Remedies Outline

CALIFORNIA REMEDIES PROFESSOR LINDA PUERTAS

UNIVERSITY OF CALIFORNIA-IRVINE

CHAPTER 1: INTRODUCTION; DAMAGES

Exam Tip 1: Remedies is a frequently tested topic on the California Bar Exam. It may be tested independently or with other topics.

Example 1: One of the questions on the July 2014 Exam involved two parties: Mark and Carol. The prompt provided that Mark and Carol were liable in Tort and Contract. The examiners then asked for the remedies the party might obtain against Mike and Carol. You would not get credit for analyzing Torts or Contracts. This is a pure Remedies question because that is what the examiners asked for in the prompt.

Example 2: One of the questions on the July 2013 exam was a crossover question. It asked examiners to analyze both intentional torts and the remedies.

Exam Tip 2: The bar examiners want to determine whether you are qualified to advise clients. Clients are seeking a fix to their legal problem.

Exam Tip 3: Demonstrate basic math when given dollar amounts in the prompt.

A. Overview

1) Damages: the most commonly tested remedy

2) Injunctive relief and other equitable remedies

3) Restitution

The default goal in any remedy is to maintain the __________________________ position standard.

o Choose the remedy that puts the plaintiff back or keeps the plaintiff in the position he would have been in but for the _____________________

B. Damages in General

Monetary relief intended to compensate the wronged party, for that wrong, based on what the party lost

2 | 2015 Themis Bar Review, LLC | California Remedies

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Status Quo Ante

1. Torts o The goal is _________________________________________ o Restore the plaintiff to the position the plaintiff would have been in but for the defendants

wrong (make the plaintiff whole) o Compensatory damages: past and present harm as well as future harms (medical expenses,

lost wages, loss of other income)

2. Contracts o The goal is __________________________________________ o Put the plaintiff in the same position he would have been in if the contract was completed

C. Types of Damages

1. Compensatory Damages o Intended to compensate the plaintiff for a legally recognized ________________ or injury. a. In Tort: Look for physical and emotional damages

1) Pain and Suffering

Example 3: Anna is in a serious subway accident and loses both of her legs. Her compensatory damages would cover pain and suffering including the loss of her legs.

Note 1: Recovery for pain and suffering requires the plaintiff to experience the pain and suffering.

Example 4: If Anna was in a vegetative state and could not experience the pain and suffering, a defendant might argue against recovery of pain and suffering damages. However, if the plaintiff can experience pain in any insignificant way, she can recover pain and suffering damages.

Note 2: A plaintiff cannot recover pain and suffering after his death because he cannot experience pain and suffering. A wrongful death action might be the appropriate compensation.

Example 5: Anna is in a serious subway accident and loses both of her legs. In addition to pain and suffering, she can also seek hedonic loss damages.

Hedonic: related to sensation or pleasure Hedonic loss damages: Loss of the enjoyment of the value of life or loss of the

enjoyment of the value to feel something happy.

Note 3: In California, hedonic losses are part of pain and suffering damages.


2) Emotional Distress Damages

Include: anxiety, emotional distress caused by fear, humiliation, or loss of freedom Example 6: Anna may be compensated for the emotional distress arising from the anxiety she experienced during the accident, anxiety she experiences now when she is near a subway, and any of the depression, fear, or anxiety she feels now because of the loss of her legs.

Emotional damages are always available in tort if you have a ____________________________________ injury (parasitic, ancillary)

If there is no physical injury, the defendants conduct must have been outrageous or ____________________________________ (beyond the standard of negligence)

3) Medical Expenses

Past, present, and future medical expenses Exam Tip 4: If there is any sort of physical harm, include a distinct section about medical expenses even if there is no given dollar amount

4) Loss of Income

Includes both present and future:

o Inability to work while hospitalized, and o Inability to work in the future (if the injury caused the inability)

Note 4: Remember, the goal in tort is retrospective.


CHAPTER 2: DAMAGES (CONTD)

A. Types of Damages (Contd)

1. Compensatory Damages a. In Contract: Expectancy Damages

Note 5: Remember, the goal in contract is prospective.

Put the plaintiff in the position she would have been in had the contract been ______________________________________

Formula: (MP - KP) + (C/I D) - ($ saved) = Expectancy Damages

1) Subtract the contract price (KP) from the market price (MP) of the goods

2) Add any additional consequential damages (C) and/or incidental damages (I)

3) Subtract money the plaintiff could have saved

Examples:

On August 31, Bob contracts with Seller Sally to buy $1000 worth of apples from her apple farm to be delivered on October 2. Sally will charge Bob a $200 delivery fee in addition to the cost of the apples.

a. Seller Breaches: September 30, Sally tells Bob she cannot sell him any apples because a pest destroyed most of her crops. The market price for the same amount of apples on that day is $1,200. Bob sues Sally for breach of contract. What are his compensatory damages?

i. MP = ________________________

Note 6: Market price is determined on the day the buyer learns of the breach. ii. KP = _________________________

Assume Bob lost three days of sales as a result of Sally not delivering the apples. Bob can determine with clarity that he lost $500 worth of profits. Bob also paid $50 in overtime for a worker to move an apple display from the front of his market.

Note 7: Consequential Damages: Any damages that naturally result from the sellers breach.

Note 8: Incidental Damages: Costs leading up to the breach in reliance on the contract.

Note 9: Buyers Damages: cost to inspect and receive the goods, the cost of alternative transportation, the cost of returning the apples, etc.

Note 10: Sellers Damages: the cost of stopping delivery or production, transporting goods to another buyer


Exam Tip 5: For the bar exam, you can discuss consequential and/or incidental damages together. Anything that naturally results from the breach or costs incurred leading up to the transaction will be consequential/incidental damages.

iii. C/I D = ________________________

iv. $ Saved = __________________________

v. TOTAL Compensatory Damages: _____________________

Exam Tip 6: Explain every step and show your work! b. Buyer Rightfully Rejects: Instead of Sally telling Bob that she would not

deliver the apples on September 30th, Sally delivers the apples to Bobs

store on October 2. Bob finds the apples are pest-infested. Does the calculation for expectation damages change?

i. Answer: ________________________.

Note 11: When the buyer rightfully rejects the goods, or learns that there has been a breach, or justifiably revokes acceptance, the buyer is entitled to the same expectation damages.

c. Assume the market price did not change from when Sally called Bob on September 30th to tell him she could not deliver the apples to October 2 when she delivered the pest infested apples.

i. Bob is entitled to the same amount of compensatory damages: $550

Note 12: Under the UCC, Bob has the right to the above compensatory damages. Plus, he has the right to sell the goods.

Note 13: After the seller breaches, the buyer has several options. First, he can take no action and recover expectation damages. Second, the buyer can cover. Third, he can accept the goods and sue for breach of warranty.

d. Buyer Covers: On October 1, Bob finds another seller from which to buy the same type and amount of apples for $1300. The new seller will charge Bob $100 to deliver the apples because this sellers farm is closer than Sallys.

This seller will also charge Bob a rush fee of $50. What are Bobs

compensatory damages?

i. Formula: (CP - KP) + (C/I D) - ($Saved) = Expectation Damages

ii. Cover price (CP) = ___________________________

Note 14: Cover Price = the cost to replace (cover) the goods. Note 15: The cover price might be greater than the market place. The cover price is still considered because we want to incentivize people to mitigate their losses.

iii. KP = _________________________


iv. C/I D = _______________________

v. $ Saved = ___________________________

vi. TOTAL Compensatory Damages = ______________________________

e. Buyer accepts non-conforming goods: Bob accepts the apples Sally delivered because he can sell half of them.

Note 16: If the buyer accepts nonconforming goods, the buyer can sue for breach of warranty.

i. Formula: (Value as warranted value as accepted) + (C/I D) - ($Saved) = Expectation Damages

ii. Value accepted: ________________________

iii. Value as warranted: ___________________________

iv. Difference: ________________________

Note 17: Continue the formula with consequential/incidental damages and any money saved to find the total expectation damages.

Exam Tip 7: Always start your analysis with compensatory damages.


CHAPTER 3: DAMAGES (CONTD)

A. Types of Damages (Contd)

1. Reliance Damages o An alternative to expectation damages in contract o A plaintiff may be awarded money damages based on his ________________________

interest o Reliance interest damages include: expenses made in ___________________________ for

performing the contract and expenses in performing the contract. o Compensatory damages are preferred. Reliance damages may be preferred when:

1) Plaintiff cannot prove profit

2) Plaintiff (non-breaching party) has a problem with ________________________ part of a contract claim

Example 7: Lack of consideration, noncompliance with the Statute of Frauds

3) Compelling public policy reasons for limiting expectation damages

4) Plaintiff (non-breaching party) cannot prove reasonable expectation damages with certainty

Exam Tip 8: Analyze expectation damages first. If these damages seem to be unfair or do not make the plaintiff whole, consider reliance damages.

2. Restitutionary Damages o The plaintiff may be awarded money damages based on the benefit

____________________________________ on the defendant by their own conduct o Gains-Based Recovery: What the defendant gained by breaching the contract and how to

compensate the plaintiff

Note 18: Restitution can be its own cause of action and a type of damages. Either way of thinking about restitution involves unjust enrichment.

Exam Tip 9: The historical difference between unjust enrichment as a cause of action and unjust enrichment as a way of measuring damages is irrelevant on the California bar exam.

o Restitutionary damages are an _________________________________ to expectation damages

Appropriate where there is a total breach of contract by the defendant that results in the defendant being in a better position

3. Nominal Damages o Alternative to expectation damages in tort or in contract


o The plaintiff has established all other elements of a cause of action but cannot show great harm or loss

o Why are nominal damages ($1) available? It can give the plaintiff a ___________________________________ judgment entitling

the plaintiff to litigation costs, if those costs are part of the cause of action.

o Nominal damages are not available when the cause of action requires the plaintiff to establish more than nominal damages.

Example 8: The burden on the plaintiff in a negligence action or fraud case requires the plaintiff to prove some amount of harm.

4. Punitive Damages a. In Tort

You usually ____________________________ compensatory damages in tort to receive punitive damages

Meant to _________________________ a defendant who engages in serious or wanton misconduct with an improper state of mind

Example 9: With malice or with fraudulent intent

These damages are not meant to restore the plaintiff, they are meant to punish and deter

Punitive damages cannot deprive the defendant of the protection of the Fourteenth Amendment Due Process Clause by imposing a ___________________ excessive punishment.

The following facts are considered in determining whether punitive damages are grossly excessive:

o ____________________ of reprehensibility of defendant's conduct; o Difference or _________________________ between the harm and potential

harm suffered by the plaintiff and the damages awarded; and o Difference between this award and the ____________________ penalties

awarded in other similar cases

Reprehensibility:

o Look for facts that the harm was __________________________ rather than purely economic

o Look for facts where the tortious conduct demonstrated an indifference to or ________________________________ of the health and safety of others

o Look for particularly ____________________________ defendants or victims (financially or physically)


o Look for conduct happening multiple times suggesting we should punish the defendant or deter others

o Look for the _______________________ requirement rather than mere negligence or accident

Proportionality: There must be a _____________________________ ratio between the compensatory damages and the punitive damages

The defendant's ability to _____________________ Exam Tip 10: Punitive damages are an option in tort when the conduct has been egregious. You can tell from the fact pattern that the defendant intentionally acted in a way that deserves punishment.

b. In Contract Punitive damages are not used as often in contract as in tort Common situations:

1) If the defendant's conduct is both tortious and a breach of contract

2) Where there is a __________________________ or body parts involved

Example 10: You contract with a funeral home to handle your mother's remains and the funeral home screws up. That may give rise to a punitive damages award. This is a very rare situation.

o Remember to "hook" punitive damages onto another type of damages Note 19: Punitive damages can hook onto a nominal damage award.

5. Liquidated Damages o Additional form of damages in ____________________________ o Damages _________________________ upon by the parties in the formation of the

contract

Damages the parties bargained for

Example 11: Revisit the apples example. When Bob contracted with Sally to purchase $1000 worth of apples on Oct. 2. The parties recognized that there is a high demand for apples in the fall and that there was a virulent pest coming through California. It would be reasonable for them to include a liquidated damages clause in their contract that set forth that Bob could lose a predictable amount of profits if Sally was unable to deliver. The liquidated damages clause could include this reasonable amount of lost profits.

o The damages in the liquidated damages clause must be __________________________ Reasonable in the ____________________________ loss at the time of the contract or

the actual loss the parties had as a result of the breach


o Courts will not enforce an unreasonable liquidated damages clause o Courts will not enforce a liquidated damages clause that requires ______________________

enforcement

Example 12: The court will not enforce a clause that requires Sally to deliver the apples to Bob.

Exception: ________________________ clauses are allowed in California because we want to incentivize parties to go through arbitration

B. Review of Damages based on Cause of Action

1. Contract Damages Available: o Expectation Damages (as if the contract had been completed)

(MP - KP) + (C/I D) - ($ saved) = Expectation Damages

o Reliance Damages (alternative to expectation damages) o Restitutionary Damages (alternative to expectation damages) o Nominal Damages (alternative to expectation damages) o Bargained-for Liquidated Damages

2. Torts Damages Available: o Compensatory Damages (as if the tort had never happened)

Pain and suffering (including loss of enjoyment or hedonic damages) Medical expenses Other expenses (loss of income) Emotional damages (can always "hook" onto physical damages)

o Nominal Damages (alternative to compensatory damages) o Punitive Damages o Restitutionary Damages

C. Practice from July 2013 California Bar Exam

Paul owns a 50-acre lot in the country. Doug owns a smaller unimproved lot to the north. A stream runs through Pauls lot near the boundary line with Dougs lot. Paul has a house at the south end of his lot and uses it for summer vacations.

Doug began to clear his land to build a house. To do so, he had to fell trees and haul them to a nearby lumber mill. He asked Paul if he could take a short cut across Pauls lot to the mill, and Paul agreed. On his first trip, Doug dumped his trees on Pauls land near the stream, in a wooded area Paul was unlikely to see,

much less use. Some of the trees rolled into the stream, blocking its natural flow.


Paul left for the winter. As a result of the winters normal rainfall, the stream overflowed, causing water to rush down to Pauls house at the other end of the

lot, flooding his garage and damaging a 3-year-old motorcycle.

Paul returned in the summer and learned what had happened. It will cost $30,000 to remove the trees. The trees presence on the lot has depressed its market value from $50,000 to $40,000. It will cost $5,000 to repair the motorcycle, and $4,000 to buy a new one.

What torts did Doug commit? What remedies can Paul seek?

a. Compensatory damages first:

i. Doug will argue he is only liable for the $10,000 reduction in the market value of the property. Because Paul does not use or see the wooded area, the damage is only $10,000.

ii. Paul will argue that the trees caused a host of other damages including damages to the motorcycle and his garage. Because this was a natural result of normal rainfall, the damage could occur again in the future. So, Doug should pay the $30,000 for the tree removal to put Paul back in the position he would have been in but-for Doug's tortious conduct.

b. Restitutionary damages:

i. Doug received a benefit by not hauling the trees to the nearby lumber mill. Doug was given a gift (or unjustly enriched) by not taking the trees all the way to the mill.

c. Punitive damages:

i. Paul graciously told Doug he could trespass across Paul's land to move the trees to the mill. Doug intentionally dumps the trees on Paul's land. Assuming you discussed the available torts, and established compensatory damages, punitive damages could be awarded if proportional to the actual damages (a single-digit ratio to either $10,000 or $30,000).

d. Nominal damages:

i. Not an issue because we are told the actual damages are either $10,000 or $30,000.

ii. Might be appropriate if the fact pattern does not include damages or if there is some reason compensatory damages fail. The purpose of nominal damages in this case would be to "hook" punitive damages.


CHAPTER 4: LIMITATIONS ON DAMAGES

There are several types of limitations on damages Use an acronym: Friendly Cows Create Cheese And Buttery Eats

1) Foreseeability in torts

2) Causation

3) Consequential damages naturally arising from

4) Certainty

5) ______________________________ Consequences

6) Benefits (the reduction for)

7) __________________________________

B. Foreseeability in Torts (Friendly)

A plaintiff is required to establish both proximate cause and actual cause Discuss whether the harm to the plaintiff was reasonably __________________________ at the

time the defendant breached its duty If the plaintiffs harm comes from a risk that was not reasonably foreseeable, the defendant is

not liable for this harm

C. Causation (Cows)

The defendant must have caused the plaintiffs injury ______________________ the defendants conduct, the plaintiff would not have suffered injury

D. Consequential Damages Naturally Arising From (Create)

Damages that ___________________________ arise from the breach are recoverable Example 13: Bob and Sally apple example. The second sellers rush fee and lost profits were consequential damages.

Consequential damages may be recovered only if they were within the parties ______________________________ or reasonably should have been at the time of the contract

Example 14: A travel company put an ad in the phonebook saying every person listed in the phonebook was entered to win a free golf trip to Scotland. Polly listed her name in the phone book and was informed that she had one the free trip. Polly purchased a bottle of champagne, new luggage, and golf clubs. She also quit her job after her boss declined to give her two weeks of unpaid vacation. The travel company then told Polly that it could not send her on the trip. All of the harms to Polly were consequential (resulting from the travel companys breach).


a. Purchasing the champagne, luggage, and golf clubs were foreseeable and reasonably within the travel companys contemplation at the time it ran the advertisement.

b. Pollys loss of income was not reasonably foreseeable. The travel company did not expect that she would quit her job to go on a free two-week vacation. So, Polly should not receive damages for her loss of income.

E. Certainty (Cheese)

Exam Tip 11: Certainty is one of the most frequently tested damages limitation.

To recover damages in tort or contract, the plaintiff must establish these damages with _______________________________ certainty.

In tort: damages must be proven by a preponderance of the evidence (more likely than not)

o Both parties will likely call experts to prove _____________________________ damages (medical costs, lost wages, etc.)

In contract: damages must be proven with a greater degree of __________________________ than in torts cases

o Business claiming ________________________________ Established business: plaintiff can more easily show lost profits using previous years New business or new line of business: it may be difficult for the plaintiff to prove lost

profits damages with reasonable certainty

F. Avoidable Consequences (And)

Exam Tip 12: Avoidable consequences is also frequently tested.

The plaintiff can be denied recovery for any harm or loss she could have ___________________________ avoided.

Exam Tip 13: If all else fails, discuss whether each potential category of damages in the fact pattern is reasonable.

The burden is on the _____________________________ to show that the plaintiff could have reasonably avoided the harm or loss.

There is no affirmative duty for the plaintiff to avoid future harms or losses. However, the defendant can raise it to reduce damages.

Example 15: A boy kicked another boy in the leg. The plaintiff was an eggshell plaintiff and lost his entire leg. The defendant was liable for the loss because in general, an injury was foreseeable, even though the specific type of harm (losing a leg) was not foreseeable by the defendant.


Example 16: Instead of being an eggshell plaintiff, the boy had a more normal response to being kicked (bruises and cuts). If that injury became infected and plaintiff did not seek medical attention, and as a result of not seeking treatment, the plaintiff then lost his leg, the defendant might seek a reduction in damages. The defendant can argue that the plaintiff could have reasonably avoided losing his leg by seeking medical attention.

Example 17: A city contracted with a company to build a bridge. The company spent $1,900 in labor and materials in anticipation of building the bridge. The city breached the contract because the bridge was no longer needed. The city repudiated the contract. What was the company entitled to?

a. The company was entitled to recover the $1,900 in labor and materials.

b. The company was also entitled to lost profits ($8,000 in anticipated profits).

Example 18: If the company continued to build the bridge despite the repudiation and spent an additional $10,000, the avoidable consequences rule would limit their damages. The company could have reasonably avoided these additional costs.

If the plaintiff makes reasonable ____________________________ to avoid the harm or loss, she can still be awarded damages even if her efforts are unsuccessful.

o Her costs incurred in trying to avoid additional damages can also be recovered as damages A plaintiff is not required to do everything in order to reduce damages.

Example 19: Shirley MaClaine had a contract with Twentieth Century Fox to star in a musical filmed in California. Fox breached the contract and offered her a part in a western filmed in Australia. She sued Fox for her expectation damages. The court held that she was not required to film the western because it was different and inferior.

G. Benefits (reduction for) (Buttery)

The plaintiffs recovery is reduced by the benefits that result from the defendants _________________________. But not by the benefits obtained from collateral sources or other sources.

If the defendants breach results in a savings to the plaintiff, this savings is subtracted from the overall damages recovery.

Example 20: Bob saved $100 on the delivery charges because the second seller was closer to Bobs store.

In tort: look for the benefit being a _____________________________ consequence of the defendants tortious conduct


o Close nexus: The benefit must stem from the tort or relate to the same interest of the plaintiff that was injured and the benefit the plaintiff wants.

Collateral source benefits: In a tort action in California, payments made by a ________________________________ as a result of the defendants conduct, __________________________________ reduce the plaintiffs overall recovery.

Example 21: Insurance companies make payments for the plaintiff.

o Policy: we want to incentive individuals to carry insurance o Rate differential: a plaintiff cannot recover more for medical expenses than what the

medical provider accepted as payment in full from an insurance company

Example 22: The medical office sends plaintiff a bill for $1000. If the medical office would have accepted $800 from insurance as payment in full, this is a collateral source from a third party so it will not reduce the plaintiffs recovery. However, the rate differential of $800 will limit the plaintiffs recovery to $800.

o Collateral source rule is not frequently applied in contract actions. It can arise in cases of breached employment contracts where the plaintiff receives unemployment benefits or insurance.

H. Emotional (Eats)

In general, emotional damages will not arise in a contract action unless:

o There is a parallel tort claim in which emotional damages are recoverable, or o The breach of contract is particularly likely to cause emotional distress (mishandling of dead

body)

Example 23: Pollys cancelled trip to Scotland. Polly cannot sue for her sadness or emotional distress because this was a contract action.

I. Interest

Post-judgment interest will almost always be awarded. Pre-judgment interest is sometimes available in contract actions (liquidated damages clause) or

a specific number of goods at a set price.

J. Litigation Expenses

Expenses for litigating, including ___________________________ and attorneys fees, are generally recoverable if contracted for or provided by statute.

Expenses from previous lawsuits are recoverable as damages if the defendants tortious conduct caused the litigation.

Example 24: Malicious prosecution


CHAPTER 5: INJUNCTIONS; EQUITABLE DEFENSES

Goal: maintain the _______________________________ Injunction: __________________________ directing a person to do something or to

___________________________ from doing something It can serve as a final remedy for the plaintiff (permanent injunction) or as a stop gap to

______________________________ the status quo through litigation

A. Prejudgment Injunctions

Often sought to prevent irreparable harm or maintain the status quo until the action is resolved

1. Temporary Restraining Orders (TROs) o An injunction for a very short amount of time; typically no more than __________________ o May be applied for ex parte so the defendant might not have notice o Primary purpose: ___________________ the status quo until a preliminary injunction can

be decided o A TRO cannot be appealed o A TRO is not effective until the defendant has notice

2. Preliminary Injunctions o An injunction issued before or during a trial that is generally effective until there is a

_______________________ judgment by the court o The preliminary injunction is also known as a temporary or interlocutory injunction o Cannot be issued unless the defendant has been given _____________________ of the

hearing and an opportunity to be heard.

3. Five factors in determining whether to grant a prejudgment injunction: o Use an acronym: I Put Five Bucks Down.

1) ______________________________ harm;

2) Feasibility of enforcement;

3) Probability of __________________________ on the merits;

4) Balancing of _______________________________;

5) Defenses

o The burden is on the plaintiff seeking the injunction. o Equitable Remedy: the court has discretion in issuing the injunction and the extent of the

injunction

b. Irreparable harm (I) Why is there not an adequate remedy at law?


Damages are preferable, partially because damages require less court oversight

Look for items that have special value that cannot be replaced easily

Example 25: Family heirlooms, 1989 Porsche Targa in mint condition, Real property, voting rights cases

c. Probability of success on the merits (Put) Analyze the underlying claim and determine whether there is a likelihood that P will win.

Exam Tip 14: If you already addressed the underlying claim in your essay, say, see above. Or look for language in the prompt that the plaintiff is likely to succeed.

d. Feasibility of enforcement (Five) Request can be denied if the it is not feasible for the court to enforce the injunction.

Courts do not want to be involved with the parties outside of court.

Look out for fact patterns that require affirmative action rather than prohibiting action

Example 26: An injunction requiring a construction company to continue constructing (as opposed to prohibiting construction).

If the court requires action it will necessarily have to monitor compliance continually

If the court prohibits action, the court is not required to intervene unless the defendant violates the injunction

When the underlying rights are sufficiently important, the court is more likely to issue injunctions requiring affirmative action

Example 27: Voting rights, discrimination

e. Balancing of hardships (Bucks) The plaintiffs hardship must be ________________________ greater than the

defendants hardship if the injunction is issued.

f. Defenses (Down) 1) Violation of fundamental rights

Example 28: Freedom of Speech

2) Other equitable remedy defenses (Laches, Unclean Hands)

B. Equitable Defenses

The court can refuse to apply these if there are countervailing equitable considerations

These defenses are not related to the plaintiffs substantive legal claim


These defenses do not prevent a plaintiff from bringing an action for damages

1. Laches o The plaintiff unreasonably _________________________ in pursuing an equitable remedy o As a result, the defendant has experienced ________________________________

2. Unclean Hands o The plaintiff is not entitled to an equitable remedy because he has acted in bad faith with

respect to the subject of the complaint

Misconduct (unethical or immoral)

The conduct must relate to the claim

C. Permanent Injunction

Issued to prevent the violation of the plaintiffs rights or to ______________________ the plaintiffs rights that have been violated

Permanent injunctions are awarded after the plaintiff has won on the merits

The factors are the same excluding the probability of success on the merits:

o Irreparable harm o Feasibility of enforcement o Balancing of hardships o Defenses


CHAPTER 6: CONTRACT SPECIFIC EQUITABLE REMEDIES

A. Specific Performance

A party to a contract is compelled by court order to render the promised ____________________________ or to substitute performance

Generally not available unless a defendant has breached a contract through nonperformance or repudiation.

Six requirements to grant specific performance Acronym: Valid Contract Cant Force Defendant (to) Do

1) Valid Contract (Valid)

Offer, acceptance, consideration

2) Certainty of Terms (Contract)

Sufficiently certain for the court to make an order

3) Conditions Precedent (Cant)

All conditions required to compel the defendants performance must be satisfied or excused

Plaintiff must have completed performance if defendants performance is conditioned on that performance or provided sufficient security that the plaintiff would complete her contract obligation

4) Feasibility of Enforcement (Force)

Consider whether the specific enforcement would impose burdens on the court that are disproportionate to the advantages gained by its enforcement

Look for facts that require the court to be involved for a long time or intrusively involved.

Example 29: Construction contract, employment contract for personal services

5) Damages Inadequate (Do)

Damages must be inadequate to impose an equitable remedy Look for unique items, land, work of art, rare manuscripts

Liquidated damages provision:

If the contract allows for liquidated damages instead of specific performance, then the court will award the liquidated damages

If the liquidated damages provision does not preclude specific performance, analyze both

Other remedies available


The availability of other equitable remedies does not bar performance, although courts generally disfavor specific performance.

6) Defenses

Equitable defenses: of estoppel, laches, and unclean hands Additional contract defenses:

o Unfairness from sharp practices (unconscionable) o Misrepresentation o Duress or Undue Influence o Mistake, hardship, inadequate consideration, impossibility

B. Rescission

Rescission is the ______________________________ or unmaking of a contract Usually rescission is followed by restitution Rescission is an equitable remedy and a legal remedy Rescission at law: plaintiff must, prior to filing the suit, and promptly upon the discovery of

grounds for rescission (mistake or fraud), give ________________________ of rescission to the defendant and ___________________________ or tender the benefits

o A plaintiff that fails to act promptly may nevertheless rescind the contract if the defendant has not been prejudiced by the delay.

o In addition, the plaintiff may be excused from retuning the benefit if: The benefit has been disposed of prior to discovery of grounds for rescission; The benefit is presently worthless; or The benefit was money and in proportion to the amount owed by the defendant to the

plaintiff

Equitable Rescission: plaintiff is required to return any ____________________________ received from the defendant and the legal remedy must be inadequate

Once a contract has been rescinded, the plaintiff may pursue a subsequent action at law

o Replevin return of specific property o Restitution monetary compensation for unjust enrichment

C. Reformation

The judicial rewriting of an agreement (contract) or another document (deed) to generally reflect the parties true ____________________________

Usually reformation is a stepping stone to other remedies such as damages or restitution Requirements for reformation:


1) The parties must have entered into an __________________________________

The agreement must not be voidable for other reasons (such as misrepresentation or fraud)

2) There must be ___________________________ with respect to the terms of the agreement

Sufficiently certain for the court to know how the writing should be reformed in accordance with the parties intended agreement

3) There must be a _____________________________

Mutual mistake: the writing does not match the agreement and both parties are unaware of the discrepancy

Look for content mistakes:

o Omission of an agreed upon term; o Inclusion of a term not agreed upon; or o Alteration of agreed terms

Effect mistakes: a mistake by both parties about what the effect is of the writing Where there is a mutual mistake, any party to the contract can seek reformation,

including an intended beneficiary or successor-in-interest The party does not have to show that the mistake resulted in an inequity adversely

impacting him (unlike when a contract is avoided entirely) Misrepresentation: a partys nonfraudulent or innocent misrepresentation

regarding the content or effect of a writing does not prevent reformation if both parties were mistaken as to the content or effect of the writing

Unilateral mistake: only one of the parties is mistaken as to the content or effect of a writing

Reformation turns on whether the other party was aware of the mistake;

o If he was aware of the mistake (whether the party fraudulently induced the mistaken party or does nothing to correct the mistaken partys erroneous belief) the mistaken party may be able to reform the contract

o If the other party was not aware of the mistake, reformation is not allowed Defenses

o Laches, unclean hands o Look for when a reformation will affect the rights of an innocent third party such as a good

faith purchaser

Innocent third parties can prevent the court from reforming the contract if doing so would adversely affect the partys rights


Not defenses to reformation:

o The parol evidence rule does not prevent a party from presenting evidence of a prior agreement to establish fraud or mistake

o The Statute of Frauds does not prevent the reformation of a contract Example 30: Reformation is not foreclosed by the Statute of Frauds when the parties mistakenly omitted or incorrectly stated an essential term required by the Statute of Frauds

o Negligence of the party seeking reformation A party who, due to negligence, failed to avoid a mistake, can still seek reformation of a

writing


CHAPTER 7: DECLARATORY JUDGMENT; RESTITUTION

A. Declaratory Judgment

A declaration of the plaintiffs ____________________, status, or other legal relations These arise out of deeds, wills, ______________________, statute, or ordinance In contract, the action may be brought before or after breach Declaratory judgment can be combined with other forms of relief (such as injunctive relief)

B. Restitution (Unjust Enrichment)

In either case (whether a cause of action or as part of damages) restitution is available when the defendant has been unjustly enriched at the plaintiffs expense

Benefit: a measurable increase in the defendants income or defendants wealth

o The defendant has received money, real or personal property, services, a debt satisfied, savings that would otherwise have been spent

Unjust: it is not necessarily unjust that the defendant has possession of the benefit, it is whether it would be unjust for the defendant to keep the benefit

o Look for facts where the defendant has wrongfully acquired the benefit or done something wrong

Theft, fraud, duress, undue influence

o Even if the defendant acquired the benefit without any fault, it can still be unjust enrichment

Example 31: An unconscious accident victim receives free medical care. She would be unjustly enriched from this medical care even though she did not do anything wrong.

1. Remedies a. Monetary judgment

Brought under a variety of actions including quasi-contract, quantum meruit, money paid for defendants use, money had and received, and goods sold and delivered

Elements:

Plaintiff has conferred a benefit on the defendant, and The defendant has been unjustly enriched by such benefit

Look at recovery based on the extent to which defendant has been unjustly enriched at the plaintiffs expense

For payment of money: the increase in defendants net assets For nonmonetary benefit (good or service):


o Value of benefit; o Cost to the plaintiff of conferring the plaintiff; o The market value of that benefit; and o The price fixed in the agreement in a contract action

Conscious Wrongdoer: generally a person who acts with knowledge of or reason to know of the underlying wrong (such as a defendant who defrauds the plaintiff)

Can also be a fiduciary who does not fulfill obligations The enrichment of the conscious wrongdoer is measured by the

__________________________________ of:

o The net profit obtained by the wrongdoing, or o The market value of the benefits wrongfully obtained

Typically called disgorgement, accounting, or accounting for profits

The plaintiff has the burden of producing a reasonable approximation of the amount of gain that the defendant received

Wrongdoer Without Fault: a defendant who commits a tort but does not do so purposefully

Example 32: Innocent conversion, unconscious trespassers, unwitting donees of embezzled funds.

Unjust enrichment of wrongdoer without fault is the ________________________________ of the benefits obtained

Not a Wrongdoer but responsible for the transaction (for example a responsible recipient) may be subject to greater liable than the innocent recipient

Might arise out of lack of care, breach or repudiation of contract, bad faith or other reprehensible conduct

b. Constructive Trust Imposes a duty to convey property to the plaintiff if the defendant would be unjustly

enriched by keeping it It gives the plaintiff back the specific property, not money As is, As if Trust

As if the defendant was keeping the property _____________________________ for the plaintiff

Returned to the plaintiff as is, regardless of increase or decrease in value property

Requirements:

If the defendant retained the property he would be unjustly enriched, and


The plaintiff can trace the unjust enrichment to the property the plaintiff wants a constructive trust over

The defendant must hold ____________________________ over the property Example 33: The plaintiff cannot obtain a constructive trust over property someone stole but does not have title for.

o The plaintiff can obtain a constructive trust against a third party transferee who has title to the property unless that party was a bona fide purchaser

Damages are inadequate Example 34: The defendant is bankrupt. The plaintiff must compete with the defendants other creditors and might not recover. But, if the plaintiff can trace

his property to an identifiable asset, the plaintiff might gain priority over it.

Example 35: The defendant has purchased an identifiable asset with the plaintiffs money and now that asset has increased in value.

Example 36: The defendant has transferred the defendants property to a third person and the plaintiff wants to pursue a claim against the third person to return the item.

Effect: the plaintiff gets the property back as is

If the property has increased in value, the plaintiff is not required to account to the defendant for the increase in the value of the property

The defendant _________________ liable to the plaintiff for any decrease in value during the defendants possession

Example 37: George steals Ruths diamond ring and sells it to a pawnshop for $3,000. With that money, George take a trip to Vegas and while gambling, hits a $20,000 jackpot. He takes this $20,000 to buy a new car. George has used Ruths $3,000 to earn another $20,000. Ruth could seek monetary damages for

the market value of the ring. The market value of the ring is $6,000. If George cannot pay the $6,000, a monetary judgment is inadequate.

a. Ruth can seek a constructive trust over the new car even if the car is worth more than Ruths ring.

b. Ruth could not get a constructive trust over something George owned before he stole from Ruth.

Look out for intermingling of funds, the plaintiff must trace the property

Example 38: George puts the $3,000 from the sale of Ruths ring into a bank account. The account already had $2,000. Then, George withdrew $3,000 from the bank account to go to Vegas. George would try to argue that Ruth should


not recover the entire $20,000 in gambling winnings because the first $2,000 in the bank account was his and he only used $1,000 of Ruths.

When a defendant comingles funds, the plaintiff is allowed to _______________________ those funds in the bank account to her, as long as there is no break in the chain.

Example 39: In the above example, Ruth would argue that the first $3,000 out of the bank account was the same $3,000 form selling Ruths diamond ring.

c. Equitable Lien Recognizes the plaintiffs claim against the defendant and imposes a lien on the

defendants property as security for that claim A lien is a monetary judgment secured by defendants property

Like a car loan or a mortgage on a house

An equitable lien is issued by the court (as opposed to negotiated by the parties) Typically, arises in _______________________ disputes Requirements:

Legal remedy is inadequate; The defendant has title to the property; The defendant would be unjustly enriched by keeping it; and The unjust enrichment relates to the property Example 40: George steals Ruths diamond ring and sells it to a pawnshop for $3,000. With that money, George take a trip to Vegas and while gambling, hits a $20,000 jackpot. He takes this $20,000 to buy a new car. Ruth can ask the court for an equitable lien on Georges car if he does not pay her the $6,000

market value for her ring.

Decline in Value:

Example 41: George crashes his new car and now its worth $1,000. If Ruth obtained a constructive trust over the car, she would only recoup $1,000.

Use an equitable lien (money judgment secured by property) when the property has _________________________ in value

The plaintiff can seek satisfaction of the remaining portion of the claim from the defendant _______________________________ after the property has been sold and the proceeds given to the plaintiff

Example 42: Same facts as above except Ruth gets an equitable lien on the $1,000 car. She can also seek satisfaction of the remaining damages from George personally.


C. Practice from the February 2013 California Bar Exam

In 2004, Mary and Frank orally agreed to jointly purchase a small storefront space for $80,000. Mary contributed $40,000 of her own money. Frank contributed $40,000 he embezzled from his employer, Tanner. Mary and Frank put the property in Franks name alone because Mary had creditors seeking to

enforce debts against her. They further agreed that Frank would occupy the property and when he vacated the property, he would sell it and give her one half of the proceeds. He then occupied the property.

In 2005, Tanner discovered Franks embezzlement and fired him.

In 2012, Frank sold the property, obtaining $300,000 in net proceeds. Frank offered to pay Mary her initial 40,000 contribution, but Mary demanded $150,000.

Mary and Tanner both sue Frank for conversion and the court found him liable to both. Remedies and defenses?

a. Tanners remedies:

i. Note that Frank stole $40,000 from Tanner, commingled it with Marys money, and purchased property over which he has ____________________.

ii. When he sold the property, it had increased in value from $40,000 to $300,000. Since Tanner can trace his property ($40,000), to something worth more in value, Tanner should seek a ________________________________ over half the value of the $300,000.

iii. Tanner would not want to seek an equitable lien because he wants to take advantage of the increase in value.

iv. Franks defense of unclean hands will not work against Tanner because there is no evidence that Tanner has unclean hands.

v. Frank might assert the defense of laches. Tanner discovered the embezzlement in 2005 but did not seek an action until 2012.


CHAPTER 8: RESTITUTION (CONTD); REPLEVIN; EJECTMENT

A. Restitution (Unjust Enrichment)

1. Remedies a. Monetary Judgment b. Constructive Trust c. Equitable Lien d. Subrogation

Permits the plaintiff to stand in the shoes of a creditor or lien holder if the plaintiffs property was used to discharge an obligation or lien on the property of the defendant

The defendant must be unjustly enriched The enrichment takes the form of a ______________________ of an obligation or lien

Example 43: George takes Ruths ring. He sells the ring to a pawnshop for $3,000. He uses that $3,000 to discharge (or pay off) his car loan. Ruth can stand in the shoes of the car lender.

Commonly occurs as payment by a surety of the debt of another or the defendant fraudulently obtains money to satisfy a debt

Effect: The plaintiff enjoys any rights and remedies possessed by the creditor or lienholder against the defendant.

This frequently results in the plaintiff having priority over the defendants other creditors

However, the plaintiff is also subject to any _______________________ that the defendant has against the creditor or lienholder.

2. Defenses and limitations o Defendants changed position

It may be inequitable to award restitution to the plaintiff when an ___________________________ defendant has changed position relying on the benefit received

The defense is not available when the defendant is a conscious wrongdoer Example 44: The defendant is an agent or trustee who receives property on behalf of a beneficiary. Then in good faith passes that property on to the beneficiary.

Example 45: The defendant mistakenly receives a benefit which the defendant expends or consumes and the expenditure or consumption would not have been undertaken if there had not been a mistake.


Example 46: The benefit has been lost, stolen, or destroyed and cannot be returned. If the benefit is merely damaged or diminished, the restitution may be reduced under the diminished value rule. The plaintiff can generally seek additional damages.

o Bona fide purchaser Equitable restitution is not available against a bona fide purchaser who takes the

property without notice of all prior equities.

o Discharge for value When the plaintiffs mistaken payment to the defendant is used by the defendant to

discharge a debt owed or to otherwise satisfy a valid claim against a third party, the plaintiff ________________________ seek restitution from the defendant unless:

The defendant had notice of the mistake or made a representation that lead to that mistaken payment

o Unsolicited benefit A plaintiff who unconditionally confers a benefit on the defendant is not entitled to

restitution if the benefit was conferred without mistake, coercion, or request Exceptions all require:

Some necessity; The plaintiff _________________________ to charge for the goods or services; and The plaintiff had no reason to know the defendant would not want that intervention

Exceptions:

Emergency Example 47: An unconscious accident victim receives free medical care. A plaintiff who supplies medical treatment without the victims knowledge or

consent is entitled to restitution if: necessary, the plaintiff intended to charge for services, the plaintiff had no reason to know the defendant would not want medical services, or consent by the defendant was impossible.

Provision of Necessities Public Health and Safety Example 48: Burying a dead person, removing obstruction from a public road

Preserve Personal Property

o A plaintiff who preserves goods belonging to the defendant from damage or destruction is entitled to restitution for services and expenses if:

o The plaintiff was in _________________________ possession of the goods;


o Preservation was not made necessary by the plaintiff; o Preservation was reasonably _____________________ before the defendant

could be contacted; o The plaintiff did not have reason to believe the defendant did not want such

preservation; o The plaintiff intended to charge for the services; and o The goods have been accepted by the defendant in their preserved state.

B. Replevin

When a plaintiff's ____________________________ property is taken by a defendant Plaintiff can regain possession of the property and recover ___________________ for loss of

use of that property (detention damages)

Example 49: My daughter stole my son's Ironman character. My son says, "Give it back!" If they were to go to court, my son would simply want the Ironman character back. My daughter would be required to return the property. My son could also seek damages for the loss of the use of the property.

C. Ejectment

When someone possesses the _________________________ of another Plaintiff must generally establish:

o __________________________ to the land, and o The right to __________________________ possession

In addition to an ejectment, the plaintiff can also seek damages

o The general measure of these damages is the _____________________ value of the property (as if the defendant was renting the property)

o These damages may include profits related to defendant's use of the land Example 50: If the defendant collected rent from tenants, the plaintiff might be entitled to those as well.

o Plaintiff is also entitled to damages for any ____________________ caused to the land during defendant's possession

Example 51: Reduction in market value because the defendant mistreated the home

Improvements to the land: In general, the defendant ________________________ recover for the improvements he made to the land before the ejection action


o Exception: A defendant who acted in _____________________________ in possessing the property may be entitled to set off the value for such improvements when the plaintiff seeks damages in addition to ejectment

D. Election of Remedies

A plaintiff cannot pursue a remedy that is inconsistent with another remedy already chosen by the plaintiff

Typically implied when a contract was procured by fraud

o Prevents the plaintiff from affirming the contract and then subsequently seeking to rescind the contract

Damages are typically inconsistent with:

o Specific performance, and o Restitution

Exam Tip 15: Discuss possible remedies "in the alternative" unless the facts indicate that the remedies are not inconsistent with each other.

Example 52: When the plaintiff seeks specific performance and then damages result from the defendant's delay or inadequacy of performance.

The election of remedies rule is generally applied only when the defendant has materially changed position in _________________________ on the plaintiff's affirmation of the contract.

The rule does not apply to the following situations (despite defendant's reliance):

o Ignorance of a fact: the plaintiff may obtain another remedy if the plaintiff made his initial choice being

ignorant of the facts or ignorant of the availability of an alternate remedy Might be due to mistake or misrepresentation

o Subsequent breach: the plaintiff may obtain another remedy based on the defendant's breach of contract if

the breach occurs _____________________ the plaintiff's initial choice of remedy

Plaintiffs may plead inconsistent remedies in the ____________________________ within the same complaint


E. Overall Summary

Contracts Torts Property

1. Damages 1. _________________________ 1. Damages

2. Specific Performance 2. Injunction 2. __________________________

3. __________________________

3. _________________________ judgment

3. Declaratory judgment/Injunctions

4. Rescission 4. Restitution

a. Monetary Judgment

b. Constructive Trust

c. Equitable Liens

d. Subrogation

4. Replevin

5. __________________________

5. __________________________

Refer to the Remedies Outline for other remedies within common causes of action including:

o Harm to reputation and privacy in tort o Financial harms resulting from fraud or misrepresentation o Employment contract

Exam Tip 16: The overall goal of the bar exam is to measure whether you are ready to advise clients. Focus on showing the examiners that you can adequately advise a client on all of her options.

Exam Tip 17: Use the numbers given to you and show your work.

VERY BEST OF LUCK!

[END OF HANDOUT]

The default goal in any remedy is to maintain the: would have been in but for the: The goal is: The goal is_2: Intended to compensate the plaintiff for a legally recognized: injury parasitic ancillary: beyond the standard of negligence: Put the plaintiff in the position she would have been in had the contract been: of contract What are his compensatory damages: Note 6 Market price is determined on the day the buyer learns of the breach: CI D: Saved: TOTAL Compensatory Damages: Answer: Cover price CP: KP: CI D_2: Saved_2: TOTAL Compensatory Damages_2: Value accepted: Value as warranted: Difference: A plaintiff may be awarded money damages based on his: Reliance interest damages include expenses made in: Plaintiff nonbreaching party has a problem with: on the defendant by their own conduct: Restitutionary damages are an: judgment entitling: compensatory damages in tort to receive: a defendant who engages in serious or wanton: excessive: of reprehensibility of defendants conduct: between the harm and potential: penalties: rather than: of the health and safety of others: defendants or victims: Look for the: Proportionality There must be a: The defendants ability to: Where there is a: Additional form of damages in: Damages: The damages in the liquidated damages clause must be: Reasonable in the: Courts will not enforce a liquidated damages clause that requires: Exception: Certainty: Benefits the reduction for: A plaintiff is required to establish both proximate cause and actual cause: The defendant must have caused the plaintiffs injury: D Consequential Damages Naturally Arising From reate: Consequential damages may be recovered only if they were within the parties: certainty: Both parties will likely call experts to prove: In contract damages must be proven with a greater degree of: Business claiming: avoided: The burden is on the: to avoid the harm or loss: But not by the benefits obtained from collateral sources or: consequence of the: as a result of the defendants conduct: reduce the plaintiffs overall recovery: and attorneys fees are: Goal maintain the: Injunction: from doing something: the status quo through litigation: An injunction for a very short amount of time typically no more than: Primary purpose: judgment by the court: Cannot be issued unless the defendant has been given: 1: Probability of: Balancing of: The plaintiffs hardship must be: The plaintiff unreasonably: As a result the defendant has experienced: Issued to prevent the violation of the plaintiffs rights or to: or to substitute performance: Rescission is the: grounds for rescission mistake or fraud give: defendant and: Equitable Rescission plaintiff is required to return any: reflect the parties true: The parties must have entered into an: There must be: There must be a: status or other legal relations: statute or ordinance: of: of the benefits obtained: As if the defendant was keeping the property: The defendant must hold: The defendant: those funds in the bank account to her as long as there: disputes: in value: after the property has been sold: undefined: over half the value of the: of an obligation or lien: that the: defendant has changed position relying on the benefit: plaintiff: The plaintiff: The plaintiff was in: before the defendant: property is taken by a defendant: for loss of: of another: to the land and: possession: value of the: caused to the land: recover for: Exception A defendant who acted in: changed position in: the breach occurs: Plaintiffs may plead inconsistent remedies in the: 1_2: 2: 3: 3_2: 5: 5_2:

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