Multiple Choice from 1999 Exam

With updated answer:

Question 11. 
 P Corp. (hereinafter P) sues D Corp. (hereinafter D) in diversity in the federal district court for the Eastern District of Pennsylvania for breach of contract under Pennsylvania law, alleging that D failed to build a factory by the deadline specified in their contract, causing P $100,000 in lost profits.  The deadline (and thus the time of the alleged breach) was July 1, 1996.  The statute of limitations for breach of contract under Pennsylvania law is two years. 
 P files suit on June 1, 1998 and has D served with a complaint three days later on June 4, 1998.  D answers ten days after service, denying liability on the grounds that P had waived compliance with the deadline.  P requests no reply to D's answer.  Thirty days after D's answer (on July 14, 1998), D discovers two things.  First of all, it discovers that it was never served with a summons.  Second, it discovers that a year ago P reincorporated from Delaware to Pennsylvania.  Pennsylvania is D's state of incorporation. 
 D therefore seeks to amend its answer to include the defenses of insufficiency of process and lack of subject matter jurisdiction. 
 Which one of the following is true?

a. The defense of insufficiency of process will fail but the defense of lack of subject matter jurisdiction will succeed.  The defense of insufficiency of process does not "relate back" and so is barred by the statute of limitations, but the defense of lack of subject matter jurisdiction does "relate back" and so is not barred.

b.  Both defenses will succeed.  Both amendments are "as a matter of course" and therefore neither defense is waived.

c. The defense of insufficiency of process will fail but the defense of lack of subject matter jurisdiction will succeed.  The amendment concerning lack of subject matter jurisdiction is "as a matter of course" and therefore that defense is not waived, but the amendment concerning insufficiency of process is "by leave of court" and therefore that defense is waived.

d. The defense of insufficiency of process will fail but the defense of lack of subject matter jurisdiction will succeed.  Both amendments are "by leave of court."  But even if the court allowed an amendment concerning the defense of insufficiency of process, that defense will fail because it is waived.  The defense of lack of subject matter jurisdiction is not waived, and the court must dismiss the action whether or not it allows the amendment. 

e. None of the above is true.

ANSWER

a. The defense of insufficiency of process will fail but the defense of lack of subject matter jurisdiction will succeed.  The defense of insufficiency of process does not "relate back" and so is barred by the statute of limitations, but the defense of lack of subject matter jurisdiction does "relate back" and so is not barred.

Wrong.  This is gibberish intended to play off of confusion between statutes of limitations on the one hand and the waiver rules under Fed. R. Civ. P. 12(g)-(h) concerning 12(b) defenses on the other.

b.  Both defenses will succeed.  Because P asked for no reply, both amendments are "as a matter of course" and therefore neither defense is waived.

Wrong.  See comments on d.

c. The defense of insufficiency of process will fail but the defense of lack of subject matter jurisdiction will succeed.  The amendment concerning lack of subject matter jurisdiction is "as a matter of course" and therefore that defense is not waived, but the amendment concerning insufficiency of process is "by leave of court" and therefore that defense is waived.

Wrong.  See comments on d.

d. The defense of insufficiency of process will fail but the defense of lack of subject matter jurisdiction will succeed.  Both amendments are "by leave of court."  But even if the court allowed an amendment concerning the defense of insufficiency of process, that defense will fail because it is waived.  The defense of lack of subject matter jurisdiction is not waived, and the court must dismiss the action whether or not it allows the amendment. 

Correct.  Because this is an amendment of a pleading to which no responsive pleading is required, D has 21days after service to amend it "as a matter of course."  Otherwise the amendment is by leave of the court.  See R. 15(a).  Since D seeks to amend more than 21 days after service of his answer, the amendments are by leave of the court.  But whether or not it allows the amendment, under R. 12(h)(1), Ds defense concerning process is waived.  Under R. 12(h)(3), D's defense of concerning subject matter jurisdiction is not waived. Even if, for some odd reason, the court did not allow the amendment, it would still have to dismiss the action. Courts must dismiss actions if they recognize that there is no SMJ.

e. None of the above is true.

Wrong, because d is true.