect of women’s roles and rights in food production, and representation of women in all decision making bodies; . . . all peoples in each of our countries are able to live with dignity, earn a living wage for their labour and have the opportunity to remain in their homes, if they so choose; . . . food sovereignty is considered a basic human right, recognised and implemented by communities, peoples, states and international bodies;

13 Hannah Wittman, Annette Desmarais and Nettie Wiebe, The Origins & Potential of Food Sovereignty 1–14, 2, Food Sovereignty: Reconnecting Food, Nature and Community (2010). 14 Id. 15 Welternährungsgipfel / conférence mondiale de l’alimentation / cumbre mundial sobre la alimentación / vertice mondiale sull’alimentazione. 16 Id.

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. . . we are able to conserve and rehabilitate rural environments, fish populations, landscapes and food traditions based on ecologically sustainable management of land, soils, water, seas, seeds, livestock and all other biodiversity; . . . we value, recognize and respect our diversity of traditional knowledge, food, language and culture, and the way we organise and express ourselves; . . . there is genuine and integral agrarian reform that guarantees peasants full rights to land, defends and recovers the territories of indigenous peoples, ensures fishing communities’ access and control over their fishing areas and eco-systems, honours access and control by pastoral communities over pastoral lands and migratory routes, assures decent jobs with fair remuneration and labour rights for all, and a future for young people in the countryside; . . . where agrarian reform revitalises interdependence between producers and consumers, ensures community survival, social and economic justice, ecological sustainability, and respect for local autonomy and governance with equal rights for women and men . . . where agrarian reform guarantees rights to territory and self-determination for our peoples; . . . share our lands and territories peacefully and fairly among our peoples, be we peasants, indigenous peoples, artisanal fishers, pastoralists, or others; . . . in the case of natural and human-created disasters and conflict-recovery situations, food sovereignty acts as a form of “insurance” that strengthens local recovery efforts and mitigates negative impacts . . . where we remember that communities affected by disasters are not helpless, and where strong local organization for self-help is the key to recovery; and . . . peoples’ power to make decisions about their material, natural and spiritual heritage are defended; . . . all peoples have the right to defend their territories from the actions of transnational corporations . . ..17

• •

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Ecuador, Venezuela, Mali, Bolivia, Nepal and Senegal and Egypt all have now guaranteed food sovereignty in their constitutions. The concept of “food sovereignty” is developing from widespread international and interdisciplinary interest in the U.S. Food sovereignty is also a global trade issue that reflects issues in the U.S. economy. In the U.S., “[f]ood sovereignty has emerged as an alternative vision for food systems that is distinctive from food security.”18 1242 The relationship between food sovereignty and local food systems is nearly a direct proportion. Food sovereignty increases with the independence and density of local food systems. Simply put, when small farmers control their own production and conditions, the surrounding communities enjoy more food sovereignty. Conversely, when large agricultural corporations or multinational organizations dominate and centralize food production, the consumers who are dependent on these multi-level food systems loose sovereignty over their own production of food. Legislation and administration of the law becomes couched in terms of the economy rather than in terms of human health. From one perspective, one might be led to call the legal representation of a publicly-held stock corporation “food law” if one of the products of the corporation are consumed by humans, but food law, as informed by food sovereignty, represents interests in the production of food for the sake of sustainable human health. 1243 World-wide, seventy percent of food is produced by peasants, who in turn make up more than half of the population19 More and more small-scale farmers are seeking legal 1241

Nyeleni Declaration (Feb. 27, 2007), http://www.nyeleni.org/IMG/pdf/DeclNyeleni-en.pdf. Michael Roberts, Food Law in the United States 442 (Cambridge University Press, 2016). 19 Tim Lang & Michael Heasman, Food Wars 202 (2d ed., 2016).

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I. Introduction counsel to ensure their independence, resilience and food sovereignty. By contrast, in the U.S., only a few companies are legally responsible for the production of food. With food production in the corporate mode, the production of food is legally represented by corporate lawyers. The practice of corporate law is so often described and explained, it needs no further contribution here. This chapter highlights instead some of the primary considerations that lawyers in the U.S. consider when working with small-scale farmers. For this counsel and representation, lawyers have opportunities to advocate local food production and to strengthen sustainable and resilient food systems by representing small farms, family businesses and closely-held agricultural enterprises.

3. Are Local Food Systems Governed by Federal or State Jurisdiction? As with all areas of U.S. law, the practice of cooperative federalism requires one to 1244 carefully study the issue in order to understand whether one or more states or the federal government, or both, have competency to make law or jurisdiction over disputes. When it comes to food law: fifteen different federal agencies, from six different Cabinet-level institutions, share authority over the safety and transparency of [the U.S.] food supply, together administering thirty-five different federal laws . . . Nine different congressional committees play a role in directing and overseeing the food safety work of these agencies . . .. Fifty-one separate interagency agreements aim to tame the jurisdictional chaos.20

Adding to this federal layer of opaque regulatory oversight, come state laws that fur- 1245 ther complicate this “regulatory hodgepodge.”21 Applied to cottage foods alone, each of the fifty state’s food code equivalents add rules that deter small food producers from tackling the local food system, thereby depriving citizens of locally-sourced and regionally-flavored foods and stripping the local economies of the benefits that harmonized legislation has in store. Harmonization, not splintering,22 of cottage food regulation is the way toward food sovereignty in the U.S. Ever since the constitutional dispute over homegrown wheat in Wickard v. Filburn,23 1246 the Commerce Clause24 has been relevant to food sovereignty.25 Nonetheless, a multitude of other legal consideration create obstacles to small scale farmers’ survival in the current market. The following are the primary legal and policy issues on which U.S. lawyers need to advise their clients who are small-scale local food producers. This chapter sets forth a variety of ideas to practicing attorneys to advocate for a sustainable and resilient food system including independent local agriculture.

Lisa Heinzerling, Food Law: Cases and Materials 2 (2017) (internal citations omitted). Id.at 3. 22 Id. at 2. 23 317 U.S. 111 (1942). 24 Handelsklausel / clause de commerce / claúsula de comercio de la constitución estadounidense / clausola del commercio [lit.], clausola della Costituzione degli Stati Uniti che conferisce al Congresso il potere di disciplinare, in via legislativa, il commercio estero e tra gli Stati della Federazione. 25 U.S. Const. art. I, § 8, cl. 3. 20

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II. General Considerations for Food Lawyers in the Local Food Movement 1. The Role of the United States’ Lawyer in the Local Food Movement 1247

Lawyers play various roles in the local food movement and can contribute greatly to improving food sovereignty. The agencies of the federal executive branch employ many lawyers who work in the day-to-day regulatory affairs, as mentioned above. In addition to lawyers in private law firms who represent local food producers, nearly all non-profit, public interest or environmental protection organizations in the U.S. employ lawyers and in-house attorneys either as policy counsel or litigators. Some of the tools used in food law are common to other areas of the law, but some have been developed by advocates to fit the needs of various food law interests, as will be outlined below.

2. Legal Tools for Local Food Advocates a) Farm Leases Farm leases26 serve functions that go far beyond the immediate contractual agreements between lessor27 and lessee.28 In fact, lawyers can craft the provisions in the client’s farm lease to permit their desired range of activities, allow for an ultimate purchase after a few years, provide adequate protection from a sale during the lease term, and capture the responsibilities and rights of both landlord and tenant during the lease term in the context of the state and local land use29 constraints. By taking the subsequent factors into consideration, practicing attorneys can use the farm lease as a tool toward establishing and maintaining food sovereignty for their clients. 1249 The usual and elementary provisions include the lease term,30 deposit amount,31 utility payment allocation,32 assignment and subletting permission,33 tax information, loss or damage to personal and real property, default,34 notice,35 dispute resolution,36 and eminent domain,37 as well as an unambiguous identification of the land to be let. In the common scenario where a few clients join forces with the aim of starting an agricultural business, lawyers should advise their clients to structure the farm lease to protect their needs in the context of the state and local land use constraints through (a) a long-term rolling tenure lease38 with option to buy, (b) a flexible cash rent plan with 1248

26 Hofpachtverträge / baux ruraux / contrato de arrendamiento de predio rústico / contratti di affitto di fondi rustici (detti anche contratti di affitto agrario). 27 Verpächter / bailleur / arrendador / concedente. 28 Pächter / preneur / arrendatario / affittuario o locatario. 29 Bodennutzung / utilisation des sols / uso del suelo / utilizzazione del suolo, uso del suolo [lit.]. 30 Pachtdauer / durée du bail / plazo de arrendamiento / durata dell’affitto [lit.], durata del contratto di affitto. 31 Pfandsumme / dépôt de garantie / suma del depósito / deposito cauzionale. 32 Zuweisung der gezogenen Nutzen / répartition des charges / reparto de utilidades / ripartizione del pagamento delle utenze [lit.], ripartizione spese e utenze. 33 Abtretungs- und Unterverpachtungserlaubnis / transfert du bail et sous-location / permiso de subarrendamiento y de cesión / permesso di cessione (del contratto) e di subaffitto. 34 Verzug / défaillance / incumplimiento de pago / inadempimento. 35 Kündigung / avis de résiliation / aviso / preavviso (di risoluzione del contratto). 36 Streitbeilegung / résolution des conflits / resolución de disputas / risoluzione delle controversie. 37 Enteignung / droit de préemption / expropriación / potere di espropriazione (per motivi di pubblica utilità). 38 Rollierende Laufzeit / bail à renouvellement automatique / arrendamiento de plazo indeterminado / affitto di proprietà fondiaria soggetto a rinnovo automatico [lit.], (contratto di) affitto rinnovabile automaticamente.

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II. General Considerations for Food Lawyers in the Local Food Movement bartering option,39 (c) specifications that improvements to the real property are deductible from the final purchase price in the amount that they enhance the value of the property, and (d) a holistic conservation plan to empower the clients’ local, sustainable, and organic farming enterprise for a resilient future. Doing anything less will do both the clients a disservice, potentially setting the clients up for failure and making them easy prey to be bought up by agribusiness giants. The following provides some considerations that may be helpful for clients who stress food sovereignty in their farm lease structure. b) Tenure Options There are various tenure options available for farm leases with specific advantages 1250 and disadvantages. Long-term leases, for instance, range from five to ninety-nine years and “enable the tenant to justify investments to improve the property, although the lease itself may not require or reward such improvements.”40 The advantages of long-term leases are tenure security, giving the “tenant confidence that they will be able to farm the land long enough to receive the benefits from sustainable practices, such as soil conservation and nutrient management . . .”.41 Moreover, long-term leases may include conservation provisions, “that decrease soil erosion, build soil nutrients and maintain farm structures.”42 For the reason that the parties are bound by the lease terms for an extended period, 1251 however, a long-term lease should include exit strategies for the landowner and the tenant.43 The lease should also clarify that no partnership44 is created between the landowner and tenant. In the case of the landowner’s default under the lease, the tenants may give notice of the default, triggering a thirty day period to give the landlord an opportunity to cure. Failure to cure should, under the lease, release the tenants from their obligations and the landowner shall return the deposit. Additionally, lawyers should consider including provisions on notices and dispute resolution, in order to mitigate the costs for clients against the landowner in any cases that could give rise to legal disputes if clients suffer economic losses, including good will,45 as a result of the landowner’s default. Finally, long-term leases may also include the option to purchase–a “straight” op- 1252 tion46 and a “right of first refusal” option47–although the transfer of ownership is delayed by the lease term.48 Nonetheless, with the option to purchase, the tenant, who is already farming the land, has a fairly flexible transition, and the purchase price can be fixed over time.49 39 Austauschoption / option de paiement en nature / opción de trueque / opzione di scambio in compensazione, opzione di permuta [lit.], ma il termine può indicare anche fattispecie non assimilabili alla nozione di permuta del Codice civile italiano. 40 Land for Good, A Landowner’s Guide to Leasing Land for Farming: Chapter VII – Lease Agreements 19 (undated). 41 Drake Agricultural Law Center, Sustainable Farm Leasing 1–8 (undated). 42 Id.; Sample Conservation provisions are listed in Drake Agricultural Law Center, Sustainable Farm Leasing 1–8, 6–7 (undated). 43 Landowner’s Guide, supra note 40 at 15. 44 ähnlich der Gesellschaft bürgerlichen Rechts / type de société civile / asociación / società semplice o società commerciale priva di personalità giuridica. 45 Geschäftswert / valeur commerciale / activo intangible de una empresa / avviamento. 46 Direktoption / option directe / opción directa / opzione “diretta”. 47 Vorkaufsoption / droit de préférence / derecho preferente / opzione con diritto di preferenza, opzione con “diritto di primo rifiuto” [lit.]. 48 Id. 49 Id. at 20.

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Chapter 15 Food Law: Implementing Food Sovereignty However, another alternative to the long-term lease is a rolling lease,50 which automatically renews unless the farmer notifies the landlord of the farmer’s intent to exit at the end of the lease term.51 Any lease provision indicating that the lease will renew automatically after the ending date signals a rolling lease. The advantage of such arrangements is that it allows the farmer to commit to the land for a longer period of time, accompanied by the aforementioned benefits of tenure security. 1254 For clients willing and interested to make an initial longer commitment, the longterm rolling lease with option to buy may be preferable, because it will give them time to establish themselves in the community and to build their business around the farm and land. Any long-term lease of three years or more with an option to extend and, eventually, a straight option to purchase, would give such clients more tenure security, but it would also help them to implement a conservation plan and sustainable farming practices, thereby increasing the value of their land for the eventual purchase. There are many competitors and the option to buy should be clearly specified in the lease, to ensure that the clients can eventually reap the fruits of their labor and are the first entitled to purchase. In essence, the option to buy with an application of rent payments to the purchase price, partially protect the clients from a “bidding war” with other potential buyers, while keeping the purchase price manageable for their budget. A prudent lawyer’s advice about the lease structure will greatly affect the clients’ ability to become central and essential members of the local food system in their state. 1253

c) Rent Rate After taking stock in the land and its variability,52 rental rates are adjusted based on “[l]ocation, soil quality, the forces of supply and demand, [the landowners’] personal goals, and negotiations with . . . neighbor[s].”53 In fact, “most agreements are set up on per acre per year basis”54 and cash rent is the most common. In a cash rent55 arrangement, the tenant bears the risk associated with the farm operation and pays a set amount every year or month.56 1256 Another option for determining rent are share leases,57 where both landlord and tenant share risks and contributions.58 Generally in New England states, for example, “rent can be paid as a cash-equivalent share of the crop or livestock produced on the property”59 for which the “share lease splits production costs and crop or livestock profits between the landowner and the tenant.”60 1257 Alternatively, a combination of cash rent and share lease is the flexible, or adjustable, cash lease.61 In this model: 1255

50 sich automatisch verlängernde Pacht / bail à renouvellement automatique / contrato de arrendamiento de plazo indeterminado / (contratto di) affitto soggetto a rinnovo automatico. 51 Id. at 19. 52 Heleba et al., A Lease Agreements Guide for Landowners and Farmers, University of Vermont Center for Sustainable Agriculture 1–8 (undated). 53 Id. 54 Id. at 2. 55 Barpacht / loyer en numéraire / arrendamiento en efectivo / affitto in contanti. 56 Landowner’s Guide, supra note 40 at 20. 57 Anteilspacht / bail à partage de récolte / contrato de arrendamiento en el cual las partes comparten los riesgos / contratto di affitto agrario assimilabile (ma non equivalente) a fattispecie contrattuali atipiche come la compartecipazione agricola o la colonia parziaria. 58 Landowner’s Guide, supra note 40 at 21. 59 Id. 60 Id. 61 flexible oder anpassbare Barpacht / bail flexible ou adjustable / arrendamiento en efectivo flexible o ajustable / affitto in contanti flessibile o adeguabile.

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II. General Considerations for Food Lawyers in the Local Food Movement [t]he landowner and the tenant set a cash “base”62 rent that is lower than straight 1258 cash rent. The landowner is paid the cash base plus a share of the actual returns to the farmer from the crop. If production and prices exceed the base, the landowner is paid a share of the increase. In a poor year, the landowner is guaranteed at least the base . . .. Flexible cash rent reduces for the tenant some of the risk of a bad year and rewards the landowner in good years.63 Although there are several other lease options, bartering64 is another common op- 1259 tion. Bartering involves an “exchange of one commodity or service for another without the use of money.”65 In the farm lease context, such as plowing the landowner’s land or mulching his garden instead of paying rent66 makes for bartering. As long as the terms are clearly defined in the lease, bartering may be a viable option for beginning farmers. For many clients, the flexible cash rent may be the best option with some allowances for bartering. An appendix to the lease may specify to what extent the parties agree to deductions from monthly rent payment and for bartering allowances. Lastly, as mentioned in section (a) above, rent payments could also be applied toward 1260 the purchase price. Including such a provision in the lease will help the clients to begin paying for the land and transform their mere possession into ownership once they exercise their option to purchase according to the provisions set forth in the option to buy. d) Improvements or Additions to Real Property When entering into a farm lease, landowner and tenant should clearly define when 1261 improvements67 and additions to buildings become fixtures68 and, thereby, part of the property, or when they remain the tenant’s personal property. Generally, in U.S. law, a fixture is “a thing which, although originally a movable chattel,69 is by reason of its annexation to, or association in use with land, regarded as a part of the land.”70 An agricultural fixture,71 however, is “erected on leased land for use in agricultural pursuits, such as tilling the land or keeping farm animals. These fixtures may or may not be removable at the end of the lease.”72 By comparison, an improvement is “[a]n addition to . . . real estate, whether perma- 1262 nent or not . . . that increases its value or utility or that enhances its appearance.”73 In the agricultural lease context, it not only matters who ultimately owns the fixture or improvements, the landlord or the tenant, but “[t]he lease should specify who is responsible for maintaining and making repairs to the land and any structures that are included in the lease, such as fences, buildings, storage structures, roads and irrigation systems.”74 Additionally, for tax purposes, it is important to distinguish between a deductible repair, which is an expenditure that keeps the property in its ordinary, efficient, operating condition, or a capital improvement, which materially enhances the value of the property or

Basis / base / base / canone di base. Id. at 22. 64 Tauschhandel / troc, ou échange de bons procédés / trueque / baratto. 65 Barter, Black's Law Dictionary (10th ed. 2014). 66 Heleba, supra note 52 at 2. 67 Verbesserungen / améliorations / mejoras / miglioramenti. 68 Zubehör / aménagements / instalaciones / pertinenze. 69 bewegliche Sache / bien meuble / bienes muebles / bene mobile. 70 Fixture, Black's Law Dictionary (10th ed. 2014). 71 landwirtschaftliches Zubehör / aménagement agricole / instalación agrícola / pertinenze agricole. 72 Id. 73 Improvement, Black's Law Dictionary (10th ed. 2014). 74 Landowner’s Guide, supra note 40 at 14. 62

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Chapter 15 Food Law: Implementing Food Sovereignty substantially prolongs its useful life.”75 Thus, fixtures and improvements must be defined so that both the landlord and the tenant can comply with applicable tax provisions and take the deductions to which they are entitled. 1263 When lawyers set up agricultural leases for farming clients in small businesses, oftentimes the farmhouses, sheds, fences, stables and similar agricultural fixtures on the land are part of the real property. Any additions or improvements to the farmhouse that such clients erect or for which they pay will likely remain tied to the land and become part of the landowner’s property. In an effort to encourage one’s clients’ to improve the real estate, especially with the option to buy, and to protect their investments, lawyers should, therefore, specify that such improvements of the real property are deductible from the purchase price in the amount that they enhance the value of the property. These figures will likely be ascertainable for tax purposes and should also factor into deductions from the ultimate purchase price of the land, savings from which one’s clients may benefit. e) Soil and Land Preservation and Conservation Planning 1264

The lease is a platform from which clients can fuel a local, organic, and sustainable food economy. With detailed lease terms outlying sustainable farming, farmers can achieve goals of being independent land stewards.76 All of the above legal considerations support local food systems. Client goals for local food systems include farming to: 1.

provide fresh, high-quality, and wholesome food to consumers interested in promoting local sources; 2. move beyond organics to achieve sustainable food systems; 3. help develop viable livelihoods for farmers; 4. generate positive economic effects on local economies; 5. remedy social justice issues such as food deserts in urban areas; 6. support development in rural areas by routing revenue away from distributors to farmers; 7. lessen the environmental footprint by shortening the length of the supply chain needed to process and transport the food; 8. provide food in a more transparent method; 9. enhance food safety by reducing opportunities for contamination; and 10. allow consumers to personally connect with the farmers who produce their food.77 1265

Although the scope of these goals is broad, the methods of accomplishing them can be tailored to most clients through the lease. There are numerous ways of accomplishing these goals in the lease, such as conservation plans and statements of purpose, compliance checks, non-compliance fees, or deposit refunds to ensure compliance with these prescribed mandates. Incentives in the lease may also include such as rent reduction if the produce can be certified organic78 or free-range79 and cruelty-free80 (for chicken), or pastured81 (for cattle) by an independent (non-governmental) organization, such as

Id. at 15. Landverwalter / agriculteur / administra de la tierra / amministratore di beni fondiari. 77 Michael Roberts, Food Law in the United States 386 (Cambridge University Press, 2016). 78 bio-zertifiziert / certifié biologique / certificado como orgánico / certificato come prodotto biologico. 79 Freilandhaltung / plein air / de libre pastoreo / (certificazione di) allevamento all’aperto. 80 ohne Tierquälerei / sans cruauté / sin crueldad / (certificazione di allevamento) senza crudeltà [lit.]. 81 aus Weidehaltung / elevés à l’herbe / de libre pastoreo (para ganado) / sistema di crescita al pascolo, nutrito ad erba [lit.]. 75

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II. General Considerations for Food Lawyers in the Local Food Movement N.O.F.A.-Mass.82 In the lease, “[i]ncentives are the key between economics and better environmental policy. People have less incentive to protect the environment today when the social costs fall on others in the future.”83 However, “[a] producer chasing profits may not have incentive to clean up its emissions to the degree desired by the rest of society,”84 which may become especially true for small businesses with substantial financial responsibilities and risks, as many clients in this chapter’s context. Consequently, the farm lease will have a greater impact than the immediate clarification of the terms between landlord and tenants, because it “addresses how societ[y] can use economic incentives within public policy decisions to align private motives with social objectives to protect the environment.”85 1266

Practice Tip Given the fact that food law draws from a number of different traditional areas of the law, food law lawyers in the U.S. also serve as counsel to acquire funding for their clients. Farmers can for example, take advantage of a nonprofit structure as described in Chapter 11, “The Charitable Sector in the U.S.: Nonprofit Organizations,” by creating a subsidiary non-profit organization with a program to educate the community about conservation and environmental protection, which can include field trips on their premises, or creating educational materials, so that the clients could be eligible for some of the many grants offered by their state’s Department of Agriculture,86 Department of Conservation and Forestry or equivalents.87 Farmers may also be able to benefit from the U.S. Department of Agriculture’s (U.S.D.A.) resource and water soil conservation88 or the U.S. Environmental Protection Agency’s (E.P.A.)89 programs under the Clean Water Act.90

3. Business Structure Research shows that the federal Farm Bill’s conservation title tends to favor large 1267 agribusiness monocultures, input-intensive, and often unsustainable farming practices.91 How farmers structure their business entity can be the decisive difference between the benefits of limited liability and exposure to unnecessary legal and bureaucratic burdens. Although this chapter will not explain the basic types of U.S. forms of incorporation, it will analyze whether a limited liability company provides the business entity with a structure better suited to provide liability protection and shared management for the various individuals involved in local farming endeavors than does a cooperative or other business entity structure, while still keeping the ultimate goal of establishing food sovereignty in mind. Then, this chapter explores what the legal implications of farming clients’ business plans may be and which legal solutions exist in light of the local, state,

82 Northeast Organic Farming Association, N.O.F.A.-Mass., http://www.nofamass.org/programs/organic -certification. 83 Nick Hanley, Jason Shogen & Ben White, Environmental Economics in Theory and Practice 82 (2d ed.) (Palgrave Macmillan, 2007). 84 Id. 85 Id. 86 U.S.-Landwirtschaftsministerium / ministère de l’agriculture des Etats-Unis / departamento de agricultura de los Estados Unidos / Dipartimento dell’agricoltura degli Stati Uniti [lit.]. 87 Maine Department of Agriculture, Conservation and Forestry, Grants, http://maine.gov/d acf/about/grants/index.shtml. 88 Environmental Improvement, Natural Watershed, Stewardship, and Easement Programs, U.S.D.A.N.R.C.S., http://www.nrcs.usda.gov/wps/portal/nrcs/main/national/programs/. 89 U.S.-Umweltschutzbehörde / agence américaine de protection de l’environnement / agencia de protección del medio ambiente de los Estados Unidos / agenzia del governo federale degli Stati Uniti preposta alla protezione dell’ambiente. 90 Water Conservation Plan Guidelines, E.P.A., https://www3.epa.gov/watersense/pubs/guide.html. 91 Laurie Ristino & Gabriela Steier, Beyond Drought: A Clarion Call to Manage for Agriculture Systems Resilience and Ecological Health, U. Oregon School of Law, J. Env. L. & Litig. (2016).

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and federal regulatory impacts and policy on such clients’ farming endeavors that may involve agritourism. Different business entity structures have merits that lawyers can use to tailor the overall enterprise structure to their clients’ needs. Assuming a scenario where five clients wish to enter into a farming business together, and their interests align (and they signed waivers of conflict), the lawyer can set up entities for each of the operations tied to the farming business, as a Limited Liability Company (L.L.C.) and the land as a Non-Profit organization. Expanding the sample client constellation, however, one may consider the situation where the farming business has several components and each of the five clients will have varying relationships to those components. Those varying relationships may best be made explicit., rather than having each of the hypothetical five clients equally involved in each of the activities and entities. In any corporation, “managers must seek to maximize the return on investment. This obligation, perhaps a fiduciary obligation, may compel sale of the real estate and investment of the proceeds into higher yielding investments or development of the property for residential or commercial purposes,”92 giving rise to potential conflicts in contravention of the clients’ original intentions. Therefore, focusing the individual clients’ strengths and expertise on some aspects of the overall operations would help to structure their entities and concentrate their efforts in subdivisions. To focus the clients’ interests, the enterprise could be separated into entities of the agricultural business and the land itself. The land as an appreciable asset, could be jointly managed by all five clients equally, incorporated and registered as a non-profit 501(c) (3) (abbreviated as N.P.O.),93 as discussed in detail in Chapter 11, “The Charitable Sector in the U.S.: Nonprofit Organizations.” As such, the land N.P.O. could benefit from fundraising, grant applications, and tax-exemption.94 In that model, however, the farm must not transfer funds95 but the money raised could be used toward the ultimate option to purchase the farm as long as it is legally structured to do so. In essence, the land N.P.O. might be registered as non-profit public charity when it provides educational components and “the land . . . is ‘ecologically significant.’”96 If a client establishes comprehensive conservation plans, the client could benefit wildlife, biodiversity, and even offset some greenhouse gases through carbon sequestration, all to support the farm that is incorporated as an N.P.O. Correspondingly, the mission statement or “purpose clauses in their Articles of Incorporation must be unique and narrow in scope,”97 which can be achieved through clear and concrete land stewardship goals. Complementary to the proposed land N.P.O., the clients can structure the rest of the enterprise as an L.L.C., such as a corporation with educational and agritourism purposes, for instance. In order to focus the work and concentration of the clients, groups of one to three clients may be managing partners, with the remaining clients as partners. The “silent” members of the L.L.C., i.e. those not actively involved, may conduct book keeping, general oversight, or other support tasks to remain involved and to establish an internal system of checks and balances among the parties. 92 Jesse J. Richardson, Jr. & L. Leon Geyer, Ten Limitations to Ponder on Farm Limited Liability Companies, 4 Drake J. Agric. L. 197, 201 (1999). 93 gemeinnütziges Unternehmen / organisation à but non-lucratif / sin fines de lucro / ente o associazione senza scopo di lucro. 94 University of Vermont Extension, Guide to Financing the Community Supported Farm (undated). 95 Annette Higby, Legal Structure of the Farm Business 1–31 (undated). 96 Christopher Kaltsas, Harmony at the Farm: Rediscovering the "Community" in Community Supported Agriculture, 56 Wm. & Mary L. Rev. 961, 981 (2015). 97 Id. at 982.

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II. General Considerations for Food Lawyers in the Local Food Movement Regardless of the choice of business entity and structure, it is not possible to avoid all 1272 liability, such as offering the land as collateral for loans, and even personal liability for “acts of wrongdoing and environmental violations.”98 Commingling funds or mixing personal and business funds may pierce the corporate veil and make clients personally liable. Therefore, as with any other business purpose, food lawyers advise that “every farm operation should carry liability insurance sufficient to protect the primary input— land—from attachment in liability suits.”99 Finally, to complete this model it should be mentioned that farmers incorporate in two steps: (1) as tenants of the land to protect their good will, intellectual property, and labor, and subsequently (2) as landowners, in order to safeguard the real estate beyond the L.L.C.100 a) Agri-tourism As was noted in Chapter 10, “Application of International Maritime Law: Issues Unique to the United States,” the United States is known for having one of the most extensive regimes for tort liability in the world, both regarding liability of parties and damages. With that in mind, and the implementation of the non-profit regime described above, this section explores the benefits in agritourism in the farming industry and the methods by which one can guard against tort liability for agritourism in the U.S. Farmers as clients find that there are socio-economic, policy and environmental benefits in agri-business. Values other than economics are cited by local producers, such as honesty, integrity, passion and heart.101 Correspondingly, Joel Salatin, a small-scale farmer who became famous through documentaries, such as Food, Inc., finds that education and entertainment are an “important dimension of the future of American farming.”102 As such, one of the more common components to local farming is agritourism, defined as “the practice of touring agricultural areas to see farms and often to participate in farm activities,”103 which provides entertainment, education and an opportunity to integrate the local community into understanding farming. The U.S.D.A. prediction that the agritourism sector would grow, has proven to be true. According to the most recent Census of Agriculture data available, the number of agritourism farms reached 23,350, with organic farms being highly concentrated in the Northeast.104 Small diversified farms are ideally suited for agri-entertainment. Unlike the massive hog facility, corn operation or soy operation that produces raw materials for industry, the small farm offers a simpler human-scale of farming. The chief qualification for the rural landowner who expects to make a living from the land through agritourism is the desire and the ability to cater to tourists and meet their expectations of a farm visit.105 Several economic reasons also favor the increasingly popular agritourism on a small farm. First, the U.S.D.A.’s Economic Research Service (E.R.S.) has published data observ98 Jesse J. Richardson, Jr. & L. Leon Geyer, Ten Limitations to Ponder on Farm Limited Liability Companies, 4 Drake J. Agric. L. 197, 199–200 (1999) (internal citations omitted). 99 Id. 100 Id. 101 Farm to Table Restaurants – chapter 1, Maine Quarterly, available at http://mainequarterly.com/fo od/2/. 102 Katherine Adam, Entertainment Farming & Agri-Tourism, U.S.D.A.-N.C.A.T. (Mar. 2001), http://ww w.agmrc.org/media/cms/EntertainmentFarmingAgriTourismATTR_8681C2E7FDC64.pdf. 103 Agritourism, Merriam-Webster Online Dictionary, http://www.merriam-webster.com/dictiona ry/agritourism. 104 Faqir Singh Bagi & Richard Reeder, Farm Activities Associated with Rural Development Initiatives, U.S.D.A.-E.R.S. Report at 7, 10 (May 2012), http://www.ers.usda.gov/media/601606/err134_1_.pdf. 105 Id.

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Chapter 15 Food Law: Implementing Food Sovereignty ing that small farms offering some agritourism activities are generally “better educated [and] better advised.”106 Nationally, about 65 % of all rural small-scale farms engage is some form of agritourism,107 putting further market pressure on clients to compete in this growing market. In fact, the “U.S.D.A. estimates that farm-level value of local food sales totaled about $4.8 billion in 2008, or about 1.6 % of the U.S. market for agricultural products. An estimated total of 107,000 farms are engaged in local food systems, or about 5 % of all U.S. farms.”108 Thus, combining local agricultural practices with agritourism can help to ensure a competitive advantage for farmers. 1278 Second, the Congressional Research Service (C.R.S.) published a report prior to the enactment of the most recent Farm Bill,109 summarizing that local food systems along with agritourism have economic advantages110 by reducing food miles, i.e. the distances food travels from producer to consumer, thereby minimizing resource input.111 In fact, “[t]he vast majority of energy used in the U.S. food system (around 80 percent) goes to processing, packaging, transporting, storing, and preparing food” but local food systems offset many of these costs.112 Notably, consumers often “perceive locally sourced foods as fresher and higher in quality compared to some other readily available foods, and also believe that purchasing local foods helps support local farm economies and/or farmers that use certain production practices that are perceived to be more environmentally sustainable.”113 1279 Third, several federal policy measures encourage agritourism and farmers can build this this into their enterprise. The Farm Security Act of 2002, for instance, promotes “more value-added agricultural production,”114 thereby qualifying clients’ enterprises for some grants through the U.S.D.A. Rural Development Rural Business and Industry (B.&I.) Loan Guarantee Program, such as rewarding organic farming practices.115 Additionally, the Food, Conservation, and Energy Act of 2008 gives “special consideration to locally or regionally produced food projects.”116 Famously, the U.S.D.A.’s Know Your Farmer, Know Your Food (K.Y.F.2) multi-media on-line compass “aims to expand local and regional food systems, using Rural Development programs as well as other programs, such as those that support farmers markets.”117 Local foods may be viewed as similar to foods carrying geographical indications (G.I.);118 however, G.I. are often more strictly defined and also may be registered under administrative trademark struc-

106 Id.

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108 Renée Johnson, Randy Alison Aussenberg & Tadlock Cowan, The Role of Local Food Systems in U.S. Farm Policy, Congressional Research Service (Mar. 12, 2013), https://www.fas.org/sgp/crs/misc/R421 55.pdf. 109 Vorlage für Agrargesetz / projet de loi agricole / ley agraria / disegno di legge agraria. 110 Id. 111 Id. “Local and regional food systems generally refer to agricultural production and marketing that occurs within a certain geographic proximity (between farmer and consumer) or that involves certain social or supply chain characteristics in producing food (such as small family farms, urban gardens, or farms using sustainable agriculture practices.” 112 Reducing Food Miles, A.T.T.R.A., https://attra.ncat.org/attra-pub/farm_energy/food_miles.html. 113 Johnson et. al., supra note 108 at 47. 114 Id. at 1. 115 Jim Ochterski and Monika Roth, Getting Started in Agritourism – chapter 5, 1–19 (undated), http://www.uvm.edu/tourismresearch/agritourism/saregrant/getting_started_agritourism_cornell ext.pdf. 116 Bagi & Reeder, supra note 104 at 2. 117 Id. 118 geographische Herkunftsnachweise / indications géographiques / indicaciones geográficas / indicazioni geografiche [lit.], indicazioni di origine.

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II. General Considerations for Food Lawyers in the Local Food Movement tures governed by the U.S. Patent and Trademark Office (P.T.O.).119 With the proper labeling of specialty food and local indicators, clients can tap into the benefits provided by the P.T.O.’s framework. Finally, agritourism can insulate itself from tort liability through careful business 1280 structuring, comprehensive insurance, and extensive waivers of liability.120 As mentioned above, forming an L.L.C. can help clients manage some of the risk, whereby “contractual obligations and liabilities are incurred by the L.L.C., not by the farm . . . [so that] moneys owed to someone who successfully wins a lawsuit against the agritourism operation extend only to the business assets as part of the L.L.C.”121 However, “[a]n agritourism operation may require a separate policy or a rider on [one’s] existing farm policy.”122 Through liability waivers, farmers can also further protect themselves because their customers, who are characterized by law as invitees on the farm premises, relinquish their right to sue. Additional safeguards to reasonably prevent harm to these invitees may be “defined farm visitor area with signage, . . . directional signs that clearly show a visitor entrance, visitor parking, and other public areas.”123 In addition to legal insulation, these separations of the land will also reduce the number of potential claims because they practically prevent attentive visitors from sustaining injuries or damages in the first place. Therefore, all other zones of the farm should be posted to warn against unauthorized or restricted entry.124 In summary, the agritourism benefits for small-scale farming range from financial incentives through government programs, competitiveness, and resilience. b) Local Land Use Regulations, State Licensing, and Permit Requirements In some circumstances, local food sovereignty ordinances and other local and state 1281 regulations are triggered through the farmer’s operation of public accommodations and their agritourism endeavors, which further complicate matters for lawyers advising these clients. An example from the state of Maine is instructive in illustrating how federal, state, and local laws interact in this context. 1282

Example In 2011, the town of Blue Hill, Maine passed the so-called “Local Food and Community Self-Governance Ordinance” (hereinafter Ordinance),125 which sets forth that “[p]roducers or processors of local foods in the Town of Blue Hill are exempt from licensure and inspection provided that the transaction is only between the producer or processor and a patron when the food is sold for home consumption.”126 Although the Ordinance may be misinterpreted to read that some clients in Maine would consequently be exempt from state and federal licensing requirements, the Ordinance actually has no practical effect on most farmers’ enterprise because it is preempted by state and federal law that occupy the field.

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/ clauses exonératoires de responsabilité / condonación de obligaciones / (dichiarazioni) liberatorie di responsabilità. 121 Adam, supra note 102 at 14. 122 Id. 123 Jim Ochterski and Monika Roth, Getting Started in Agritourism–chapter 5, 1–19, 13 (undated), http://www.uvm.edu/tourismresearch/agritourism/saregrant/getting_started_agritourism_cornell ext.pdf. 124 Id. 125 Verordnung über lokale Lebensmittel und kommunale Selbstbestimmung / arrêté sur les produits alimentaires locaux et l’autogestion de la communauté / ordenanza municipal sobre alimentos locales y autonomía / ordinanza sull’autogoverno del cibo locale e della comunità. 126 State v. Brown, 95 A. 3d 82, 91 (2014) (citing Ordinance at § 5.1).

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Chapter 15 Food Law: Implementing Food Sovereignty The Preemption Doctrine127 under the Supremacy Clause128 of the U.S. Constitution,129 enables a federal statute to invalidate a state action or a state action to prevent the enforceability of a local action under certain conditions. This means that local ordinances are preempted and cannot be enforced as valid local laws if a state preempts the rule-making in question. Several spheres of preemption rules exist among federal, state and local or municipal laws or ordinances. Some competencies are clearly delegated to the U.S. Congress in Article I, § 8 of the U.S. Constitution. Other areas of competency are reserved to the states through Amendment X. But there are also shared competencies and in those areas, if a conflict in competency between the federal law and state law occurs, and the federal government has acted first, it is said to “pre-empt” state law. In a similar manner, federal or state law can pre-empt local law. As the Supreme Judicial Court of Maine held in State v. Brown, a case involving a complaint against a dairy farmer for violations of state licensing and labeling laws for milk products, the test to determine whether state or federal law preempts the Ordinance is whether “the State has already ‘occupied the field’ with respect to licensing of milk distributors and food establishments.”130 1284 It follows that Maine’s legislature has occupied the field by passing 7 M.R.S.A. § 1 et seq. to regulate agriculture and animals, thereby preempting the Ordinance and rendering it irrelevant to our clients’ enterprise. Specifically, Parts 2 and 3 of Title 7, control licensing requirements to sell and distribute agricultural products. Consequently, Maine’s Title 7 pre-empts the Ordinance and invalidates the proposition that some farmers are exempt from licensing requirements. Among the fifty U.S. states, there are many differences as to the specific food codes and food safety regulations in place. Moreover, federal law may or may not occupy the field and thereby pre-empt state laws and regulations–and sometimes completely invalidate local ordinances. 1283

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The “farm-to-table” pathway has been coined in the food movement and is being complicated by an intricate set of permitting, licensing, and other regulatory compliance requirements. The following explanation is limited to the common situation when the “table” is located on the farm where the food is produced, i.e. when farms harbor on-site eating or food processing establishments. In the farm to table restaurant, the responsibility to prevent foodborne diseases is the farmer’s and relates to the food sourcing and processing every step of the way. For example, according to Maine’s Food Code131 and revisiting the case study from the previous section, “foodborne diseases cause approximately 48 million illnesses, 128,000 hospitalizations, and 3,000 deaths in the United States each year” and “[t]he annual cost of foodborne illness in terms of pain and suffering, reduced productivity, and medical costs are estimated to be $10–$83 billion.”132 Research has shown that the barriers in small restaurants to comply with all of the safety precautions are “lack of trust in food safety legislation and enforcement officers; a lack of

127 Vorrangprinzip / primauté / principio según el cual las leyes federales tienen prioridad sobra las leyes estatales / principio della “priorità legislativa” in riferimento alle leggi federali statunitensi nei confronti delle leggi statali. 128 Vorrang-Klausel / clause de suprématie / cláusula de supremacía / clausola di supremazia. 129 U.S. Const. art. VI, § 3, cl. 2. 130 Id. (internal citations omitted). 131 Lebensmittelgesetz / code alimentaire / codigo alimentario / codice alimentare. 132 State of Maine Food Code (2013) at v.

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II. General Considerations for Food Lawyers in the Local Food Movement motivation in dealing with food safety legislation; and a lack of knowledge and understanding.”133 More often than not, the clients’ Farm-To-Table Restaurant compliance requirements 1286 with local and state regulations are extensive and mainly involve the state’s Food Code and the federal Food Safety Modernization Act (F.S.M.A.).134 F.S.M.A.’s Produce Rule,135 inter alia, may apply to farmers but the degree of the rule’s application depends on the farmer’s average annual sales.136 Additionally, the farmer will likely have to comply with the Preventive Controls Rule,137 because the farmer will operate a farm and process foods.138 Both of these rules will, at least initially, only apply to the farmers as a “small business”139 with slightly relaxed requirements. 1287

Practice Tip Several guides for the “industry” are available for farmers that break down special provisions and explain how F.S.M.A should be applied:140 • • • • •

Sanitary Transportation of Human and Animal Food FDA-2013-N-0013 (April 2016); Accredited Third-Party Certification FDA-2011-N-0146 (November 2015); Standards for the Growing, Harvesting, Packing, and Holding of Produce for Human Consumption FDA-2011-N-0921 (November 2015); Current Good Manufacturing Practice and Hazard Analysis and Risk-Based Preventive Controls for Human Food FDA-2011-N-0920 (September 2015); and Record Availability Requirements: Establishment, Maintenance, and Availability of Records FDA-2002-N-0153 (Formerly Docket No. 2002N-0277) (April 2014).

In conclusion, farmers may not be able to provide meat, eggs or dairy, depending on 1288 the respective state’s food codes, from their own farming activity due to facility licensing and inspection requirements. a) Small Farm Financing Various financing models, such as direct consumer financing, traditional farm loans, 1289 Community Supported Agriculture (C.S.A.),141 or private investor funding, create different legal impacts on the client’s operations. This section highlights some legal considerations in funding for the local farmer in the U.S.

133 Charlotte Yapp and Robyn Fairman, Factors affecting food safety compliance within small and medium-sized enterprises: implications for regulatory and enforcement strategies, 17 Food Control 42– 51 (Elsevier 2006), available at http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.468.7277&rep=r ep1&type=pdf. 134 Lebensmittelsicherheits- und Modernisierungsgesetz / loi de modernisation de la sécurité sanitaire des aliments / ley sobre la modernización de la seguridad alimentaria / legge statunitense di modernizzazione della sicurezza alimentare. 135 Final Rule on Produce Safety, F.D.A., F.S.M.A. (undated), http://www.fda.gov/Food/GuidanceRegulat ion/FSMA/ucm334114.htm. 136 National Sustainable Agriculture Coalition, F.S.M.A. (Nov. 2014). 137 Regelung zu Vorsorgekontrollen / règle des contrôles preventifs / reglas preventativas de control / regolamento sui controlli preventivi (degli alimenti destinati al consumo umano). 138 Final Rule for Preventive Controls for Human Food, F.D.A., F.S.M.A. (undated), http://www.fda.gov/F ood/GuidanceRegulation/FSMA/ucm334115.htm. 139 Kleingewerbe / petite enterprise / pequeña empresa / piccola impresa. 140 Rules & Guidance for Industry, F.D.A., F.S.M.A. http://www.fda.gov/Food/GuidanceRegulation/FSM A/ucm253380.htm. 141 Hofdarlehen, kommunal geförderte Landwirtschaft / prêt agricole, agriculture soutenue par la communauté / agricultura con apoyo comunitario / agricoltura sostenuta dalla comunità locale (associazione di mutuo impegno tra una azienda agricola e una comunità di sostenitori che implica un legame diretto tra produttore e sostenitori/consumatori).

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Chapter 15 Food Law: Implementing Food Sovereignty Direct consumer financing, traditional farm loans, Community Supported Agriculture (C.S.A.), or private investor funding, create different legal impacts on any client’s operations. First, farmers “need to identify their annual operating expenses and proposed multi-year capital investments separately in order to evaluate the best financing option.”142 Farming clients “may need a large amount of borrowed cash for the first year of operation and they will likely require a certain amount of cash every year at the beginning of the season.”143 Additionally, small-scale farmers will need to pay all operating expenses within the year and should use that period’s farm income to do so.144 1291 Regardless of the financing options that farmers choose, they “make sure they have the time and resources to properly execute and administer the process from start to finish.”145 In this process, farmers typically must rely upon lawyers to establish financing in a manner that preserves their clients’ autonomy at all times and reduces exposure to takeover by large companies. This danger is a real one: “[a]ccording to Farm Aid, every week approximately 330 farmers leave their land for good,” and “[m]any farm families are constantly on the verge of financial ruin.”146 Financial structures can, for example include a crowdfunding. “There are five types of crowdfunding: financial return equity, debt, royalty, non-financial reward, and donation.”147 To develop crowdfunding, a farmer may create an item of value produced from a local farm, recipe collection or heirloom pumpkin or tomato picture collection to give “back” to investors as a reward. In this so-called “donation-based crowdfunding,” which “is a way to source money for a project by asking a large number of contributors to donate a small amount to it,”148 a considerable amount of money can be raised, while the advertisements are provided by grassroots movements149 or through social media. “In return, backers may receive token rewards that increase in prestige as the size of the donation increases; for small sums, the funder may receive nothing at all. Sometimes referred to as rewards crowdfunding, the tokens150 for donations may include pre-sales of an item to be produced with funds raised.”151 1292 Other avenues of securing financing are the down payment loan and the principal loan. The Maine Farmland Trust (M.F.T.), for instance, offers down payment loans “for some or all of the down payment needed to secure a loan from a commercial bank, Farm Credit or Farm Service Agency”152 and principal loans, “in which M.F.T. provides a firstposition loan to help a borrower purchase farm property.”153 Moreover, “M.F.T. also provides [free] business planning services for applicants.”154 Maine also has a so-called 1290

142 University of Vermont Centre for Sustainable Agriculture, Guide to Financing the Community Supported Farm at iii (undated). 143 Id. 144 Id. 145 Id. 146 Michael Snyder, The Family Farm Is Being Systematically Wiped Out Of Existence In America, http://t heeconomiccollapseblog.com/archives/the-family-farm-is-being-systematically-wiped-out-of-existence-i n-america (last accessed April 27, 2016). 147 Crowdfunding to Fund the Farm, AgConnect, (undated), http://agconnectpa.org/news/crowdfundi ng-to-fund-the-farm/. 148 Investopaedia, Donation-based Crowd Funding, http://www.investopedia.com/terms/d/donationbase d-crowd-funding.asp?o=40186&l=dir&qsrc=999&qo=investopediaSiteSearch. 149 Basisbewegungen / mouvements populaires / movimiento popular / movimenti di base, movimenti dal basso. 150 Wertmarken / jetons / fichas / gettoni. 151 Id. 152 Maine Farmland Trust, Farmland Access Loan Program, https://www.mainefarmlandtrust.org/farmla nd-access-new/farmland-access-loans. 153 Id. 154 Id.

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II. General Considerations for Food Lawyers in the Local Food Movement “Potato Marketing Improvement Fund,” codified in 01–001 CMR Ch. 31, § B. It can be used for farms that have more than $50,000 in revenue and may be applied toward improvements, equipment purchases and other farm development initiatives. State financing options, which vary from state to state, enable farmers to diversify the sources of loans. As a special financing case, C.S.A.’s are “farm[s] whose financial and social support comes from individuals or entities in surrounding communities,” with common interests rather than geographic ties that make up communities.155 Correspondingly, the community financing option “is financial capital exchanged directly between farmers, food processors and people or other entities within their communities,” whereby “[c]ommunity [c]apital includes human, environmental and financial capital.”156 In other words, this method accounts for many traditionally externalized costs, such as human labor costs, environmental degradation, or societal values. C.S.A. is modelled on the notion that “Where there is a Community Supported Farm, there also can be a Farm Supported Community.”157 Two possible methods of selling C.S.A. shares in some clients’ enterprises would be membership or subscription bases or, in the alternative, multi-year C.S.A. shares. Membership or subscription C.S.A. shares are structured like a club membership that entitles the member to a certain amount of food product per month or access to specialty products.158 The other option of the multi-year C.S.A. share would allow a customer to pre-buy food produced during more than one growing seasons. These shares can be bought for a substantial amount of money, for example one thousand to ten thousand dollars or more, simply due to the extended timeframe for producing these shares’ worth of food and the fact that the volume of food purchased can be much higher than one would consume in a single three-month growing season.159 Through these investments, customers have a real stake in the farmer’s enterprise. A detriment of that stake is that customers then feel entitled pressure farmers’ productivity and punctuality of deliveries. A benefit, however, is that invested customers advertise by word-of-mouth and through volunteering events for special C.S.A. shareholders. In the legal structuring of farm finance, many types of investment contracts and even C.S.A. shares may be considered securities and would, therefore, be regulated under the Securities Act of 1933 and the Securities Exchange Act of 1934.160 C.S.A. shares are generally only securities if they are a vehicle for earning shareholder profit, rather than the prepayment of food.161 General partnership interests, or active members and managers of an L.L.C. carry the right to participate in management. They differ significantly from limited, investor partners, or passive members of an L.L.C., whose interests are more likely to be considered securities. The more active a limited partner in the operation, the less the chance is that the business transactions with the entity will meet the legal definition of security.162 Direct consumer financing, especially if the loans are non-secured, for instance, might qualify as securities and might be “monitored by government regulatory agencies for their compliance with consumer protection regulations such as the Truth in Lending 155 University of Vermont Centre for Sustainable Agriculture, Guide to Financing the Community Supported Farm at ii. 156 Id. 157 Id. 158 Id. at 42. 159 Id. 160 Id. at 2. 161 Id. at 3. 162 Id. at 2.

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Chapter 15 Food Law: Implementing Food Sovereignty Act.”163 A farmer should consult a tax attorney for assistance with farm business management planning with the goal to set up a financial framework for the enterprise and to develop legally-advantageous farm finance strategies. For more explanation of income tax, see Chapter 9, “Income Taxation and Audits.” 1298 Conversely, traditional farm loans, such as the ones offered through the U.S.D.A., take various forms, as summarized in the table below: Table 1: U.S.D.A.-F.S.A. Guide to F.S.A. Farm Loans.164 Loan Type Guaranteed Loan Program

Direct Loan Program

Land Contract Guarantee Program 1299

Short Description Guaranteed loans are made and serviced by commercial lenders, such as banks, the Farm Credit System, or credit unions. F.S.A. guarantees the lender’s loan against loss, up to 95 percent. F.S.A. has the responsibility of approving all eligible loan guarantees and providing oversight of the lender’s activities. Direct loans are made and serviced by F.S.A. using Government money. F.S.A. has the responsibility of providing credit counseling and supervision to its direct borrowers by helping applicants evaluate the adequacy of their real estate and facilities, machinery and equipment, financial and production management, and goals. Land contract guarantees are available to the owner of a farm or ranch who wishes to sell real estate through a land contract to a beginning or socially disadvantaged farmer or rancher.

One of the drawbacks of traditional financing is the potential liability for small-scale farming clients if loans become taxable income. A loan becomes income if it is forgiven because the loan amount is no longer “loan proceeds” under the Tax Code. Farmers must, in that situation, file a Form 1099, which carries various complications with it, such as timing.165 Second, some loans might appear to the Internal Revenue Service (I.R.S.)166 to be sales. For instance, the I.R.S. may determine “that some ‘loan’ proceeds are really sales proceeds and therefore taxable.”167 It is crucial to distinguish how the “transaction is structured” from “how the transaction actually plays out. In general, courts look to indicators such as whether legal title passes, how the parties treat the transaction and the parties’ intent.”168 Thus, in the U.S. legal system, one must not only be aware of how legislation governs the situation, but also how the local and regional courts interpret statutes and administrative regulations.

163 Business Dictionary, Consumer Loan, http://www.businessdictionary.com/definition/consumer-loan .html#ixzz472hnqXZJ. 164 Your Guide to FSA Farm Loans, U.S.D.A.-F.S.A, http://www.fsa.usda.gov/Internet/FSA_File/fsa_br_0 1_web_booklet.pdf. 165 Robert Wood, When "Loans" Are Taxed As Income, Forbes (Sep. 26, 2011), http://www.forbes.com/s ites/robertwood/2011/09/26/when-loans-are-taxed-as-income/#2ad0900d354d. 166 Bundessteuerbehörde / administration fiscale / administración federal tributaria / amministrazione tributaria federale, agenzia delle entrate statunitense. 167 Id. 168 Id.

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III. Conclusion b) Intellectual Property Issues In addition to the primary issues that are presented and analyzed in this chapter, it is 1300 important that a farmer consider issues of intellectual property, just as industrial farmer does. For explanation of intellectual property in the U.S., see Chapter 8, infra, “Intellectual Property Protection and Enforcement in the U.S.” The following issues are some of the more common ones to include intellectual property: the Food Safety and Modernization Act (F.S.M.A.), organic certification, food and nutrition labeling, special food manufacture, record keeping, warranties, and food and water testing. Some of these issues are not time-sensitive, as described below, but because each of them could affect the local farmer’s business plan, they must be considered. Farmers can protect their enterprise’s name and some of their signature fruit, flower, 1301 or vegetable breeds through trademarks.169 Labels on cottage foods, tents or farmer’s market stands can also be trademarks. A local farmer’s corporate identity could be protected by copyright law.170 Local farmers’ cookbooks, local recipe collections, menus, websites including photos of their produce, value added goods, farm or other aspects unique to their enterprise, brochures or other advertising materials that are creative and original, all may obtain copyright protection. Due diligence, however, would require prior searches to ensure that those copyrights and trademarks suggested are not already in use.171 Various works of the parties may also be patentable, such as holiday wreaths, original designs of scarecrows, or some plant hybrids and seedlings of their special breeds and other plants. Notably, however, patents may be cost-intensive and only create a negative right, i.e. preventing infringement, so that the parties may not chose to file for any patents unless they make business sense.

III. Conclusion As pointed out in the introduction to this chapter, in the U.S. “food law,” is not a sin- 1302 gle body of law. Food law spans across environmental, administrative, corporate, intellectual property, and international law. In addition, given the relatively small size of the clients in food law, a lawyer might be called upon as counsel to help plan and establish finance and other business planning, and not just reiterate to the client what federal, state and local statutes, regulations and ordinances state. Indeed Comment 2 to the U.S. Model Rule of Professional Conduct 2.1 states that “in rendering advice, a lawyer may consider factors other than the law such as moral, economic, and social factors relevant to the client's situation.” The local farmer’s situation will require the lawyer as counsellor to advise on most if not all of these factors.

169 Schutzmarken

ri).

/ marques déposées / marcas registradas / marchi (per la tutela di prodotti agroalimenta-

170 Tettlebaum et al., Farm and Food Law: A Legal Guide for Lawyers in the Legal Services Food Hub 1–93, 79 (undated). 171 Id. at 80.

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Index This index provides a list of terms and the paragraph numbers in which they are found. If a term is the subject line of a title or subtitle of a chapter, it is not included here. If an idiomatic English term was translated literally, the literal translation is not included in the index. The reader may wish to review the table of contents as well as reviewing this index when searching for a word or phrase. As an aid to the reader, terms in English, French, German, Italian, Latin and Spanish are included. Abhilfe nach Equity-Recht 175 Ablaufplan für das Einreichen von Schriftsätzen 372 abode – permanent 781 – service 239 abogado Defensor 125 abogado transaccional 133 abschließende Verfügung 371 accord de confidentialité 409 accordo di riservatezza 409 act of God 570, 910 Act to Prevent Pollution from Ships 907, 923 actionability 651–688 actions récursoires 260 acuerdo de arbitraje 456 acuerdo de confidencialidad 409 Administrative Appeals Office 1044 administrative law judge 1225 Administrative Procedure Act 1042, 1203, 1234 admiralty 824 Admiralty Extension Act 830 advocacy 72, 125–133 advocate 125 affidavit 244, 1115 affirmative defenses 255 Agriculture, U.S. Department of 1235, 1266, 1275–1279 agritourism 1267–1281 agrobiodiversity 1237 Air Pollution Control Act, Pennsylvania 1200 allisions 884, 892 alternative dispute resolution 134, 272, 455 American Law Institute 145 amount in controversy 172–177 analogical reasoning 397, 440 Anti-Dumping Convention 918–920 anwaltliche Schweigepflicht 279 Anwaltsgebühren 72 apelación 25–27, 86, 371–375 apelado 373, 424 apelante 373, 421 appeal 25–27, 86, 371–375 – interlocutory 374 appel 25–27, 86, 371–375

appelant 373, 421 appellant 373, 421 appellante 373, 421 appellate briefs 421–424 appellate court 156, 372, 421 appellato 373, 424 appellee 373, 424 appello 25–27, 86, 371–375 arbitration 136, 272, 453–512, 838, 850, 865–878 Army Corps of Engineers 1203 arraignment 1123 Attorney General 62, 960, 1040, 1111, 1183 Attorney Work Product Doctrine 409 attorney-client privilege 279 Audit Technique Guidelines 800 Australia 93, 144, 836 Ausweisung 1058 authority, persuasive 429, 468 Automated Biometrics Supported Border Control 1056 Ballast Water Management Act 922 baratto 1259 barreau 106 bartering 1249, 1259 baux ruraux 1248 Bergungsvertrag 892 Berufung 25–27, 86, 371–375 Berufungsgericht 90, 156, 421, 753, 814, 1044 Betriebs- und Geschäftsgeheimnis 620–642, 738 Bezirke 157 bill of lading 859–865 Bill of Rights 337 bloc de signature 216, 392 bloque de firma 216, 392 Board of Immigration Appeals 1040 boilerplate 560–599, 880 breach of contract 142, 219, 245, 334, 407, 429, 440–447, 570, 606, 763 brief – dispositive 413 – initial 425–450 – opposition 389–450 – reply 389–439 burden of proof 896, 899, 1133, 1136, 1217

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Index Bürgerliches Gesetzbuch 54 Business Judgment Rule 1020–1021 C.E.R.C.L.A. (Comprehensive Environmental Response, Compensation and Liability Act) 163, 908, 1229–1231 cabotage laws 857 Canada 836, 1072 (note 117) cancellation proceedings 737 caption 210 cash rent 1255 cease-and-desist 741 certified public accountant 793, 805 chambers 161, 386, 391 chancellor 142, 1186 charitable organizations 947–1016 charitable trust 957–1016 charter 822 – bareboat 883 – demise 883 – party 490, 870, 881–890 – slot 888 – space 889 – voyage 887 charterer 646 (note 7), 849, 886 checks and balances see Constitution, U.S. choice of forum 107, 581, 812, 865, 870–878, 899 choice of law 53, 107, 202–206, 428, 578, 865, 870–876, 898–899 citación judicial 310, 318, 387 citation 310, 318, 387 citazione in giudizio 310, 318, 387 claim preclusion 379 Clarity, Principle of 644–687 class actions 151, 229–232 clause attributive de jurisdiction 190 clause de divisibilité 565 clause de Suprématie 104, 1283 clausola di salvaguardia 565 clausola di scelta del foro 190 clausola di supremazia 104, 1283 Clean Air Act 924, 1173, 1187, 1200, 1212, 1227, 1234 Clean Streams Law 1200, 1219 Clean Water Act 906–909, 1173, 1187, 1200, 1212, 1234 cláusula de selección de foro 190 cláusula de supremacía 104, 1283 cláusula de separabilidad 565 Code civil 54, 1161 (note 19) code de déontologie judiciaire 87 Code of Federal Regulations 832, 946, 1044, 1095, 1165, 1179, 1203

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codice civile 54 codice deontologico forense 126 codice di condotta giudiziaria 87 código civil 54 código modelo de conducta judicial 87 collateral estoppel 380 commerce clause see Constitution, U.S. Commercial Instruments and Maritime Lien Act 891 Commerciality Doctrine 967, 970 common law 69, 73–91 – English 75, 91, 823 common property 1198–1199 comparative law 17–21, 36–149, 689 comparativism 21, 40, 149 compartecipazione 1104 conditions générales 644 condizioni generali 644 confidentiality agreement 409, 522 conflicto de leyes 47 conflicts of law 38, 47 conflits de lois 47 conflitto di leggi 47 Congress 105, 155, 156, 495–499, 639–641, 694, 721, 760, 829, 946, 977, 1014, 1079, 1084, 1100, 1170, 1200, 1224, 1238 consideration 142, 532 (note 7), 617–622, 974 conspiración 1104 conspiracy 34, 1104 Constituion, U.S. – federal courts 156 Constitution, Pennsylvania 1199 Constitution, U.S. – advisory opinions by a court 1207-1210 – checks and balances 1271 – commerce clause 1097, 1176, 1198, 1246 – enumerated powers 1170 – federalism, cooperative 1170 – incorporation doctrine 97 – property clause 1198 – standing 1207 – stare decisis doctrine 82–84 – supremacy clause 104, 779, 1198, 1283 contraprestación 532 (note 7), 617–622, 974 contrepartie 532 (note 7), 617–622, 974 contropartita di scambio 617–622, 974 convention d’arbitrage 456 Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea 868 Convention on Pollution of the Seas by the Dumping of Waste and Other Matters 918 Copyright Act of 1976 695 copyrights 702–705, 721, 742–748, 1301

Index corte de apelación 90, 156, 421, 753, 814, 1044 corte d’appello 90, 156, 421, 753, 814, 1044 corte suprema 156, 343, 1044, 1052 cour d’appel 90, 156, 372, 421, 753, 814, 1044 cour suprême 156, 343, 1044, 1052 Court, U.S. – Tax 807–819, 967 criminal – aliens 1048 – jurisdiction 904, 1096–1099 – laws 904 – Rules of Procedure 1112 – statutes 904, 1120, 1190 cross-examination of witnesses 352, 1137 crowdfunding 1291 cruise ship 879 custodia 301 custodia legis 892 customary law 75, 80 damages – compensatory 143, 764 – liquidated 647, 651, 657, 662 – punitive 99, 143, 640, 896, 913 – statutory 744–746 danni punitivi 99, 143, 640 data security 1219 Datenschutz 1219 daños punitivos 99, 143, 640 Death on the High Seas Act 839, 900 debris 918–920 declaración jurada 244, 1115 Defend Trade Secrets Act 606, 639–643, 738 défenseur 125 defensive issue preclusion 381 délai de prescription 266 delegation 574–586 demurrage 894 Department of State 319, 958, 1037, 1071 deposition 274, 292, 309–335, 407, 411, 815, 1220 derecho internacional privado 47 dichiarazione giurata 244, 1115 Digest of Justinian 822 diritto internazionale privato 47 disclosure – automatic 273, 283–294 – initial 283–291 discoverability 495 dispute resolution 71, 75, 92, 134, 463, 499, 1157–1160, 1249 diversity – complete 173–174 – jurisdiction 20, 114, 169, 172–188, 196, 203, 835

– of citizenship 110–113 doble nacionalidad 1033 docket number 210, 392–393, 443, 445, 447 Doctrine of Laches 941, 943 domaine public 702 domicile 174, 781 dominio público 702 dommages et intérêts punitifs 99, 143, 640 doppelte Staatsangehörigkeit 1033 doppia cittadinanza 1033 double nationalité 1033 droit de la responsabilité civile délictuelle 140 droit des contrats 140 droit des obligations 77 droit international privé 47 droit international public 37 droit maritime 824, 835, 932 dual nationality 1033 due diligence 860–861, 908, 1301 due process clause 82, 189 Economic Enterprise Zone 904, 906–909, 926 economic zone 929 effet direct 1199 eidesstattliche Erklärung 244, 1115 Einschreiben mit Rückschein 240 einstweilige Verfügung 634 electioneering 975, 981–982, 1000, 1012–1013 electronically stored information 275, 282 emplazamiento 233, 387, 403 Endangered Species Act 1234 English Common Law see common law, English enrichissement sans cause 54 enriquecimiento injusto 54 Entschädigung mit Strafcharakter 99, 143, 640 Environmental Impact Assessment 1216–1217 Environmental Impact Statement 1216–1217 Environmental Protection Agency 1172–1173, 1176–1180, 1188, 1200–1233 equity 340, 828, 943, 1168 Erie Doctrine 203 espulsione 1058 Etat du for 172 ex parte 642, 764, 851, 1112 excess benefit 974 exclusion 1058 executive actions 1044 executive order 1044, 1060, 1206 exhibits 292, 413, 418–422, 434 exordium 514–521 Fahrlässigkeit 429

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Index fair use 706, 748–752, 762 Federal Arbitration Act 454, 878 Federal Bureau of Investigation 1106 Federal Food, Drug and Cosmetics Act 1233 Federal Insecticide, Fungicide, and Rodenticide Act 1234 Federal Rules of Appellate Procedure 161, 421 Federal Rules of Civil Procedure 151–385, 441, 467, 815, 843, 852, 876, 932, 940, 1112 federalism 102–104, 777, 779, 842–848, 1096, 1169–1232, 1244 fees, attorney 117 felony merger 140 Fish and Wildlife Service, U.S. 1203 fixtures 1261 Food and Drug Administration, U.S. 1235 food code 1285 force majeure 570 foreman 359, 361 formalism 49, 53 forum – non conveniens 197, 200, 873, 877, 879, 903 – selection 190 – shopping 107, 112 forza maggiore 570 Frachtbrief 859 fraud 1096, 1100–1102 Freedom of Information Act 1061, 1219 fuerza mayor 570 functionalism in comparative law 21, 23, 49–59, 60, 149 garde 301 Gegenforderungen 260 Gegenleistung 532 (note 7), 617–622, 974 Gegenpartei 373, 421 Gemeinfreiheit 702 Generally Accepted Accounting Principles 793 genericide 731 (note 48) genetically modified organisms 1233 Gerichtsstandsvereinbarung 190 Geschäftsbedingungen 644 Gewahrsam 301 global warming 1237 good will 817 grassroots – lobbying 975 – movement 1291 Great Depression 787 Great Lakes 853, 921 green card lottery 1072 greenhouse gas 1237, 1270 Hague Rules 833, 855–867

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Hague-Visby Rules 855, 868 Harter Act 856, 858, 866 Himalaya Clause 859, 869 höhere Gewalt 570 honoraires d’avocats 72 honorarios de abogado 72 Immigration and Nationality Act 1029, 1044 Immigration Court 1040, 1047–1052, 1091 in privity 379 incontestability 729 incorporation doctrine see Constitution, U.S. Incoterms 866 ingiustificato arricchimento 54 injonction 214, 220, 224, 226, 638 injunction – permanent 226–227, 638 – preliminary 224–227, 634–638 inter parties review 766 interim relief 633 international law 37–38, 820, 833–834, 905, 930, 1233, 1302 internationales Privatrecht 47 interrogatory 295 interstate commerce see Constituion, U.S., commerce clause intimé 373, 424 Jones Act 836, 848, 853, 857, 886, 896, 901 judicial notice 353 Judiciary Act of 1789 156, 829, 842, 844 jury trial 94–96 jus cogens 834, 930 Klageschrift 211, 270, 392 Kollisionsrecht 47 Körperverletzung 255 Kreuzverhör 352, 1137 Länder 28, 103 landlord 91, 486, 1248, 1251–1265 Lanham Act of 1946 723 latent conditions 883 latent defects 861 Laws of Oleron 822 legge sulla prescrizione 266 lettre recommandée avec accusé de réception 240 lexus 830, 845 ley de prescripción 266 liability – joint and several 177, 263 – strict 144, 758, 896, 908, 916, 926, 1230 lobbying 969, 975–980, 1013 Long Arm Statute 192–193 longshore and harbor workers 832, 899

Index longshoremen 886 M.A.R.P.O.L. (International Convention for the Prevention of Marine Pollution from Ships) 906–908, 923–924 Maritime Law Association 867, 928, 930 Maritime Lien Conventions 892 Markman hearing 756 marques déposées 692, 721, 1301 mediation 134–138, 272 medida cautelar 214, 220, 224, 226, 638 minimum contacts test 193 Miranda rights 1118 Mittäterschaft 1104 Model Code of Judicial Conduct 87 monocultures 1237, 1267 mortgage 892–893 Musterrichtlinie für Richter 87 mutatis mutandis 656, 658, 685 Mutual Benefit Organizations 951, 1016 National Environmental Policy Act 1216 Natural Resource Damage Assessment 911 natural resources 911, 1198 negligence 204, 429, 886, 896, 899–900, 910, 913, 931, 1230 negligencia 429 negligenza 429 New York Convention 454, 462 nexus 845 nonprofit 944–1026, 1238, 1266, 1269 Oberster Gerichtshof 156, 343, 1044, 1052 obiter dicta 65, 88, 469 Ocean Dumping Act 920 offshore – drilling rigs 897 – oil platforms 901 Oil Pollution Act of 1990 909 Oil Spill Liability Trust Fund 915 orden de protección temporal 634 ordinanza restrittiva preliminare 634 ordonnance restrictive temporaire 634 organic 1237, 1249, 1264, 1265, 1275, 1279, 1300 Outer Continental Shelf Lands Act 897 Panama Papers 1151 Park System Resource Protection Act 926 partnership 174, 196, 957, 1090, 1251, 1296 patrocinatore 125 patto compromissorio 456 Political Activities Test 968, 975, 981 Pomerene Act 866 popular culture 41–42

posesión 301 precedent 72, 81–91; see also stare decisis doctrine preponderance of the evidence 896, 899; see also burden of proof presidential system 103 (note 107) prevención de la entrada 1058 privilegio del rapporto avvocato-cliente 279 Produkthaftung 143 protection des données 1219 provvedimento cautelare 214, 220, 224, 226, 638 pubblico dominio 702 public domain 702, 706 quarantine 861 quota 1036 R.I.C.O. (Racketeer Influence and Corrupt Organizations Act) Rechtsanwaltsordnung 126 refugees 1029, 1039, 1044, 1087–1092 Refuse Act 919 reglas de responsabilidad professional 126 règles de déontologie 126 rental rates 1255 res judicata doctrine 379 résidence habituelle 174, 781 residencia habitual 174, 781 residenza abituale 174, 781 Revenue Ruling 802, 946, 981 risk allocation 647, 655–666 Rotterdam Rules 867–868 Rules of Professional Responsibility 510, 794, 807 salvatorische Klausel 565 Sammelklage 151, 229 Schiedsvereinbarung 456 Schöffen 92 Schuldrecht 77 Schutzmarken 690, 721, 1301 secret d’affaires 620–642, 738 secret professionnel de l’avocat 279 Secretary of State 958, 962 secreto commercial 620–642, 738 secreto profesional del abogado 279 segreti industriali 620–642, 738 seguridad de datos 1219 separability 462 severability clause 565 Ship Mortgage Act 892 sicurezza dei dati 1219 Signatur 216, 392 signature block 216, 392

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Index signification 234, 318, 403 soil conservation 1250, 1266 standard of review 422–424 ständiger Aufenthaltsort 781 stare decisis doctrine 82–84 Stato del foro 172 statute of limitation 163, 266, 815, 864, 869, 942, 1100, 1105 Streitwert 172 sua sponte 217 subcharters 882 subcontract 644–689 subpoena 310, 318, 387, 505, 1107–1108, 1119 subsidiary 1266 summary judgment 153, 269, 325–335, 446–447 summons 181, 191, 208, 233, 234, 237–243, 318, 403, 505 Superpac 1013 supersedeas bond 375 Supplemental Rules for Admiralty or Maritime Claims 843 Tauschhandel 1259 temporary restraining order 221, 634 términos y condiciones generales 644 terms and conditions 644, 659 tortfeasor 143, 263 trade secret 620–642, 738, 763 trademarks 639, 691, 721, 724–726, 733, 762, 1301 Trans-Atlantic Trade Partnership 1233 translationalism in comparative law 21, 60

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tribunal de apelación 156, 372, 421 tripartite division of powers of state 104 troc 1259 trueque 1259 Trusted Traveler Global Entry Program 1056 U.N.C.L.O.S. (United Nations Convention on the Law of the Sea) 834 ungerechtfertigte Bereicherung 54 Uniform Commercial Code 1165, 1192 United Kingdom 105, 131, 836, 1162 unjust enrichment 54, 640, 764 Unterlassungsanspruch 214, 220, 224, 226, 638 vacatur 453, 482–492 Verjährungsfrist 266 Versäumnisurteil 244 Verteidiger 125 Vertragsrecht 140 Vertraulichkeitsvereinbarung 409 Vienna Convention on the Law of Treaties 833 Visa Waiver Program 1078 Visby Amendments 855 voir dire 62, 347–348 Völkerrecht 37 Vorladung 233, 310, 318, 387, 403 Vorrangs-Vorschrift 104, 1283 Water Pollution Prevention and Control Act 906 wire fraud statute 1100; see also fraud Wohnsitz 174, 196, 781 writ of certiorari 85, 489–490, 1052