Post on 10-Apr-2015
description
transcript
Remedies outline
2 goals: 1) What remedy to choose 2) and once chosen how
to measure it?
What does the court do for a successful plaintiff?
Grant specific relief usually specific performance or an injunction
“in personam remedy” operates against the D’s person
Award substitutionary relief or money damages
Award= adjudicate, decide after consideration
“in rem” operate against the D’s property
Award restitution based on defendant’s gain or unjust enrichment
What court may do to the defendant?
Require D transfer title or possession of property
Order D to do something
Prohibit D from doing something
Direct the D to be confined (contempt) to coerce him to obey any of
the above except to force payment
Enter a money judgment to compensate P, to prevent D’s unjust
enrichment, or to punish D
Equitable versus Legal Remedies
Principle equitable remedies:
Injunction, specific performance, constructive trust- associated
to specific or in personam relief
For judge to grant equitable relief P must show legal
remedies inadequate, without equitable relief will suffer
irreparable injury
Major legal or common law remedy-
money damages substitutionary or in rem relief
Differences between equitable and legal remedies
1
No right to jury trial for equitable remedies
Judge will enforce an in personam equitable order by holding the
defendant in contempt; in contrast to the plaintiff’s
collection of money damages with a writ of execution,
garnishment, and judgment lien.
Tort Remedy Goals
1. Prevent a tort from occurring- injunction
2. Restore the Status Quo- can be done through specific performance,
restitution or restoration for a property tort
3. Compensate the P for Loss- compensation or indemnity principle- can
award damages for P’s physical or mental injury, pain and suffering,
lost income, and loss of property value, etc.
4. Deter Future Torts- market economic analysis stress structuring actual or
potential P damages awards should encourage D’s to take precautionary
goals to prevent future mishaps
5. Establish, Declare, Vindicate P’s Rights- declaratory judgment different
than injunction for it neither commands nor forbids anything
6. Punish wrongdoers- punitive damages for aggravated wrongful act
Remedies goals in Contract
1. Fulfill Plaintiff’s expectancy of gain- may consist of specific
performance or money damages if SP not available
2. Special Damages to restore plaintiff’s losses and reliance
expenditures P incurred
3. Restitution- court’s rescission of K or agreement followed by
restitution will restore the plaintiff and the defendant to respective
situations prior to the transaction
4. Punish or deter the D- by granting the plaintiff’s expectation and
special damages will deter D’s from breaching Ks. (market
2
economist). A court will almost never award P punitive damages when
a defendant breaches a K.
5. Declare or terminate parties contractual rights or duties- may grant
declaratory judgment either before or after a parties breach
Remedy goals for Unjust Enrichment
1. Restore the benefits D unjustly holds, restitution- primordial concept.
2. Punishment and deterrence- subordinate goals when D has give up
benefits she has unjustly reaped.
Summary of Historical Crap
Common law courts
tort-property actions
1. Specific relief/ restitution of property
Ejectment- to recover possession of real property/land.
Detinue- developed from writ of debt, and to be used against an
unfaithful bailee, let the D either return the chattel or pay
plaintiff its value
Replevin- to retrieve P’s personal property from a D.
2. Compensatory Damages- money for harm
Trespass- historically to someone’s person, to chattel, or to land allowed for
damages
Trespass to the case- to compensate the P for injuries ranging from indirect
& negligent injuries to the person to nuisances and various business
torts
Trover- for D’s conversion of P’s chattels allowed for compensatory
damages
3. Punishment- historically would allow jury to award Ps punitive
damages bc of “detestation” of act itself
3
4. Prevention- Common law Courts could not award equitable remedies,
had to go to Court of Chancery (Court of Equity) thus major
deficiency- dual courts
5. Declaration of Rights, obligations and status- problem in common law
courts, but could award nominal damages.
Contract Breaches historically-
Account- originally D’s breach of fiduciary obligation- fell out of favor
cumbersome procedure for dual lit. in both court systems
Covenant- no covenant if debt is applicable- only for instruments under seal.
Debt- oldest personal action, D’s duty to pay P a certain amount either by
contract, custom (statutory required payment), or record (collect money
judgments)
Assumpsit- 2 forms-
special assumpsit- P’s action on a simple express contract supported by
consideration, whether executory or partially executed.
General assumpsit- used common counts, including work done or quantum
meruit used by contemporary courts to develop the remedy of legal
restitution and concept of quasi contract.
Chancery Court- used if common law court fell short, equitable court
Granted equitable relief- such as declaratory, uses and trusts, as well as
mortgages
Enforcing a lien still considered to be equitable matter; separate equitable
defenses such as “Laches” and “unclean hands” evolved.
Specific performance and injunctions- decisions were not necessarily
precedent thus criticized for being unpredictable and vague
All reformed by Field Code in 1848; led to
FRCP: Today “only one action a Civil Action” R.2 FRCP
Chap 2- Money Damages
4
Injured P principal civil remedy is money damages; performs two
functions 1) a plaintiff is compensated for loss and 2) damages deter
particular defendant and other potential defendants from incurring
future liability, thus they take reasonable precautions.
Damage determinations require a lay jury because states and Fed Const.
require it
7th Amendment: “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 re-examined in
any Court of the United States, than according to the rules of the common
law”--- historical reasons for jury- prevent tyranny etc.
Very few cases even heard by juries bc they settle
Rules encourage settlement- FRCP pretrial conference 16(A)(5) and
FRE 408 parties settlement offers and negotiations not admissible.
FRCP 68 any litigant that rejects a settlement offer and receives a less
favorable judgment pay other sides attorney fees.
Most jury trial parties share four common characteristics-
Intransigent Party- unwilling to agree
Reputation to protect
Outcome is uncertain
Stakes are unusually high
Controversial doctrines:
Pain and suffering
Punitive damages
American Rule requiring each side to pay attorney’s fees
Gavcus v Potts (USCA 7th Cir. 1986) p.17.
Stolen silver Coins- compensatory damages and Att Fees
Gavcus brought action against stepfamily for trespass and conversion of her
silver coins from late husband. Jury awarded her special verdict of new
5
locks, alarm and Att Fees from prior action concerning possessory interest
in coins and punitive damages.
DC set aside jury verdict and gave her $1.
C of A affirms DC decision- “nominal damages can be awarded when no
actual or substantial injury has been alleged or proved, since law
infers some damages from the trespass” also “consequential damages
can be awarded for actual or substantial injury to realty.” & “CD can be
recovered for a trespass, since a trespasser is liable for all injuries
which are the natural and proximate result of trespass”
Trespass can cause mental distress and illness or physical harm. No
emotional distress in Gavcus bc failure to proof to nature extent and
causation of ED
Att Fees- recoverable from prior action only if 1). prior litigation was the
natural and proximate result of the subsequent def. wrongful act and 2).
involved the P and a third party.
Punitive damages only if compensatory damages
Dura Pharmaceuticals v Broudo (SCOTUS 2005) p20
Stock fraud- FDA approval, false profits
P brought action against D for stock fraud- governed by statute- Throw
complaint out bc did not even meet Conley requirement of “short and plain
statement” as to provide the D with fair notice of what the plaintiff’s claim
is and the grounds upon which it rests.”
Did not show causation that Dura’s fraud caused an economic loss
Bc price fell after FDA not approved came out but gained back all value
within a week.
Sec Ex Act 1934 forbids use of deceptive device in connection with sale of
securities
Basic elements of stock fraud:
1. a material misrepresentation ( or omission)
2. scienter, i.e. wrongful state of mind. Or knowledge/intent
6
3. a connection with the purchase of security
4. reliance or “transactional causation”
5. economic loss
6. loss causation- causal connection between misrepresentation and
loss
Dura argued P did not prove last two elements, SCOTUS agrees says “Given
the tangle of factors affecting price, the most logic alone permits us to say I
that the higher purchase price will sometimes play a role in bringing about
a future loss.” Must chow causation not simply “touch upon”
Related to Dura p.118 Randall v Loftsgaarden tax benefits incurred due to
capital losses should not be subtracted from claim
Youst v Longo (SC Cali. 1987) p25
“I could have been a contender” Horse Racing interference
“it is well settled law that interference with the chance of winning a contest,
such as the horserace at issue here, usually presents a situation too
uncertain upon which to base tort liability.”
P sought Compensatory damages between actual finish (5th) and finish
which allegedly would have occurred but for D’s interference. Punitive of
250K also sought
Did not plead physical personal injury or property damage
RST 774B actual discusses such scenario in comments “not sufficient
certainty to entitle P to recover”
To speculative to recover Compensatory Damages
Notes case point to some curious cases where some contestants allowed to
recover. I.e. Beauty contest disqualified bc not notified of earlier start time
A railroad breached agreement for delivery thus getting contestant 2nd
instead of first
Puzzle contest, answer erroneously marked wrong, given amount equal to
odds times the prize money.
7
Other speculative claims: Lost chance to survive in malpractice cases
Smith v State Dept of Health and Hospitals (Louisiana SC); x-ray
cancer MD no follow up, man died shown he had 10% chance of life if
notified on day of x-ray. So damages totaled and then only 10%. 3
recognized methods for calculating Lost chance of survival
1. focus on chance of survival lost due to negligence (used above)
2. Plaintiffs approach- if any chance than MD pays full claim
3. -Adopted by lower court in Smith- percentage more favorable
outcome – becomes percentage probability.
Can recover damages for fear of cancer as part of pain and suffering
damages if also liable for P’s physical injuries.
Medical monitoring
3 sub types- 1) D pays a lump sum to each individual P for future medical
attention
2) P’s Md’s send monitoring bills to D 3) a Court supervised
monitoring program is sought such as in
Henry v Dow Chemical Co. (Sc Mich 2005) p30
Class action for Dioxin Exposure in Tittabawssee flood plain in Mich.
Court supervised Medical monitoring sought
Court denies as plaintiffs have suffered no actual harm yet; only potential
for injury thus P’s have failed to state a valid negligence claim and grants
Sum. Judgment
“It is present injury, not fear of an injury in the future, that gives
rise to a cause of action under negligence theory.”
Importance of requirement of present physical injury 1) who actually
possesses a cause of action 2) reduces the risk of fraud by setting a minimal
threshold 3) would force Court to compromise judicial power to uncertainty,
“Our common law jurisprudence has been guided by a number of prudential
principles. Among them has been our attempt to avoid capricious
departures from bedrock legal rules as such tectonic shifts might produce
unforeseen and undesirable consequences”
8
Not emotional distress bc no physical manifestations of such distress
Court not in business of crafting policy in the dark, deference to Legislature
already created the Mich Dept of Env. Quality
Dissent p.39
Plaintiff’s physical harm secondary to defendant’s economic health
P’s claim for med. Monitoring warrants equitable relief- P exposed to dioxin
at over 80 times deemed safe
“Court has equitable jurisdiction to provide remedy where none exist at law,
even if the parties have not specifically requested an equitable remedy.”
9
Proving the amount of damages p.47
Court can easily determine some of P’s damages; i.e. lost wages, medical
expenses, the value of damaged property, expectancy and reliance damages
for breach of contract
However some difficult to prove: lost business profit (mind games v western
pub.)
Future pecuniary damages hard to calculate
Some compensatory hard to calculate such as P’s pain and suffering or
mental anguish
To prove damages first must prove the fact of damages then must prove
amount of damages- however even if damages amount uncertain “the
tortfeasor, not the P, should bear the burden of some uncertainty in the
amount of damages”
Plaintiff’s lost capacity to earn (past wages)(aka economic
damages)
Washington v Am. Comm. Stores Corp (SC Neb 1976) p48
Jury verdict of 76K arising out of car crash
P , 24, was successful collegiate wrestler and working as adult parole officer
at time of crash. Had a life expectancy of 49.9 years no dispute to
permanency of P injuries or that injuries prevented P from wrestling.
“It is well settled law that loss of earning capacity is distinct from loss
of wages, salary, or earnings, is a separate element of damage.”
Loss of past earnings is an item of special damage and is specifically
pleaded and proved
Impairment of earning capacity is an item of general damage and proof
may be had under general allegations of injury and damage.
Factors include- P’s age, life expectancy, health, habits, occupation,
talents, skill, experience, training, and industry.
10
Agree with jury sufficient evid. to find P pursuit of wrestling career valid.
Again general damages thus no specific evid needed to recover.
Childs v US (USDC Georgia 1996) “unborn General”
Lawsuit for wrongful death under the Fed Tort Claims Act- State subs. Law
governs
Car crash 3rd passenger, mother and unborn child “General” die
immediately when struck by postal truck. P bring action under FTCA, D
admit liability, and have stipulated to estate of Debra and General are worth
$8794 for funeral and medical ex. Plus some more for damage to the car.
Issue is to amount of damages for P wrongful death claims. Debra 33, , had
life expectancy of 47 years- also 8 months pregnant with General, life
expectancy of 73.
Debra worked as produce manager at Kroger
Lost future income 4 elements
1. base year or entry level income (projected before tax income)
2. income growth rate (inflation, progression, productivity gains)
3. worklife expectancy (how long someone would have remained
in workforce)
4. discount rate (present value of decedents future income) (PV)
personal tax offset; personal expense/consumption offset; (some don’t
use)
+lost fringe benefits (includes health insurance, pension benefits, social
security.) usually 15% of PV of decedents lost income.
Lastly +lost household service (hours spent doing housework times
minimum wage).
Battle of experts for amount of lost future income damages varied between
$890K and $195K.
Total economic loss equals all of above added together,
difference in Childs, for debra- 1.148 million versus 398K
Generals lost future income-
11
No lost household services for unborn child, but lost future earnings and
lost fringe benefits- Differences astounding $1.7 million versus $433K
“Who will fail and who will succeed and who will either enjoy or suffer
through life, is a game of fools” & “the mathematical precision the experts
put on General’s death illusory”
Both experts paid to see what they saw- P overvalues, D undervalues
Difference in Debra’s economic damages explained by difference in worklife
expectancy, used P expert’s calculations for Debra fringe benefits bc talked
to Kroger, both calculations for lost household service too high. Total
economic loss 1.35 million
General more speculative , big caring family, but from single mother
so 1.08 million
Sept 11th compensation- administrative remedy set up within two weeks,
based on male tables, still victims families wanted more, 1st year ass. at law
firm.
Also subrogation (infra) reduced payments, except workers comp and
private charity
Use stat mortality tables and work-life expectancies as authorities, not
binding on court though.
Waldorf v Shuta (p.61)- consideration as future attorney, when a high school
dropout far too speculative
Good notes p.60-68
Pain and suffering (p68) (aka, nonpecuniary, general damages,
hedonic- when referring to loss of enjoyment)
Also compensatory damages. Premised on P has been through trauma
has lost more than earnings or medical bills. Pain is physical. Suffering
takes many forms: grief, bereavement, fear, and frustration.
Referred to as noneconomic, but are they? Posner thinks not, economic
but non-pecuniary.
12
“Two shortcomings to awarding pain and suffering- 1) money awards do
not make them whole, 2) there is no rational scale that justifies the
award of any particular amount., in compensation for a particular amount of
pain.” Consorti v Armstrong
Are Pain and Suffering damages used to pay attorney fees? P.69
Subjectivity of pain and suffering, conversion to dollar amount is difficult
and expensive
Parts of pain and suffering-
Victims anguish and terror felt in the face of impending injury and
death
Victims tangible physiological pain at time of injury and through
recovery
V’s loss of enjoyment of life- hedonistic damages
V’s loss of consortium
Hard to prove- must discuss V’s life before accident, during, and after,
what therapies
Loth v Truck-a-way (Cali CA 1998) p71 “Active lady struck down/Whore
expert”
PI from a auto accident- P awarded general damages and
D argued not admissible, expert testimony to hedonic damages, but it is
admissible
F: P car struck by 24-wheel truck, she walked away, continued business trip
then cut short went to Dr. complained of headaches and back stiffness. Saw
army of Dr’s but none able to stop pain. D conceded liability only issue was
damages. P’s expert testified to hedonic damages.
however should have been precluded bc of double recovery -pain and
suffering and hedonic. Only one collection of pain and suffering and
hedonic included in that figure. No separate jury instructions because
one figure
Only person whose pain and suffering is relevant is the P’s.
13
can ask for per diem basis for pain and suffering (the norm in Fla.)
No formula for calculation (SCOTUS); Smith’s calculation does just that.
“a life is not a stock, car, home, or other such item bought and sold in some
marketplace.”
$890K verdict not excessive although Smith’s testimony could lead to
runaway verdicts and should be inadmissible. Still remand bc curative
instruction did not properly correct prejudice of Smith testimony.
Notes: Unit of time break down not allowed in some jurisdictions, Ok in Fla.
Some states all right if come with line at end that this is just an estimate
McDougald v Garber (NY CA 1989) p80 “Comatose Caesarean”
P permanently comatose after botched Caesarean section by D and
anesthesiologists.
Jury awards $9.6M + $1M for pain and suffering + $3.5M for loss of
pleasures and pursuits of life. Trial Judge reduced to 4.9M and 2M for pain
and suffering (one award)
Can she suffer conscious pain and suffering if comatose? No! “Cannot
experience the pleasure of giving it away” award must have utility to victim
to be compensatory
Dissenting opinion – basically she is suffering even if she does not know it.
highly emotional response, majority injects an extra element into equation
by creating utility.
“to obtain the benefit of this legal fiction the law requires a
prerequisite to recovery that the V of a tort have cognitive
awareness” & “therefore the P has the threshold burden of proving
consciousness for at least some time following an accident in order to
justify an award of damages for pain and suffering”
Notes p.87 “[Above] burden can be satisfied by direct or circumstantial
evidence but mere conjecture, surmise, or speculation is not enough”
14
“often when unconsciousness or death occurs shortly after a tort, it is
difficult, sometimes impossible, to determine if a decedent suffered or was
actually conscious of any pain”
Limitations on Damages Recovery
Avoidable Consequences/ Avoidance
Williams and Robbins v Bright (NY SC 1997) p90 “Jehovah’s Witness
can’t see the Dr.”
P victim in car crash driven by her father, some evidence he fell asleep.
P religious beliefs do not discharge duty to mitigate damages. She claimed
Jehovah’s not allowed blood transfusions. Then she became wheel chair
bound after necrotic development of bone structure in knee.
She got “reasonably prudent Jehovah standard” at Trial Court, in effect
discharging her of any duty to mitigate. Relied on Ballard
Appeal: “State does have a compelling interest in assuring that the
proceedings before its civil tribunals are fair. And that any litigant is not
improperly advantaged or disadvantaged by adherence to a particular set of
religious principles.”
Courts purposes must be secular, unfairly advantaged to P in instant case.
Dissent- distinguished Ballard; court gave right charge below, new
instruction impermissible 1st Amend. Violation
Collateral Source Rule
Exception to the rule barring P from recovering compensatory
damages that exceed the P’s losses. Plaintiffs can still recover full
amount from defendant tortfeasors even though they have already received
compensation for their injuries (i.e. medical or car insurance). Not always
insurance!
Such as Shriners in Moulton v Rival Co. “a plaintiff who has been
compensated in whole or in part by a source independent of the tortfeasor
15
is nevertheless entitled to a full recovery against the tortfeasor, to prevent
the tortfeasor from gaining a windfall.”
Even Posner agrees not a windfall for P.
Tort Reform sought though b/c some P’s collecting from disability and court
judgments
In Fla. Reduce the amount of damages paid to the claimant from collateral
sources however if right of subrogation exists (i.e. insurance) than no
reduction in damages.
Subrogation- Conventional Subrogation gives third party (mostly
“insurer”) right to “step into P’s shoes” and recover from D the expenses
incurred by third party in putting P in the rightful position; [also equitable
subrogation related to restitution] Subrogee (payor) and Subrogor
(victim)
Lagerstrom v Mertle Werth Hospital-Mayo Health System (SC Wis
2005) p102
“I owe Medicare”
P estate sues hospital and insurers for wrongful death/med mal. Get
judgment of $55,755.00 ; D at trial presented evidence that out of pocket
expenses were only $755.
Collateral Source evidence brought in by D, but P not allowed to rebut with
evid that may need to reimburse Medicare $89K.
Opinion saturated with statutory interpretation.
Ultimately finds “… evidence of collateral sources is admissible and if
presented then P must be allowed to show any potential obligations of
subrogation or reimbursement.”
Dissent- heavy disagreement bc US not joined as a party, so would affirm
lower decision
2nd Dissent- majority against legislative intent thus full dissent, “some
litigants use the rule to get around the cap on noneconomic damages [aka
16
pain and suffering]” legislative history is clear “does not require juries to
make offset bc of collateral sources but permits them to.”
Notes p118 “Benefits rule provides that if defendant’s tortious conduct
confers a benefit, as well as a harm, on the plaintiff jury may weigh the
value of benefit against the claimed harm.” i.e. negligent digging discovers
oil well
Enhancement and adjustment of compensatory
damages
Prejudgment interest
Jurisdictionally set at around 8 to 9%, and compound “calculated on
principal and interest from prior period”
Present value of money more than future value, “a dollar today is worth
more than a dollar tomorrow”
Prejudgment interest- from the time claim arose to judgment
Post-judgment or judgment interest- from the time of judgment to payment,
set by statute and often very low
Contract interest- interest a debtor agrees to pay a creditor
Jurisdictions split on awarding interest- left over medieval crap that interest
perpetuates feudalism and only awarded if D knew exactly what it owed.
Pendulum swinging to award prejudgment interest
Punitive damages (aka exemplary damages, vindictive damages, smart
money)
Awarded in addition to compensatory damages and aimed at making an
example out of D
Tuttle v Raymond, III (SC Maine 1985) p122 “Trying to pass 6 people”
D drove car excessive fast in a 25mph zone, struck P causing serious injury
Punitive damages properly awarded when D acts with “malice” does not
over compensate P but serves to deter D’s
17
Other jurisdictions use different words but basically higher degree of
negligence needed for tortious conduct- aggravated tortious conduct,
willful, wanton, outrageous, etc.
Double Jeopardy not in play with civil punitive damages
Hard to measure, similar to pain and suffering, and emotional distress
Relevant is D’s wealth, Cali have to show D can pay before allowed to
ask
In this case D did not act with required malice
Also clear and convincing standard for burden of proof of such damages in
over half of jurisdictions
Notes: Louisiana, Mass, NH, Wash lack common-law punitive damages only
when statute provides. Nebraska no punies whatsoever, state constitution
forbids them.
2nd RST § 908(2) “punitive damages may only be awarded for conduct that is
outrageous, because of def’s evil motive or his indifference to the rights of
others.”
Rarely available in Contract Breaches [unless accompanied by a tort]:
contrary to concepts of Contract law for freedom of/and stable transaction.
“K transactions do not usually engender as much resentment or mental and
physical discomfort as do torts”
Examples where granted in K breach: violation of non-compete agreement
was an egregious breach of a covenant.
Constitutional challenges to punitive damages
Under 8th Am. “excessive fines”
Previous challenges survived 1/526 [TXO] ratio of compensatory to punitive,
compelled states to include post-verdict factual eval. of jury’s punitive
awards for excessiveness
Constitutional Analysis is not done under 8th Am but rather 14th Am. Due
Process
BMW v Gore (SCOTUS 1996)(from Alabama SC) p133 “BMW paint job”
18
Dr Gore bought BMW, damaged in transit, repainted in America and then
sold to him told it was brand new, constituted fraud. He sued for price of
car plus punitive damages of $500K; won award of $4M; AL SC reduced to
$2M; SC said still grossly excessive
In 14th Am. Analysis look to states interest the punitive award is designed to
serve
And the degree of reprehensibility of the defendant’s conduct.
Max civil penalties in AL for deceptive trade practices was $2000, coupled
with BMW was only trying to fix its car, still a BMW so punitive damages
excessive.
Scalia Dissent, no guideposts
Ginsburg Dissent, leave AL SC decision undisturbed because only trying to
follow our decision in TXO, further every state recognizes punitive damages,
it is a state concern
On remand AL gave $50K said civil penalty not applicable bc they are weak
and AL P’s should choose courts to remedy D’s wrongs.
State Farm v Campbell (SCOTUS 2003) “Insurance Company left him”
Reaffirms Gore uses same three guideposts
UT man filing bad-faith insurance lawsuit v State Farm. He passed 6 cars on
highway and killed 1 person injuring others. After trial State Farm
abandoned him and claimed owed no liability. TC returned verdict of $2.6M
in compensatory and $145M in punitive damages.
Analyzed under three guideposts
1. Reprehensibility of D’s conduct
2. Proportional. Is the ratio outrageous “few exceeding single digits”
are not.
Presumption against 145 to 1
Suggested 1 to 1. Not followed though
3. Disparity between punitive damages and civil penalties authorized
$145M neither proportional nor reasonable.
19
Did not follow 1 to 1 on remand awarded $9M to campbells
When are employers responsible for employees tort leading to
punitive damages?
A. Restatement view, adopted by California, 4 scenarios where
principal can be assessed punitive damages 1. Principal
authorized the doing 2. Agent unfit and principal was
reckless in employing him 3. Agent was in managerial
capacity and was acting in scope of employment 4. Employer
or manager ratified the act
B. Most courts willing to extend broader exposure, if employee
acting within the scope of his/her employment.
Courts not sympathetic to Defendants in mass tort and have imposed
successive punitive damages awards against them from multiple P’s.
Reasons for Remittitur, ruling by a judge to reduce amount of damages
from a jury verdict. Usually because amount awarded exceeded amount
asked for.
Subsequent remedial measures (407) should not be reason to reduce
punitive awards
Mathias v Accor Economy Lodging (USCA 7th 2003) p155 “bed bugs”
P’s got bed bugs at Red Roof Inn. D willful and wanton conduct $186K
punitive damages and only $5K in compensatory. D knew about bed bugs,
told by exterminator to close down hotel so it could be sprayed down, D’s
district manager refused thus imputing D. Total damages equaled $1000
per room in hotel (191)
“the judicial function is police a range, not a point”
Attorney fees p160
The “American Rule” both winning and losing litigants bear their own
expenses.
20
Tort reform activist want loser pays or one way loser pays (only losing D’s
pay).
Primary exceptions-
1. contract,
2. statute,
3. judicially created exceptions
a. bad faith litigant (controversial)
b. “common fund” doctrine- analogous to quantum merit-
litigant who starts class action can collect from other
members of the plaintiff class awards.
Nilsen v York County (USDC Maine 2005)
Did not go over, recognizes “common fund”
Tort Reform p178
Controversial provisions – passim-
Best v Taylor Machine Works SC Ill. 1997 p180 “Worst Forklift Accident
Ever”
P was injured while working, operating a forklift, mast broke moving slabs
of hot steel, flammable hydraulic fluid caught on fire and engulfed P. P
broke both ankles jumping and suffered 40% burns on body, face. Suing
Forklift manufacturer, seller, and hydraulic fluid maker. Asking to strike
down (declaratory and injunctive relief) Tort Reform which caps
noneconomic damages at $500K.
Cap not rationally related to a legitimate government interest.
Undermines the power and obligation of the judiciary to reduce
excessive verdicts. Cap struck down.
Dissent- legislation passes rational basis test, need not approve only that
question is debatably and rational answer.
21
Notes: Ill passed a new malpractice cap at $1M
Workers comp, removed most employer-employee damages claims from
the jury, no doubt that it is a legislative usurpation of courts.
Gourley ex rel. Gourley v Neb Methodist Health System, Inc. (SC Neb
2003) p191
“Cap on noneconomic damages for baby Colin”
Neb-Medical Liability Act caps medical mal actions to $1.25M. DC ruled
denied gourley’s EqP and R’t to jury trial. Negligent care during pregnancy,
Baby Colin born with cerebral palsy; awarded $5.625M.
“It is commonly held that courts will not reexamine independently the
factual basis on which a legislature justified a statute, nor will the court
independently review the wisdom of the statute. This court does not sit
as a superlegislature to review the wisdom of legislative acts”
Uphold statute, reassess damages at $1.25M, law does not violate any
provision of Neb. Constitution briefed or argued.
Concurring opinion rips act for not making cap only apply to noneconomic
damages
Therefore P cannot fully be compensated for economic damages such as
hospital bills.
Dissent special legislation and thus violates Neb Const. bc unfairly
advantages D
Notes: Neb legislature listened to concurrence and raised limits to $1.75M
Caps also struck down in Petrucelli v Wis Patients Comp. (2005)
Wis limited cap to $350K “the leg. enjoys wide latitude in economic
regulation. But when the legislature shifts the economic burden of medical
mal. from insurance companies and negligent health care providers to a
small group of vulnerable, injured patients, the leg. action does not seem
rational.” Failed even rational basis test
22
Chap 3 Equitable Remedies- the Injunction p217
1. Equity acts in personam
Most used equitable remedy the injunction; others include the
constructive trust, an equitable lien, subrogation, accounting for profits,
equitable rescission, reformation, and specific performance.
“Equity acts in personam” common function of equity remedies is the
personal response or conduct each requires form the defendant. For in
personam to work the judge will wield contempt against a recalcitrant or
disobedient def.
“A court with personal jurisdiction over the defendant is able to order the
defendant in personam to act or refrain from acting in another state.”
When is international trademark injunction proper, Lanham Act factors
include
1. Whether D’s conduct has a substantial effect on US commerce
2. Whether D is US citizen
3. Whether extraterritorial enforcement of the trademark will
encroach upon foreign trademark rights.
Tabor & Co. v McNall (Ill CA 1975) “Dueling Courts”
Tabor, Nevada Corp., doing business in Ill. Contracted with McNall Bros., a
Wis. Co, for purchase and delivery of grain in Illinois. McNall defaulted.
Tabor filed suit in Illinois, McNall contested personal jurisdiction, then D
filed suit in Wisconsin. Illinois Trial Court ordered an injunction against Wis.
Court from not litigating in Wis.
CA says improper to grant such injunction, in personam, joins the
party not a foreign court
Notes: “once a D is hooked, can always jerk him back to obedience by the
threat or fact or personal constraint.”
Some courts recognize out-of-state courts simply as matter of comity.
Full faith and credit clause applies to judgments, not necessarily injunctions
23
Statute prohibits a fed court from enjoining state court litigation, even if
lawsuit in exception to statute fed court can abstain, Younger v Harris.
Matarese v Calise (SC RI 1973) p231 “Some property in Italy” p231
TJ ordered D to convey land by deed to be recorded in Italy, and issued
injunction enjoining def from transferring property to anyone but the P.
Court had power over D and therefore had power to order
conveyance even though land was situated in Italy.
Court does not transfer legal title of property but orders it so, and enforces
such order through contempt, attachment or sequestration.
US v McNulty (USDC 1978) “Irish lottery winner” p234
D won Irish lottery roughly, $128K, IRS came to collect winnings, which D
had tried to secretly collect and deposit in foreign bank. D’s money still in
bank but D in prison for tax evasion and subject to tax penalties of $68K.
D’s only way of satisfying judgment is money in foreign bank. Court
ordered D to repatriate his assets from the bank and deposit them
with clerk of court. Again “in personam” jurisdiction thus can order D to
transfer funds and can punish him for not doing so.
2. The Plaintiff’s inadequate legal remedy, irreparable
injury
will not grant specific relief when there exists and adequate remedy at law
adequacy doctrine- in chancery courts carried over to American colonies
and still the law in almost every jurisdiction
Irreparable injury rule- still cited to
3. Equity cannot protect personal, political, or religious
rights
Certain domains outside the scope of court’s powers
24
No remedy available and injunction not proper in “political thicket” Bush v
Gore
Courts lack jurisdiction to issue injunctions (TRO) in religious disputes
Decker ex rel Decker v Tshetter Hutterian Brethen (SD 1999)
Court may grant an injunction in the area of church-state relations. Court
granted injunction to prevent school prayer at public school events.
Ingebretsen v Jackson PS Dist. (fed 5th 1996)
Courts often issue injunctions to protect P’s personal and political
constitutional rights
4. Equity lacks jurisdiction to enjoin a criminal prosecution
Norsica v Board of Selectman (SC Mass 1975) p242 “Transient store”
P owned retail store, Board said she needed pursuant to Mass Stat. a $200
transient license and a $500 bond to operate, P also being charged
criminally for violating same statute. She filed for declaratory relief that her
store not within scope of statute and won. Selectman (D) appeal
“True rule that equity will protect personal rights by injunction upon the
same conditions upon which it will protect property rights by injunction.
These conditions are 1. That unless relief is granted a substantial right of
the P will be impaired to a material degree; 2. That the remedy at law is
inadequate and 3. That the injunction relief can be applied with practical
success and without imposing an impossible burden on the court or
bringing its processes into disrepute” from Kenyon v Chicopee
Concentrated on 2nd prong of Kenyon test
The available defenses to the criminal complaint provided an adequate
remedy at law thus injunction should not have been granted.
Shuman: 6 merchants alleged police threatened to prosecute for not having
license to conduct business. No injunction- other adequate remedies at law
Kenyon: repeated abuses by prosecution, police, and judges left Jehovah
witnesses with no other adequate remedy at law.
25
“not ground for equity relief since the lawfulness or constitutionality
of the statute or ordinance on which the prosecution is based may be
determined as readily in the criminal case as in the suit for
injunction.”
Also cited Younger abstention unless “very special circumstances”
26
5. Equity lacks jurisdiction to enjoin a crime
People ex. Rel. Gallo v Acuna (SC Cali 1997) p248 “Latino gang
members, injunctions”
Preliminary injunction entered against 38 individual members of an alleged
street gang in San Jose CA. 5 challenged the Order to Show Cause
Public nuisances enjoinable by injunction; “to qualify as a public
nuisance the interference must be both substantial and
unreasonable.” Backed up in RST substantiality as proof of “significant
harm” further defined as “real and appreciable invasion of the plaintiff’s
interests”, one that is “definitely offensive, seriously annoying or
intolerable” objective measure: “if normal persons in that locality would not
be substantially annoyed or disturbed by the situation then the invasion is
not a significant one.”
Highwater mark “Pullman injunction” –In Re Debs 1896- broke strike of
Pullman railroad employees by public nuisance injunction b/c strike’s effect
on national commerce.
Has been limited by state courts People v Lim Cal 1941 “ultimate legal
authority to declare a given act or condition a public nuisance rests with the
Legislature” and court cannot extend definition of public nuisance
unreasonably
[Repetition or continuance of any criminal act is a public nuisance so vests
the court of equity’s power to abate crimes with injunction.] paraphrased
from Lim; proscribing act also must further community and collective
interests to vest power of equity courts
Paragraph a and k not invalid, pass constitutional muster and behavior of
defendants can be proscribed by injunction because record is replete,
behavior is a public nuisance.
Concurrence and Dissent peaceful assembly should not be enjoined
2nd Concurrence and Dissent Blanca Gonzalez should not be enjoined, no
evidence she is gang member
27
Dissent Montesquieu, Locke, and Madison would be rolling over in their
graves.
Provisions of preliminary injunction too vague , prohibitions encompass
much lawful activity that not defined as public nuisance. “Unfortunately,
there are some who think that the way to freedom in this country is to adopt
the techniques of tyranny.” CJ
Earl Warren
Compare Acuna with City of NY v Andrews (NY 2000) where NYC tried to
combat prostitution in Queens plaza with similar injunction. Court held “The
city has made it quite plain that it intends to use this injunction to bypass
the Criminal Court, which it sees as providing inadequate relief.” Equity
should not intervene bc juries reluctant to convict in criminal prosecutions.
Struck down on association and freedom of travel grounds.
Buffer-zone injunctions granted in Madsen v Women’s Health Center
(SCOUTS 1994) buffer at 36 feet. Also Schenck (1997) floating buffer at 15
feet
Original buffer-zone Jackie Onassis v paparazzo 25-feet floating
Vices and other things that injunctions have been issued against; obscenity
(porn), crack, AIDS, Love Canal waste sites US v Occidental Chem. Corp.
1997; Illegal gambling, Failed to enjoin- stop Global Warming, repackaged
products liability suits against lead paint and gun manufacturers.
6. Equity will not enjoin a libel
Prior restraint rule- an injunction is a prior restraint if it forbids a D’s
speech, think it threatens the D’s expression more than subsequent
punishment.
Tory v Cochran (SCOTUS 2005) p268 “Guy defamed Johnnie Cochran”
28
Tory engaged in continuous unlawful defamatory activity against Cochran.
Court issued permanent injunction that D could not Cochran or law firm in
any public forum.
Cochran died, case is moot but
“an order issued in this area of First Am. rights must be precise and
narrowly tailored to achieve the pinpoint objective of the needs of
the case.”
B. Injunction Procedure
1. Interlocutory relief, TRO and Preliminary injunctions
given promptly to eliminate or minimize P’s irreparable loss before the
judge’s final decision. Preserves the controversy for a meaningful decision
after full trial. Must weigh P’s loss versus protecting D from possible
erroneous interlocutory injunction.
TRO- after a hearing, can be done ex parte usually called “ex parte
TRO”
Preliminary injunction- before full trial after an adversary hearing
Permanent injunction (aka injunction)- only after a full trial. FRCP
65
Roe v Crawford (USDC 2005) p272 “pregnant prison inmate”
Preliminary Injunction held by telephone call. Pregnant female in women’s
prison filed to have an offsite abortion in St. Louis. D, refused to transport
P, thus was stalling which was increasing the health risk to the P. P’s
motion is granted
4-Point Test/ 4 factors: (1) the threat of irreparable harm (2) balance
between harm to plaintiff and harm in granting injunction versus the
D (3) the probability movant will succeed on the merits (4) the
public interest.
1. relied on roe v wade to show irreparable harm
2. harm of P outweighs D’s bullshit argument
29
3. P will probably ultimately succeed bc case law supports her position
4. No harm to public interest by granting
No more defiance of its orders P wins
In general Roman test for granting preliminary injunctions
1. remedy of law inadequate
2. substantive right being infringed on [he has no idea what the fuck he
is talking about]
Disfavored Preliminary Injunction (notes p275)- one that alters
status quo, is mandatory, and gives movant full relief she seeks at
trial.
Sliding Scale for evaluating these any p seeking one then must show
“modified likelihood on the merits standard”- either Injury really high or
high likelihood of success on merits
2. Jury Trial After Merger
No jury when party seeks injunction,
Feltner v Columbia Pictures Television (SCOTUS 1998) “copyright old
TV shows”
Copyright infringement case Feltner (D) owned several TV stations which
showed unauthorized TV shows under copyright by Columbia (P). P won a
$8.8M judgment from judge verdict. D argued should have been heard by
jury because damages are juries domain. Even though damages were fixed
by copyright statute and thus statutory damages, an equitable relief.
Columbia argued this did not trigger jury trial right of 7th amendment
because not a “suit at common law” because no legal rights ascertained.
Historically copyright infringement has been adjudicated in courts of equity
since 17th century. Common law rule “in cases where the amount of
damages was uncertain, there assessment was a matter so peculiarly
within the province of the jury that the court should not alter it.”
30
right to jury trial includes the right to have jury determine the
amount to damages, if any awarded [to copyright owner].
Note: be careful what you wish for, Feltner got his jury and they awarded
Columbia $31.68M
C & K Enginering Contractors v Amber Steel Co. (Cal SC 1978) p285
“Subcontractor water plant”
P suit for damages stemming from a breach of contract based entirely on
equitable doctrine of promissory estoppel, neither party entitled to jury
trial.
D, subcontractor, gave in bid to P, contractor, to do some work on water
plant. P gave master bid to city, approved, D backed out claiming bid was
“honest mistake”.
Empanelled advisory jury on issue of P’s reasonable reliance on D’s
promise, jury found reliance reasonable and Judge order D to pay the cost of
detriment, another contractor.
Promissory estoppel:
1) promise
2) reliance on the promise
3) reliance was reasonable so it was foreseeable and incurred detriment (jury)
4) enforcement is necessary to avoid injustice
***damages are only the detriment incurred
Promissory Estoppel and Unjust enrichment would be equitable
“to avoid injustice” – equitable
“a jury trial must be granted where the gist of the action is legal”
No jury needed equitable doctrine.
Dissent focus not on rights but on remedies, P who seeks damages should be entitled to jury. Also the rule in Michigan.
31
3. Equitable Cleanup
Ziebarth v Kalenze (ND SC 1976) p292 “Specific performance cow”
Cattle buyer contracts to buy calves from D. D sells them to someone else, P
files suit asking for specific performance. Which is impossible bc D already
sold cows to 3rd party
Overrules “law of substituted legal relief” which is espoused in UCC § 2-716
[specific performance] and in subpart 2 states: “the decree for specific
performance may include such terms and conditions as to payment of the
price, damages, or other relief as court may deem just.”
D knew no specific performance, which would trigger non-equity action, in
damages thus D should have requested jury did not, so verdict ok. Tipsy
Coachman sort of.
C. The Modern Injunction: Discretion and Flexibility
1. The Chancellors Discretion
Navajo Academy v Navajo United Methodist Mission School (NM SC
1990) p297
“Academy moves in with Mission”
Two schools Academy moves to mission campus (1981), Academy does not
charge tuition thus enrollment jumps and swallows mission. Mission enters
into year to year subleases (1981-1986) but needs an upgrade of facilities so
asks Academy to ask Bureau of Indian Affairs, because free school, for grant
which is approved. In 1987 Mission seeks to get Academy evicted. Academy
files for damages of $1.8M and ask for continued occupancy. Court grants 3
years it gets to stay and then it is forced to leave. Not outside of Courts
discretion because “the fashioning of an equitable remedy, in a suit
involving equitable powers of the court, was an abuse of discretion.”
Improvements to school, but for the Academy, can be viewed as a couple
years rent.
32
Weinberger v Romero-Barcelo (SCOTUS 1982) p301 “bombing off PR”
Gov. and citizens of Puerto Rico suing the Navy, over test bombing off some
island. Some bombs did not detonate thus PR argues Navy is violating the
Fed Water Pollution Control Act (FWPCA), DC agrees but does not file an
injunction, CA orders Navy to stop bombing until they get a permit.
Test is whether statute/ Congress permits injunction, or provides other
relief.
SCOTUS says injunction not the only way of granting compliance but
FWPCA does authorize …permanent or temp injunctions and permits DC to
order the relief it considers necessary to secure prompt compliance with
act.
2. Two maxims of Equity: Clean hands and Laches
a. Clean Hands doctrine
Green v Higgins (SC Kan 1975) p310 “Schisters trying to do business”
Both P and D committed fraud in selling/buying house. Committed fraud
against real estate agent, third party with right of first refusal, and each
other.
Clean hands doctrine; “in substance provides that no person can obtain
affirmative relief in equity with respect to transaction in which he has,
himself, been guilty of inequitable conduct.” To be applied at discretion of
court, conduct that amounts to unclean hands must be willful
conduct that is fraudulent, illegal, unconscionable and it must relate
to the subject matter of the suit. Additionally the purpose of clean hands
doctrine is to protect the courts, and not a matter of defense of the party
asserting it as an affirmative defense.
Not effected by merger, only available in suits of equity.
b. Laches
Stone v Williams (Stone I) (USCA 1989) p315 “Hank Williams baby”
33
Hank Williams Sr., country music star, died at age 29 in 1953 had baby, P,
who is suing for her share of copyright renewal rights for all his hits. His
estate was litigated in 1967 for his son Hank Williams Jr.
She did not know who her rumored dad was till she was 21, also told
“everything has been decided against you”. She had numerous chances to
investigate further but finally choose look at documents until 1984 with her
attorney. DC ruled doctrine of laches barred her claim. “equity aids the
vigilant, not those who sleep on their rights.”
She should not be penalized for not participating in 1967 proceedings, or
for the period between 1974 to 1980 because she did not want to upset
adoptive parents. But no excuse for waiting five more years to file until
1985.
Doctrine of laches not a bar because P’s conduct unexcused it must
also be determined whether the D was prejudiced in the delay.
If no excuse than any prejudice sufficient, however if mediocre
excuse then slight prejudice. Prejudice can be shown through 1.
Decreased ability of the defendants to vindicate themselves or 2.
Inequity in light of some change in D’s position to permit plaintiff’s
claim to be enforced.
D prejudiced in both ways
Stone v Williams (Stone II) (1989) p320
D’s lawyers intentionally and fraudulently covered up plaintiff’s identity. D
had unclean hands thus decision reversed.
“The evidence of fraud which the AL SC found persuasive, makes SJ on the
grounds of laches inappropriate.”
Notes: She eventually won in Stone III
“Some courts have held the running of an analogous SoL creates a
rebuttable presumption of unreasonable delay and prejudice flowing
therefrom.” Goodman p322
34
D. Contempt
Still must obey the injunction if not then held in contempt
Direct contempt- from behavior in the courtroom
Indirect contempt – disobedience from outside the courtroom, Entitled to
notice and a hearing
1. What Orders Support Contempt?
FRCP 65 (d) Contents and Scope of Every Injunction and
Restraining Order.
(1) Contents.
Every order granting an injunction and every restraining order
must:
(A) state the reasons why it issued;
(B) state its terms specifically; and
(C) describe in reasonable detail — and not by referring to the
complaint or other document — the act or acts
restrained or required.
H.K. Porter Co. v National Friction Products (USCA 2nd 1977) p325
Settlement agreement between the parties. P wanted clause enforced had
contempt proceedings
To have contempt must have been disobedience of “an operative
command capable of enforcement.” And that command, if it is in
substance an injunction, must comply with rule 65(d)[above] of
FRCP.
DC judgment did not use language which a contractual duty into an
operative command. Even if it was an operative command, which it was not,
did not conform to mandatory precedents in FRCP 65(d)(1)(C) because it
merely referred to the settlement agreement and did not issue an operative
command.
35
“Equitable decrees…trace their origin to the royal command… to obey the
chancellors direction. B/c of the risks of contempt proceedings, civil or
criminal, paramount interests of liberty and DP make it indispensible for the
chancellor to speak clearly, explicitly, and specifically if violation of his
direction is to subject a litigant” to penalty including damages.
Even statute not enough, as a reference.
2. What is a violation?
Playboy Enterprises v Chuckleberry Publishing (USDC 1996) p328
“Playboy v Playmen”
Def. Tattilo, Italian man, publishing “Playmen” magazine in Italy since 1967,
D wanted to bring Playmen to US in 1979. Playboy got Judgment in 1981
which enjoined D from publishing, printing, distributing or selling in the
United States an English Language Magazine titled “Playmen”. D in 1996
has violated judgment now by operating “playmen” website from Italy.
A Court has the power to hold a party in civil contempt when (1) there is a
“clear and unambiguous” court order; (2) there is clear and convincing
proof of noncompliance; and (3) the party has not attempted to comply in a
reasonably diligent manner.
**** failure to comply need not be willful****
Cyberspace not a safe haven, Tattilo has violated the Court’s Injunction,
Contempt granted
3. The Puzzle of Criminal Contempt-Coercive Contempt
International Union, United Mine Workers of America v Bagwell
(SCOTUS 1994) p334 “Mine workers causing ruckus getting fined”
Unions told not to violate injunction, every violation brings penalty of $100K
for violent and $20K non-violent. 7 separate contempt hearings for over 400
offenses racks up $64M in fines for Union. Companies and union settle and
vacate $12M in fines but $52M still owed to Virginia and two counties.
36
Union argues fines are criminal contempt and not civil contempt thus
needed a jury and higher standard of proof.
Civil Contempt- “carry the key of prison door in your own pocket.”
1. coerces the D into compliance with the court’s order, or
2. compensates the complainant for losses sustained
Criminal contempt- a fixed sentence of imprisonment and is imposed
retrospectively for a “completed act of disobedience.” Gompers (had
been put in jail for 12 months was criminal contempt) “thus a flat,
unconditional fine totaling even as little as $50 announced after a finding of
contempt is criminal if the contemptor has no subsequent opportunity to
reduce or avoid the fine through compliance.”
What protections are afforded and When?
“Courts independently must be vested with “power to impose silence,
respect, and decorum, in their presence” Anderson “inherent Contempt
authority” Gompers
Thus direct contempt’s can still be handled summarily
Indirect contempt’s of complex injunctions demands reliable fact finding
and triggers the criminal procedural protections [presumed innocent,
advised of charges against them, have an opportunity to respond to
charges, right to counsel, right to call witnesses, have a public trial,
unbiased judge, right not to testify against oneself, and proof BaRD; and
afforded a jury for serious criminal contempt] to prevent arbitrary exercise
of judicial power.
Fines levied on Union were not compensatory and were punitive thus should
have triggered criminal procedural protections such as criminal jury trial.
Scalia Dissent $52M criminal, too extreme a case to try and clarify civil
versus criminal contempt. Would satisfy all the previous tests.
4. Confinement, Contempt, and Cash money: Ability to comply.
Statutes authorize a judgment creditor to institute collection proceedings or
discovery proceedings to find the judgment debtor’s assets.
37
Judge may enforce an order to pay with contempt even though requires him
to pay money bc defendants failure to comply considered contumacious
conduct.
“Yet cannot get any blood out of a turnip” contemptor can assert the
defense of inability to comply” Deadbeat dad cannot be forced into civil
contempt if he is unable to pay Hughes v Georgia Dept of Human Resources
p 344 Contemptor has both burden of persuasion and burden of production
on defense of inability to pay.
Moss v Superior Court, Ortiz (SC Cal 1998) p345 “Deadbeat dad has to
pay”
There is no constitutional impediment to imposition of contempt sanctions
on a parent for failure to pay child support when the parent has the ability
to seek and accept available employment.
A court order requiring parent to pay child support and thus seek and
accept gainful employment is not a violation of the thirteenth Am.
Prohibiting involuntary servitude. Neither it is a violation of Cal Const. “A
person may not be imprisoned for a debt” bc provision has long been held
not to apply to imprisonment for crimes or contempt’s.
5. The Collateral Bar
Ex Parte Purvis (Sc AL 1980) p352 “protestor imprisoned for 3 criminal
contempts”
Purvis violated of TRO by striking against his employer, Water Works Board
of Birmingham. Sentenced to criminal contempt of 15 days for 3 separate
incidents of contempt. Uphold TRO despite Purvis contention that
Injunction violated his constitutional rights to freedom of assembly, etc.
“order issued by court with jurisdiction… must be obeyed until it is reversed
by orderly and proper proceedings even though it may be constitutionally
defective” unless rare case [If transparently invalid- ridic high standard]
38
where compliance would cause the irreparable injury and appeal would not
totally repair the error.
5. Who may obey
Because courts cannot make general rules that apply to the masses, such as
statutes as made by legislatures, then injunctions only apply to certain
people.
Can be geographically specific Acuna or Milk Wagon Drivers p359 or 36
feet Madsen
People v Conrad (Cal CA 1997) p360 “Two groups one abortion clinic”
Two groups picket abortion clinic, one group, “Solano Citizens for Life” has
injunction enjoined against it. “Operation Rescue of California, another anti-
abortion group, claims they are unrelated. ORCal was at clinic to “test the
injunction”. Parties did not know each other and thus could ORCal members
could not be enjoined by previous injunction. Did not act “in concert” as
required by injunction.
Ex Parte Davis (Tex 470 SW 2d 647) [Roman asked up to look up] “It don’t
apply to me”
Beaumont preacher building church against injunction
states that an injunction is binding only upon the parties to the
action, their officers, agents, servants, employees, and attorneys,
and upon those persons in active concert or participation with them
Neither Bible Baptist Church nor Davis were parties to the 1962 temporary
injunction. The question here is whether a non-party to the original
injunction proceeding, was in active concert or participation with the Brites.
This court in Ex Parte Foster said that while a person not named as a party
is not ordinarily bound by the terms of the injunction decree and therefore
cannot be punished for violating its terms, he is ‘in active concert or
participation’ with the named party if he participated in the original
39
proceeding and was a real party in interest when the decree was
rendered
E. The Enforcement of Constitutional and Public Law
Through Structural Injunctions
Granted to protect P’s constitutional rights usually infringed by schools,
prisons, jails, and now mental hospitals and even police departments.
Future based hard to draft and strain the judiciary, also Separation of
powers concerns because may usurp executive and legislative power. But
sometimes needed because other branches too slow to react, i.e. Brown II
“all deliberate speed.”
Courts can hold city council members or other government officials in
contempt for not following structural injunctions; Courts can subject
injunctions over entire systems as in Dixon v Berry where courts supervised
the DC mental health system for over 25 years.
A judge may also grant relief from an injunction when the prospective
application in “no longer equitable” FRCP 60(b)(5).
1. Attempts to remodel an existing social or political institution to bring it into conformity with constitutional demands
2. Typically complex and invasive 3. Likely to involve judge in tasks traditionally considered to be non-judicial, that is,
less about rights and duties and more about management4. Used only as public law remedies for serious and pervasive rights violations5. Ex. restructure school system to facilitate equality of educational opportunity
F. Injunction Reform2 big areas: Limits on strike injunctions and injunctions which effect
unconstitutional prison conditions
Frew ex Rel. Frew v Hawkins (SCOTUS 2004) p374
Texas parents filed a class action lawsuit on behalf of their children against
state healthcare officials, claiming deficiencies in the state's Medicaid
program. The case was settled through a consent decree, a written
40
agreement similar to a contract that the court approves and has the power
to enforce. Two and a half years later, parents were unsatisfied with the
state's progress and filed a motion to enforce the consent decree. The
district court found that the consent decree was enforceable, but the court
of appeals reversed, holding that the state was immune from enforcement
under the Eleventh Amendment, which provides that a state cannot be sued
by individuals from other states, countries, or its own residents unless it
explicitly waives immunity. The court of appeals held that a consent
decree is not enforceable against a state or its officials except to
vindicate a federal right under 42 U.S.C. § 1983. The court found no
violation of a federal right and no waiver of sovereign immunity;
therefore, the consent decree was unenforceable.
Chapter 4 – Unjust Enrichment- Restitution
A. Doctrine of Unjust Enrichment is an Equitable one, providing
one party should not be able to benefit at the expense of another because of
an innocent mistake or unintentional error. UE opposite of Officious
intermeddler- window washer.
Kistler v Stoddard (Ark CA 1985) p384 “Hey I planted those crops”
Stoddard tenant farmer for 20 yrs. planted crop in Nov. 1980. Farm owner
died, estate sold land which Stoddard planted on. New owner unjustly
enriched. Stoddard had no equitable or legal claim to the crop, but that
does not mean D (Kistler) is entitled to be unjustly enriched.
Kossian v American Nat. Ins. Co. (Cal CA 1967) p393 “Cleanup of Fire in
hotel”
The plaintiff was hired by the owner of a hotel to clean up debris after a
fire. He performed the work but was never paid. Later, the hotel owner filed
a bankruptcy petition. The trustee in bankruptcy abandoned the hotel to the
defendant company, which held a mortgage on the property. The defendant
41
took possession of the debris-- free premises, and also collected on an
insurance policy the hotel owner had maintained for the defendant's benefit
pursuant to the mortgage. The insurance contract indemnified the
defendant for fire loss, including the cost of removing debris; but, like most
insurance contracts, it did not require that the work be done.
The plaintiff asserted a restitution claim against the defendant, seeking a
money remedy in the amount of the insurance proceeds corresponding to
debris removal. Although the defendant never requested the plaintiff's
services, and the insurance payment was based on an independent contract
between the hotel owner and the insurer, the court allowed the claim. It
interpreted the "equitable doctrine of unjust enrichment" to mean
that the defendant should not "be indemnified twice for the same
loss, once in labor and materials and again in money, to the
detriment (forfeiture) of the party who furnished the labor and
materials."
Patureau-Miran c.(v) Boudier (France 1892)
Boudier, manure salesman, supplies Patureau-Miran’s tenant; tenant
evicted and court finds unjust enrichment; action in de rem verso [action
for restitution based on the defendant’s UE] derives from the
principle of equity which forbids one to enrich oneself at the expense
of another.
Knaus v Dennler (Ill. CA 1988) p396 “neighborhood lake and dam”
P purchase lake front lot, had ½ earthen dam protecting the neighborhood
from flooding. Dam broke now P want D’s to help pay for dam. Some
neighbors contributed to fix dam. Smedleys, one D, neighbors objected to
their portion of the dam being repaired. Ill courts recognize quantum meruit
but not applicable. “B/c P’s instructed the repairs to be commenced
notwithstanding defendant’s opposition and lack of willingness to
42
enter the agreement proposed by P’s, we are unable to find the Ds
voluntarily accepted a benefit, as required to establish unjust
enrichment.”
D’s are freeriders, and get trespass damages of $130.
Notes: does common fund fit into UE?
B. Legal Restitution: Quasi-Contracts
Legal Restitution two branches (A) money or value restitution, occurs when
a successful plaintiff recovers a money judgment measured by the
defendant’s unjust enrichment. (B) specific or specie restitution includes
replevin and ejectment; where the D returns the P’s exact chattel or real
property respectively.
3 “common counts” or Quasi-Contract:
Complaint for money had and received
Quantum Valebant- for goods sold and delivered
Quantum Meruit- for service rendered under UE principle
Not equity in chancery sense- thus need a jury trial and P prevails
then get a money judgment.
Many cases, even ones below, confuse equitable and legal restitution;
mistakenly use terms interchangeable. Be on the look out for improper
vocab.
1. Measuring the defendant’s benefit-services
Occurs because no contract or tort but P has conferred a benefit on the D
Campbell v TVA (USCA 1969) p406 “trade journals for TVA library”
P made microfilm trade journals for TVA, but no K because was ordered by
an employee at TVA with no authority to enter into such a contract.
Action in Quantum Meruit.
Two ways to measure benefit D received: 1. Fair market value or 2.
How much the benefit has been worth to the person upon it was
conferred?
43
Bc it was TVA library, real benefit to patrons, almost immeasurable.
Correct in using fair market value, Only fair market value is to TVA
library.
Also did not need to follow experts assertion that microfilm could have been
done for $10K. Campbell recovery was for $30K.
Dissent J. Rives (only one year of college) judgment in exact amount of
original invalid contract, thus decision did not even follow their own rule.
Maglica v Maglica (Cal CA 1998) p415 “maglight unmarried seperation”
Unmarried couple who lived together for 20+ yrs, Husband started
maglight, wife’s ideas helped grow company. She got $84M in quantum
meruit from Jury.
No contract, no marriage bc no “common law” marriage “the fact they
remained unmarried is dispositive”
“The measure of recovery in quantum meruit is the reasonable value of the
services rendered provided they were of direct benefit to the defendant.”
“the idea that one must be benefitted by the goods and services bestowed is
thus integral to recovery in quantum meruit.”
Improper jury instructions misled the jury, Quantum meruit is not an
implied contract
New trial, new jury instructions, more facts about business relationship
coupled with facts about living together, holding themselves out as husband
and wife, could help wife prevail.
C. Equitable Restitution
1. Constructive Trust
more beneficial in three situations, and major equitable restitution
1. D is bankrupt, and P can trace his or her property to identifiable asset
2. D has purchased an identifiable asset with P’s property, and that asset
has appreciated in value
44
3. D has transformed P’s property to a 3rd person, and P wants the 3rd
person to return the item; operating like replevin or specific
restitution
P must TRACE so chancellor can find the constructive trust “res”
Simonds v Simonds (NY CA 1978) p422 “1st Wife wants her life insurance
money”
Decedents 1st wife seeks to apply a constructive trust on proceeds of life
insurance policy. Separation agreement required husband to keep life
insurance policy, of $7000 to be paid to her. Insurance policy lapsed.
“The separation agreement vested in the first wife an equitable right in the
existing policies. Decedents substitution of policies could not deprive the
first wife of her equitable interests, which was then transferred to the new
policy.”
Cardozo: “a constructive trust is the formula through which the conscience
of equity finds expression. When property has been acquired in such
circumstances that the holder of legal title may not in good conscience
retain the beneficial interest, equity converts him into a trustee”
45
2. Tracing
Restatement of Restitution § 202 comment c
Explains the stealing money lotto conundrum explained in E &E p282
Limits on tracing:
creditors: fraud victims of a ponzi scheme should each get a pro rata
share US v Durham
Life Ins.: embezzled money then buy Life Insurance only entitled to
amount of embezzled money, interests, and any costs
Homesteads: yes can get homestead if take your money and buy a
house, However Fla one of the most protectionist
states for homestead
C. Defenses to Restitution
Non-affirmative defenses: attack either the unjustness or enrichment tag
the P with intermeddler or volunteer status
Affirmative Def:
a. Time bar- varies if legal then jurisdictions contract statute of limitations
or equitable restitution under equitable doctrine of laches
b. Change of position-estoppel- if making restitution would be “inequitable”
or estoppel if bank overtransferred, D asked if it was his money and bank
assured him “money is yours” then creates estoppel- must show relied on P
representation p432
c. Bona Fide purchaser- second hand purchaser no idea, what you
purchased was without good title- must show lack of knowledge under UCC
d. Discharge for value- when creditor discharges debt owed to them bc
thought money was clean or property had good title.
Chapter 5- Restitution in Transactions
A. disqualifying the P for Rescission-Restitution
1. Election of another Remedy
46
FRCP 15 allows P’s to amend complaint adding or retracting remedies
FRCP 54(c) tells a judge to grant the relief to which the successful plaintiff
id entitled even if the party has not demanded such relief in the party’s
pleading.
UCC remedies cumulative
Gannett Co. v Register Pub. Co. (USDC 1977) p436 “Hart-fraud Times”
Sale of Hartford Times, D overvalued assets and fraudulently inflated
circulation stats.
P learned of this only after purchase, did not rescind right away.
TC held waited two months, to long, to rescind thus affirmed the contract.
“the reasonable time period within which rescission must be
demanded starts the moment the injured party is on notice of the
fraud.”
To force shares of Hartford back upon Gannett at his stage would be
unequitable.
2. Lack of Injury
Earl v Saks & Co. (Cal SC 1951) “How much is that Fur Coat?”
Lady gets Saks to sell fur coat to BF only because she promises to pay
difference. She then returns to get coat monogrammed and pays the
difference, he tells Saks he is rescinding. He then sues Saks for conversion.
But no injury Saks has coat, he has paid nothing, only signed sales slip and
Mrs. Earl has paid $916.30 which can be returned.
So Contract Rescinded, [in modern day we call this a return]
Monetary Injury is a requirement- classic view- Prof. Pomeroy
Harper v Adametz (SC of Errors Conn.) 1955 “Lying Realtor”
Realtor defrauds buyer out of 63 acres by lying to buyer and seller. Ends up
purchasing the 63 acres for his son (D). “Equity will not permit these D to
keep a benefit which came to them by reason of Jere’s fraudulent conduct.”
47
“If one acquires property by means of fraudulent misrepresentation of a
material fact, equity will assist the defrauded person by fastening a
constructive trust on the property”
P gave addition $1000 he had offered and court ordered D to convey 63
acres to P.
B. From Defective Negotiations to plain Overreaching
1. Seller’s right to disclose
Reed v King (Cal CA 1983) p455 “For Sale: mother and her four children
murdered”
Murder of five people, 10 years ago, does Seller have to disclose?
In general seller of house has a duty to disclose: “where the seller knows
of facts materially affecting the value or desirability of the property
which are known or accessible only to him & also knows that such
facts are not known to, or within the reach of diligent attention and
observation of the buyer.”
2. Undue Influence
Odorizzi v Bloomfield School Dist. (Cal CA 1966) p460 “homo school
teacher resigns”
School teacher forced into resigning after arrested for homosexual activity.
Wants declaratory relief reinstating him after charges were dropped
Undue influence involves an application of excessive strength by a
dominant subject against a servient object
Undue Influence certain characteristics of excessive strength:
1. Timing of discussion of transaction
2. Consummation of transaction at unusual place
3. insistent demand that be done immediately
4. extreme emphasis unexpected consequences of delay
5. use of multiple persuaders of dominant party
6. absence of third party advisors
48
7. statements that there is no time to consult financial advisors or attorneys
Remanded to TC for factfinding determination
****Roman- also possible duress and threat of character concerns in
Odorizzi
3. Duress-Business Compulsion
Selmer Co. v Blakeslee-Midwest Co. (USCA 1983) p466 “I had to take
the offer”
Selmer, P, subcontractor entered into agreement with D, general
contractor, D was to supply something to P then P to build and deliver to
site. D was late in delivery and P incurred cost of $150K, offered to settle
for $120K, D refused to budge from counteroffer of $67K. P accepted
because of economic difficulties and now is suing for rest of costs incurred
claiming “economic duress”
“The mere stress of business conditions will not constitute duress where the
defendant was not responsible for the conditions.”
4. Unconscionability “Doctrinally difficult”
Discover Bank v Superior Court (Cal SC 2005) p472 “Fucked up
cardholder agreements”
Arbitration agreement between Discover and Card holders, arbitration
came about because aggregate late payments from class action [payment
was late after 1pm]
“When a party has superior bargaining power and has carried out schemes to deliberately cheat
consumers out of individually small sums, the waiver becomes applicable and is
unconscionable.” Gave discover card unequal bargaining power
C. No Enforceable Contract
49
Contract may fail bc of SoF, failure of consideration, lack of capacity,
party’s mistake or illegality.
1. SoF Required Writing Rule
Marriage
Year
Land
Executor
Guarantor
Sale of goods over $500 and UCC 2-201 revised $500 to $5000 [revised still
not adopted as of 2010]
Schweiter v Halsey (Wash SC 1961) p 481 “SoF land case”
Tried to convey land with an inadequate description of the property.
Violated Statute of frauds thus voided whole agreement
Abrams v Unity Mutual Life Ins. (USCA 2001) p485 “preneed funeral
insurance”
P, funeral director brought on by Insurance company to start selling
“preneed” insurance for beneficiaries to cover funeral costs. No written
contract despite 7 drafts of a contract and relationship lasts 6 years.
Contract claim is barred bc violates SoF and unjust enrichment claims is
barred for two reasons. One it based on the same promise and seeks the
same relief of the barred contract claim, thus enforcing it would circumvent
the statute of frauds. Second he cannot prove what benefit he conferred on
Unity without the draft contract, the fatal flaw resurfaces.
50
2. Lack of Capacity
Halbman v Lemke (Wis Sc 1980) p488 “minor buys car, car breaks down”
P a minor buys car from D. Car breaks P take sit to garage repair bill
$637.00 does not pay bill. Garage removes engine and tows to minor’s
house.
Infancy Doctrine- Absolute right of minor to disaffirm a contract
Absent misrepresentation or tortious damage to the property, a
minor who disaffirms a K for the purchase of an item which is not a
necessity may recover his purchase price without liability for use,
depreciation, damage, or other diminution in value.
Draft of Rst. Of Restitution § 16 Illustration 13 allows Seller to offset
depreciation with
minor buyers refunded purchase price/consideration
D. Ground for restitution
1. Deficient Consideration
Johnson v GM Corp, Chevy motors division (Kan SC 1983) “UCC
revocation” setoff
P, bought a new truck, traded in old received a limited warranty. Problems
with new truck almost immediately. Continued to drive truck bc seller
refused to take back after numerous chances to cure defects. Seller wants
setoff for depreciation of truck while litigation on going
“A B that properly rejects or revokes acceptance is first made whole from
the injuries resulting from the seller’s failure to perform his part of the
agreement, escapes the bargain, and forces any loss resulting from
depreciation of the goods back on the seller.” B had vested security interest
pursuant to 2-711 UCC thus should have kept truck after S refused to
retake possession.
Get out from under being wrongful to the Seller [2-608(2)(a)] bc
transportation is necessity not a luxury thus had to use truck
51
However S gets there setoff 2 ways to calculate:
1. Lease vehicle monthly depreciation
2. Alternative method highway safety method
Chose second method D gets their setoff but also owes P’s interest at 10%
from time of attempted revocation till judgment, ouch!
2. Mistake
Renner v Kehl (Ariz SC 1986) p499 “jojoba farming”
Equitable rescission from a mutual mistake. Buyers of land wanted to start
a jojoba farm S thought land was sufficient for jojoba farming. Turns out not
enough water a P’s wanted out of agreement. TC awarded and CA upheld
P’s getting back their down payment and all damages incurred with drilling
test wells etc.
Ariz SC struck down award and said “P’s are entitled to their down payment
plus the amount by which their efforts increased the value of the petitioners
prop. Not the $229K in damages awarded because that would shift the
risk of mistake onto the D’s which is incompatible with equitable
rescission.”
Terra Nova Ins. v Ass. Commercial Corp. (USDC 1988) p504 “stolen
truck insurance fraud”
Scharbarth commits insurance fraud but insurers pay out anyways, despite
investigating realizing Scharbarth probably commits fraud Ins. pays out
claim scared of retaliatory claim for bad faith insurer. Scharbarth goes to
jail after FBI gets involved.
“Under Wis. Law plaintiff’s cannot recover from Associates what turns out
to be a mistake of fact.”
Scharbarth however owes the full amount plus interest
52
Lenawee County Board of Health v Messerly (Mich SC 1982) p 508
“leaky septic tank”
Pickles’ purchased investment property only to discover the septic tank was
leaking out onto the ground. The Board moved in and condemned the
property, and seeking a permanent injunction until the property was
brought into compliance. Injunction granted. Messerly’s former buyers filed
foreclosure and Pickle’s countered with rescission. TC found no cause of
action, CA found a mutual mistake that went to a basic element of the
contract, an income producing property.
SC Mich reverses “In cases of mistake by two equally innocent parties,
we are required, in the exercise of our equitable powers, to determine
which blameless party should assume the loss resulting from the
misapprehension they shared. Equity suggests the risk should be
allocated to the purchasers.” –no rescission
53
Mutual of Omaha v Russell (USCA 1968) p 512 “travel insurance”
Woman tries to buy travel insurance from machine, no change buys it from
booth, but buys different insurance, she dies on flight back and is not
covered under 2nd insurance because trip lasted one day longer, would have
been under 1st insurance. “The printed contract controls” family gets
nothing
3. Illegality- Violation of Public Policy
Judge can raise illegality concerns sua sponte
Bovard v American Horse Enterprises, Inc. (Cal CA 1988) p517 “roach
clips and bongs”
P, sued to recover promissory notes executed by D’s in connection with
Ralph (other Defendant) purchase of Corp. from P. At trial judge discovered
Corp made jewelry but really bongs and roach clips, and sua sponte
stopped proceedings and threw out compliant.
Discussion of Moran which list several factors
1. nature of the conduct
2. extent of public harm which may be involved
3. moral quality of the conduct of the parties in light of the prevailing
standards of the community
No enforcement of the K
R.R. v M.H. & husband (Mass SC 1998) “Surrogacy agreement”
Enforceability of surrogacy parenting agreement. Lady backed out after 6
months pregers despite complex agreement which provided for
compensation and custody rights.
Minority of states outlaw, a few have made them legal, including Fla which
requires intended mother to be infertile. Others place restrictions but Mass
Legislature silent
Examine adoption statutes that require waiting period before mother can
give away baby. Thus because of public policy surrogacy agreements are
void in Mass.
54
Leaves open door if unpaid and mother waits to give up, then would be
legit, but again still unenforceable because then not really an agreement.
What about intended father having to pay child support to adoptive mother
despite not being real father? Yes he does have to pay in Cal. In Re
Marriage of Buzzanca p527
Chapter 6 - Contort
EVRA Corp. v Swiss Bank Corp (USCA 1982)
Hybrid tort, contract Roman hates this shit
Scrap metal dealer lost a valuable contract b/c D failed to effect a telex
deposit
Awarded $2.1M by Trial Judge most of which was for lost profit
****Posner decision****
cites Cardozo “The sender can protect himself by insurance in one form or
another if the risk of non-delivery or error appear to be too great.*** The
Company, if it takes out insurance for itself, can do more than guess at the
loss to be avoided.”
P is not entitled to recover consequential damages from D
C.Economic Loss Rule
Local Joint Exec. Board v Stern (Nev SC 1982) p539
“Can’t work suing over fire at MGM grand”
“Forseeability of economic loss even when modified by other factors
is a standard that sweeps too broadly in a professional or
commercial context.”
“the law does not spread its protections so far” Robins Dry Dock
a. The economic loss doctrine
ii. A judicially created doctrine providing that a commercial
purchaser of a product cannot recover from a manufacturer,
55
under the tort theories of negligence or strict products
liability, damages that are solely “economic” in nature
iii. Three policies upon which application of the economic loss
doctrine to tort actions between commercial parties is
generally based:
1. To maintain the fundamental distinction between tort
law and contract law
2. To protect commercial parties’ freedom to allocate
economic risk by contract
3. To encourage the party best situated to assess the risk
economic loss, the commercial purchaser, to assume,
allocate, or insure against that risk
****Exxon-Valdez Oil Spill p 540****
Trans-AK Pipeline Liability Fund, set up to pay for damages, and the Courts
agree owner’s losses not proximately caused by the oil spill. Either
geography too remote, or impact was on customers who stopped
patronizing. Adkins v Trans-Alaska Pipeline
Chapter 7 Breached Sales Agreements
UCC article 2 governs sale of goods
First must show UCC applies sale of fungible goods over $500
§2-703 covers Sellers remedies in general and comment 1 tells us that
Seller’s remedies are cumulative, unless facts bar a specific remedy. In
addition comment 4 guides us to section §1-106, an umbrella to the entire
remedies provisions stating “remedies are to be liberally administered to
the end that the aggrieved party may be put in as good a position as if the
other party had fully performed”.
§2-711 covers Buyers Remedies and §1-106 also applies
McCarthy v Tobin (Mass SC 1999) p557
No UCC b/c about land not goods
56
Preprinted real estate form –OTP- gave extension passed extension by five
days and Same day P signed agreement sent by D’s lawyer D accepted 3rd
parties offer to purchase. P gave agreement to D’s lawyer the next day. P
then filed for specific performance and damages.
Was the OTP a firm offer? Controlling fact is intention of parties and OTP
was binding and contains familiar contractual language Aug 16 deadline is
merely a condition subsequent and was waived bc negotiations continued.
Specific Performance appropriate “because property is unique and
money damages will often be inadequate to redress a deprivation of
an interest in land.”
B. Buyers Damages for Seller’s Breach
1. Tort v Contract
Selman v Shirley (Oregon SC 1939) p566 “This house aint got no Logs”
The general rule of damages in fraud is that a plaintiff is entitled to "such
damages as naturally and proximately resulted from the fraud."
2. Expectancy Damages v Rescission-Restitution
Horton v O’Rouke (Fla DCA 1975) “4 families and Federal tax Lien”
Ps, rental agreements to live in houses under construction, moved in then
told Federal Tax Lien encumbering at $94K. Assured Lien would be
removed, renters continued to rent for 22 months. Finally told lien not
going to be removed. Then ousted by other Co. who took control of title.
They filed for damages against D construction Co. and original landlord.
“No suggestion of bad faith on D’s part” so no damages
Standard measure of K damages for benefit of the bargain:
Difference between value of the land when it should have been
conveyed less the contract price as yet unpaid.
Classic expectancy
3. Measuring the Buyer’s Expectancy
57
Wilson v Hayes (TX CA 1976) p580 “Selling and buying bricks”
Sell 600,000 bricks for $6K, Seller, Defendant-Wilson delivered only
400,000 bricks. Market value $.05/ brick
UCC 2-712 Cover or 2-713 MP:
o 2-712: cover
buyer doesn’t have the goods K’d for (for a number of reasons)
formula: return of buyer’s purchase price + cost of cover
(cost to obtain substitute goods) – K price + incidental
damages + consequential damages – expenses saved
requirements:
good faith—no unreasonable delay—reasonable
purchase or reasonable K to purchase—failure to cover
leaves all other remedies intact but may impact
consequential damages (cmt. 3)
o you don’t have to cover but if you have
consequential damages (i.e., forward sale) and
you don’t cover—you will be sued for breach and
cannot get damages
o some cases you can’t cover, then you have
consequential damages
o §2-713: when buyer doesn’t coverreturn of buyer’s
purchase price + MP – KP + ID + CD – ES
timing: mkt. price at time buyer learns of breach
location: market price at place of tender
Under 2-711 he gets his $2000 back for price paid then under 2-713 he gets
the $8000 for non-delivery or repudiation.
Texpar Energy v Murphy Oil USA (USCA 1995) p580 “asphalt sale”
Basically get more than out of pocket expenses and 2-713 proper
application
58
§1-106 “remedies are to be liberally administered to the end that the
aggrieved party may be put in as good a position as if the other party
had fully performed”.
Wolf v Cohen (USCA 1967) p 587 “No damages in real estate”
Suit for damages out of series of real estate transactions; B, going to resell
but never did, supposed 2nd buyer backed out. Then filed damages against
Seller
“measure of damages for breach of a contract of sale is the difference
between the K price and the fair market value of the property.”
Hourihan v Grossman Holdings (FLA SC 1982) p590 “mirror image
house”
House built mirror image DCA applied Edgar v Hosea
SC Fla applies 346(1)(a) of RST of K Diminution of value theory
Basically get reasonable costs and in fixing problem or difference in
value of the product contracted for and value had performance been
received by the plaintiff; if this is possible without economic waste
Oloffson v Coomer (Ill. CA 1973) covers Buyers remedies for UCC 2-711
and 2-713 as well as repudiation 2-610
When Seller repudiated B should have secured new corn that day thus only
get market price at time and place of tender. 2-713(2).
No 2-712 because not cover had unreasonable delay!
4. Buyer’s Special Damages: Lost business Profits
59
AM/PM franchise Ass. V Atlantic Richfield Co. (Penn SC 1990) p604
“Sold Bad Gas”
Agreement required franchises to sells ARCO gas, blended with oxinol and
caused consumers to have car problems. Precipitous fall off in gas sales
during period in which they started selling this bad gas.
Rely on 2-714 and 2-715
2-714: value of conforming goods – value of non-conforming goods (general damages)
2-715: incidental and consequential damages
a. 1. loss due to general or particular need 2. known at time of K-ing by S 3. couldn’t be avoided through cover or otherwise (only economic
damages) b. injury to person or property—only economic damages
Lost profits a form on consequential damages: 3 types of lost profits
1. lost primary profits (difference what B would have earned and what
they did earn bc of breach)
below only available in breach of warranty cases
2. lost secondary profit (loss of secondary goods)
3. loss of prospective profits (aka good will damages) (AM/PM first
case in Penn to allow)
2 and 3 become more speculative
for Good will damages [p given opportunity to set forth but must show (a)
such profits were related to the breach of warranty and (b) there is a
reasonable basis on which to calculate]
5. New Business Rule
Mindgames v Western Pub (USCA 2000) “Cleaver Endeavor: the most
fucking ironic game name ever”
Wanted $40M in expected profits that it never earned bc of D’s lack of
marketing
Abrogates “new business rule” for Ark [even though fed court]
60
Real question is to undue speculation; P had no track record when he
created cleaver endeavor could point to no other games he had made. Plus
$40M a bit steep had to have sold 10M copies of game to earn that.
6. Emotional distress stemming breach of contract
Erlich v Menezes (Cal SC 1999) p619 “leaky dream home”
Wanted dream house, but contractor built house that leaked everywhere.
Claimed emotional distress had physical illness, heart condition, brought on
by shoddy construction. “damages those likely to result therefrom”
Need separate tort to collect emotional distress damages, not recoverable
in breach of contract
7. Economic loss rule revisited (p539 originally) p630
***Tort or product liability avenues of recovery possess special advantages:
it avoids wavier (on labels or packaging), it liberates P from Hadley v
Baxendale contemplation limit on special damages, unlocks the plaintiff’s
access to recovery for mental suffering and to possible punitive damages.
Line between product liability and contract-warranty doctrines:
1. D has no tort-products liability duty when a defective product causes
a P purely monetary harm Seely v White motor Co. only contract
damages, when product injures only itself.
Second test minority nonexistent
8. Reliance Damages
Wartman v Hightower (MD CA 1983) p635 “Flagpole sitter venture”
Met with attorney to incorporate venture, Att. Ok’ed selling stocks then
realized problem contacted Hightower and offered them to meet with
incorporation specialists They refused bc would have cost $10K, Jury gave
them reliance damages
Appeal over reliance damages
61
“ordinarily profits lost due to a breach of K are recoverable. Where
anticipated profits are too speculative to be determined, monies
spent in part performance, in preparation for or in reliance on the
contract are recoverable.”
II. Sellers Remedies
A. Specific Performance
Centex Homes Corp v Boag (NJ AC 1974) p641
“Seller trying to force Condo on Couple”
Guy buys house then transferred to Chicago, stops payment on check, down
payment.
Seller, Vendor, asks for specific performance, that agreement be performed
in full.
“Specific performance…should be confined to those special instances
where a vendor will otherwise suffer an economic injury for which
his damage remedy at law will not be adequate, or where other
equitable considerations require that the relief be granted.”
B. Sellers Damages
1. Sellers expectancy and other damages
basic expectancy K price minus market price [at time and place for
tender]
or KP-MP
2-706 KP- Resale price
2-709 recover price
2-708(2) sellers “lost profit”
2-718 liquidated damages
Jagger Brothers v Technical Textile (Penn AC 1964) p646 “Yarn
repudiation”
62
Agreement to buy 20,000 pounds of yarn at $2.15/lb. buyer repudiate after
only taking delivery of 3,723, noticed seller would refuse future deliveries.
S awarded $4069.25 in a bench trial, MP $1.90 award represent 16,277
times the $.25 difference between KP and MP. [(KP-MP) x 16,2777]
Pursuant to 2-708 judgment affirmed
McMillian v Meuser Material and Eq. (Ark SC 1976) p 648 “Bulldozer
resale”
K to sell bulldozer, Buyer breached supposedly over wrong delivery date.
S resold 14 months later, sought damages under 2-706, which provides
for difference in KP- lower resale price; resale was commercially
unreasonably delayed.
Remittitur (reduction) of damages award, incidental damages ok’ed bc
reasonable to upkeep
Sprague v Sumitomo Forestry Co. (Wash SC 1985) p651 “No notice of
resale Logs”
Logger, P, entered into K to sell logs to D, who cancelled K bc of difficulties
at its sawmill. In answer B said mitigate, S then did but failed to notice B as
required by 2-706(3). Not an affirmative defense for B, rather element of S’s
claim under recovery under 2-706 thus S must prove at trial. So no recovery
under 2-706
But 2-703 allows for elections of remedy coupled with 1-106 they must be
administrated liberally so can recover under 2-708(1)(classic expectation
damages): MP-KP+ID-ExS affirm most of award some discussion of what is
difference between ID and CD which are not recoverable under 7-708(1)
[but are allowed under 2-708(2) subject to undue speculation dealt with
infra]
“incidental damages are normally incurred when a buyer repudiates and
include expenses incurred in transporting, storing, or reselling the
goods. …
63
Consequential damages do not arise within the scope of the immediate
buyer-seller transaction but rather stem from the losses incurred by the
non-breaching party in its dealings, often with third parties, which were
the proximate result of the breach and which were reasonably
foreseeable by the breaching party at the time of contract.”
2. Seller’s profits
R.E. Davis Chemical v Diasonics Inc “lost volume seller” p655
Medical equipment B breached, S sued claimed entitled to offset of 2-708(2)
as a lost volume seller; 2-708(2) provides “if the measure of damages
provided in subsection (1) are inadequate to put the seller in as good a
position as performance would have done then the measure of damages is
the profit (including reasonable overhead) which the seller would have
made from full performance by the buyer together with any ID provided in
this article (2-710).”
Lost volume seller not solely focused on capacity to sell but rather
would it have been profitable for the seller to produce both units.
D. Seller’s restitution
Wellston Coal v Franklin Paper Co. (Ohio SC 1897) p673
Suit in Quantum Meruit for coal K breached by D in down months when MP
was below KP. Executed K during winter when KP was below MP.
“justice and fair dealing require that the D, having repudiated the K,
should pay the market price for the coal at the time it was
delivered.”
Dietz v Dietz (Minn SC 1955) p 676 “mom and son joint tenants” p676
Mom conveys half of house to son as joint tenants, in consideration for his
promise to take care of her for the rest of her life. He gets married and
feuds begin, ending with him ousting her through. She files a claim in unjust
enrichment thus imposing of constructive trust is proper
64
Constructive trust may be imposed where the plaintiff shows the existence
of relationship of justifiable reliance or confidence (or fiduciary duty) and
the abuse by defendant of confidence and trust bestowed under it to
plaintiff’s harm.
Calculating Damages
1. General damages: Diminished value v Cost to repair
Hewlett v Barge Bertie (USCA 1969) p782
“If reclamation and repair costs exceed the ship’s just value at the
time of casualty, then it is a constructive total loss and the limit of
compensation is the value plus interests”
65