Examination in

FEDERAL JURISDICTION

PROFESSOR ERIC S. JANUS

FALL 1992

General Instructions:

This is a take home examination. Your answer must be returned to the Student Services Office at William Mitchell College of Law by the close of business on the last day of the Examination Period, and no later than 72 hours after you picked the exam up. If you must turn your exam in on a Sunday (when the Student Services Office is closed), you may turn the exam in to the Circulation Desk of the WMCL Library. It is your responsibility to see that the date and time when you turn the exam in are logged onto the exam.

This examination consists of 8 pages, numbered sequentially, counting this page. If you are missing any pages, contact the Student Services Office at once.

After you have opened the envelope containing the exam, you may not use or refer to any materials other than: the assigned casebook, class notes, class handouts, outlines and other materials which you have personally participated in preparing, and dictionaries (legal or English). After you have opened the examination envelope, you may not discuss this exam or any federal jurisdiction issues with anyone else.

Your examination answer must be typed. It must not exceed 12 pages of doubled spaced type with normal margins. Material in excess of stated page limits will not be considered in grading.

The examination has two parts. Each has equal weight in the grade. Part I requires you to write an essay in which you discuss one of two quotes about the body of law concerning federal courts. Your essay should be no longer than 6 pages. The essay will be evaluated on the following factors: organization and clarity, depth of understanding exhibited, incisiveness and originality of thought and analysis.

Part II of the exam consists of a single factual situation. You are to write an essay not longer than 6 pages discussing the issues of federal court jurisdiction and power which arise out of or concern these facts. This answer should not exceed 6 pages. This answer will be evaluated on its completeness, organization, analytical clarity, and depth. Further instructions about this part of the exam are stated below.

Part I. Answer one of the following questions. Limit your answer to this part to no more than 6 typed pages, double spaced.

Question 1. Comment on the following passage:

The body of Supreme Court decisions shaping the law governing federal courts is pulled by two sets of tensions. On the one hand, the relation between state and nation, encapsulated in the term "federalism," exerts a powerful influence. On the other, the relation between the legislative and judicial branches of the federal government is deeply implicated as well. It can be argued that the Court's respect for the division of power between state and nation has often distorted its view of the proper division of power between the Court and the Congress.

OR:

Question 2. Pick two or three main areas of federal jurisdiction law. Write an essay comparing and contrasting the role played in each by the idea of federalism.

OR:

Question 3. Pick one main area of federal jurisdiction law. Write a statute restating the law in that area. Your restatement need not conform to existing law, except as required by the constitution. Write an essay showing the relation of your restatement to current law and justifying your restatement by a discussion of policy.

OR:

Question 4. Comment on the following statement:

Supreme Court jurisprudence has imposed appropriate limitations on the role of federal courts in enforcing individual rights.

Part II. In this part you are given one factual situation. Your answer, which should not exceed 6 double-spaced, typed pages, should identify the federal jurisdiction and power issues arising from or concerning this factual situation, and discuss and analyze those issues.

You may choose to structure you answer in one of two ways. Method 1: Identify all issues, and give approximately equal emphasis to discussion and analysis of each of the issues. Method 2: Identify all issues, but give disproportionate emphasis in your answer to one or more issues which you consider to be most difficult or interesting or complex. In either case, you "identify" an issue by naming the doctrine or area of law (e.g., "diversity jurisdiction"), pointing out which facts implicate that doctrine or area of law (e.g., plaintiff and defendant are both citizens of Minnesota), and briefly stating the legal problem or issue raised by the application of the doctrine or law to the facts (e.g., whether complete diversity is required by §1332). The object is to state the issue in a way which demonstrates to the reader that you have an understanding of the operation of the doctrine or area of law and its application to the facts.

This problem involves hypothetical federal and state Acts. No knowledge of or relationship to actual federal or state law is assumed or intended. In the event you conclude that some portion of the facts is ambiguous, incomplete, or logically inconsistent, please follow this procedure: Note in your answer the ambiguity, incompleteness or inconsistency. Then, make an assumption or extension of the facts which will enable you to answer the question in a manner which meaningfully demonstrates your knowledge of the subject matter. State in your answer the assumption or extension you are making.

Facts:

It is now 1995. Assume the law of federal jurisdiction has not developed since 1992, i.e., it is the same in 1995 as in 1992 (with the exception of the facts given in this problem).

In 1993, the Federal Health Care Reform Act (FHCRA) became law. FHCRA seeks to establish universal health care coverage through a combination of state/federal Medicaid and Medicare programs, and employer-provided health insurance. FHCRA offers states substantial federal funding for Medicare and Medicaid programs. In exchange for the receipt of this federal funding, the states are required to conform their Medicare, Medicaid and health insurance laws to standards set out in FHCRA. FHCRA provides a set of "default" provisions which govern if a particular state, having accepted federal funding, has failed to promulgate laws in conformance with the requirements of FHCRA. Under the default provisions, every employer of 10 or more employees is required to provide to its employees health insurance meeting the "default" standard. Under FHCRA, non-conforming employee health insurance plans are "null and void".

FHCRA provides, in pertinent part:

Section 1111. State Health Care Plans. To be eligible for federal funding, a state must submit a State Health Care Plan, meeting the standards of FHCRA, to the Secretary of Health and Human Services.

Section 1112. Non-discrimination. The State Health Care Plan must prohibit discrimination in the provision of health care services on the basis of race, sex, sexual orientation, disability, and religion.

Section 1115. Noncompliance. The Secretary of Health and Human Services may deny or terminate federal funding to States which do not comply with the standards of FHCRA.

Section 1116. Action. The Secretary of Health and Human Services may commence an action to recoup funding paid to any State in violation of any provision of FHCRA.

The Dennet Artificial Intelligence Corporation (DAIC) is a corporation incorporated in Delaware. Its corporate headquarters is located in Milwaukee, Wisconsin. It has three manufacturing plants. Two small plants, located in Wisconsin, manufacture component parts (called "homunculi"), and employ 50 employees each. The homunculi are shipped to the company's main plant, which is located in Minnesota, where they are assembled, together with components manufactured at the Minnesota plant, to make pandemonium contention modulators (PCM's), which are the centerpiece of DAIC's artificial intelligence technology. The Minnesota plant employs 2000 people.

In 1994, Minnesota enacted the Minnesota Health Care Reform Act (MHCRA). The MHCRA contains the following provisions:

Section 100. Provision of Health Care Benefits: Employers must provide health insurance for their employees. Such insurance must conform to the following standards:

Subd. 1 The insurance must provide for physician's services and inpatient hospitalization for all medically necessary procedures, except as provided in subdivision 2.

Subd. 2. To the extent permitted by federal law, the insurance plan may limit benefits for hospitalization for mental health treatment to 30 days per calendar year and for physician's services for mental health treatment to 30 visits per calendar year.

Subd. 3. Employers must submit their health insurance plans to the Commissioner of Health for approval.

Section 200. Enforcement

Subd. 1. The Commissioner of Health may, by order, declare an employer insurance plan out of compliance with this Act.

Subd. 2. The Commissioner of Health may commence an action in state district court to enforce the provisions of this law.

Subd. 3. An employer aggrieved by an order or other action of the Commissioner of Health may commence an action in any court of competent jurisdiction to seek appropriate redress.

Section 300. Rights of employees.

Subd. 1. Disputes about the right to benefits under any employment insurance plan may be submitted to an administrative hearing conducted by the Department of Health.

Subd. 2. Decisions of the Department of Health are reviewable in district court.

Subd. 3. In any such administrative hearing or judicial review, the determination of "medical necessity" shall be a question of law, to be decided without a jury.

Subsequent to the enactment of the Minnesota Health Care Reform Act, DAIC adopted a health insurance plan for its Minnesota employees. The plan limited mental health benefits to 30 days and 30 visits, as set out in section 100, subd. 2, quoted above. DAIC submitted its plan to the Minnesota Commissioner of Health, who approved the plan.

Subsequently, the Secretary of the U.S. Department of Health and Human Services notified the Minnesota Commissioner of Health that she had determined that the Minnesota law violated the anti-discrimination provisions of the federal law because it discriminated against persons with mental illness. The Secretary's notice stated the Secretary's intention to commence proceedings to recoup federal funds paid to Minnesota. The Minnesota Commissioner entered an "order" (the "noncompliance order") declaring that DAIC's insurance plan did not comply with state law, because of the limits the plan put on mental health benefits. The Commissioner notified DAIC of the order, and of his intention to sue DAIC in state district court to seek compliance with the law.

Subsequently, the following litigation ensures:

Lawsuit I: S, a citizen of Minnesota, who is a shareholder of DAIC, sues DAIC and its directors in Minnesota State District Court. In this shareholder derivative suit, S claims that DAIC and its directors are violating their fiduciary duty by maintaining their present insurance plan. S claims that the breach of duty is as follows: the insurance plan, being contrary to federal standards, is "null and void"; thus, under federal law, DAIC is required to provide insurance pursuant to the default provisions of federal law, an obligation which will impose significant additional financial burdens on the DAIC.

Lawsuit II: DAIC sues the Minnesota Commissioner of Health and the State of Minnesota in federal district court. DAIC seeks a declaration that its health insurance plan complies with federal standards and Minnesota law. It also seeks to enjoin the defendants from taking any action to enforce the Commissioner's noncompliance order. It also seeks a declaration that the Commissioner's noncompliance order was "null and void" as of the date it was issued. DAIC seeks a preliminary injunction prohibiting the Commissioner and the State of Minnesota from commencing a lawsuit in any court to enforce the noncompliance order. The lawsuit also seeks damages against the State of Minnesota for any financial harm befalling DAIC by reason of the Commissioner's noncompliance order.

Lawsuit III: Before the federal court rules on the motion for a preliminary injunction, the Minnesota Commissioner of Health commences an action in state district court against DAIC, seeking an injunction requiring DAIC to provide insurance which does not discriminate against persons who need mental health treatment. The Commissioner's suit is based on the MHCRA and makes no mention of federal law. DAIC Answer asserts the defense that federal law permits limitations on benefits for mental health treatment, and thus, under section 100, subd. 2 of the MHCRA, DAIC's insurance plan is legal under state law.

DAIC removes Lawsuits I and III to federal district court in Minnesota.

Lawsuit IV. Meanwhile, S, the wife of E, a former employee of DAIC, sues DAIC in federal district court, seeking damages under the Minnesota Wrongful Death Statute. S claims that DAIC's failure to provide benefits was illegal and was the proximate cause of E's suicide. S and E were citizens of Minnesota. During a pre-trial conference, DAIC raises the point that prior to E's death, E challenged DAIC's refusal to provide extended mental health benefits in a state administrative hearing. At the hearing issues of federal law were not raised or determined. The hearing officer held in favor of DAIC. The matter was not appealed further. At the trial on S's suit against DAIC, there is conflicting medical testimony as to whether mental health treatment in excess of 30 days was "medically necessary." S has demand a jury trial on all issues of contested fact.