Remedies Outline Fall 2009 - Kelly

I)

EQUITY and EQUITABLE RELIEF

A) Rule of remedies: To place victim in the position he would have been in had the wrong not occurred B) Origins of Equity i) Emphasis on conscience ii) Most states have unified law and equity courts except for DE and NJ iii) Entitled to jury in law cases but not in equity cases largely depends on whether right existed in 1792 C) STANDARDS FOR AVAILABILITY OF EQUITABLE RELIEF i) Conscience and equity demand relief ii) Equity acts in personam iii) Irreparable harm/ Inadequacy of legal remedy (1) Legal remedy adequate if it is as complete, efficient and practical as equitable remedy (a) When money damages are as good as injunction (b) If money damages and equitable remedy are equal, then choose legal remedy (c) Incomplete: damages might not suffice (d) Impractical: injunction is much simpler and surer (e) Inefficient: injunction avoids damage testimony (2) Inadequate remedy = insufficient to put plaintiff in position before the wrong was committed (3) Specific Performance: equitable remedy will not be granted unless the good is unique or that something about it would prevent money damages from giving full relief; shortage of item insufficient (Fortner v. Wilson) (a) UCC 2-716 Specific performance may be decreed if the goods are unique or in other proper circumstances (i) Unique item 1. Jewelry may be considered unique where it involves an engagement ring (Schiller v. Miller) a. But realize argument that ring can be replaced where purpose of it is investment and not sentiment no irreparable injury (ii) Other proper circumstances under UCC 1. Extreme shortage of item a. Substitute may not be available or equal b. Price will increase given shortage c. Incidental costs to finding substitute difficult to predict 2. Inadequate remedy at law insufficient to put plaintiff in position before wrong committed 3. Uncertainty as to damages a. Estimates inaccurate b. Incomplete if damages might be less than venture pursued c. Impractical if it is easier to allow venture to proceed d. Inefficient if requires testimony on damages 4. Risk of repeated litigation a. Incomplete if nuisance causes health risk b. Impractical where wrong is too small to justify repeated actions c. Inefficient since multiple suits costly for everyone (b) Note: Land is presumed to be unique (c) Issues with denying specific performance -1-

Remedies Outline Fall 2009 - Kelly (i) If cover is impossible, how are damages measured? 1. Market Price (cover price) K price a. But if the items price is regulated, then market price and K price would be equal and damages would be zero (ii) Jury may wrongly determine market price (iii) Cover transaction must be reasonable not comparable price but comparable item (4) Efficient breach (a) Liability rules allow this where benefit to defendant greater than harm to plaintiff defendant breaches and pays (b) Property rules prohibit this which prohibit violation of rights even if defendant willing to pay injunctions arise as a result of this as an absolute prohibition of the wrong D) EQUITABLE DEFENSES i) Equitable relief is discretionary (1) Court may deny equitable relief even when plaintiffs legal remedy inadequate (a) Court denied injunction to build animal shelter even where legal remedy inadequate since damages cant compensate for continued nuisance of dogs barking; public policy argument that dogs have to go somewhere (George v. Animal Defense League) (b) Courts reluctant to grant specific performance where it would require judicial supervision over a long period of time (2) Impracticality and court over supervision is a defense to an equitable remedy (3) Courts deny injunctive relief where it is problematic and say that the legal remedy is sufficient ii) Unclean Hands (1) Rule: He who comes to equity must come with clean hands; Party seeking equitable relief must not himself have been guilty of any inequitable or wrongful conduct with respect to the transaction of the subject matter of the present suit (a) Result will always be that one wrongdoer is unjustly enriched (b) Its not a comparative rule like in pari delicto: simply a question of if plaintiffs hands are clean and not if theyre cleaner than the defendants (c) Defense recognizes that equitable decrees have effect on third parties and should not be entered without consideration of those third party effects (d) Unclean hands will not be invoked where its application will produce inequitable results, especially where the rights of innocent parties are involved (2) Sheridan v. Sheridan (a) Court denies distribution of ill-gotten marital property (husband embezzled from company) to wife seeking it in dissolution proceedings (b) Courts will sometimes leave property in hands of main wrongdoer so wronged third parties can seek it from wrongdoer (3) Highwaymens Case (a) Two bandits agreed to rob travelers and split profits and when one refused to split, the other sued for an accounting and court dismissed the case invoking unclean hands (4) American University v. Wood (a) Plaintiff wanted to enjoin defendant from sending misleading advertising communications to plaintiffs students but court denied equity where plaintiffs communications were just as misleading -2-

Remedies Outline Fall 2009 - Kelly (b) Court of conscience refuses to protect plaintiff in the commission of fraud upon the public though not unclean hands with respect to the defendant (5) Relief granted despite unclean hands (a) Seagirt Realty v. Chazanof (i) Original fraudfeasor who transferred property to hide it from creditors sued to have it returned to him and court returned property to him regarding his unclean hands as washed during lapse of 20 years (ii) While plaintiff had unclean hands, the unclean hands do not relate to the transaction with the defendant so it doesnt count iii) Unconscionability (1) K defense where court may refuse to enforce a K or a specific unconscionable term or limit the effect of unconscionable term (2) Definitions (a) Unfair surprise + unreasonably favorable terms (b) Unfair surprise + Oppression (c) Lack of meaningful choice + Harsh terms (d) Unduly harsh terms, regardless of surprise (3) Cambpell Soup v. Wentz (a) Where plaintiffs were buyers of red cored carrots and sued for specific performance from sellers, court denied equitable relief even though carrots were unique because K was too hard a bargain and too one-sided an agreement (b) Court still awarded plaintiffs damages but simply denied equitable relief so K was still held enforceable despite unconscionable terms iv) Laches (1) Rule: Equity aids the vigilant; any unreasonable delay by the plaintiff instituting action where delay causes prejudice to the defendant. (a) Unreasonable delay = unjustified delay (i) Justified ignorance of facts constituting cause of action, personal disability or ongoing settlement negotiations make delay reasonable (b) Causing prejudice can include things like large amount spent by defendant, loss of witnesses, circumstances of relationships between parties have changed, or diminished memories (i) Be prepared to argue that little prejudice caused to D who actually benefited from holding a benefit longer than entitled to (c) But watch out for the fact that an issue may not be ripe yet prior to the harm (2) Contrast with statute of limitations (a) SOL applies at law while laches applies only to equitable relief (b) No equitable relief if laches applies but damages still available up until the SOL (i) Laches never extends the SOL; it can only shorten the period that you can sue for equitable relief (c) SOL starts running from date of injury or date of discovery of injury for latent injuries (3) City of Eustis v. Firster (a) Court used laches defense to deny injunction to remove certain piers and boathouses where plaintiff waited 10 years after purchasing land (b) Delay was unreasonable where plaintiff failed to investigate whether there was obstruction to his property (c) Prejudice to defendant is large of requiring them to remove structures which they built, maintained and repaired -3-

Remedies Outline Fall 2009 - Kelly (i) Delay in removal is actually a benefit to defendant since they keep the unjust benefit longer (ii) Lease revenue might have covered cost of maintenance so not so much prejudice (4) Stone v. Williams (a) Court applied laches to deny relief to plaintiff who delayed 5 years in filing for proceeds from her fathers songs because the 5 year delay was unreasonable and it prejudiced the defendant due to death of witnesses and defendant had entered into transactions with third parties (5) Nahn v. Soffer (a) Court applied laches to defendants claim for specific performance for sale of property where delay was 21 months between exercise of option contract to the date scheduled for closing (b) Repudiation by plaintiffs excused further performance but did not excuse the delay in asserting a claim for specific performance (c) Prejudice to plaintiffs because property value increased from $200K to $350K and defendants failed to pay property taxes but this doesnt seem like prejudice because plaintiffs got to keep property longer than they deserved v) Promissory Estoppel (1) Requirements- Rest Contracts 90 (a) Promise (b) Reliance (c) Reasonably expected to induce reliance (d) Detriment (2) Generally used as an exception to requirement of consideration certain actions make it seem like bargain was made (a) A substantive cause of action which permits foreseeable reliance substitute for consideration and supplies basis for breach of K action (3) Equitable defense in the sense that it enjoins the defendant from raising a particular defense injunction against certain defenses (4) Feinberg v. Pfeiffer (a) Court relied on promissory estoppel to refute defendants argument that there was no consideration by plaintiff for K where plaintiff made promise to pay plaintiff $200 per month for life for retirement and plaintiff retired in reliance of that promise (b) Without defense of lack of consideration, plaintiff proves case for enforceable contract and wins vi) Equitable Estoppel (1) This merely precludes equitable relief and relegates plaintiff to legal remedies (2) Requirements (a) Assertion of fact (b) False or the fact that other party claims is false (c) Reliance (d) Detriment if fact contradicted now (3) Similar to fraud (a) Intent to induce reliance (b) Knowledge of falsity (c) Justifiable reliance -4-

Remedies Outline Fall 2009 - Kelly (d) Ex.) defendants fraudulent conduct; plaintiff knowingly permits defendant to make expenditures or improvements to property when plaintiff knows it to be plaintiffs property (4) Comparison to Promissory Estoppel (a) Both require proof of reliance and detriment (b) Promise is different from assertion of fact so no need to prove falsity for promissory estoppel (c) No need to promise a reasonable expectation of inducing reliance in equitable estoppel because of built-in assumption of reliance on assertions of fact (5) United States v. Georgia- Pacific (a) Court applied equitable estoppel against plaintiff government where defendant Georgia-Pacific agreed to donate certain lands if boundaries were extended to include lands but subsequent public land order retracted boundary of forest and thereafter, government allowed owners successor to manage remaining timberlands at considerable expense and add a great deal of value to them (b) Government was equitably estopped from bringing suit for specific performance E) Summary of Equitable Defenses i) Courts try to find something that borders on some type of misconduct (1) On part of plaintiff (unclean hands) (2) On part of defendant (promissory estoppel) (3) In litigation (laches, fraud in equitable estoppel) (4) Negotiation tactics (unconscionability) F) RIGHT TO JURY TRIAL i) Rule: Where a complaint contains mixed legal and equitable claims, the legal claims must be determined by a jury prior to any final court determination of equitable claims (Dairy Queen v. Wood) (1) Common issues to both legal and equitable claims is decided by jury and judge must defer to jurys determination in deciding whether to grant equitable relief (2) The right to jury trial extends to derivative actions by stockholders of a corporation for those issues, if the corporation had been suing in its own right, would have been entitled to a jury (Ross v. Bernhard)
II)

INJUNCTIVE RELIEF
A) STRUCTURAL TYPES i) Preventative order not to do something ii) Reparative ordered to do something to right the wrong iii) Structural - reorganize institution in a way to reduce harm (i.e. school desegregation, prison reform) B) PERMANENT INJUNCTION i) Background (1) Issued after trial on the merits and determination of fault; not permanent and can be subject to modification ii) Four factor test (1) Inadequate remedy at law (folds into irreparable harm analysis sometimes) (2) Irreparable harm (3) Balance of hardship to plaintiff if denied against that to defendant if granted (straight inequality) (4) Public interest -5-

Remedies Outline Fall 2009 - Kelly iii) Ebay v. MercExchange (1) Court declined to issue a permanent injunction even though it found that defendant Ebay had infringed on MercExchanges patent (a) May have been a pragmatic decision not so shut down the website over the patent (2) Court applied 4 factor preliminary injunction test from Hughes to this patent case (3) No way of setting damages here because no market to determine FMV for damages (4) But injunction gives plaintiff power to extort large percentage of profits undue hardship defense should be used by defendant (5) S. Ct. held that injunction for patent infringement must still satisfy 4 factor test and cannot issue as a matter of rule as appellate court did C) PRELIMINARY INJUNCTIONS (before trial) i) Background (1) Preventing of irreparable harm until trial and lasts until final judgment entered (2) Issued to maintain status quo pending trial (a) But this analysis is difficult to apply; hard to characterize what status quo is (b) Not some independent requirement in 4 factor test but may be a useful argument (3) Requires evidentiary hearing with witnesses which takes time since some discovery need be taken (a) Cannot be issued ex parte under Rule 65(a)(1) ii) Four factor test (Hughes v. Cristofane) (1) Irreparable injury / inadequate remedy at law (a) Must be immediate: substantial likelihood that it will occur or become inevitable before next chance to act (b) Comparative inadequacy: After trial, any inadequacy may suffice but before judgment, the its only money argument may be sufficient to defeat irreparable injury argument (c) Situations alleging harm of reputation resulting as a consequence of the wrong often suffice for irreparable injury (d) Irreparable injury can result from situations where a student is suspended money compensation inadequate (2) Probability of success on the merits (a) Most courts require this (b) Cf American Hospital Supply which does not require certainty or even 50%+ but only need to show that there is some serious issue which deserves resolution more hardship to plaintiff requires less likelihood of success (sliding scale) (c) J. Posners formula (i) Grant preliminary injunction if: P x Hp > (1 P) x Hd2 (ii) Probability of harm is multiplied by magnitude of harm (3) Balance of hardships (a) Straight inequality unlike undue hardship defense (4) Public Interest (a) Often plays little role public has no special interest either way (b) Often part of the balance of hardship consideration iii) Note: Courts generally do not enjoin socially useful projects (dog shelter, incinerator) if there is even a small probability that it will not be a nuisance D) TEMPORARY RESTRAINING ORDER (TRO) -6-

Remedies Outline Fall 2009 - Kelly i) Background (1) Attempts to prevent irreparable harm until preliminary injunction (2) Issued after hearing on motion with some supporting affidavits; can be issued ex parte in some instances ii) In many jurx, TROs can only be prohibitory (D is prohibited from doing something) but substance may be mandatory (1) D is prohibited from permitting a wall to remain on Ps property = D is required to remove wall E) EXPERIMENTAL AND CONDITIONAL INJUNCTIONS i) Delay of Injunction (1) Boomer v. Atlantic Cement (a) Facts: Court found defendant who owned a large cement plant near Albany liable for nuisance for injury to property from dirt, smoke and vibration from plant. (b) Court rejected ordinary rule in NY that an injunction would issue if a nuisance was found not unsubstantial (i) Ordinary rule didnt weigh disparity in economic consequence between effect of injunction and effect of nuisance (c) Court conditions issuance of injunction only if defendant does not pay for permanent damages to plaintiffs economic loss on property ii) Cost of Issuance of Injunction (1) Spur Industries v. Webb (a) Court finds a nuisance but finds that plaintiff was essentially the cause of the damage because plaintiff developer brought residents close to nuisance conditions issuance of injunction on plaintiff paying for defendants cost of moving or shutting down (b) Plaintiff has committed no legal wrong for having to incur cost but court is saying that the undue hardship of having defendant bear all costs of injunction may weigh against issuance of injunction iii) Undue Hardship Defense Against Injunctions (1) Hardship to defendant if injunction granted is disproportionate to harm to plaintiff if injunction denied (a) Hardship must not just be greater than but disproportionate (2) May not be applicable to defendants who are intentional wrongdoers (3) Contrast with 4 factor test for injunctions which applies the weighing of hardship with straight inequality (4) Public interest can be weighed in this defense; c.f. 4 factor test where public interest is explicit factor F) CHALLENGING INJNCTIONS i) Appeal (1) Can appeal permanent injunction by appealing liability from underlying case (2) Appealing preliminary injunction is an interlocutory appeal and must be authorized (3) TROs are not appealabe in federal courts (4) Safe and traditional method ii) Collateral Bar Rule (1) Rule: Collateral attack on injunction by violating injunction first and then appealing contempt judgment on grounds of invalidity of injunction will not work not a proper defense to criminal contempt and conviction will be upheld (a) Only applies to orders that court had jurisdiction to issue -7-

Remedies Outline Fall 2009 - Kelly (i) If federal judge issue injunction in a case where there is no federal jurisdiction or diversity of citizenship, then order invalid and collateral bar rule inapplicable (United Mine Workers) (ii) But a court has jurisdiction to determine its jurisdiction has power to enjoin conduct until it has completed jurisdiction determination so criminal contempt can still apply if that order is violated (b) Direct appeal is the only safe way to challenge validity of injunction (c) Walker v. Birmingham (i) Even though injunction against protest as held to be unconstitutional, violators still guilty of criminal contempt for violating order against protesting. (d) In CA: collateral bar does not prevent a defendant from avoiding both criminal and civil contempt if order found invalid (e) Injustice of the rule when injunction is invalid because what violator did was legal but he is jailed for disobeying injunction (2) Exceptions (a) During contempt hearing, if injunction is shown to be invalid, can avoid civil sanctions but not criminal punishment (b) Author if injunction not judge (c) Issuing judge from another country (d) Issuing judge from another state (3) Rationale (a) Preference for invalid injunction to be obeyed than risk the irreparable harm that would result from violation of injunction high rate of obedience with rule (b) Usually injunctions are correct (i) Privileged communications: Must refuse to answer and defend the contempt by claiming privilege must risk sanction to appeal G) HEARING REQUIREMENT i) TRO (1) Little more than a few hours notice or ex parte (2) Requires complaint and some supporting affidavits (3) Two part test- Rule 65(b) (a) It clearly appears from specific facts shown by affidavit or by verified complaint that immediate and irreparable injury, loss, or damages will result to applicant before adverse party or his attorney can be heard in opposition, and (i) Must show a substantial likelihood that harm sought to be prevented will occur (b) The applicants attorney certifies to court in writing the efforts, if any, which have been made to give notice and the reasons supporting his claims that notice should not be required (i) While court prefers notice, there are situations where notice would be inappropriate because harm would continue with notice H) PERSONS BOUND i) Rule 65(d): TRO or preliminary 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 who receive actual notice of the order by personal service or otherwise. (1) If defendant is not involved in the contempt, the employee cannot be (Alemite Mfg. Co. v. Staff) -8-

Remedies Outline Fall 2009 - Kelly (2) Idea that equity acts in personam and orders someone to not do something and not that the thing cannot be done (3) Includes bona fide successors or assignees (a) A bona fide purchaser, acquiring, with knowledge that the wrong remains unremedied, the employing enterprise which was the locus of the unfair labor practice, may be considered in privity with its precedessor for Rule 65(d) (Golden State Bottling v. NLRB) (i) Bona fide purchaser essentially continues the business as it was same operations so court treats as if the same company for purposes of injunction ii) SUNY v. Denton (1) Where injunction issued against student protestors and faculty protesters then protested, court reversed finding that faculty was in contempt for violating order. (2) Bad drafting of injunction: prohibited all other persons receiving notice of this preliminary injunction, whether acting individually or in concert from acting...in such unlawful manner as to disrupt or interfere with plaintiffs lawful and normal operations or unlawfully interfere with ingress or egress from such properties... or employing unlawful force or violence (a) Order does not prohibit anything lawful interference (b) Unlawful interference with unlawful operations (c) Lawful violence (3) Persons not parties can be bound only if parties were acting either as agents or servants of the defendants, or in combination or collusion with them or in assertion of their rights or claims. iii) Civil Rights Cases (1) United States v. Hall (a) Rule: Courts of equity have inherent jurisdiction to preserve their ability to render judgment in a case such as this; can issue an ex parte order against an undefinable class of persons (i) A district court has power to punish a person for criminal contempt who is neither a party nor bears any legal relationship to a party in a school desegregation case because orders like this excite community passions and are particularly vulnerable to disruption by undefinable class of persons who are neither parties nor acting in concert (2) This is a very narrow exception to Rule 65(d) that injunctions act in personam I) NOTICE REQUIREMENT i) Requirements (1) Clear and plain terms of scope of injunction (2) Must be from reliable source ii) Willful ignorance is not an excuse at least where youve received actual notice (Midland Steel Products) (1) No need for actual knowledge of the order as long as notice of it is received (2) Its actual notice and not actual knowledge which is relevant iii) Notice of order must be delivered in some appropriate way as to give parties bound actual notice (1) Publication of an injunctive order in newspapers and the posting thereof on the employer's vehicles have been held not of themselves sufficient to charge with notice J) BOND REQUIREMENT i) Rule 65(c): One who obtains a preliminary injunction or TRO must usually post security to protect the defendant against loss. -9-

Remedies Outline Fall 2009 - Kelly (1) To guard against loss defendant may incur from refraining from acting in a way he had a right to act (2) D must prove that he suffered from erroneous issuance of order and recovers damages on the bond and bond company recovers from plaintiff (3) Exception for the U.S. and its officers or agencies ii) Rationale (1) Assign risk to plaintiff who led court to error (2) Unjust enrichment of plaintiff (3) Deter frivolous litigation by plaintiffs iii) Bond limits risk to plaintiff only 4 states allow recovery above the posted bond amount (1) Smith v. Coronodo Foothills (a) Where TRO issuing court set bond at $10 in an ex parte motion without defendant present, the court found the Association liable for more than cash bond set (b) If defendant has opportunity to be heard, then standard for amount of bond is reviewed using an abuse of discretion standard. iv) Increase to bond amount (1) Continuum v. Incepts (a) Where original bond was $200,000 and court order bond to be increased to $2MM, appellate court held that the increase would impose a substantial hardship on plaintiff who had annual profits of $2.5MM but that the amount could satisfy any judgment for damages as a result of wrongful issuance, and instead kept the bond at $200,000 on the condition that plaintiff waive bond amount as cap v) Practical tips (1) Plaintiffs should have injunction bond ready before motion and be prepared to argue about amount of bond (2) Defendants should be prepared to demand a large bond K) STAYS i) Rule 65(b): On 2 days notice to the party who obtained the TRO without notice or on such shorter notice as the court may prescribe, the adverse party may appear and move for its dissolution or modification and in that even, the court shall proceed to hear and determine such motion as expeditiously as the ends of just require (1) If trial court refuses relief, party against whom relief was granted can seek stay from appellate court. ii) Rule 8: Stay of Injunction Pending Appeal. Motion shall show that application to the district court for the relief sought is not practicable, or that the district court has denied application, or has failed to afford the relief which applicant requested... shall also show the reasons for the relief requested and the facts relied upon... reasonable notice of the motion shall be given to all parties. iii) Four factor test (Washington MTA v. Holiday Tours) (1) Likelihood of success on merits of appeal (2) Irreparable injury if enforcement proceeds pending appeal (3) Harms to other parties (4) Harms to public interest L) FRAMING THE INJUNCTION i) Rule: Injunction should put plaintiff in the position he would have occupied if the wrong had not been committed but only to prevent wrong from being committed and not to enjoin any other legal conduct - 10 -

Remedies Outline Fall 2009 - Kelly (1) Identify the wrong (a) Do NOT determine what right would be and then achieve that (2) Determine how absence of wrong would have affected the situation ii) Rule 65(d): shall set forth the reasons for its issuance, shall be specific in terms, shall describe in reasonable detail, and not by reference to the complaint or other document, the act or acts sought to be restrained. iii) Jurisdiction (1) Court of equity has no inherent jurisdiction to resolve a family dispute between parents as to the school their child should attend when there is no question concerning custody of child incident to separation or divorce of parents (Kilgrow v. Kilgrow) iv) Specificity Requirement (1) The words within the immediate vicinity were too vague for an injunction prohibiting picketing near a home (Murray v. Lawson) (a) Alternative wording: in front of; within X feet of; within sight distance of; on plaintiffs street (2) Without specificity, hard for plaintiff to know when order is violated to seek contempt; difficult for defendant to know when violating; difficult for police to know when to interfere (a) Courts rarely conclude that an injunction is so vague as to be invalid and unenforceable most courts hold injunction was sufficiently precise so that defendants knew their conduct was prohibited. (3) The rights of a wife in her husbands affection are not property rights which can be governed by injunction (4) But the more specific an injunction it, the easier it is for defendant to find a loophole to violate (5) Where court permanently enjoyed defendants from making, baking and selling chocolate chip cooks which use or utilize plaintiffs formula and defendants added vanilla to their cookies which plaintiff did not do, court found injunction only commanded defendants not to produce cookies containing the exact same ingredients in exact same proportions as plaintiff (Peggy Lawton Kitchens v. Hogan) (6) In injunction implicating the First Amendment, the injunctive relief should be no more burdensome to the defendants than necessary to provide complete relief to the plaintiffs whether certain provisions burden no more speech than necessary to serve a significant government interest (Madsen v. Womens Health Center) (a) Court upheld provision for 36 ban on public property and noise restrictions but overturned provisions of which included private property and ban on images observable M) MODIFICATION OF DECREES i) Permanent Injunctions (1) Rule 60(b)(5): A permanent injunction may be modified or dissolved upon a showing of changed circumstances (a) Factual Change- injunction no longer needed to prevent harm (b) Law Change- conduct no longer illegal; continued injunction grants plaintiffs more relief than legally entitled to receive (i) Agostini v. Felton - Change in establishment law from time of issuance of injunction entitle petitioner to relief from permanent injunction ii) Consent Decrees - 11 -

Remedies Outline Fall 2009 - Kelly (1) Where parties agree to terms and court issues order on those terms (a) Ex.) divorces, suits v. the government (2) Consent decrees may exceed the law parties may agree to more than law requires (3) Change in law allows modification of consent decrees so that plaintiff does not receive more than legally entitled by law (4) Finding by district court that school district was being operated in compliance with commands of equal protection clause of the Fourteenth Amendment and that it was unlikely that school board would return to its former ways would be finding that the purposes of desegregation litigation had been fully achieved, and no additional showing of grievous wrong evoked by new and unforeseen conditions was required in order to have desegregation decree dissolved (Board of Education v. Dowell) (a) Court should address whether school board has complied in good faith with desegregation decree since it was entered and whether vestiges of past discrimination have been eliminated to extent practicable N) DECREES AFFECTING THIRD PARTIES i) Remedial Civil Rights Orders (1) Since United States Department of Housing and Urban Development permitted violations of the Constitution and federal statutes by knowingly sanctioning and assisting the Chicago housing authority's racially discriminatory public housing program, a remedial order against HUD affecting its conduct in the area beyond Chicago's geographic boundaries but within the housing markets relevant to the respondents' housing options was warranted (Hills v. Gastreaux) (2) In action against union, contractors, and trade association alleging racial discrimination in operation of union hiring hall and apprenticeship program, district court had no inherent power, either under its traditional equitable authority or under All Writs Act, to allocate to contractors and trade association a portion of the costs of a remedial decree requiring integration of hiring hall and apprenticeship program where contractors and trade association had not practiced intentional discrimination and could thus not be held liable for violation of Civil Rights Act of 1866 (General Building Contractors v. Pennsylvania) ii) Structural Orders (1) Where problems involving misconduct by small number of city policemen, not named as parties defendant, were fairly typical of those afflicting police departments in major urban areas and none of defendant city officers was alleged to have acted affirmatively in deprivation of constitutional rights of plaintiff classes, district court erred in injecting itself, by injunctive decree, into internal disciplinary affairs of state agency, i. e., municipal police department. (Rizzo v. Goode) (a) Injunction attempted to remove effect of the wrongs instead of ordering the right result city officials had not committed any wrongs O) INJUNCTIONS AGAINST CRIMINAL ACTIVITY i) Rule: Equity will not enjoin a crime. (1) There must be something more than the crime such as a civil wrong. (2) Remedy at law is adequate with criminal prosecution ii) Rationale (1) Potential conflict with constitutional right to jury since equity does not afford a jury trial (2) Circumventing proof beyond a reasonable doubt (3) Circumventing limit on self incrimination - 12 -

Remedies Outline Fall 2009 - Kelly (4) Stigma suffered by person enjoined label of habitual offender iii) Repeated violations (1) If repeated violation of city ordinance constitutes a nuisance, then equity can grant relief not because it is a crime but because the violations are repeated to the extent that their repetition effects such public rights as to constitute a nuisance (State v. H. Samuels) (a) This is an exception more than the rule; most judges will not say that any crime is a nuisance which can be enjoined P) INJUNCTIONS AGAINST LITIGATION i) State Court Injunctions Against Foreign State Litigation (1) A state court may have the power to enjoin litigation in other states but it is a discretionary exercise of power (2) Enjoining a party effectively deprives court of ability to decide case, even within its jurisdiction ii) State Court Injunctions Against Federal Litigation (1) Rule: State courts cannot enjoin federal litigation; if there is federal jurisdiction, the court can exercise it though federal court may decline to exercise it (Donovan v. Dallas) (a) Probably cant enjoin removal of a state action to federal court since that would be enjoining a federal action iii) Federal Court Injunctions Against State Litigation (1) Federal courts have the power to enjoin state litigation but federalism forbids federal courts to enjoin absent special circumstances (a) Judicially created exception to enjoin where a person about to be prosecuted in a state court can show that he will suffer irreparable injury if proceeding in state court not enjoined pending potential prosecution but must be a real threat of prosecution (i) Federal court should not enjoin if the state court prosecution is already proceeding (b) The possible unconstitutionality of a statute on its face does not itself justify an injunction against good-faith attempts to enforce it by prosecutor in state court; injury faced was solely that incidental to every criminal proceeding brought lawfully and in good faith (Younger v. Harris) (i) Strong arguments for irreparable injury here 1. No real damage action allowed against prosecutor or state because of immunity 2. Risk of criminal prosecution and conviction 3. Cost of defending both prosecution and contempt proceeding 4. Certain constitutional harms which do not result in prosecution (2) 28 U.S.C. 2283. Anti-Injunction Act (a) Prohibits writ to stay proceedings in state court unless: (i) Expressly authorized by Act of Congress 1. Where 42 U.S.C. 1983 expressly authorizes a suit in equity to redress the deprivation under color of state law of Constitutional rights, this was expressly authorized because it created a specific and uniquely federal right or remedy, enforceable in a federal court of equity, that could be frustrated if the federal court were not empowered to enjoin a state court proceeding (Mitchum v. Foster) (ii) Where necessary in aid of its jurisdiction (iii) To protect or effectuate its judgment - 13 -

Remedies Outline Fall 2009 - Kelly (3) Enjoining government agencies? (a) Where court issued injunctive order to significantly revise the internal procedures of the PA police department, court exceeded its discretion and structural injunction was reversed (Rizzo v. Goode) (b) Where court set 30 days as the maximum length for isolation in a prison, Court found this to be enforceable in light of the fact that prison had not fully complied with courts numerous orders (Hutto v. Finney) (c) Where district court ordered that the State fund salary increases for teachers of a magnet school, it was beyond remedial authority of court because it was an interdistrict remedy siphoning money away from other school districts to pay for this school is giving the plaintiffs far beyond what they would have had if there had been no segregation (Missouri v. Jenkins)
III)

ENFORCEMENT OF EQUITABLE DECREES

A) CONTEMPT i) Forms of Contempt (1) Violation of court order (2) Hindrance of court operations ii) Problems with Contempt (1) Contempt is powerful three different types of sanctions which may be severe with limited procedural protections (2) Contempt poorly defined (3) Power urges restraint reserved for cases where it appears necessary (a) Not every insult will be contempt; must give some latitude where criminal defendant required to argue his own case (In re Little) iii) Two Types (1) Must look into purpose to determine type can be monetary or jail (2) Civil (a) Compensatory remedial to victim for damage from contempt (i) Measured by position party would be in if court order was obeyed (ii) Parties generally receive injunction + damages 1. Injunction prevents future harm 2. Damages cover harm preceding injunction + compensatory contempt for harm after injunction (iii) Attorney fees incurred in prosecution of contempt recoverable as long as it is reasonable and based on proof that harm was suffered (Time Share Systems) 1. Exception to American Rule which generally does not award attorneys fees absent statutory authority or contractual obligation (b) Coercive- designed to encourage obedience; finite termination once contempt ceases; Key to jail in contemnors pocket (i) Most useful for passive contempt doing nothing is contempt of court and conduct ceases contempt (ii) Ends once proceeding is over (iii) VT Womens Health Center 1. Court imposed prospective fines of $10,000 per day for first violation and $20,000 per day for future violations was coercive because it was capable of being avoided by defendants by adhering the courts order - 14 -

Remedies Outline Fall 2009 - Kelly 2. This case was before Bagwell and can be contrasted because it was a prospective fines but if court attempts to assess the fines later, it would probably be criminal contempt. (iv) Could become criminal in nature if it becomes apparent contempt will not coerce because then it becomes punitive (3) Criminal (a) This is to punish past violations through jail or monetary sanction (b) Requires criminal procedural protections indictment, right to attorney, proof beyond reasonable doubt, jury trial, mens rea (c) Yates v. United States (i) If witness is jailed for civil contempt, it is inappropriate to hold witness in jail for refusal to testify once grand jurys term ends because civil coercive effect no longer applicable (ii) Court may hold witness in criminal contempt and impose a punishment for a continued refusal to testify past violation (d) United States v. PATCO (i) $5000 fine imposed for person violating court order against striking was criminal because it was imposition for past violation subject to criminal procedure protections (e) United Mine Workers v. Bagwell (i) Where court levied contempt fines of $64mm against a union for violations of a labor injunction, S.Ct. found these to be criminal fines (ii) Not civil coercive contempt because by the time the contempt fine is totaled, key is no longer in violators pocket since acts have already occurred iv) Defenses to Contempt (1) Defendants not bound by decree (2) Did not receive notice of its requirements (3) Impossible to comply with decree B) Procedural Requirements Different Types of Contempt i) Direct Contempt (1) No need for witnesses since it occurs in presence of court sanction must be imposed immediately and not deferred to separate sentencing hearing (2) Examples (a) Disruptive acts in court (i) If contempt charged involves disrespect to or criticism of a judge, that judge is disqualified from presiding at the contempt hearing except with consent of the person charged with contempt (b) Threatening letter from attorney to court clerk (c) Assault on the incorrectly thought to be witness (d) Letter from father of husband in divorce proceeding to wife and threats to her attorney (e) Sending an abusive letter to judge (3) Summary contempt (4) Unexcused absence of an attorney is a hybrid of direct and indirect contempt because offense is committed by not appearing in court but non-excuse occurs when attorney appears in court to offer explanation that does (In re Yengo) (a) If explanation is inadequate or frivolous, court can treat as direct contempt (b) If explanation is adequate, court should treat as indirect contempt and refer to another judge for order to show cause - 15 -

Remedies Outline Fall 2009 - Kelly ii) Requirement for Jury (1) Rule: The right to a jury applies to criminal contempt proceedings where: (Bloom v. Illinois) (a) The maximum punishment allowed by statutes is 6 months or more (i) But where there is no maximum punishment, court uses actual sentence imposed but then there is the dilemma that a jury trial cannot be demanded until you know the sanction (b) Where the fine is imposed for past acts and for punitive purposes no floor for fine amount to qualify as criminal contempt iii) Removal from Courtroom (1) Rule: Confrontation clause not violated where defendant was removed from courtroom for extremely disruptive behavior; essential to proper administration of criminal justice that dignity, order, decorum be observed (Allen v. Illinois) (a) Other options: (i) Bind and gag but keep present (ii) Cite for contempt (iii) Remove from courtroom until he promises to conduct himself properly
IV)

DECLARATORY JUDGMENTS
A) Background i) Definition: To determine rights, obligations or status a decree delineating parties rights (1) Different from injunction because no need to show irreparable injury ii) Primary utility is to eliminate uncertainty iii) Allows a potential defendant to bring suit first (1) Can think of it as laches defense in reverse because it gives the potential defendant a way to avoid potential prejudice from laches iv) After declaratory judgment, party can get relief based on the judgment under 28 U.S.C. 2202 (Damages or injunction) v) Examples (1) Lot line is here (2) Lien is valid or invalid (3) Patent valid or invalid (4) Insurance policy does or does not cover claim (5) Divorce (6) Quiet title actions vi) Advantages (1) Forum shopping (2) Better action when you seek to continue relationship with other party declaration of who is right is less harsh than judgment or injunction (3) Clarification prior to violation (4) Potential for speedier action less discovery and less fact-specific B) Case or Controversy Requirement i) Rule: A controversy must be definite and concrete, touching the legal relationship of parties having adverse legal interests; must be a real and substantial controversy (1) Where plaintiff insurance company asked for declaratory judgment that 4 policies be declared null and void for lapse of nonpayment and that obligation upon remaining policy consisted of paying the sum of $45 upon death of insured, court found a controversy (Aetna v. Haworth) - 16 -

Remedies Outline Fall 2009 - Kelly (2) Basic question is whether the facts alleged show that there is a substantial controversy, between parties having adverse legal interest, of sufficient immediacy and reality to warrant the issuance of declaratory judgment (3) Certain employees who sued to prevent the Commission from enforcing the Hatch Act by declaring it unconstitutional, who had not yet violated the Act, did not present a case or controversy (United Public Workers v. Mitchell) (a) Power of courts to determine constitutionality of Acts arises only when the interests of litigants require use of judicial authority to protect against actual interference. (b) Only person who presented a case or controversy was one who had violated the Act and was fired as a result (4) Where threatened action by government is concerned, courts do not require a plaintiff to expose himself to liability before bringing suit to challenge the basis for the threat--for example, the constitutionality of a law threatened to be enforced. (5) In a patent declaratory judgment for validity of the patent, a licensee presented a live case or controversy even though he had not breached the contract and refused to pay royalties, provided that you indicate intention to breach and that there is some threat extended to you that leads you to believe you will face negative consequences for doing so (MedImmune v. Genentech) C) Jurisdiction i) Rule: Actions for declaratory judgments must satisfy the same requirements for diversity or federal question jurisdiction; a federal question must be on the face of a well-pleaded complaint and cannot merely be anticipated as a defense (1) Simply because someone may raise a federal law as a defense somewhere down the line is not sufficient for federal jurisdiction where there is no diversity D) Adequacy of Remedy i) Rule: No explicit requirement that legal remedy be inadequate in 28 U.S.C. 2202 but courts exercise discretion in denying relief if convinced it would be less effective than another method or is unnecessary ii) Exercise of Discretion (1) Creative Non-Violence v. Hess (a) Plaintiffs sought a declaratory judgment that the judges requirement that people rise when a judge enters or exits a courtroom was unconstitutional (b) While there was still a case or controversy because there was past conduct of judges imposing sanctions for not rising, court declines to proceed on the action where judges indicated that as long as they were informed in advance that the person was not rising for religious reasons, court declined to hear the action because the likelihood of recurrent confrontations is to small to warrant a decision (c) Three factor test used: (i) Bona fide intent to discontinue actions (ii) Effectiveness of discontinuance- structural changes making it less likely to repeat actions (iii) Character of past violations intentional v. innocent mistake (2) Provident Bank v. Patterson (a) Federal court should not have denied relief in diversity action brought for declaratory judgment that insured's automobile was being operated by driver within scope of permission granted to him by insured on ground that contemporaneous state tort actions raised mooted question as to coverage of policy where the state and federal actions did not involve identical parties and - 17 -

Remedies Outline Fall 2009 - Kelly same issues in that, inter alia, state suits raised agency question while federal suit dealt with whether driver had permission thus bringing his own liability within coverage of policy. (3) Katzenbach v. McClung (a) In cases where the state criminal prosecution was begun prior to the federal suit, the same equitable principles relevant to the propriety of an injunction must be taken in deciding whether to issue declaratory judgments (b) Since Civil Rights Act provides statutory proceeding for determination of rights and duties arising thereunder, courts should ordinarily refrain from exercising jurisdiction to grant declaratory relief in cases involving rights and duties thereunder. (4) Wilton v. Seven Falls (a) In declaratory judgment context, normal principle that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and wise judicial administration (i) Federal action may abstain to state action even if federal action was filed first (5) National Wildlife Federation v. United States (a) Sometimes the great public importance of an issue militates in favor of its prompt resolution by means of mandamus or declaratory relief, but at other times public interest dictates that courts exercise restraint in passing upon crucial issues. (b) Judicial restraint precluded issuance of mandamus and declaratory relief against alleged failure of the President of the United States and the Director of the Office of Management and Budget to comply with the requirements of the Forest and Rangeland Renewable Resources Planning Act of 1974 in preparing the proposed fiscal budget for 1979 because (1) as such remedies would require intervention in the wrangling of the federal budget and budget procedures, matters which were the archetype of those best resolved through bargaining and accommodation between the legislative and executive branches, and (2) discretionary relief would intrude on the responsibilities, including the shared responsibilities, of the coordinate branches. Forest and Rangeland Renewable Resources Planning Act of 1974, 8(b) as amended E) Intellectual Property Context i) Significant remedy for owners or potential infringers without it, patent holders may exercise undue market leverage ii) A case or controversy exists even if alleged infringers did not receive direct notice iii) Importance of declaratory judgments to prevent coercive use of patents
V)

RESTITUTION
A) Rule: A person who has been unjustly enriched at the expense of another is required to make restitution to the other i) No need to prove inadequate legal remedy unlike equitable actions for injunction can seek this or damages B) Contract setting i) Restitution as remedy for breach ii) Restitution following recission iii) Seeks to put defendant in the position defendant would have occupied if promise had not been made - 18 -

Remedies Outline Fall 2009 - Kelly (1) Applies even if defendant is justified in refusing to perform C) Elements of Unjust Enrichment i) Benefit to defendant from plaintiff ii) Unjust for defendant to keep benefit without compensating plaintiff (1) No need for actual contract between the parties (a) Where through a reasonable mistake, one builds house on anothers land, landowner electing to keep the house must pay for it even though on contract between landowner and builder (Beacon Homes v. Holt) (2) Injustice does not lie in how benefit was acquired (3) Simply the absence of a just reason to keep benefit without paying for it (4) Just to keep: (a) Gifts (i) Donative intent (ii) Delivery (iii) Acceptance (b) Benefits bestowed by volunteers (i) Officious intermeddlers 1. Voluntary interference (ex. person who plants crops on land while bankruptcy eviction proceedings pending) 2. Note: If you have a duty to do something, then you are not a volunteer (ii) Bypasses opportunity to negotiates providing benefit without asking whether wanted (c) Fruits of a valid contract D) Types i) Preservation of anothers things (1) Rest Restitution 117. Entitled to restitution a person preserves things from damage or destruction if services were necessary before person could reasonably communicate with owner; had no reason to believe owner did not want him to act; preserver had no donative intent; owner accepts things. ii) K sale of diamond at flea market (1) Unjustness depends on whether K is valid if invalid, unjust to retain diamond iii) Benefits resulting from fraud (1) Stewart v. Wright (a) Where victim of fraud sued for restitution, even though he was a participant in the fraud, court granted restitution to victim because victim was part of an unsuccessful scheme to defraud while defendants were part of a successful one (b) In pari delicto defense did not apply because plaintiff was not equally wrong as defendant iv) Repairs to property (1) Western Coach v. Roscoe (a) Where creditor repaired a trailer home and then sought restitution from original borrower for cost of repair and paid back taxes, borrower was unjustly enriched because creditor was not a donor or volunteer because creditor had interest in repairing to protect its own interests E) MEASURE OF ENRICHMENT i) Rule: Put defendant (person receiving benefit) in the position she would have occupied had benefit not been bestowed (1) Note: Plaintiff should sue for damages and not restitution when the Plaintiffs loss is greater than benefit to defendant - 19 -

Remedies Outline Fall 2009 - Kelly ii) Two Methods (1) FMV of services provided (2) Amount of increase in defendants wealth (a) Comparing costs is NOT a proper measure (b) Where plaintiff made repairs to a stolen car, owner of stolen car who received car back with repairs was ordered to pay restitution in the amount of the difference between the value before and after the plaintiff worked on the car, regardless of the value when stolen (Iacomini v. Liberty Mutual) iii) Conduct of plaintiff considered (1) Bron v. Weintrab (a) Where plaintiffs here acquired title to property in an unethical manner, court inclined to give smallest compensation required and does not give the benefit of the full value of the land but simply the cost of what it would cost the defendants to get the right from someone else F) SPECIAL TYPES OF RESTITUTIONARY REMEDIES i) Constructive Trust (1) Definition: (a) Created by law as a remedy to unjust enrichment trustee (defendant) holds property for benefit of plaintiff (i) Different from a resulting trust which is a trust created with intent even though procedural defect prevented proper formation (ii) Action in equity by holder of equitable title which means the court first declares you the beneficiary and then you receive the body of the trust Wrongdoer may hold legal title but doesnt own property because he is holding title for beneficiarys benefit 1. Different from replevin and ejectment because both those actions must be instituted by the holder of legal title (2) Requirements (a) Defendant engages in unconscionable conduct, duress, abuse of trust (i) Where defendant did not engage in any unconscionable conduct in the plaintiff quitting his job and moving closer to defendant and defendant refused to convey property which had been orally promised, there was no grounds for a constructive trust (Fletcher v. Nemitz) (b) Obtains property or benefit holds legal title (c) Remedy at law is inadequate (3) Advantages of remedy (a) Subjective value > legal remedy unique items (b) Property value may exceed damages claim (c) Better remedy when defendant is insolvent (i) Constructive trust removes property from defendants estate so creditors cant take it (d) When property has been transformed trust allows tracing (i) Plaintiff can receive proceeds of sale or items bought with proceeds (ii) Allows recovery of property from buyer if buyer is not a bona fide purchaser for value (4) Disadvantages of remedy (a) May produce overcompensation (b) May harm creditors (5) Limited remedy: (a) Requires conscious wrongdoing - 20 -

Remedies Outline Fall 2009 - Kelly (i) Fraud or theft (b) Identifiable property (i) Not just any of defendants property but rather plaintiffs equitable property ii) Equitable Lien (1) Definition (a) Useful when there is no claim of ownership (b) Proper remedy where part of the property or part of the fund belong in good conscience to the defendant or to someone other than plaintiff (c) Security interest in the sense that plaintiff benefited the property so plaintiff can foreclose on property to collect debt (d) Never exceeds compensation amount of lien fixed by amount owed to plaintiff (i) In a rising property market, person would prefer constructive trust than equitable lien since dollar amount fixed in lien (e) Limited priority secured claim so equal in priority to other secured creditors (constructive trust always has first priority) (2) Applicable to: (a) Good against all persons who acquired an interest with knowledge or notice of plaintiffs equitable lien, but not against anyone who acquired an interest without such knowledge or notice (Leyden v. Citicorp) (i) Can be actual or constructive notice (facts which would lead a reasonably intelligent person to inquire) (b) Where one party has paid another partys liabilities or debts upon certain identifiable property (Rolfe v. Varley) (3) Neither equitable lien or constructive trust available against a bona fide purchaser for value iii) Tracing (1) Allowed in both the constructive trust and equitable lien (2) A constructive trust may be imposed on proceeds of life insurance policies where a portion of the premiums were paid with wrongfully obtained funds in a pro rata share- (percentage of wrongfully obtained funds + legally obtained funds) / total amounts paid (G&M Motor Co. v. Thompson) (3) Methods of tracing commingled amounts: (a) Presumption that wrongdoer spends his own money first and whatever money is left is the plaintiffs (b) Apply the lowest intermediate balance rule- amount limited to lowest intermediate balance, even if there were later additions
VI)

DAMAGE REMEDIES
A) Rule: Seek to put party in the position she would have occupied if wrong had not been committed i) Contract: Put plaintiff in position she would be in if promise had been performed ii) Property: Damages for inability to convey good title for costs incurred by buyer as a result of the deal B) Basic Measure of Damages i) Rule: How much money would be needed to repair or replace the thing injured ii) American Rule (Basiliko v. Pargo Corp.) (1) Benefit of the bargain= FMV of property at time it should have been conveyed contract price - 21 -

Remedies Outline Fall 2009 - Kelly (a) Some jurisdictions reject damages of lost profit of anticipated resale of property though the general rule is incidental and consequential damages can be recovered (i) UCC 2-713 for goods- damages is the difference between the market price at the time when buyer learned of breach and the contract price together with any incidental and consequential damages, but less expenses saved as a result of sellers breach (b) Must subtract contract price because buyer no longer need pay contract price; sellers breach excuses buyers performance (2) Can also think of this as the expectation interest = position if promise performed (a) The wrong here is the breach of contract (3) Almost always used for real estate instead of difference between cover price and K price because of uniqueness of real estate (4) Fair market value (a) The price that an owner willing but not compelled to sell ought to receive from one willing but not compelled to buy. (b) A resale contract can provide evidence of FMV on which to base an award of damages for breach of initial sales contract (c) Court sometimes uses cover price in determining FMV iii) British Rule (1) Return of the deposit plus interest and expenses incurred after contract is made very narrow rule for property (2) Can think of this as reliance interest = position if promise had never been made (a) The wrong here is the making of the contract iv) Cost of Repair v. Diminution in Value (1) Both of these fall under expectation interest both seek to put plaintiff in position she would have occupied but for the wrong (2) Cost of Repair (a) Cost to remedy the wrong (b) Generally used when damage is considered temporary (i) Repairs < Value Before Injury (ii) Repairs < Value after repair (iii) Repairs < Value added by repair (c) If repairs are unreasonable, defendant is generally not liable for cost of repair exception: when theres a environmental statute mandating the repair (d) Preference for awarding cost of repairs but courts will not award it if repairs are disproportionate to value of property or diminution of value in property (i) Note: But remember, value is the value to the plaintiff so watch out for items with large subjective values (3) Diminution in value (a) Difference in FMV of the property before and after the injury (b) Applies when damage to property is considered permanent (i) Permanent damage = generally is when the cost to remedy is greater than the value after repairs (c) Courts may impose this on top of cost of repair if repairs dont properly restore property to value to plaintiff before injury v) Measures of Value (OBrien Bros v. Helen B Moran) pg 469 (1) Market value (a) Timing affects price used - 22 -

Remedies Outline Fall 2009 - Kelly (i) Normal rule is to use date of injury- Indiana approach; avoids manipulation by plaintiff (ii) Where typical practice of farmer was to harvest crop first and delay in selling crops until spring, court allowed spring price for calculation of damages where evidence showed it was common practice and not done to enhance damages (Semenza v. Brown) pg 473 (b) Must subtract savings as a result of breach (c) Type of Market (i) Wholesale v. retail 1. Where company had a truck stolen and company paid wholesale price for truck, court nonetheless awarded retail market price as damages because there was no evidence that company could purchase wholesale unless buying in bulk and not just one truck (United Truck v. Kleenco.) pg 476 (ii) Rental v. purchase (iii) Geographic: local v. regional (2) Replacement cost less depreciation = cost to cover (3) Capitalization of earnings- based on how much income will be earned over time (a) This is similar to ensuing loss similar to lost profits which are consequential but using them to calculate value of property makes them direct damages (b) Formula (i) Income x Discount (1/1+ expected rate of return^year)= 1 years present value (ii) Then add up all the years of expected useful life to arrive at value (iii) Ex.) $15,000 expected income, expected rate of return of 6%; 10 years useful life 1. Year 1: $15,000 x (1/1.06) = Prevent Value of Year 1 of earnings 2. Year 2: $15,000 x (1/1.062) = Prevent value of Year 2 of earnings vi) Losses beyond Value (1) Consequential damages (a) Rule: allows recovery for not just the thing you would have had had injury not occurred but also the way you would have used it to create value (b) Lost profits (i) Measured by the amount of profit that a plaintiff could prove would have been generated had the plaintiff not been deprived of use of the property, less the amount of profit actually generated during deprivation (United Truck v. Kleenco) pg 476 (ii) Requirements 1. Seller had reason to know at time of contracting that if K was breached, buyer would be deprived of profits foreseeability 2. Lost profits are reasonably ascertainable 3. Lost profits could not have been reasonably prevented (c) Loss of Use (tort terminology) (i) Fukida v. Hawaii Service pg 482 1. Loss of use damages are available for damaged property and is NOT limited to the amount of the property value, even where plaintiff did not actually rent a replacement vehicle a. Plaintiff still lost convenience and time for not having his car, even if he didnt rent replacement - 23 -

Remedies Outline Fall 2009 - Kelly b. According to United Truck v. Kleenco, these are available for destroyed property also. 2. Limited to period of time reasonably necessary to obtain replacement, to effect repairs or to recover possession of the property replacement must be reasonable (ii) Three measurements 1. Rental value or the amount that could have been realized by renting out the property- must be gross profits so saved overheard must be deducted (storage, insurance) 2. Reasonable cost of renting a substitute (normally should only be used where a substitute is actually rented) 3. Ordinary profits that could have been made from use of the property normally only used when rental substitute unavailable or type of property damaged not the type normally rented (d) Incidental losses (i) Cost of making substitute arrangements 1. Where fertilizer maker was forced to dip into his ammonia stockpile to make up for reduced ammonia output as a result of a malfunctioning machine, plaintiff could recover for amount in diminished stockpile which is measured either by cost to replenish stockpile or if not replenished, market price (Mississippi Chemical v. Dresser-Rand) pg 491 (ii) UCC 2-710. Incidental damages to an aggrieved seller include any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the buyer's breach, in connection with return or resale of the goods or otherwise resulting from the breach. (iii) UCC 2-715. Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach. (2) Prejudgment Interest (a) This constitutes damages for loss of use of money plaintiffs deprived of money they should have received needed to borrow some aond interest is the rental fee on money (b) Available even if the plaintiff did not borrow money similar to loss of use for deprived property (c) Semenza v. Brown (i) Montana interest statute (discretionary award) states that interest accrues 30 days from demand letter 1. Penalty for failure to settle or litigation delay 2. Penalty for misconduct lets jury augment damage with interest, at their discretion 3. Consequential damages for nonpayment a. Direct loss: pay the money of money owed b. Ensuing loss: plaintiff could have used the money but this creates a proof problem i. Hindsight permits selection of great investment ii. Credibility issue - 24 -

Remedies Outline Fall 2009 - Kelly iii. Certainty issue of whether plaintiff would really have invested in a certain way (d) Limitations of prejudgment interest (i) Applies only to liquidated amounts- an ascertainable amount of money (ii) Simple interest rather than compound interest (iii) Some courts treat as general damages rather than consequential damages and court performs calculation rather than jury C) LIMITS OF MARKET MEASURES i) Market measures are less valuable in some settings: (1) Subjective value for personal items (2) Fantastic claims (3) Pain, Suffering and Indignity which are non-market items ii) Subjective Value (1) Strict Hierarchy of different measurements- WA law (Mieske v. Bartell Drug Co.) 499 subjective views of worth. (a) Market value if available; (b) If destroyed property has no market value, then replacement value (c) If destroyed property has no market value and cannot be replaced or reproduced, then value to the owner (i) Note: Damages are not recoverable for sentimental value placed on property by owner 1. But realize that there is a strong argument that value to owner is all sentimental value (ii) Subjective value may overlap distress because price must overcome the loss of property but no recovery for emotional distress unless it was intentional infliction (2) In some cases, may want to start further down the list even if there is a market value or replacement value (a) Certain personal items have more intrinsic value to owner than market value or replacement cost may be able to compensate for (3) FMV of personal items such as home movies impossible to determine because no overlap between what a buyer would pay and what a seller would sell at = no market transaction from which to determine FMV (a) Buyers willing to buy tapes at very low price (b) Sellers only willing to sell at high price (4) Value to Owner? (a) Utility value (b) Cost of replacement, original cost, cost to reproduce (Comment e to Rest 2d Tort 911 value of item to owner) but not including sentimental or fanciful value (c) Owners reserve price = lowest amount owner would accept for goods (d) Hypothetical transaction: Market price IF someone valued goods more than Plaintiff (e) Note: The only real evidence comes from plaintiffs testimony (i) Credibility issues (ii) Potential exaggeration worth since no market limit (5) State of Ohio v. United States DOI pg 507 (a) A regulation limiting damages recoverable to the lesser of either the cost of restoring or replacing the equivalent of an injured resource OR the lost use value was directly against Congress intent - 25 -

Remedies Outline Fall 2009 - Kelly (i) Loss of use value does not give injured party value of lost things (ii) A rule such as the one above would give no preference for restoration since it could cost more than loss of use (6) Non-existent goods (a) Chatlos v. National Cash Register pg 516 (i) For a non-existent good, plaintiffs were entitled to the value warranted minus the value delivered because the machine was kept (ii) Case stands for potentially high damage award if only plaintiffs put in expert on damage calculation and defendants dont put in any evidence of potential damages (7) Benefit of the bargain (a) Similar to expectation interest in that it seeks to put person in position they would be in if wrong had not been committed (b) Used commonly in situations of fraud and misrepresentations (Liberty National v. Sanders) pg 520 (i) Measure of damages is the benefit of the bargain which is what the K promises if warranties or representations had been true (c) This rule treats torts and contracts the same fraud and innocent breach of K are treated equally (d) Makes it irrelevant whether words spoke were a promise or misrepresentation iii) Pain, Suffering, Distress (1) Pain Damages Essential: (a) Tort damages act as incentive to take precautions against commission (b) Forces harms to be internalized by defendant (c) Omit pain damages and too little incentive to prevent injuries (i) But exaggerating pain is too much incentive to prevent injuries 1. Leads to higher transaction costs and higher costs to consumers in potential increased harm (d) Allowed where distress accompanies a physical injury or an insult to individual dignity but not recoverable when distress accompanies lost property (i) Note: Some courts may make an exception for willful or intentional torts (2) Limitations (a) Cannot be so high that it shocks the conscience or monstrously excessive that it necessarily implies that the verdict must have been result of passion and prejudice (i) Appellate review is limited and deferential to trial judge or jury (ii) Trial judge has more latitude to overturn verdict if it is against the great weight of the evidence (b) Must be some rational connection between evidence on damages and verdict (c) Defendant not required to pay for ideal requirements but rather reasonable requirements of care (Sharman v. Evans) pg 528 (d) Generally courts do not grant loss of joy as a separate award but include it into the pain & suffering calculus no double counting (e) Some cognitive awareness is necessary for loss of enjoyment of life (McDougald v. Garber) pg 540 (3) Contract setting (a) Generally not allowed unless there is some kind of physical injury or serious distress particularly like to result from this kind of breach of K (i) Coffins falling apart (ii) Vacations ruined by agents breach - 26 -

Remedies Outline Fall 2009 - Kelly (iii) When breach of K is willful and wanton provided distress was reasonably foreseeable at time (b) Existence of a contract claim does not affect available of distress for tort arising from transaction (c) Minority view (i) Allows emotional distress in K cases involving transaction between vendees and builder-vendors but only in the sale of a completed house (Kishmarton v. William Bailey) iv) Indignity and Intangible Losses (1) Golden Rule argument generally not allowed argument to jury to imagine itself in plaintiffs position impermissible because it encourages jury to depart from its neutral role (2) Joan W. v. City of Chicago (a) Court awarded compensatory damages where plaintiff was strip searched for a traffic violation (b) Court uses other verdicts in similar actions to determine whether this plaintiffs award was monstrously excessive and finds it was significantly higher than other cases (3) Memphis Community v. Stachura (a) A deprivation of a right may cause distress but generally speaking, that deprivation has no separate and independent value = plaintiff cannot receive additional compensatory damages for constitutional violation (b) No independent recovery for the loss of a right aside from the right to vote (c) Implication: may be okay to value rights as long as it is not abstractly; must be a particular injury to the particular plaintiff v) Wrongful Death (1) Plaintiff shift: Plaintiff is the family members = claim by heirs (2) Rule: Put plaintiff in position she would be in if wrong not committed compensate for familys losses caused by death (3) Includes: (a) Burial expenses (b) Loss of financial support (generous computation) (i) Income Purely personal savings 1. Federal courts use net pay after taxes 2. State courts tend to vary between net and gross pay 3. Jury Miscalculation Issue a. Juries may adjust damages upwards to adjust for taxes but awards are not taxable so risk of overcompensation b. Federal courts instruct juries while state courts vary (ii) Maybe subtract savings as well since family still inherits those (iii) Not pro rata: entire rent, all utilities, all food (c) Loss of services (i) Deceased helped with family duties which now family must go out into market and replace those services (ii) Provides compensation for death of person without wages (d) Loss of companionship (Minority view) (i) Most states dont include this (ii) Applies only to children and elderly rationale is to recognize that there is value to family contribution vi) Survival Action - 27 -

Remedies Outline Fall 2009 - Kelly (1) Rule: Allows tort actions to continue despite death of the plaintiff (a) Estate continues to prosecute claims (b) Proceeds paid to estate which is different from wrongful death actions where the proceeds are paid to the family (2) Useful for torts unrelated to death (a) Defamation: losses are real despite death of plaintiff (b) Incapacitating injury: loss of support caused by tortfeasor and not by subsequent death (3) Increase recovery (a) Grants property damage: i.e. person killed in car crash and car is also damaged (b) Interim losses income (c) Pain & suffering if plaintiff survived long enough to experience this, then increases recovery vii)Loss of Consortium (1) Rule: Put plaintiff in position she would have occupied absent wrong; spouses losses caused by injury (2) Claim by a spouse for 3 Ss: services, support (emotional), sexual relations (a) Does not include financial support because victim can receive damages by lost earnings suit or increased medical costs income still available to support spouse (3) Only applies to married couples although domestic partner statutes may change this (4) Childs claim for loss of parents consortium quite rare (5) Parents claim for loss of childs consortium nearly nonexistent (6) Usually limited to most severe injuries because of incentives to exaggerate

D) LIMITATIONS ON RECOVERY
i) Causation (1) Rule: Any loss that would have resulted had defendant not committed the wrong cannot be recovered (2) McKennon v. Nashville Banner (a) Where an employee is discharged in violation of the ADEA and the employer later discovers some wrongful conduct that would have led to discharge if it had been discovered earlier, some recovery is appropriate starting from a calculation of backpay from the date of the unlawful discharge to the date the new information was discovered (b) Key question is not what caused discharge but what caused the harm harm was caused by violation of ADEA ii) Certainty (1) Rule: Damages are not recoverable for loss beyond an amount that evidence permits to be established with reasonable certainty (Schonfeld v. Hillard) (a) Maximum cap on damages but not rejection of damages (b) Even if damages not reasonably certain, can still make an argument for reliance interest where the person would be if the promise had not been made (c) Applies to each element of damages calculation: i.e.) lost profits and lost assets separately (d) Where a business is a new business, lost profits must be established with reasonable certainty for recovery - 28 -

Remedies Outline Fall 2009 - Kelly (i) But note that lost assets of the business may be able to be established with reasonable certainty how much someone would have paid for the right to purchase this asset from you (2) Wrongdoer Exception (a) When the existence of damage is certain, and the only uncertainty is as to the amount which was caused by the defendants breach, the burden of uncertainty as to amount of damage is shifted to the defendant (3) Two ways to state doctrine (a) Requires both existence and amount of damages (i) If wrongdoers breach causes amount to be uncertain, then wrongdoer exception allows jury room to estimate amount (b) Requires existence of loss to be reasonably certain (i) If existence reasonably certain, jury can estimate amount of loss iii) Foreseeability (1) Rule: Losses as a result of the breach are only recoverable for those that the defendant had reason to foresee at the time of formation (a) Arise in the natural course of events (b) Party gave notice of their likelihood before K was formed (c) Involves the magnitude of the loss and not just the type of loss (2) The more uncertain something is (i.e. lost profits), the harder it is to foresee (3) Some courts couch foreseeability in terms of what must be foreseeable is the actual lost profit damages from liability although the general rule is that only some type of loss must be foreseeable iv) Economic Loss Doctrine (1) Rule: Damages for purely economic losses are not recoverable in tort actions in the absence of physical injury (personal injury or property damage) (2) Courts apply a foreseeability test in limiting consequential damages (a) Louisiana ex rel Guste- this case actually allows for fishermen to recover from a chemical spill to a river even though they suffered no physical injury and other cases make similar exceptions to the rule (b) Common Exceptions: (more of recharacterization of duty owed rather than actual exceptions to rule) (i) Consortium and wrongful death (ii) Fraud (iii) Libel (iv) Attorney Malpractice (v) Intentional Infliction of Emotional Distress (vi) Interference with contract (vii) Bad faith breach of insurance contract (3) Rationale: (a) Limit on effectiveness of deterrence of damages because defendants cant be expected to take precautions against every injury (i) Also, if cost of taking precautions > benefit, defendant may stop engaging in the business (public policy argument) (b) First party insurance is cheaper liability insurance available. (4) Functions of Rule: (a) Limits recovery by remote victims (b) Differentiates contract from tort claims (i) Contract terms govern when the only damage is to the property itself - 29 -

Remedies Outline Fall 2009 - Kelly (ii) Tort rules govern for other claims when there is more injury other than the property itself and this rule limits the amount of damages recoverable on tort claim (5) Rule is almost redundant because you can reach the same results applying foreseeability and certainty (6) Used to limit damages recovery so that not every person injured by some action can recover (a) Reduces the amount of loss the defendant must internalize even though defendant caused loss and the loss was certain and foreseeable v) Benefits Rule (1) Rule (Rest Torts): Where defendants tortious conduct has caused harm to plaintiff or his property and in doing so has conferred upon the plaintiff a special benefit to the interest which was harmed, the value of the benefit mitigates amount of damages, where equitable (a) Only the net harm will be awarded as damages limit is to prevent plaintiff from being in a better position than would have occupied but for the wrong (b) This is a tort rule although the same rule applies in contracts but it is built into the damage calculation for contracts (i) You only recover anything in excess of the contract price - resale price. 1. Ex.) If buyer of car breaches before performance commences, seller could recover K price of car minus the value of the car a. Keeping or reselling car is a benefit of breach and you dont get to recover damages for that benefit amount (2) Requirements (a) Special benefit= must be identifiable (b) Must be caused by the defendant (c) Must be to the interest injured (d) If equitable (3) Troppi v. Scarf (a) Benefits of unplanned child may be weighed against all elements of damage claimed by plaintiffs who had unwanted child as result of pharmacist's negligently supplying tranquilizer rather than birth control pill called for by prescription, but application of benefit rule did not prevent recovery for expenses of rearing unwanted child. (i) Case by case analysis for amount of benefits conferred depending on unique factual circumstances of couples 1. Family size 2. Family income 3. Age of parents 4. Marital status (b) Majority of jurisdictions deny recovery for the cost of raising a healthy child although that does not prevent recovery of other costs of pregnancy such as medical costs and pain during pregnancy vi) Collateral Source Rule (1) Rule: Benefits received from third parties other than the defendant cannot be used to offset the damages the defendant owes (a) Somewhat of a limitation on the benefits rule (b) Defendants not entitled to mitigation of damages for those benefits that plaintiffs would have received even without defendants wrong (2) Rationale - 30 -

Remedies Outline Fall 2009 - Kelly (a) Encourage parties to buy insurance (b) Wrongdoer should be made to pay to deter wrongful conduct, regardless of whether plaintiff has other source of compensation (3) No offset of damages where plaintiff receives benefits from insurance, pension, continued wages, or disability payments, which are all benefits for which the plaintiff has actually or constructively paid for benefits (4) Issue of double recovery? (a) No double recovery because insurance policies generally provide for subrogation or refund of benefits on a tort recovery vii)Avoidable Consequences Doctrine (1) Rule: When a plaintiff, by reasonable conduct, could have reduced the size of the loss, court refuses to compel defendants to pay for those additional losses. (a) Example: When a company kept building a bridge even after the county repudiated the contract, the additional expenses incurredthose that could have been avoided by halting construction)were subtracted from the contract price in calculating damages (b) Similar to incidental damages rule where plaintiff can only recover for reasonable costs incurred to minimize the loss (c) Rest 2d Torts 918 - limits avoidable consequences to reasonable effort or expenditure after the commission of the tort (i) Courts are reluctant to apply this doctrine to situations where failure to wear a seat belt increases amount of damages (2) S.J. Groves v. Warner (a) No duty to mitigate damages by contracting for supplemental supply of concrete when it was clear that concrete supplier would not perform satisfactorily where both plaintiff and defendant have had an equal opportunity to reduce breach of contract damages by the same act (b) Equally reasonable to expect defendant to minimize damages and so defendant cannot assert duty to mitigate damages as a way to reduce damages (i) In a way, applicable in every situation so the better rule is that because the plaintiff acted reasonably in its choice to continue with existing arrangements, court prevented defendant from asserting plaintiffs duty to mitigate by same actions available to defendant (3) Parker v. Twentieth Century Fox (a) Substitute employment must be comparable, or substantially similar to that which the employee has been deprived. Employees rejection or failure to seek other available employment of a different or inferior kind cannot be used to mitigate damages (i) No need to look for job in neighboring town can stick to current location and reasonable commuting distance (ii) No need to look for a job in a different field (iii) No need to take an offer from same breaching employer viii) Public Policy (1) Method of Analysis (a) Identify the public policy (b) Establish policy as that of the state (i) Recognizable authority: 1) statutory; 2) judicial precedent (note that newly established policies tend to be weaker) (c) Establish policys implication - 31 -

Remedies Outline Fall 2009 - Kelly (2) Method of use (a) Policy arguments help interpret and apply doctrines (b) Policy arguments pose objections to doctrines and favor limitations on doctrinal result (3) Troppi v. Scarf (a) Public policy of state supporting contraception favors a tort scheme which encourages pharmacists to exercise great care in filling prescriptions (b) Implication of not allow negligence claim for wrongful birth would mean that damages for negligent contraception would equal $0- seems like an undesirable result (c) Note: Other courts may reject claims because public policy may not favor treating a healthy child as a loss. (i) Taylor v. Kurapati- difficult to say what the public policy here was except that maybe it was against public policy to award damages for birth of child (4) Brunswick v. Pueblo-Bowl (a) Court refused to allow plaintiff to recover damages where plaintiffs damages stemmed from too much competition and anti-trust statute was designed foster competition E) AGREED REMEDIES i) Liquidated Damages (1) Permits parties to agree on the amount of damages or the method of computing damages (2) UCC 2-718. Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty. (a) No need to prove actual damages are greater than liquidated amount (i) Red Sage v. Despa 1. A lease provision providing for a 50% abatement of rent for breach of an exclusive use covenant, negotiated by sophisticated parties, was not an unreasonable estimate of the damages likely to result from breach of the covenant. Damages could have been much larger or smaller so amount abatement was reasonable. (b) The requirement of adequate remedy is not mentioned in the Rest. Contracts and only in the UCC (3) Rationale: (a) May increase recovery (i) Overcomes difficulties with certainty and foreseeability (ii) May add certain damages: attorney fees, emotional loss, subjective value, maybe even avoidable loss (b) Simplifies litigation (i) Reduce cost of proving loss (ii) Increase likelihood of settlement since only issue may be liability and not amount of damages (iii) Improve decisions about breach since cost of breach known beforehand (4) Reasonableness of provision (a) Unreasonbly large amount = penalty = unenforceable (b) Role of parties intent - 32 -

Remedies Outline Fall 2009 - Kelly (i) If unreasonable in light of anticipated damages, then court presumes parties intended provision to be penalty but if reasonable, court presumes parties intended liquidated damages (ii) But note that even if the anticipated losses were small and liquidated damages provision provided for a large amount, and damage actually is large, still enforceable despite the fact that parties may have intended penalty (c) Ease of damages calculation (i) If loss is easy to calculate, court expects liquidated damages to be pretty close to actual damages (ii) If loss difficult to calculate, get more leeway in liquidated damages provision amount (d) Characterization of provision (i) Rule of reasonableness only applies to liquidated damages clauses so if you can characterize it as something else, rule not applicable (ii) Examples: 1. Provision for alternative performance a. Early performance b. Bonus for early performance 2. Rent adjustment provision (iii) Ridgley v. Topa Thrift 1. Where K had a provision that charged 6 months interest for prepayment of loan only if the person was late in making loan payments turned clause into penalty provision ii) Substitute Remedies (1) UCC 2-719(1). Agreement may provide for remedies in addition to or in substitute for those provided for and may limit or alter the measure of damages recoverable under this article, as by limiting the buyers remedies to return of goods and repayment of the price or to the price to repair and replacement of nonconforming goods or parts; and resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy. (2) May be used unless it fails of its essential purpose (a) If substitute remedy provisions fails, you have any other remedy you would normally have from breach (b) Unless the substitute remedy provides plaintiff with minimally adequate recovery, the court treats it as failing of its essential purpose (i) Where seller is unsuccessful in repairing or replacing the defective part regardless of good or bad faith (ii) There is unreasonable delay in repairing or replacing defective components (c) Pierce v. Catalina Yachts (i) Jury found Catalina acted in bad faith in its breach of the warranty although this case is a little odd because its not that defendant refused repairs disagreed about extent of repairs needed; court struck clause limiting recovery of any consequential damages iii) Exclusion of Certain Remedies (1) UCC 2-719(3). Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not. - 33 -

Remedies Outline Fall 2009 - Kelly (2) UCC 2-302: If court finds contract or a provision to be unconscionable, court may refuse to enforce the contract, limit application of unconscionable clause, enforce remainder of contract without unconscionable term iv) Unconscionability (1) Unfair surprise (procedural unconscionability); and (a) Some sort of concealment of terms (b) Court unlikely to find this where contract is a commercial contract between sophisticated commercial entities (Childrens Surgical v. National Data) (2) Unreasonably favorable terms (substantive unconscionability) (a) Unreasonable if no commercial justification and just for pure advantage (3) Some variations unconscionability (a) Unfair surprise OR unreasonably favorable terms (b) Harsh terms (c) Lack of meaningful choice (i) Sometimes includes imbalance in bargaining power F) PUNITIVE DAMAGES i) Available when: (1) Actual malice: purpose to harm (2) Implied malice: inference of a purpose to do harm (3) Reckless indifference (4) Cal Civ Code 3294: when you show by clear and convincing evidence that the person is guilty of oppression, fraud, or malice, allows recovery for exemplary damages only in tort situations specifically exempts out punitive damages for K breaches (5) Employer liability (a) Principal authorized or ratified the conduct (b) Principal was reckless in employing the employee (c) Personally guilty of oppression, fraud or malice (d) Court should review type of authority employer has given to employee, amount of discretion employee has in what is done and how it is accomplished ii) Method of Measurement: (1) Relevant factors (a) Motives of wrongdoer (b) Degree of calculation involved in defendants conduct (c) Extent of disregard of others rights (d) Deterrent effect may need to consider the wealth of defendant to determine amount necessary to deter (e) Wealth (2) One measure is the total potential savings as a result of the wrong iii) Limitations (1) No punitive damages for innocence and mere negligence or gross negligence (2) Cannot be so excessive that it appears to have been given under the influence of passion or prejudice proportionality relevant to inquiry iv) Constitutional Limit (State Farm v. Campbell) (1) Due Process clause under 14th Amendment requires that a person receive fair notice of the conduct that will subject him to punishment and the severity of the penalty that a State may impose. (a) Defendants wealth cannot itself be sufficient to justify a large punitive damages award where the other 3 factors below are not met (2) Factors: - 34 -

Remedies Outline Fall 2009 - Kelly (a) Reprehensibility of defendants conduct (i) Whether harm was physical or economic (ii) Reckless disregard (iii) Financial vulnerability of victim (iv) Repeated conduct or isolated incident (v) Malicious conduct or mere accident (vi)Rule: Compensatory damages presumed sufficient unless defendants conduct so reprehensible to justify punitives to achieve punishment or deterrence (b) Proportionality (i) No bright-line ratio between punitive and compensatory damages (ii) Few awards exceeding single digit ratio will satisfy due process 1. If compensatory damages are small, larger ratios may satisfy DP 2. If compensatory damages are large, smaller ratios only may satisfy DP (iii) Rule: Punitives must be both reasonable and proportionate to the amount of harm to the plaintiff and to the general damages recovered (c) Civil Penalties (i) Lower sanctions on the books = less likely D has notice that State might impose large punitives (ii) Punitives not a substitute for inadequate fines G) ATTORNEYS FEES i) Rule: Parties pay their own attorneys fees under the American rule with exceptions ii) Exceptions: (1) Agreement by contract fee shifting arrangements (2) Family law (3) Collateral litigation (a) Consequential damages as a result of other litigation with third parties as a result of breach (4) Litigation misconduct (a) Fees resulting from contempt of court (b) Frivolous litigation (5) Statutory exceptions iii) General Guidelines (1) All these exceptions only apply if there is a prevailing party which means a court entered judgment and not merely a change in defendants behavior (2) Must be reasonable does not mean it is equal to actual cost of attorneys to plaintiff (3) Lodestar Calculation (a) Number of hours x Reasonable Hourly Rate (b) Adjustments (i) Time and labor required for the case (ii) Novelty and difficulty of issues involved (iii) Skill required to litigate case (iv) Ability of attorney to accept other work (v) Customary fee for similar work in the community (vi) Whether fee is fixed or contingent (vii) Time limitations imposed by client or circumstances (viii) Amount involved and results obtained (ix) Attorneys experience, reputation, and ability - 35 -

Remedies Outline Fall 2009 - Kelly (x) Undesirability of the case (xi) Awards in similar cases iv) Common Fund Rule (1) Defendant pays damages into a common fund and attorney fees come from the plaintiffs total recovery in the fund (2) Fees here are not usually calculated Lodestar but rather through a percentage recovery
VII) REMEDIES SCENARIOS

A) Misdiagnosis i) Causation is the main issue tough to show that failure to diagnose actually caused the medical harm ii) Use lost chance of recovery in these cases to show that failure to diagnosis actually caused the harm of the lost chance of recovery (even if only small chance) iii) Must apportion remedy (1) If the injury produced losses of say $1MM and the defendants negligence reduced the chance of recovery by 30%, then P would recover $300K iv) Would require jury to compute chances of recovery before and after negligence in all cases B) Chemical Exposure i) For damages for bodily injury resulting from chemical exposure, Ps must prove to a reasonable medical certainty that exposure to chemical caused each of their particular injuries (1) This is for presently ascertainable injuries ii) To establish damages for increased risk of susceptibility to future disease, the predicted future disease must be medically reasonably certain to follow from existing present injury (1) Mere conjecture or even possibility does not justify the court awarding damages for a future disability which may never materialize (2) Mere increased risk of a future disease or condition resulting from an initial injury not compensable (3) Probably need to show a very high percent chance of future disease materializing, at the minimum over 50% which is a mere probability iii) Mental distress from fear of an increased risk of disease from an already existent injury (1) Only recoverable where such distress is either foreseeable or a natural consequence of, or reasonable expected to flow from, the present injury (2) In context of certain types of injuries and exposures to certain chemicals, cancerphobia has been one basis of claims for mental anguish damages iv) Where a single wrongful or negligent act produces both personal injury and property damage, a single cause of action arises which must be claimed or recovered in a single lawsuit or not at all C) Discharged Employee i) Goal of Title VII is to compensate victims for their injuries by restoring them so far as possible to a position where they would have been had it not been for the unlawful discrimination. ii) Avoidable consequences: claimant must use reasonable diligence in finding other suitable employment cannot refuse a job substantially equivalent to the one he was denied (1) Need not: - 36 -

Remedies Outline Fall 2009 - Kelly (a) Go into another line of work (b) Accept demotion (c) Take a demeaning position D) Injured Employee i) For calculating damages, it is assumed that if the injured party had not been disabled, he would have continued to work, and to receive wages at periodic intervals, until retired, disability or death ii) Award for impaired earning capacity is intended to compensate for diminution in income stream (lump sum at end of litigation) (1) Assume that the worker could have continued to work up until a specific date certain (2) Income stream = after tax wages + benefits unincurred costs related to work (3) Must apply a discount rate based on the rate of interest that would be earned on the best and safest investments E) Noise Nuisance i) Seek injunction preventing defendants from holding concerts with loud music (plaintiffs were residents in adjoining apartment building) (1) Fact that injury may be only occasional does not prevent injunction still a continued nuisance ii) Noise, to be enjoined, must produce a substantial injury and annoy the normal person (1) Must consider balance of hardships: extent to which D would be damaged by a hardship versus how plaintiff would be damaged by failure to enjoin iii) Look to reasonableness of defendants activities in the locality (1) Whether area is residential or industrial (2) Utility of defendants activities (3) D can try and argue plaintiffs came to the nuisance merely one factor F) The Terminated Distributor i) Where repudiation of a promise to continue to be a supplier turned the plaintiff corporation from being a going concern into a liquidation sale, plaintiff had reliance interest in suppliers promise ii) Devaluation of a company due to the suppliers breach is a reliance injury similar to cost of moving expenses as a result of promised employment iii) This is an action in promissory estoppel seeking reliance interest

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