5. Which motion should the retailer file to challenge the jury's damages award?

The jurisdiction of federal courts is concurrent with state courts. This means that a particular controversy that is litigable in federal court may also be brought in state court. Where jurisdiction is concurrent, the plaintiff makes the initial decision whether to use state or federal court by filing his case. The defendant then may choose to remove or remain under the state court's jurisdiction.

When determining whether to do an Erie analysis, the threshold question is whether there is a controlling Federal Rule of Civil Procedure (FRCP) or federal statute. If any federal law controls (is «on point»), there is no Erie problem. However, in the absence of a controlling federal statute or Rule, the question becomes whether the issue at hand is substantive or procedural.

In the Erie decision, the U.S. Supreme Court held that a federal court sitting in diversity must apply state substantive law of the state in which it sits on all substantive issues in a case. This includes the state's conflict of law rules. For all procedural issues, a federal court sitting in diversity must apply federal procedural rules (the FRCP).

Exam tip: When a potential Erie analysis arises on the MBE, pay close attention to the facts. If the court is not sitting in diversity and is exercising federal question jurisdiction, federal law will apply and there is no need to examine applicable state law.

A motion for a new trial may be filed based on numerous grounds, including that the verdict is either excessive or inadequate. If a federal judge believes the jury's damages award is too high (excessive) such that it «shocks the conscience,» or, in a diversity case, if the award meets the applicable state standard for excessiveness, the judge may order a new trial or offer the alternative of a reduction in damages («remittitur»). See Gasperini v. Center, 518 U.S. 415 (1996) (requiring federal trial courts to apply a state standard when considering a motion for a new trial based on excessiveness of the verdict).

When a plaintiff is offered remittitur, he may choose between accepting an award less than given by the jury or submitting to a new trial. The court cannot simply lower the award given by the jury, it must offer the plaintiff the alternative option of receiving a lower award or a new trial. Hetzel v. Prince Williams County, 523 U.S. 208 (1998).

If the trial judge believes that the jury's compensatory damages are too low (inadequate), he may NOT offer the defendant the choice of accepting a higher award («additur») or submitting to a new trial. «Additur» is not allowed in federal cases because it violates the Seventh Amendment. However, additur is permissible in many state cases because the Seventh Amendment does not apply. In federal court, if the judge believes damages are too low, the court may grant a new trial.

D is correct. The retailer should bring a motion for a new trial on the ground that the verdict is inadequate. This is a diversity case in federal court, which means when there is no controlling federal rule, the court should apply state substantive law of the state in which it sits (here, State A). There is a controlling federal rule, however, related to «additur.»

The retailer is seeking relief for inadequate damages. The only remedy available is a motion for new trial on this basis. «Additur» is the legal mechanism for increasing a damages award, but the U.S. Supreme Court has held additur unconstitutional under the Seventh Amendment, so it may not be used in any federal court, including those in diversity. This is the controlling federal rule and will prevail, even though in this situation, state substantive law would otherwise apply. As a result, the only option for the retailer is a motion for new trial on the ground that the verdict is inadequate.

A is incorrect. The retailer may ask for a new trial, but not on the basis that the award «shocks the conscience,» which is the federal standard. This is a diversity case, so Erie requires application of federal procedural law and state substantive law. Thus, State A's standard of «inadequate» applies. The retailer may NOT ask for additur because it has been held unconstitutional in federal court, including in diversity cases.

B is incorrect. This answer is only partially correct. The retailer should file the motion for new trial on the basis that the damages are inadequate, as explained above. However, the retailer is not permitted to raise additur because it has been held unconstitutional in all federal cases, including diversity, by the U.S. Supreme Court.

C is incorrect. «Remittitur» is the wrong doctrine, as it is used to decrease, rather than increase damages. Moreover, this choice also references the «shocks the conscience» standard, which is the federal standard and does not apply here, where State A's substantive law would apply to damages that are either «excessive» or «inadequate.»