Legal Torts K UE Compensatory damages, punitives Compensatory damages  Reliance, expectancy P holds title Replevin Ejectment D holds Title


Equitable injunctions Injunction, aka specific performance Constructive Trust (D title + other situations where breach of fiduciary duty) Equitable lien Subrogation

THE RIGHTFUL POSITION PRINCIPLE P’s rightful position = the position the P rightfully would have been in but for the D’s wrong.  Compensatory damages are meant to place the P in his or her ―rightful position‖ by converting the harm by D into a monetary damage award. There are multiple theories re: how to calculate the proper measure of damages (e.g. value, reliance, expectancy, etc).

US v. Hatahley (10th Cir. 1958): Indians used open range land owned by US for their livestock, then US rounded up animals and sold them to glue factory. The district court determined a set amount of damages for each animal and multiplied that amount by the number of animals lost by each P & it also arrived at a sum for mental distress and awarded each P an equal amount  Court got it very wrong Held: Reversed the damage award, b/c the calculation methodology isn’t ―reasonably certain.‖ Need individualized accounting re: value of each lost animal (as breed, age, training, etc affects an animal’s value), pain and suffering of each individual (as one person might be affected more than another), etc.  By making a blanket damage determination, the court failed to consider the damages actually incurred by each P  different levels of economic harm and emotional distress incurred

Rule: ―The fundamental principle of damages is to restore the injured party, as nearly as possible, to the position he would have been in had it not been for the wrong of the other party.‖ Policy: Don’t want to give out arbitrary damage awards that bear little relation to actual losses. Awards that are tied to actual losses leads to consistency and precision, since you know what an animal is worth on the open market at any time. Law and economics approach:   If the damage award will be less than the profits that will be made from the breach, then the breach should occur. Law and economics approach to Hatahley would say that rounding up the animals to provide notice is inefficient, burdensome, and costly… it would be cheaper to round the animals up, send them to the glue factory, then pay damages for the actual value of the animals. *****


VALUE AS THE MEASURE OF THE RIGHTFUL POSITION Value of Property as a Measure:   In the case of destroyed property, replacement value will only sometimes restore P to the RP Lesser of Two Rule: a P whose property has been injured may recover the lesser of the diminution of the property's market value (MV) or replacement cost (money you would need to get back as close as possible to the thing lost) o P is entitled to be made whole but the D is generally entitled to make the P whole in the least expensive way. Court will pick the cheapest way to the D every time o In the case of total destruction, the diminution of property's value and replacement cost are not always the same  The diminution in MV in the case of replacement is the MV because the thing got completely destroyed (diminution is total) Rightful Position looked at from a societal perspective (won’t take into account sentimental value)

In Re September 11th Litigation a. Property = leases  P bought the right to 99 years of leases to the WTC (he didn’t purchase the building, he purchased the right to lease the buildings) i. Present value of leases $2.5 mil (how much money he was buying the leases for) ii. Buildings were destroyed. How do you compensate? Court articulates the lesser of two rule iii. P says he should get the replacement value = $16.2 billion. Argues that the lesser of 2 rules doesn’t apply because due to his K, he's on the hook for damages to the property. Basis of argument is specialty property exception: property was unique and thus doesn’t have a FMV (can’t apply the lesser of 2 Rule because you can’t determine the FMV) No robust market place that would allow us to set a MV (church, school, etc). 1. Court says there's a market  he was a participant in the very market that was created for the WTC after privatization 2. Illustrates that there can be something with special characteristics, but doesn’t meet exception. Key is whether there's a market for it. If it has a value in the business context, we stop. b. Diminution of MV is 2.5mil (total diminution = value reduced to 0 because of destruction) c. Loss of Use: Court doesn’t look at loss of use to compensate (like Hatahley case) i. Many courts find that if property is completely destroyed, the cost of use is included in the FMV (Goodman says this doesn’t make sense & they are not reconcilable). What judges now do to compensate for loss of use for items that have been destroyed is prejudgment interest on the compensatory amount. ii. Majority rule: If damaged, you compensate for loss of use. If its destroyed, you don’t (controversial) Consumer Items (that are functional and replaceable): Measure value by awarding [replacement – depreciation (at instant before destruction)] This is a way of combating the lemon effect problem (prices driven down because buyer wonders what’s wrong with the good, since person is selling  consumers generally value their goods more than the market) Item that doesn’t have a FMV Trinity Church v. John Hancock Mutual Life Insurance Co. (VERY IMPORTANT, FOUNDATIONAL CASE) i. Trinity Church's building was damaged during the construction of the nearby John Hancock building, and it sought damages for the structural harm to the church. Held: Since FMV cannot be ascertained (as the church is landmarked and can’t be torn down, not going to be sold), the Court examined the condition of the church before and after the damage, then apportioned compensatory relief proportional to the amount of damage actually caused by D. 1. Thing hasn’t been destroyed ii. Property was damaged (cost of repair v. cost of replacement). Trinity church doesn’t fit into the lesser of 2 rules


1. No market for churches 2. Cost of repair in this case was uneconomical (only done if considered reasonable or economical to do so) ii. Cracks can’t be repaired, must be replaced  would have to rebuild the whole structure. Cost or repair/replacement is prohibitive b/c of the kind of masonry involved iii. P sues for structural damage. How do you reimburse the P? 1. Abandon the lesser of 2 rule 2. The "takedown" theory of damage assessment: Damages measured as how far from replacement (1968-1972) i. In 68 = 26%; in 72 = 65% ii. Take cost of reconstruction and attribute to the D the difference between 68 and 72 (65-29 =39% of total value) 3. Here, measure (unlike WTC) was a reasonable position that still favored the client & they won iv. Take away from trinity 1. In remedies, we don’t stick to the rules all the time i. Policy underlying lesser of two = try to reimburse the D in the most efficient manner ii. This policy was embodied in Trinity measure of damages 2. As long as you reach a conclusion that is justifiable, even if you can’t tie it to a rule, ok if tethered to existing principles v. Dissent: damages are only appropriate for actual loss and the church is still going. Argument = that there's no damage—no depreciation (the building is just as useable and just as much of a historical landmark than before) 1. No depreciation = no measurable loss = no damages 2. Majority's response = shouldn’t turn a blind eye to the damage d. Landmark is a per se fact to show social utility  uniqueness & benefit that goes beyond that to the owner i. No FMV if landmark b/c no robust market  cost of replacement. If too expense, we stray from the rule ii. Wouldn’t want to force the idiosyncratic expenses an owner puts into a house on the D e. The rule we extract from Trinity won’t always work in other situations Automobiles: many courts order the cost of repair when it's the appropriate measure + residual change in value (difference between the value before the accident and the value after repair) to subsidize for the decrease in value ***** RELIANCE AND EXPECTANCY AS MEASURES OF THE RIGHTFUL POSITION A. Buyer’s Breach: Neri v. Retail Marine Corp: Ps buy a new boat for $12k & makes a deposit of $40. Seller agrees to immediate delivery in exchange for increased deposit of $4250. P is hospitalized and rescinds & D refuses to refund the deposit (goods rejected by P). P sues to recover the deposit & D counterclaims for breach of K. D wins. ii. Damages: 1. 4250 Deposit (P) 2. 2579 profit;674 incidental expenses (D) 3. K for sale of boat a. Boat was sold 4 months later to another buyer for the same price – where's the harm? i. D argues that he could have sold 2 boats but for the breach  lost sale so D argues he should get profit from lost sale to P 4. Everyone wins: a. Profit: rule is that normally you don’t get lost profits on a breach of K if the same price (b/c sold to someone else). But here a lost volume


seller (business to sell a particular item over & over again). In this case, a lost sale is considered damage if it’s because of a breach. How much damage? Lost profit: The profit that would have been made on that sale (he doesn’t get the cost of the boat because he keeps the boat) i. Expectancy costs: Lost volume sellers get the benefit of the sale (expectancy damage = measure of the RPP needs to get what he expected to get from the bargain) 1. $ 12k sale price 2. $ 2579 profit on sale= expectancy damages 3. Very controversial 1. Argument against: Markets would come to a halt if courts penalized people for cancellations, etc 4. Rule: if you're a lost volume seller, you're permitted to get the expectancy (entitled to the benefit of the bargain) 1. Positive costs  $ that would have come in 5. Test for lost volume seller (factors): 1. Item which is easily obtained in a repetitious manner 2. Buyer who will in a reasonable amount of time purchase the item subsequent to the breach 3. Person who is the seller depends not upon use or traffic of the item, but on profits made off of the sale of the item 6. Arguments against Neri being LVS: 1. Not a reasonable amount of time between sales b/c he had to order every boat individually  he wasn’t displaced by the breach 7. What if you're the buyer and there's a breach? See Chatlos ii. Reliance costs: here, incidental damages (aka out of pocket. Expenses that are incidental to the deal. How collateral do we get? Proximate cause). As a result of the breach, he had to expend some money (storage of boat) 1. $ 674 storage/maintenance costs = reliance damages (reliance is an imperfect label b/c he's not relying on anyone. This is more a consequence of the breach -- can call them consequential damages) 1. Plainly a direct consequence of breach 2. How wide of a scope should the reliance be? (scope of reliance can be controversial) Majority view = out of pocket, direct reliance on the act 3. Reliance = negative costs b. Restitution (to the P) Refund of the deposit: would be unjust enrichment to D if he were permitted to keep the total deposit . $ 4250 deposit . Goes back to the buyer. Not part of a compensatory scheme (returning the money for a sale that didn’t happen) iii. Notes: 1. Retail's $650 in expenses is its reliance loss; $2579 in lost profits is its expectancy loss. RM has no restitution interest at issue because it didn’t pay or deliver anything to the Neris 2. Even if the Neris breached, retail would be unjustly enriched if it kept the whole deposit a. Court says they are entitled to the restitution of the difference between the damage they caused and the total deposit ($997)


B. Seller's breach: i. Chatlos Systems, Inc.v. National Cash Register Corp.: 1. P is the buyer & there's a breach a. P sues for breach of warranty b. Appeals court says to do the benefit of the bargain and it ends up being almost double i. Here it's what the buyer thought they were getting, converted to money ii. Sale price=$46k, value of actual item = $6k i. Warranted value = $207k 2. The correct measure of damages for contract breach is the difference between the fair market value of the goods accepted and the value they would have had if they had been as warranted a. Benefit of the K price as warranted = 207 - 6k =201 (not a windfall  thought of as them earning what they thought they were getting by making a deal) b. The current rule is that you get what was promised to you (not reimbursement) 3. Majority view: enforce expectancies, even when they are disproportionate to the K price C. Expectancy in Tort i. Smith v. Bolles: Bolles (P) was awarded damages based on the value of stock as it would have been had Smith's (D) fraudulent representations been true 1. Rule: the proper measure of damages for fraud in the sale of stock is the actual loss suffered due to the deception, not the purported value of the stock a. The action here was not brought for breach of K, thus no expectancy interest was lost 1. P was defrauded (price misrepresented & land was worthless). Sue for damages a. Court reverses. Since it's tort, P doesn’t get the benefit of the bargain b. P gets their money back (purchase price reimbursed), but not what they would have gotten 2. The proper measure of damages for the tort of fraud is the actual loss to the buyer, not the purported value of the goods. If this action were brought in contract, expectancy damages would probably be awarded today 3. P should have sued in breach of K a. This is a strange anomaly in the law, probably due to the parallel & divergent evolution of K and tort law b. Now, even if plead in tort, if expectancy can be shown, damages measured like in K c. Most jurisdictions respond by erasing the line between fraud & breach of warranty UCC Remedies – See Handout   If you benefit from the breach, you don't collect damages (if there's no measureable $ damage, there's no damage. No damage = no cause of action) If lost volume seller and replacement K is less than original K, some courts will view lost volume provision (708(2)) as obviating the lost $ on the replacement sale o Ex:  k1 =12,000, lost profit =2500  K2= 11,800  Should seller get $2700 or just $2500? Majority view is that the $200 is bundled in the concept of lost profits on the sale (would be double-counting to award $200 in addition to lost profit)


o o

What we think is just is up to lost profit & then we ignore the future sale Basic idea is that person in the business of making deals gets the lost deal back

 All buyers get expectancy  Lost volume sellers get expectancy, but no other sellers get it o Can get expectancies even if not lost volume seller (don’t get profit , but can get the difference between sale prices see UCC)
CONSEQUENTIAL DAMAGES Consequential damages are damages incurred after the initial loss caused by defendant’s wrongful act Rule: Consequential damages should be allowed in contract suits if they are not limited by the actual contract and are reasonably foreseeable. In torts consequential damages are often allowed. Buck v. Morrow: Morrow leased a pasture to Buck for 5 years to graze cattle. Contract stated if Morrow sells the lease he will compensate Buck for any loses as a result of sale. After 2 years, Morrow sells the pasture. Buck tries to find other land where he can graze his cattle but was unsuccessful. While he is looking for land he has to hire extra people to watch the cattle but ends up losing some cattle anyways. Finally find the land and has to pay extra money for the land then he did for the lease under Morrow. i. General damages = cost of cover (how much more he has to pay each remaining year for the new land). But paying Buck that money will not put him back in rightful position because he suffered other damages as a result of the breach. He had to hire extra help while he looked for a new pasture. But even with extra help, he lost some cattle. Money spent on extra help + cost of cattle lost = consequential damages. (Note: consequential damages should be included in A). Trial court denied consequential damages because they are ―too remote‖ aka denied them on policy grounds. This was so because consequential damages were greater than direct and by allowing this it means people entering contracts will have to fear greater liability. Appellate court reverses, consequential damages here are foreseeable and not limited by contract. Rule: a party may recover any consequential damages reasonably anticipated by the parties for breach of a leased of real property a. P should get benefit of the bargain + consequential damages b. Damage from the breach is that P gets the benefit (entitled to be compensated for the loss of the benefit if the other party breaches) Exception to the rule of allowing consequential damages if they are foreseeable involves cases when the breach of contract is only failure to pay money owed. The only consequential damages that is available = interest on the money at the legal interest rate. Rule not applicable in tort cases. a. Rationale: money is fungible, and many contracts involve money and allowing such damages would raise the cost of contracting since people would have to try to guess the consequences of money not being paid on time. In this situation, courts expect the P to go and borrow money while he sues the breaching party.




Meinrath v. Singer Co: P is owed 300,000 from Singer. He writes Singer a letter that says if you don’t pay me I will suffer serious consequences (will lose other business)  Consequential damages claim: D knew his other business ventures would fail if he didn’t have the capital from the K. Singer still does not pay and P sues for the money and consequential damages of 770,000 (capital lost when his other companies went bankrupt). Contract in this case did not exclude consequential damages but the court does not allow recovery for consequential damages because they said the consequential damages are too remote. i. Rule: a creditor may recover only interest on late payment of money due and no consequential damages are recoverable  NO CONSEQUENTIALS BEYOND INTEREST



a. No court will pay consequential damages for a failure to pay money  P only gets interest on the judgment i. What rate of interest to give is set by statute b. Rationale: The RPP  not going to entertain how much money P could have made on investment. Going to assume all person can get is interest because consequential damages are extremely speculative. With money there's an easy out because there's a marketplace that provides the answer (get the prevailing rate of interest) Exception to the Exception: Breach of insurance contract in bad faith. Ex: Insurance Co. fails to pay a claim for plaintiff’s house that burns down, for no good reason. Consequential damages can be recovered since breach of insurance contract in bad faith is a tort and the Meinrath rule does not apply. If, however, the insurance company’s decision was based on a reasonable, but erroneous, reading of the policy then no consequential damages can be recovered. a. No punitives in K unless insurance companies wrongfully withhold money b. In CA and most jurisdictions, consequentials are permitted in addition to punitives

Texaco Inc. v. Pennzoil Co: Pennzoil's (D) "agreement in principle" to acquire three-sevenths of the stock of Getty Oil was breached when Texaco (P) made a higher bid for, and announced its plans to merge with Getty o Pushing the boundaries of consequentials  should excessive expectancies be compensated? (biggest consequentials/benefit of the bargain in history) o Pennzoil won $10.53 billion  3.5 billion in punitive damages  7.56 in compensatory o Pennzoil had little to no out of pocket expenses, but their expectancy costs were huge lost opportunity to make $  Lost opportunity = agreement to purchase Getty holdings at a discount  Texaco tortiously interfered with the deal o P argues that because of their scale, they were able to do more with a barrel of oil than another  They able to purchase $10.87 barrel (prevailing market value) of oil for $3.40 because they were going to buy so much o Court follows through with the current expectancy rule  Pennzoil gets the benefit of the bargain  No reliance costs  For a tort, get consequential losses if there's interference. Only real conflict was the form of measurement of the benefit of bargain (product v. share price) o Rule: the P in an action for tortious interference with an existing K is entitled to recover the full pecuniary loss of the benefit it would have been entitled to under the K, as well as consequential and punitive damages o Pennzoil didn’t deviate from the idea of rightful position. Ps get to chose measure that’s more advantageous LIMITATION OF REMEDY AND LIQUIDATED DAMAGE CLAUSES Kearney & Trecker Corp v. Master Engraving Co.: Master Engraving (P) bought a machine tool from Kearney (D) which did not operate properly and sought consequential damages for lost profits o P bought machine for $167k o Warranty & limitation of remedy:  Product free from defect for 12 months/4000 hrs  Seller is not liable for any consequential damages  Buyer's remedy is exclusively limited to:  Repair or replacement OR  Refund at seller's option o Machine malfunctioned and was inoperable 25 -50% of the time. As a consequence, P lost profits  P sues and claims they should get a refund + lost profits (reasonable request in the absence of limitation in agreement)




D says that they always responded to P's calls and that it's P's handling of the machine that was the problem I: is the limitation valid? Court says that it is ok in theory to have a remedy that limits consequential damages (P knew and bargained for it, so it’s an assumed cost)  Policy: costs of potential liability would be passed on to consumers without K limitations such as these (to cover increased insurance costs)  would break the market. Necessary to keep business from being a high-risk endeavor  Sellers permitted to limit consequential damages, but here it's coupled with a limitation of remedy (repair or replacement provision)  are remedies being over-limited here? Does the combination fail in its essential purpose/unconscionable?  Consequential limitation ok, but repair and replacement clause not. The court doesn’t throw out the whole remedy, only the repair or replacement part  P should get a refund (Can’t force P to keep a machine that doesn’t work) Rule: a consequential damages disclaimer is not invalidated by the failure of a limited remedy provision unless it is unconscionable  Limitations are ok, so long as parties don’t bargain around it to the point that any remedy that's left is so ineffectual that there's no remedy (Goodman)  To the extent that there is no remedy, or that it fails its essential purpose, don’t strike the whole K, just sever the portions that fail  There's a respect for the bargaining between the parties

Liquidated Damages o When the parties bargain in advance for the $ amount of compensatory damages (e.g. if breach  $x)  Can do it, but courts will look at it with suspicion. If there's any doubt, it'll get thrown out o Conditions  The amount must be reasonable: can’t be too high when compared to amount of compensatory damages person would get w/out clause (absolute condition); AND  Difficult to accurately measure compensatory damages (more of a characteristic of LDs than a condition) o If either party sues, they're a mess because of the tautological conditions (have to figure out the actual damages to defend the clause) In re Trans World Airlines (didn’t discuss in class): LD not unreasonable because it was a reasonable estimate of the injury that would occur in the case of early lease termination for plane Under-liquidated LD clauses: Require reasonable LD clauses because if it's over-compensatory, the court will strike it down as a penalty  Penalties NOT allowed in compensatory scheme  But what happens if the LD clause is under-liquidated (underestimates damages caused by the breach)? NOT A PENALTY  Not that rare  Nothing in common with over-liquidated damages cases. Question becomes whether they are exclusive clauses  Is the clause an exclusive remedy?  If trying to strike it down, will argue that it is exclusive  Allow people to bargain around LD clauses, unless there's no real remedy left. If under-liquidated, there's no real remedy Penalty v. No remedy (Exclusive)  If over-liquidated (over the reasonable amount), it's a penalty  always thrown out


If it’s under-liquidated (under the reasonable amount), might keep it if a person can get a reasonable remedy that will put them in their rightful position in some other way  if it's the exclusive remedy, it will be thrown out o Limitation ok, just don’t make it so there's no remedy left

Northern Illinois Gas Co. v. Energy Cooperative Inc.: ECI (D) filed suit for breach of K when NIG stopped purchasing naphtha for the production of natural gas Rule: A mutually agreed upon liquidated damages clause provides the exclusive measure of damages in the event of default  A party who chooses not to pursue liquidated damages may not seek other measures of damages

LITIGATING DAMAGES FOR PERSONAL INJURY AND DEATH Wrongful Death damages: Courts do not compensate all that much for pain and suffering when someone dies. Ex// For a plane crash, the pain and suffering figure dramatically increases if the P knew about his fate for like ten minutes before he died… BUT, if it was an instantaneous death, then no pain and suffering award. Total damages for death are generally smaller than someone who lives (but is hurt). BUT, estate and survivors may receive inflated figures for loss of earning capacity after death (almost as a punitive measure to compensate for low P&S awards). All jx provide funeral expenses. All jx provide some measure of compensation for financial support (e.g. lost wages, lost earning capacity) that decedent would have provided to dependents. Financial support is the principal measure of recovery in many jx. The death of children, retired persons, and adults without dependents may lead to little to no recoverable damages under the financial support category. This has driven the expansion of recoverable damages to include society and intangible services in some jx, which would allow a mother and father to receive compensatory damages for the wrongful death of their child under a ―loss of society‖ theory. Most jx permit recovery for the monetary value of services the decedent would have provided (e.g. household chores; nurture, training, education, and guidance that children would have received from their parents; etc). A smaller majority of jx permits compensation to recover for loss of ―society‖ (the positive benefits Ps would have received if decedent had lived, like love, affection, care, attention, companionship, comfort, and protection). May also include loss of consortium. A few jx expressly permit compensation for grief and emotional distress. Even in jx where juries are NOT supposed to award for surviving family members’ grief and emotional distress, juries may incorporate this figure into their calculations of damage awards. Recovery of hedonic damages (value of decedent’s life to himself) has been allowed in a few states (CT, NM, GA), and in an increasing number of federal civil rights actions (on behalf of decedents killed by police officers). Indifference curve: whenever PI or wrongful death. Idea that normally compensatory damages should make the person indifferent to whether they experience harm or get compensation  Tends to work in commercial context because it puts person in rightful position  But this doesn’t work with PI & WD because in a WD case the victim won’t be indifferent to giving estate money in exchange for dying (no amt of money can compensate for life or limb!)  Thus, Personal injury is undercompensatory (want your left arm!)


THE DEBATE OVER TORT REFORM Arbino v. Johnson & Johnson (recent OH case) o Plaintiff Melisa Arbino sued Johnson & Johnson in 2006 alleging that she had sustained injuries from using a birth control patch manufactured by the company. Her lawsuit included claims that four tort reform statutes enacted by the Ohio legislature in 2005 to place caps on damages were unconstitutional  Statute says non-economic damages are limited to the greater of 250k or 350k/500k (usually 250 or 350). Exempt are the worst/catastrophic cases & Med Mal  Statute also allows the jury to determine the amount of damages awarded (but then the statute comes in and cuts it down to size) o OH supreme court holds statute is ok  Limit responds to earlier concerns (that led to previous invalidation of earlier statutes)  Here no med-mal cases  Court felt Med mal cases should not be limited because to not fully compensate would create an arbitrary and capricious distinction between classes of victims (irrational burden placed on the people that needed it the most) Constitutional concerns that arise with tort reform statutes:  Right to jury trial  Would be violated by limiting compensatory damages because many states permit jury trials in civil cases where there are money damages at stake  counter is that it doesn’t violate the right to a jury trial because statute allows jury to make findings of fact, and after, law will be applied (and therefore doesn’t invade the province of the jury)  counter to this is that it's worthless to let jury express their view, but not carry it out  Supreme Court responds that this is done all the time (e.g. treble compensatories as punitive damages)  Dissent's response to this = we always tell juries what they can and can’t award, but in the case of punitives, we're not taking away compensatories, we're doing it to punish. Here, we're invading the compensatory realm.  Counter to this = that’s what the RPP is all about (view of OH population is that this is the appropriate amount as opposed to judgemade views about what is rightful)  Right to a remedy (access to courts, like due process -- State Constitutions)  Denying the opportunity to get compensation  Right to due process  Is there a substantive right that’s being taken away by limiting amount of compensation?  DP  is it a fundamental right (determines the std of review)? Here, not a protected class  RBR (state interest + statute has rational basis)  Argument in favor of this being a rational statute that furthers legislature's goal: concerned with insurance companies; less burden on courts, making state more business-friendly (won’t get sued as much), lowering-workers comp rates (p154 evidence of benefits that would come to the state; would be too expensive to the state to have unlimited compensatory damages to Ps – legitimate interest + rational basis because it will achieve goal & limited  dissent: stats are from biased sources  Goodman doesn’t agree with this  from a legal perspective, we don’t care that these are biased because if the court is going to review the reason behind a statute for RBR, we need to know if there's a fundamental right involved. If not, will defer to legislature and facts it relied on


 

Dissent says that even if we defer, it’s not achieving the goal of the statute -- here, having the state of OH subsidize an out-of-state corporation at the expense of OH (Johnson & Johnson from NJ)

Equal protection  Same factual arguments as DP o This case wasn’t about this, but if point of tort reform is to get rid of frivolous lawsuits, we have procedural mechanisms to deal with this (demurrer, etc)  Statutes miss the boat  if problem is frivolous lawsuits, that’s not the same as oversized compensatory damage claims  We don’t have a problem in our country with oversized compensatory damages screwing things up because there aren't that many (McDonalds coffee is the rare case). The ones that do sue for such large claims and don’t get thrown out as frivolous probably need the money  Denying these people the money they need because of a problem that doesn’t really exist  Studies show that the rise in premiums is due to insurance companies having to increase their capital because they're insurance companies (required to be capitalized). If insurance companies have invested in the market and economy tanks, they lose their money and have to raise premiums to recover money (insurance company is essentially like a bank -- trying to get tort reform to justify high premiums used to make up shortcomings of the market)  Frivolous lawsuits are a problem, but tort reform statutes don’t deal with this problem (e.g. Ps lawyer filing 99 frivolous lawsuits claiming 500k and 1 resulting in a settlement; companies have to hire lawyers, expend money to get claims dismissed)  It’s not that TR doesn’t work, instead that it disproportionately burdens those who are entitled to the damage (Goodman's view). Traditional tort reform arguments:  D’s attorneys: o Verdicts are too high, too arbitrary.  Mean verdicts are too high. Ex// $2mil reflects what insurers have to pay. o High verdicts lead to high med-mal insurance rates, which puts doctors out of business and affect the premiums paid by end-consumers for health insurance.  P’s attorneys: o Verdicts are appropriate, not arbitrary.  Median verdicts aren’t high. Ex// $200k reflects the experiences of most Ps. o No shortage of med-mal insurance, except due to interest rate gaming by insurance companies in 1980s. o Med-mal insurance rates are not tied directly to number of cases, verdicts, etc. It’s tied to insurance company greed. ***** DIGNITARY AND CONSTITUTIONAL HARMS Levka v. City of Chicago (7th Cir. 1984): 53 y/o woman was arrested for a misdemeanor, then strip searched at the jail as per departmental policy. P alleges that she was emotionally harmed and that she suffered work losses as a result, though there was conflicting evidence. The jury awarded $50k in emotional damages, but no economic losses. Held: The Court granted a remittitur of $25k OR a new trial, stating that the verdict was excessive in light of verdicts in similar strip search cases (noting that cases with high verdicts had aggravating circumstances, and this one did not). Standard of review re: damage amounts: An appellate court will defer to a jury’s finding re: the amount of damages, unless the award is ―monstrously excessive‖ or ―shocks the conscience.‖ o In deciding if a verdict is excessive, one factor that courts consider is other jury verdicts (i.e. in similar lines of cases). Note re: Remittitur  It is unconstitutional for the appellate court to just reduce the jury award. o



Instead, the court has to grant a ―remittitur or a new trial,‖ which is said to be acceptable b/c the party reduced ―accepts‖ the remittitur over the prospect of a reversal and new trial. Note re: Addititur  Addititur violates the right to jury trial, b/c it add damages that no jury had ever awarded.  The only remedy for an unreasonably low verdict is a new trial. 

Carey v. Piphus (US Sup. Ct. 1978): High school freshman with [what looked to be] a joint in his had was automatically suspended by principal. P sued, alleging it violated his due process rights. Held: SCOTUS affirmed the trial court’s grant of injunctive relief (namely, the suspension was to be lifted and expunged from the P’s record) and denial of damages.     Rule: If a P’s constitutional rights have been violated, then he may be eligible for compensatory damages (including mental and emotional distress). Rule: Damages are not presumed from a violation of a constitutional right. P has to prove damages, by alleging facts as to an actual injury that resulted from the wrong. Rule: If actual damages aren’t proven, then P can only recover nominal damages (~$1). Just because you rights were violated doesn’t mean you get money damages, you have to prove there were damages arising from the violation

General  Equitable remedy  An injunction is a coercive kind of preventative remedy o Trying to prevent the harm before it occurs  maintaining the plaintiff in their rightful position so that no compensatory damages are necessary  Coercive becomes it comes in the form of an order that carries a penalty for disobedience  Ripeness doctrine = threshold rule to get an injunction o Threat of injury must be ripe before a court will issue an injunction  Q: Is there a real danger that the bad act the P claims the D is going to engage in is going to occur?  Test: Is there sufficient evidence to show that the purported harm will occur imminently or immediately? OR if the purported harm is not imminent:  (1) Is it possible to say with some certainty that the harm will occur eventually?  (2) Are the facts as presented by the P sufficiently developed for a reliable decision?  Flexible: if the P can really show that the harm will occur, even though not imminent, can get an INJ o Aka the propensity requirement: must show D has the propensity to violate the law before the court will issue o Rule is the same for both preliminary and permanent injunction  Permanent INJ = the result of a trial (called a permanent INJ even if it has a time limit, e.g., restraining order)  Preliminary INJ will last for a set amount of time, but are designed to keep things in place before the trial (so won’t last longer than trial) Two steps to get an Injunction: 1. Show ripeness/propensity (for all INJ) 2. Irreparable injury rule: must show that if the INJ does not issue the P will suffer irreparable injury, i.e., money damages won’t suffice a. If compensatories would be sufficient, the common law says that we wait  let the D do the damage and the P sue for it because the common law prefers compensatory damages b. General rule = as a default position, let someone breach a K and recover money damages


c. Humble Oil case (destruction of docs) would easily satisfy this requirement ***** PREVENTATIVE INJUNCTIONS (PREVENTING LAWFUL ACTS) Ripeness Rule Almurbati v. Bush: Gitmo detainees filed a motion for a preliminary injunction forbidding the gov't to transfer any P out of Gitmo without 30 days notice to the court and counsel. 6 enemy combatant Bahrain nationals heard news reports that they would be transferred to countries where they would be tortured— Gov’t presented contrary evidence. o Rule: to obtain injunctive relief, the P must show that the threatened injury is not merely remote or speculative  Court denies request for Preliminary INJ because it fails the ripeness test  the harm is too remote and too speculative. Basic mistrust of the executive branch is not enough  Goodman says case is limited to its facts (another court might have found news reports were sufficient. There could have been a propensity argument that the Gov’t has a propensity to violate the law) Humble Oil case (Note case) o P seeking preliminary INJ to prevent the D from destroying evidence because the P was under the belief that D constantly shredded docs  Court denies the INJ finding its not ripe because the only evidence was an affidavit from Ps attorney saying that P thought it would happen & didn’t trust D (bare accusation)  Denied because more evidence needed  There needs to be a clearly demonstrated necessity based on evidence, not argument/speculation o Paradox: the more likely a P needs this type of INJ, the more likely the INJ to be worthless because the D is predisposed to engage in bad behavior Injunction must be narrowly-tailored to match the wrongful conduct: Marshall v. Goodyear (5th Cir 1977): Following a successful suit on behalf of an employee illegally dismissed due to age, the US labor Dept (P) obtained a nationwide injunction against Goodyear (D). No evidence of a nationwide discrimination policy existed o Rule: The scope of injunctive relief should not be broader that the evidence warranting it  Injunctive relief should only be granted as is appropriate to remedy the problem at issue in the suit before the court  Here, the discharge of a single employee was at issue, not a nationwide policy. The issuance of a nationwide injunction was far broader in scope than the situation before the court, and therefore was not appropriate  no propensity for showing discriminatory policy  An injunction that isn't tailored to conduct goes beyond the scope, and thus isn't ripe Mootness: P must show propensity. But what if the D visibly changes their course of conduct & preempt the court? U.S. v. W.T. Grant Co: After Hancock (D) resigned certain interlocking directorates, the Government (P) continued to petition for an injunction barring such activities. The gov’t introduced no evidence of a plan by D to renew the activity o Rule: For a permanent injunction to issue, there must be some cognizable danger of recurrent violations  Here, no evidence that the conduct in question was apt to recur was shown, and therefore the trial court was well within its bounds of discretion in denying the injunction o Mootness  Different burden of persuasion here  D is trying to render the case moot. Burden is on the D to show that reliable evidence is there such that possibility of INJ wouldn't be considered (3 factor test)


In order to consider whether the evidence is sufficiently reliable when D trying to prove they are no longer engaging in unlawful behavior  3 factors:  (1) the bona fides of the express intent to comply  (2) effectiveness of the discontinuance  (3) character of the past violations The party seeking the injunction must show the court that relief is still needed! That there exists some cognizable danger of recurrent violation (something more than a mere possibility). *****

PROPHYLACTIC INJUNCTIONS (PREVENTING LAWFUL ACTS THAT MIGHT HAVE WRONGFUL CONSEQUENCES) I. II. D not engaging in illegal behavior, but a prediction that illegal behavior will flow from it that P wants to stop. Difference between preventative and prophylactic a. Preventative stops people from engaging in wrongful behavior (have to show propensity) b. Prophylactic is trying to prevent harmful consequences from lawful conduct i. The more egregious the conduct, the greater the need for a prophylactic

Nicholson v. Connecticut Half-way House, Inc.: Ps want to prevent D from opening a half-way house in their neighborhood (nuisance claim). P fears that the residents will commit crimes and home values will depreciate. Ps want the court to eliminate the half-way house all together to eliminate the risk that it'll be harmful. o I: whether and when the court can enjoin the commencement of an anticipated nuisance  Court says the fear of crime + depreciation is merely speculation  the L for nuisance is too speculative to justify an INJ. Facts not sufficiently developed at this point to make a reliable decision. o Here different kind of ripeness  Q is whether the act will be harmful  The mere possibility that half-way houses tend to do the things the Ps allege isn't enough b/c doesn’t say anything about this particular house  not ripe because propensity not shown. P can still sue if harms actually occur  not unlawful to open a half-way house o Note: Likely to be tested on a case in the middle of Nicholson (not a bad act) & Humble (bad act) e.g. behavior that the person is going to engage in that's unlawful, but won’t result in much harm PepsiCo, Inc. v. Redmond: Agreement to never reveal trade secrets. Situation is created that D can’t act in a way that doesn’t violate the K agreement. It’s inevitable violation, but nevertheless lawful for him to work for a competitor  Court grants a preliminary INJ ***** REPARATIVE INJUNCTIONS (REPAIRING THE CONSEQUENCES OF PAST WRONGFUL CONDUCT) I. II. Reparative injunctions do not raise ripeness issues because the wrongful act has already occurred INJ can be used to help undo the harm of a past violation (but can’t undo past violation) o By their very nature, since they're forward-looking, they can't remedy past harms (only money can)  Stops harm from going forward

Forster v. Boss: Sellers sell a lakeside property & promise buyers that they'll be able to get a dock permit + promised they would remove their swim dock. They didn’t remove the dock and buyers were denied a permit because the sellers already had one (Fraud + breach of K).


Trial court awarded $12,500 because of the fraud re: the permit, $10k in punitive damages because of fraud, and $2500 for the physical dock removal. Court also ordered an injunction to surrender the permit and one to remove the swim dock  Court says the injunction restored the Ps to their rightful position. Allowing them to get conpensatories also would violate the double recovery rule o Just because there are 2 possible remedies, doesn’t mean you get both --> INJ + Money = double recovery. This would be a windfall for the Ps -- they need to chose between the available remedies o Ps allowed to keep punitive damages  pegged to the idea that there was fraud. To get punitives, there must be compensatory damages or restitution, so court orders $1 in compensatory damages so the punitives can stand o Ps forgot to ask for interim compensatory damages  Interim compensatory damages are coupled with injunctions  Ps are entitled to INJ + some money for the lost use of the permit from the time of the deal closing to the time of the restoration of permit  Need to figure out what the lost use is worth in dollars  Note: Should not be afraid to ask for more than one type of remedy, as long as there is no double recovery SCOPE of Injunctions – Two Views: Winston & Bailey (SCOTUS)  Implicate political view of what function the judiciary should play  Winston & Bailey exemplify polar opposites of the view of how much harm a reparative INJ should seek to undo.  When a court is fashioning an INJ, it exercises discretion based on "sound legal principles:" Winston-Style   Represents the RPP tradition: restore P as close as possible to their rightful position Court should do what is only necessary incrementally to put the P back in the RP and no more   Bailey-Style Represents tradition that it's the court's roving commission to do good Bailey position also sees it as putting the P in the rightful position, but that they must go beyond the P's current RP in order to ensure that they don’t fall short of the RP soon afterwards (keeps the P in the RP for longer) Roving position to do good is a much older position that the RPP (court at equity was able to fashion very "activist" injunctions) Bailey-style injunction is an extremely activist approach & runs counter to the views of many judges

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Rightful Position Approach Winston Research Corp. v. Minnesota Mining & Manufacturing Co.: has developed an improved recording device & 2 of his former employees start a competing company. They take their knowledge with them & complete a machine 14 months later that’s similar to P's recording Device. TC issues an INJ because they stole Ps trade secrets, but no money damages (Can’t use their trade secrets for 2 years). P appeals and says it should have been a permanent INJ (a true permanent INJ). o Court says that secrets were going to become public, so permanent INJ would be too drastic o Court decides that it would take 14 months to develop the machine & extends the INJ to 2 years because that’s how long it would take if TS were enforced o Case represents judicial economy: Court does no more than necessary to put party that was harmed in their rightful position o Case has become emblematic of the narrowly-tailored reparative INJ


Equitable discretion approach (RPP + eliminating possibility of D doing the harm again) Bailey v. Proctor Mutual Fund (Aldred) set up in a way that's no longer permitted: those who had the ability to decide what to invest in were the SH who held $150k; the capital was provided by customers who were giving the co $6mil in debentures to invest (fixed rate of return). Debentures were unsecured so if the corporation goes under, the $ disappears (risky investment). Congress outlawed this in 40s  Statute grandfathered the application of the prohibition, but as soon as the arrangement was extinguished, it couldn’t be revived & no new companies could use it. Aldred became insolvent through fraud and company was taken over by a court-appointed receiver to run the company while the litigation goes on. Receivership is part of preliminary INJ (i.e., in case their ripe, need company to be taken away from them in case there is fraud). Company becomes solvent again while under receivership  in the face of this, the district court orders liquidation (after finding Liability for fraud) notwithstanding the new, honest owners. o Court says that even though company is grandfathered in and allowed to continue with debenture scheme, but that they’re going to shut it down anyway because it’s a horrible arrangement  Court’s policy justification: stop it because Congress saw fit for this process to be discontinued  But this overstates the law because Congress could have outlawed this structure across the board, but they put in the grandfather clause  more nuanced view is that Congress doesn’t want new companies to do this, but existing companies can. (Uses the cover of the congressional act without really applying it) o Case has become emblematic of the court's roving commission to do good in equity ***** THE SCOPE OF STRUCTURAL INJUNCTIONS Structural Injunctions: o Restructure institutions that are systematically violating the law or whose very structure is unlawful. o Ex) Schools, prisons, antitrust divestment, etc. o Structural injunctions often involve a long series of preventive and reparative injunctions in a single case presenting a complex fact situation. Each individual order is part of a continuing attack on a larger problem.

School Desegregation Swann v. Charlotte-Mecklenburg: The district maintained a completely segregated school system through law and busing. Held: The Court noted that ―neutrally drawn‖ attendance zones were not necessarily a sufficient remedy (even though it may be all that’s constitutionally required), b/c it might lead to de facto segregation. As such, the Court approved a wedge shaped plan and busing to lead to greater possible degrees of desegregation. o Note: This is an extreme, similar to Bailey. Milliken I: Intentional pattern of segregation in Detroit. The district court found that desegregation within Detroit was impossible, so it required metropolitan desegregation plans (involving suburban districts that weren’t part of city lines and thus weren’t parties to the original lawsuit). Held: The Sup. Ct. held that the


rightful position is desegregating Detroit. As the surrounding metropolitan areas did not themselves violate the Constitution, they cannot be ordered to be part of the remedy for desegregating Detroit. o Note: This is the other extreme, similar to Winston. Milliken II: On remand, the district court ordered educational components (e.g. tutoring, special training for teachers, etc) as part of the remedy to improve the education quality in previously segregated black Detroit schools that received fewer resources than the white schools. Held: The remedy was affirmed. o Note: In the wake of this case, many courts ordered extra spending for educational components as a remedy RATHER than busing or other desegregation measures. Missouri v. Jenkins (US Sup. Ct. 1995): De jure segregation in Kansas City schools. The district court ordered the elimination of all vestiges of segregation, and ordered wide-ranging relief (e.g. salary increases, early childhood development programs, court involvement in capital improvement plans, etc that cost nearly a billion dollar). o Held: The District Ct. violated Milliken I, in that the court required resources to be spent in the offending district over other districts that had not violated the Constitution. Further, the District Ct. went too far with the remedy. Once de jure segregation is overturned, the legal harm is done… and since a remedy should only be fashioned to fix the legal harm, granting anything else (like continued quality education programs after the segregation was overturned) would go far beyond the P’s rightful position. o This seems to overturn Milliken II, b/c it states that the judiciary cannot fashion a remedy that takes away resources from another area. o The court is basically rejecting Bailey, stating that the judiciary should never go beyond remedying the rightful position, b/c it treads on local autonomy. o Thomas concurrence: o Just b/c a school is black doesn’t mean that there’s a constitutional violation, as there could be voluntary housing choices or other private decisions that lead to the racial characteristics of the school. o Structural injunctions are not proper. The judiciary shouldn’t supervise gov’t institutions on a continuing basis, b/c of federalism and separation of powers.  When a court retains jx over the implementation and modification of the structural injunction, this:  Causes constant revisions to remedies in order to reach some abstract and often elusive goal.  Deprives the parties of finality and a clear understanding of their responsibilities.  Injects the judiciary into the day-to-day management of the schools (or prisons, tax code, etc), which is beyond their Article III competence.  His ideal remedy? An injunction ordering the district to stop segregating by a certain date. He would probably allow the parties to fashion the remedy themselves, and then the Ps could come back to court if segregation wasn’t remedied. No ongoing monitoring, no specific relief handed down by the court, etc. o This is the CURRENT VIEW of the court today. Structural injunctions aren’t proper, due to concerns re: federalism and separation of power. The courts shouldn’t be actively involved in state matters over a long period. o Souter dissent: o Segregation isn’t the harm. Rather, the harm is the effects of segregation (namely, a system wide reduction in student achievement resulting from underfunded schools for black students). The effects are what need to be remedied by increasing student educational performance through expanded programming, funding, etc. o Disagree with the majority’s reading of Milliken. In that case, we did NOT prohibit imposing a remedy on a guilty district that has intended consequences in a neighboring innocent district. o Ginsburg dissent: o 7 years for a court to be in charge of a school district isn’t a long time, when you consider that racism/slavery was a 200+ year old institution run by the state.


Institutional Reform Hutto v. Finney (US Sup. 1978): District Ct. held that conditions in Arkansas prison were unconstitutional, but said that D could fashion its own remedy (twice). App. Ct. reversed and imposed a structural injunction (re: limiting number of men per cell, requiring that each have a bunk, discontinuing the ―grue‖ diet, and setting 30 days as the maximum isolation sentence), b/c prison system officials acted in bad faith and didn’t try to remedy the problems causing conditions to deteriorate further. Held: The Sup. Ct. affirmed the injunction re: setting 30 days as the maximum isolation sentence.  ―Taking the long and unhappy history of the litigation into account [re: D failed to remedy the harm even after repeated opportunities to do so], the court was justified in entering a comprehensive order to insure against the risk of inadequate compliance.‖  Essentially, the Court is more likely to accept structural injunctions if the parties have repeatedly failed to remedy the harm (or willfully violated less restrictive injunctions). Lewis v. Casey (US Sup. Ct. 1996): Prisoners in AZ filed a class action, claiming that inadequate law libraries and legal assistance interfered with their right of access to the courts. The district court found two instances where inmates were blocked from the library, and as a result entered a system wide injunction regulating the operations of prison law libraries. Held: The Sup Ct. reversed the injunction, stating that courts can only remedy past or imminent harms that rise to the level of a constitutional violation (here, the harm to the two particular inmates) and can’t go any further. Poor management/organization of the law libraries is not enough of a reason for the court to take it over. The Court also criticized the lower court’s failure to consider the proposed remedies offered by the parties, and the problems asserted by the prison officials re: that would result to the prison system from the structural injunction.  Rule: Systemwide injunctions are not appropriate when there are limited, nonsystematic violations. Courts can only remedy past or imminent harms that rise to the level of a constitutional violation and can’t go any further.  Note: This is similar to Goodyear case re: limited scope of injunctions.  Note: This is similar to the Thomas concurrence in Missouri v. Jenkins criticizing structural injunctions, not to mention a critique of Bailey’s equitable discretion/‖roving commission to do good‖ approach. o Rule: Court must give deference to the ―legitimate interests‖ asserted by the parties, and consider remedial plans submitted by the parties. o After this decision, Courts have been overruled for failing to consider the proposed remedies and interests of the parties. This is almost a special rule for structural injunctions.  Concurrence (Souter): o District Court didn’t have sufficient evidence to create a systemwide injunction of this magnitude. o Disagrees with the majority (re: two individual violations shouldn’t lead to a system wide structural injunction). Instead, he wanted to remand the case back to the District Court to make more findings re: the functioning of the libraries, as he seems to imply that there’s likely more violations occurring than the two Ps. A structural injunction could be appropriate depending on the expanded record. US v. Virginia (US Sup. Ct. 1996): VMI (state-supported male military school) was found to be unconstitutional, so the state created the VWIL (female military school with a different course structure, etc). Held: The Sup. Ct. reversed, stating that the remedy of creating a separate program for women was inadequate. VWIL is inferior (no reputation, no hazing, etc), and the remedial decree doesn’t closely fit the constitutional violation as it doesn’t place the person in the position that they would have occupied in the absence of discrimination (the rightful position principle). o Conservatives are happy to give an injunction here, b/c it doesn’t cause judicial overreaching (i.e. taking over the school itself, monitoring the admittance process, etc). It is a simple remedy


(―change the rules and allow qualified women into the school‖) and it puts Ps in their ―rightful position‖ w/o more). Modifying Injunctions Structural injunctions are final judgments, but they can be modified—don’t need to re-sue and start over again. Can go back to court and request modifications due to changed circumstances. Court can revisit old order under the equitable powers. *****

THE RIGHTS OF THIRD PARTIES 1) If the ORDER is directed TO DEFENDANT  Third parties can be affected substantially, but NOT to the point of being restructured. a. Third parties can be affected substantially by orders to Ds who violated the law. (Hills v. Gautreaux) b. The third party cannot be sucked up into a structural injunction. (Milliken I) c. Restructured = Significant changes like restructuring or taking over an entire organization. 2) If the ORDER is directed TO THIRD PARTY OR INNOCENT D  Minor and ancillary is OK a. Innocent third parties can be ordered to follow the court’s direction (even if they’ve never heard of the case), so long as those orders are ―minor and ancillary.‖ (General Building Contractors). Notes:  Pay attention to who is explicitly being ordered to do something.  There is no ―rule‖ regarding structural injunctions, it’s all policy and politics. "Rule" = To resolve tension, look at P & what they want/whether they're sympathetic and think of justices' positions. Hills v. Gautreaux (US Sup. Ct. 1976): The Chicago Housing Authority operated a racially discriminatory housing program, which was knowingly funded by HUD. The Court of Appeal ordered them to consider a wider metropolitan plan, namely creating housing alternatives in areas beyond Chicago’s city limits. Held: The Sup. Ct. affirmed that the District Ct. has the authority to direct HUD to engage in remedial efforts in the metropolitan area outside of Chicago city limits. The Court noted that this ruling is NOT counter to Milliken I, b/c HUD is a federal agency that has jurisdiction over other metropolitan areas (while the school in Milliken did not have such jx). The injunction orders HUD to exercise the power that it already has, in a way that remedies the harm. The Court also noted that this doesn’t interfere with the autonomy of local govt, b/c they’re already affected by HUD funding levels and application procedures. General Building Contractors Assn v. PA (US Sup. Ct. 1982): P (skilled workers) allege that racial discrimination was occurring at the hiring hall and the apprenticeship program, so they sue union, apprenticeship program, class of employers, etc. The District Court found that employers were not aware of discrimination, but nonetheless imposed a remedy on the employers to make sure discrimination doesn’t occur. Held: The Sup. Ct. reversed, stating that since the employers were not found liable, they shouldn’t have such a burdensome remedy imposed against them. The Court stated that the order isn’t minor and ancillary, b/c it imposes considerable burdens/costs on the employers (namely, if they don’t meet minority utilization goals through union hiring, then they must find non-union affiliated skilled minority workers or


train unskilled minority workers; share financial costs incidental to enforcement in the range of hundreds of thousands of dollars; etc).  Rule: Parties not subject to liability shouldn’t have an injunctive remedy imposed against them (unless it’s ―minor and ancillary‖ provisions that are necessary for implementation of the injunction), and shouldn’t be assessed the costs of implementation.  Rule: To show that a remedy is appropriate, need to prove that (1) the party violated the law and (2) the remedy extends no further than necessary for implementation.  Concurrence (O’Connor): In some circumstances, I believe that third parties/non-liable parties could be required to submit reports to aid the court re: imposing and monitoring the relief ordered on the liable parties. Thus, quarterly reports could be considered minor and ancillary.

IRREPLACEABILITY Damages or Injunction? Irreparable Injury Rule: Courts will not grant an equitable remedy if a legal remedy would be adequate.   If money damages would be adequate, the injury is not irreparable and will not be prevented This rule is an accident of history. There's no logical reason for this rule because the nucleus of the rule exists for no logical purpose. Exists because in England we had two courts.

Note: no jury if P is asking for an injunction -- Constitutional right to a jury trial is limited to cases where there are money damages. Note: don’t be fooled by irreparable injury rule -- judges will work around it to get the results that they want  On exam, mention the rule + articulate why it should be money or injunction and the consequences of each result Pardee v. Camden Lumber Co.: D is about to cut timber on the Ps land because he thought it was his land. P goes to court to try to get a preliminary INJ before the harm occurs until the court can sort out who the land belongs to. Court of appeals dissolves the INJ because they look to the irreparable injury rule— reason that money damages are sufficient because this is a trespass. o Court attacks the adequacy of the legal remedy  As times changed, people have changed their ideas about the value of timber on land (goes from being nuisance to valuable)  No remedy that can reconvert money back to trees again  Change is societal. Rule governed by societal norms.  Held: Cutting down trees is no longer a favor, it’s now an irreparable harm & therefore an injunction is appropriate o Not a case about the court violating the rule, but rather, changing the facts so that the rule can be preserved o Rule is restricted to special areas. If too onerous court will say it only applies to that area. Most of the time the court will decide if it’s easy for it to supervise the issuance of an injunction  if too onerous, court will likely say that the legal remedy is adequate o Adequacy  What makes a legal remedy inadequate? There's an inquiry into uniqueness  Item is unique if it cannot be replaced in the market  If goods are readily replaceable with cash, the remedy doesn’t matter because the P will get what they want either way  Exceptions to rule (aka ―unique‖):  Land; maybe Goodman’s Dodge Dart (if arguing pre-accident)


Brook v. James Cullimore & Co.: Replevin case: common law writ for possession of property. Brook owes Cullimore money and isn't default. C wants the property, but B comes up with cash value of property and asks him to take it instead. o Court says B gets the property  direct violation of the rule (money when adequate) Why? Legal not equitable—courts issue writs of replevin (looks like an injunction, but it’s a legal remedy) Continental Airlines, Inc. v Intra Brokers, Inc.: Continental sought an INJ against Intra's sale of travel discount coupons Rule: A party is entitled to equitable relief of an injunction when economic damages would be difficult and expensive to prove.  The impossible immeasurability of harm doesn’t mean Continental wasn’t harmed—the harm here was to Continental's right to control its own discount policies o No evidence presented of any harm or benefit as a result of Intra's conduct, nonetheless, the district court issues a permanent injunction to intra not to sell the coupons o Court says money damages would be inadequate because "the measure of injury defies calculation" -- ripeness + inadequate remedy, so need an injunction  Case illustrates rule that irreparable injury does not have to be a serious injury; it means injury of any magnitude that cannot be remedied at law o Here, liability + eminence of harm + difficulty of assessing damages = INJ Damages or Specific Performance? Specific Performance Granted: Campbell Soup Co. v. Wentz: W contracted to sell special stubby & bright orange carrots to C but sold them to neighbor instead after FMV skyrockets above the K price per ton. Neighbor resells carrots to C on open market & C sues for specific performance after suspecting they were buying K carrots RULE: A party may have specific performance of a K for the sale of chattels if the legal remedy is inadequate  The choice between damages and specific performance is a choice between 2 ways of giving P his expectancy: between the expected carrots and the expected value of the carrots  The trial ct denies the request b/c it’s a commercial context – typically would say P needs to get the legal remedy (damages to subsidize the purchase)  Appellate court says that there should have been specific performance because C needed this particular type of carrot, which was unique and important to consistency in Campbell soup o Scarce good + use value make it unique (combination of a unique good + unique use = either on own could be enough, but here easy case  strengthens Campbell's case for SP) o In time of shortage, buyer can get specific performance for product that becomes unique (because of shortage) + end user has unique use, making it even more unique  NOTES o Even if commercial context, look to make sure legal remedy is adequate  forget about significance of injury or commercial nature as proxy for money damages o Court says here it's easy to order parties to comply with the K (don’t need court supervision to enforce) o Courts more likely to issue an INJ that’s easy to enforce  Goodman: #1 predictor of whether court will issue equitable or legal remedy

You can’t contract for an equitable outcome (e.g. specific performance) because equitable remedies are only for courts to issue

Efficient Breach o Idea that occasionally breaching a K and suffering the consequences is good if the commodity can be put to better use by the breacher  Injunction is a road block to the efficient breach because specific performance prevents it altogether o Law & economics view: matters whether or not the transactions costs of the deal are high or low



When they are low, parties can deal with each other individually, but threat of INJ isn't bad b/c simply forces them to come to an arrangement  Pushes people to make an arrangement, which is better than a court setting damage figure through litigation  When TCs are high (some problem that prevents parties from negotiating), an INJ is likely to be the final word  Not preferred because the INJ is unlikely to put the assets to their most valuable use  Note: the likelihood that they are high or low is independent from likelihood INJ will issue  L & E/Posner school of thought likes INJ if parties are able to deal amongst themselves outside of court Goodman: little application to the real world because as soon as litigation starts, transaction costs are high, so idea of efficient breach is mythic  As soon as the opportunity for efficient breach comes up, the litigation costs wipe out any efficiency  Once all the values are known, it doesn’t matter whether you get specific performance or a damage figure because either way it will be the same loss to the Ds  2 reasons why the D might engage in this opportunistic behavior (Campbell)  Belief that they can get away with it b/c enforcement is imperfect and there's little to lose by trying  Third party might be offering more than the FMV  In the absence of shortage or some market distortion, profitable breach isn’t possible  In shortage cases, there is an opportunity for efficient breach BUT these are precisely the cases where someone will sue and litigation will wipe out efficiency  also the type of case that court will order specific performance because of uniqueness  In one situation the market prevents the efficient breach, in others, courts do  L & E view is to get rid of specific performance in the shortage context b/c it takes away parties' opportunity to deal amongst themselves

BURDENS ON THE DEFENDANT OR THE COURT  Have to ask whether they're will be a disproportionate burden on the D if specific performance is granted o Basically apply the irreparable injury rule until it feels like it shouldn’t be applied  i.e., burden in the court or D

Specific Performance Denied: Van Wagner Advertising Corp v, S & M Enterprises: VW contended that S&M's cancellation of a lease of billboard space on the side of a building was ineffective because only an owner making a bona fide sale could terminate the lease, and VW's lease hadn't been terminated by the former owner of the building, Michaels, before she sold it to S&M. P wants the space for 10 years & D wants to just pay money damages…what's the remedy? RULE: the point at which breach of K will be redressable by specific performance lies not in an inherent physical uniqueness of the property but, instead in the uncertainty of valuing it o Notes:  Denial of specific performance violates the irreparable injury rule -- here, real estate and real estate is unique so legal remedy inadequate  Find that money damages should be for the entire 10 year term  Court says that even though this is unique, SP is properly denied when money damages would be adequate to reimburse the P and equitable relief would result in burden on the D that is disproportionate to the harm  Commercial space here might be unique, but there are ways of figuring out the exact value of the space for the purposes of commercial advertising o Uniqueness isn't enough  "economic interchangeability" is a better phrase than uniqueness



If something has economic interchangeability, then money damages should be adequate  Here, the use of the real estate was interchangeable with other advertising spaces –there's a market for it so bring in experts and figure it out  Whereas you can’t be given money to buy new trees D's were arguing that they shouldn’t have to pay 10 years of damage If Ds had won the argument that damages over 60 days were difficult to prove, the court might have ordered specific performance (& won the battle but lost the war)

Whitlock v. Hilander Foods, Inc.: Grocery store starts $1.5 mil expansion. Foundation footings exchange 18 inches into Ps property underground. P sees this is happening during construction and says they can’t continue unless they pay him & they're unable to reach an agreement. P sues to remove the footings & TC grants SJ for D, finding D didn’t intentionally encroach and that laches applies (unreasonable delay by P to file suit) RULES: o Default position when dealing with encroachments, is that hardship to D is weighed against the benefit to the P  If the burden on the D is too high, don’t apply the irreparable INJ rule (modern addition to the doctrine –IIR says nothing about this)  BUT if the D deliberately encroaches or if there's a protest by the P (P puts D on notice that they disagree), the D can be on the hook for everything (p410) o Burden is squarely on the D here  If D encroaches in the face of P's protest to the encroachment, no weighing of interests  D is on the hook for removal no matter the burden  If we didn’t have this exception it would result in a private kind of eminent domain  Waiver: A D who builds in the face of a protest assumes risk and essentially waives the court weighing the hardships o An INJ will issue if D intentionally encroaches b/c engaged in wrongdoing, so D waived right to get the court's help o Take Away:  When there's a gun to the courts head, they'll find a way to give $/legal remedy  If the INJ is denied, there's a damage remedy = big win for D (i.e., if equitable remedy is disproportionate, then court will prefer the legal remedy)  Refusal to provide an "uneconomic" remedy in the equity context is the same idea as the legal context (i.e. disproportionate burden exception is analogous to the uneconomic rule/no rule b/c doesn’t fit (Trinity Church)) Co-operative Insurance Society LTD. v. Argyll Stores (Holdings) LTD. (English Case): When Argyll decided to close one of its stores due to poor economic performance, landlord Co-op sought specific performance on the lease Rule: a court may not order specific performance of a covenant to maintain business hours when lessee believes it would be financially detrimental to keep the business open o Even though Argyll breached the lease, it is not in the public interest to require the company to carry on a business at a loss if there is another way to satisfy Co-operative's expectations. An award of damages brings the litigation to an end, while repairing Co-op's damages o Notes:  Here the burden isn't only on the D  burden on the court itself makes them not want to issue the injunction  This is an addition of the modern age – not in the irreparable injury rule  Specific performance would be a tremendous burden on the D  D would be required to run business at a loss  Also burden on the court  Would require court to supervise the D's running of the Safeway  When courts have orders for evaluation of finished product, specific performance is more appropriate


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Orders to achieve results OK. But if it's to carry on/monitor activities, that's a problem & burden on court would be too high

Cases turn on Ps reason for needing INJ and the burdens on D and/or on Court. Court is willing to take on higher burdens if in furtherance of public interest o In US courts will go further when public interests are at stake (in Argyll, private interest)  E.g., School desegregation (constitutional right belonging to the whole public) o ―courts of equity may, and frequently do, go much farther both to give and withhold relief in furtherance of the public interest than they are accustomed to go when only private interests are involved‖ (SCOTUS)

OTHER REASONS TO CHOOSE REMEDIES Service Contracts: courts will not award specific performance of a service contract (employment K) because (1) it is hard to enforce and (2) looks like involuntary servitude First Amendment: If we know that speech is defamatory, do we let the speech occur and sue for damage or issue an INJ? Willing v. Mazzocone: woman was marching up and down next to a court house with cow bells and signs which said the law firm D stole money from her and sold her out to insurance company. Her claim was the law firm had to pay $150 to her doc and they only gave him $125 and kept $25 to herself. The Law firm wants an injunction that would enjoin P from marching and uttering untrue statements. Damages are not as good because it would be really hard to measure the damage to the law firm’s reputation and because D is insolvent (court rejects insolvency argument & states that this cannot be considered for irreparable injury because this will lead to discrimination against the poor because it will be easier to enjoin a rich D than a poor one. Minority view). Propensity & irreparable injury requirements are met; however, court denies injunction because of 1st A concerns because injunction would be a prior restraint. Court felt that injunction is this case is prohibited by state constitution which prohibits imposition of prior restraints. P will have to get damages for loss to reputation that has already occurred and possibly punitive damages if they can prove that D was aware that the stmts were false when she made them.  Not awarding an INJ may lead to multiplicity of lawsuits: every time the D makes defamatory stmts P will have to go into court and sue for damages after each incident. Courts can award future damages for actions already done but cannot award damages for actions that have not yet taken place.  Majority view: D’s ability to pay damages is very relevant to irreparable injury inquiry. o Injunctions that preventing speech trigger First Amendment issue. Supreme Court has said it is not a violation of First Amendment to hold one liable for damages, if they made stmts w/ malice (knowing that the stmt was false or w/ reckless disregard that it was false) o Right to a Jury  If P seeks an injunction then the case does not go in front of the jury. In contrast suits for damages there will a trial by jury if that is what parties want.  There are some cases where P seeks some combo of legal and equitable relief (and where this would not lead to a double recovery). The fed rule is that all jury issues must be tried before any nonjury issues (the state practice is divided). The judge will then decide the nonjury issues, but he will be bound by the jury’s factual determination. New Standard/eBay eBay Inc. v. Mercexchange (2006): M sues eBay for patent infringement. Jury finds that patent is valid and that eBay infringed it & that award of damages was appropriate. Injunction: would require eBay not to use its business method that is subject to the patent which would mean shutting down eBay. Damages: very complicated to calculate. Trial court refused to grant permanent injunction because P’s willingness to license patents sufficient to establish that P will not suffer irreparable injury and Fed Circuit reversed & announced a per se rule: permanent injunction will be issued once infringement and validity of patent have been adjudged. US SC rejected the per se rule for patent cases and held that on remand the lower court needs to apply 4 part test:


1. Plaintiff has suffered irreparable injury; 2. Damages are inadequate (same thing as irreparable injury) 3. Balance of hardship between P & D, a remedy of equity is warranted (this existed as a defense D can use to argue against injunctions, now it becomes a requirement that P has to prove) 4. The public interest would not be disserved by a permanent injunction (in the past it was on D to raise the argument that public interest would be impeded by the injunction) Result is that a greater burden is now put on parties who seek an injunction in fed court, because now they have the burden to show #3 & 4. It was not clear whether this is now the test for permanent injunctions or the other propensity/ irreparable injury/ policy concerns test (have to argue both in fed court and on test). Also, not clear if ―new test‖ is only applicable to patent cases. There was no such test before this case, it seems that the Court has taken (and somewhat mangled) the test for preliminary injunctions and applied them to permanent injunctions.

As students, we should say what eBay says and do the analysis by mixing 1 & 2 together (mix 1 & 2, do 3 and leave 4 out if not a preliminary INJ or public interest issue)

PRELIMINARY OR PERMANENT RELIEF The Substantive Law of Preliminary Relief Can control abuse of prelim inj upfront (standards), but can also control on the back-end if inj improvidently granted -- P gets inj but loses the case after trial) then the INJ bond is money that P has to put up upon issuance of preliminary INJ and give up money to D if they lose the case Permanent Injunctions (Ebay) o P must establish:  (1) irreparable injury (likelihood of the harm)  (2) legal damage inadequate  (3) Equity is warranted after balancing hardships of P and D (magnitude of the harm) o Court will assess the severity of harm to the P & consider how much irreparable harm the P will suffer o Court will balance the severity of the harm against the risk of error o Hardship to P if inj were not granted balanced against hardship D would suffer if preliminary inj were improvidently granted (providently granted INJ would be the right result) o This is the step that makes getting a preliminary injunction extremely difficult  (4)public interest not disserved by a permanent injunction Preliminary Injunctions (Winter) o P must establish:  (1) P likely to succeed on the merits  (2) P likely to suffer irreparable harm in the absence of preliminary relief  (3) balance of equities tips in P's favor  (4) injunction is in the public interest In a prelim INJ case, P is only asking to: 1. prevent harm that can be prevented after trial but not before trial. If a trial is going to solve the problem, that’s fine, but it might be too late for some or all the harm 2. P is only seeking to cure irreparable harm that a trial cannot cure Winter v. Natural Resources Defense Council, Inc. o NEPA requires navy to issue an environmental impact report before any action o SCOTUS reversed and vacated the preliminary INJ & announced a 4 part test (see above)


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9th circuit and district court balanced factors 1 and 2 against each other (old way of doing things). According to Roberts, we're done doing this and now have to do equally well on both factors (and rest) Winter rule changes the law, whereas Ebay was a misstatement of the law There used to be a sliding scale used to weigh all factors against each other  Ginsburg dissent stated that the Supreme Court did not actually overturn the sliding scale test which led to some confusion (wishful thinking). 9th Cir’s recent case is also saying that the sliding scale is approach can still be used. Though, it appears that majority is rejecting sliding scale/balancing test and requiring that P prove all 4 factors Pre-winter, factor 1 was the same but for (2) needed to show the "possibility" of irreparable harm (post-winter = "likely")  Before it was seen as a factor test & now it's applied as an element test Case makes it significantly harder to get preliminary injunction Goodman sees this case as a balance of hardship case + he doesn’t have a problem with the result

Winter, eBay, Monsanto all making it harder to get injunctions in federal court.  Under traditional permanent injunction test, P did not have to bring up or prove hardship or public interest. eBay brought the 2 tests closer together except with permanent injunctions P does not have to show likelihood of success on the merits since merits have already been decided.  Courts also look whether the preliminary injunctions that changes the status quo (some circuits including Ninth). Some circuits say that it should be harder to get a preliminary injunction that changes the status quo then one that preserves the status quo. However, this leads to dispute on what was the status quo. Not a part of the test but the Ninth Circuit says the burden on P is heavier when he is trying to change the status quo Bonds: o Meant to remedy a serious problem (risk of error/improvidently granted INJs) that could come up in preliminary injunction phase o Harm suffered is at the hands of the court, not the P – can’t have the D sue the P or the court  the bond that the P puts up upon request + grant of the prelim is the remedy that the D gets if its improvidently granted  Supposed to disincentivize frivolous lawsuits, improvident grants o Most states do this o What happens if the bond is so expensive that it's difficult to calculate? Will a huge disincentive deter Ps from seeking preliminary INJs? o Most courts waive bonds on issues that are of public interest or on large public interest cases –Can only do this if permitted by statute, but most statutes permit courts to do this o If the legislature wants to have waiver, why not set aside some money for it? This has been proposed and would be a good compromise Coyne-Delaney Co. v. Capital Development Board o When a preliminary injunction issued in favor of CD was reversed on appeal, the district court refused to award damages on the injunction bond o Rule: A prevailing D is entitled to damages on an injunction bond unless good reason for not awarding damages exists The Procedural Law of Preliminary Injunctions and TROs Temporary Restraining Orders: fastest way to get relief from the courts. TROs are designed to prevent irreparable harm that will occur even before a preliminary injunction hearing can be held. Carroll v. President and Commissioners of Princess Anne: White Supremacist organization held an aggressive rally near courthouse on August 6, 1966 & promised to hold another the following night. The


next day gov obtained a TRO, which forbade the group to rally for the next 10 days (order was then extended for next 10 months). Notice of hearing was not given, no attempt to give notice was made, and hearing was held ex-parte. US SC held that the TRO was issued improperly. Due Process requires notice of a hearing or at the very least an attempt to give notice or have a compelling reason why notice cannot/should not be given– right to notice and a hearing if the government is going to take adverse action against you (DP right does not turn on the fact this is a First Amendment case).   If no notice of a TRO is given, D cannot be held in contempt for violating it. FRCP 65 states that courts may issue a prelim injunction only on notice to the adverse party. TRO may be issued w/o notice only if: o (1) affidavit shows specific facts indicating immediate and irreparable injury, loss, or damage will result to the one petitioning for TRO before the adverse party can be heard and (2) attorney of party asking for TRO certifies in writing any efforts made to give notice and the reasons why it should not be required. Compelling reason for not giving notice: (1) Cannot find the D; (2) Between the time of the notice and the hearing the D will do the very thing the TRO is designed to prevent (can use as evidence the fact that D has a history of doing such a thing) Under Rule, the party against whom the TRO w/o notice was issued can, w/ 2 day notice to the party that obtained the TRO (or with shorter notice if set by the court), can appear in front of the court and ask the court to dissolve or modify the TRO. The court must hear & decide the motion as promptly as justice requires. Note:

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How long do TROs last? TRO without notice: 14 days (used to be 10), with a single 14 day extension under Rule 65. The longest a TRO can last is 28 days and then it dissolves. TRO w/ notice: Issue is not clear & Rule 65 is silent Sampson v. Murray: P, a gov employer, was fired and she claims that she was entitled to more procedural protections. She sues asking for a prelim injunction mandating gov not to fire her while there is an admin appeal of her discharge. Court orders a TRO (w/ notice) for ten days but then extends the TRO indefinitely. Is TRO still a TRO if it last indefinitely? Fed Rules does not define what constitutes a TRO. But US SC in this case holds that TRO with notice lasting more than 10 days morphs into preliminary injunction. This is important because an order granting TRO is not appealable while the order granting prelim injunction is appealable hence, if TRO becomes prelim injunction it then becomes appealable.  Conflicting authority: US SC in Granny Goose held that TRO with notice lasting more than 10 days (now 14 days) is a nullity, it cannot be appealed, and D is not subject to the order after 10 (now 14) days and thus cannot be in contempt for violating it.  Courts generally seem to follow Samson and treat TRO lasting more than 14 days as morphing into prelim injunction meaning that D is still subject to the order but it can be appealed. If TRO is issued for a year, as a D you can: (1) Can move to dissolve the TRO, must give two days notice that you are moving to dissolve though can ask for a shorter period. If district court says no to dissolving the TRO, that decision is appealable. (2) Can violate after 14 days and hope that court treats as if it dissolved under Granny Goose. (3) Can wait 14 days and appeal arguing that it is a prelim injunction under Sampson. Safe strategy in unclear case: Move in trial court for dissolution of TRO, and appeal that decision.

PROSPECTIVE OR RETROSPECTIVE RELIEF? Suits Against Officers in their Official Capacities


Sovereign Immunity Rule: You cannot sue a state that’s not your own state. Prohibited by 11th Amendment at both law and equity. Rule: You cannot sue your own state for money damages… UNLESS the state has expressly and unambiguously waived sovereign immunity re: that particular program/cause of action/etc. See Hans v. Louisiana, Ford Motor Co. v. Department of Treasury, Edelman v. Jordan. Rule: You can sue your state for prospective injunctive relief. See Ex parte Young, Edelman v. Jordan. Rule: You can sue an officer of the state—either in his official capacity or personally—for money damages. See Ex parte Young. P may sue the officer in his official capacity, to make him exercise or refrain from exercising some of the powers of his office. P may sue the officer in his personal capacity, to make him pay compensation out of his own pocket (i.e. money damages). However, P will have to get past the hurdle of qualified immunity, which protects the official in his personal capacity. Note: States are likely (but not required) to indemnify an officer sued in his personal capacity. as a damage suit against the state and toss it out (Edelman). BUT, you cannot sue an officer of the state to get specific performance of a K with the govt. BUT, you cannot sue an officer of the state re: state rights. It can only be used to enforce federal rights. BUT, when Congress has provided a detailed remedy that does not include a Young suit against a state official, the statutory remedy preempts the Young remedy (and thus, you cannot sue an officer of the state in such instances). BUT, Young may be restricted from being used to recover physical property from the govt. Edelman v. Jordan (US Sup. Ct. 1974): In exchange for federal matching funds for its state disability welfare program, IL agreed to run the program in compliance with federal law. Federal law required states to determine an applicant’s eligibility and cut the first check within 45 days of the application filing date. However, IL took 4+ months to process the applications and started paying prospectively from the date that they determined eligibility. Held: The Sup. Ct. affirmed the permanent injunction ordering the State to comply with federal regulations in the future, but reversed the award of back pay (the amount of withheld prior benefits). B/c a retroactive award of monetary relief is barred from being levied against a State. Rule: A suit by private parties seeking to impose a liability that must be paid from public funds in the State Treasury is barred by the 11th Amendment. Rule: If liability is found against a State, then prospective equitable relief is the only remedy. Even bad faith won’t allow money damages against a State, b/c of full sovereign immunity. Prospective equitable relief that has fiscal consequences on a State Treasury is permissible if spending money is a necessary result of future compliance with a decree that, by its terms, is prospective in nature. Rule: The fact that a State agrees to accept funds from the Federal Govt for the operation of a State program is not sufficient to constitute waiver of sovereign immunity. We will only find waiver of sovereign immunity when there is express, unambiguous language to that effect. programs and sovereign immunity. Thus, states that accept federal funds may be sued for failure to follow federal regulations. Dissent: Douglas It makes no sense to hold that money judgments are forbidden, but prospective injunctions are allowed… b/c the 11th Amendment doesn’t make a distinction btwn suits at law and suits in equity. If a State accepts federal funds for their program, then there’s complete waiver of their sovereign immunity.


Dissent: Brennan The 11th Amendment does not apply to this case, and Hans is incorrect (holding that you cannot sue your country or state for money damages). When the States joined the Union, they gave up sovereign immunity. believed that they were giving up sovereign immunity at the Constitutional Convention. Dissent: Marshall Accepting federal matching funds in exchange for the State’s voluntary assumption of federal law constitutes waiver of sovereign immunity, even if it’s not an ―express‖ waiver. States shouldn’t be able to accept money and then not follow the Federal Govt’s requirements. The Courts’ power to order retroactive payments is an essential remedy to deter States from circumventing the requirements of federal law. iolated federal law by failing to comply with regulations re: the disability welfare program, and we must provide a remedy. Suits Against Officers in their Personal Capacities Harlow v. Fitzgerald (US Sup. Ct. 1982): Fitzgerald testified to Congress re: cost overruns for a military plane. Angry re: the whistle blowing, he was fired (though it was called a ―reduction in force‖). Fitzgerald sued Nixon, several high level aides, etc. Held: The Court reversed, b/c the lower court incorrectly held that agents were only entitled ―absolute immunity or no immunity.‖ The case was remanded for reconsideration re: whether QI applied. Absolute immunity: For officials whose special functions or constitutional status requires complete protection from suit. Includes: Legislators acting in their legislative function, judges acting in their judicial functions, presidents performing their executive function, administrative law judges, prosecutors. Ex// A legislator who defames someone while speaking on the floor of Congress has absolute immunity. Qualified Immunity: For executive officials and govt employees in general, qualified immunity (conditional protection from suit) is the norm. Includes: Governor and his aides, high federal officials/aides in the executive branch, police officers, etc. Rule: Govt officials performing discretionary functions generally are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.  The official’s conduct is judged on a reasonable person standard (objective).  Rights that aren’t clearly established to a reasonable person:  If the law at the time was not clearly established, an official could not reasonably be expected to anticipate subsequent legal developments.  An official could not be said to ―know‖ that the law forbade conduct not previously identified as unlawful. Protects conduct that is borderline. Rule: Only the outliers (i.e. people who do something really reprehensible) are typically found liable.  If the law was clearly established, the immunity defense ordinarily should fail, since a reasonably competent public official should know the law governing his conduct and shouldn’t violate it. Note: QI applies to damages only. It does not apply to injunctive relief. Concurrence: Brennan Given the ―knew or should have known‖ standard, I imagine that some measure of discovery may sometimes be required to determine exactly what a public-official D did ―know‖ at the time of his actions.


Thus, if the P alleges that the D actually knew that they were violating the law, then it should be an issue for trial. Note: P is suing officers in their personal capacities, and seeks to recover damages (from their personal assets) for the past misconduct.

Declaratory Judgments History/General: o Older than anything we've done (goes back to Roman times)  Received into European civil law because of Roman influence  Typically used for property, validity of wills, etc o In the 1900s US academics started probing into the validity of declaratory judgments  Introduced for the first time as an academic matter in 1922  In 1934, Congress passed Federal Declaratory Judgment Act – allowed courts to issue them  Today, we still have the federal statute + 40 states with state versions of the act and the rest have it on the books or through common law  all states do them o DJs are the only form of relief that are statutory in nature o Primary purpose of this remedy is to determine rights, obligations, and status in advance of harm  Preventative like an injunction, but not coercive  DJ does not have a coercive element – no possibility of contempt  Instructs parties as to rights, obligations, status o DJs NOT bound by law-equity division: Because it’s modern and statutory in nature it has bypassed the debate between equity & law. It's neither, and doesn’t have to fit into either category because it came after  DJs don't require a showing of irreparable injury: As a practical matter, if its neither legal nor equitable in nature, the P is free to seek a DJ without having to show there would be irreparable injury because we bypass the law & equity paradigm completely  Right to a jury trial: only guaranteed if it's a proceeding at law and not equity. Here, courts will look at the nature of the proceeding. If it's equitable in nature, no right to a jury trial. If legal, then P does get a right to jury trial  court s will analyze case for purpose of jury trial, but not for purpose of irreparable injury rule Nashville, Chattanooga, & St. Louis RR v. Wallace: The RR sought a judicial declaration that a state gasoline tax was unconstitutional. No additional legal or equitable relief was requested o Rule: federal courts may issue declaratory judgments when an actual controversy exists  While declaratory relief may be in the form of an advisory opinion, it need not be, and the fact no relief other than the declaration is sought does not necessarily make an opinion merely advisory  Here, the respective rights of the parties are in controversy, and the Court's holding will decide the controversy o Note: per article 3, sec. 2 of the Constitution, federal courts may only decide cases or controversies –advisory opinions are not permitted; an adjudication of actual rights must be made. However, as the court points out, an adjudication of rights in and of itself may be all that a case requires o Class Notes:  RR suing under TN Declaratory Judgment Act  TN statute does a good job of showing what a DJ statute looks like. 6 elements:  (1) statute confers jx on the court to declare the rights of parties, without actually issuing an order  (2) a declaration has the same force as a final judgment -- treated just like a final judgment  (3) good for determining rights, status, or legal relation/obligations


 

(4)there is no DJ where it would not terminate the controversy giving rise to the proceeding (allows statute to withstand Constitutional challenges b/c not issuing advisory opinion – resolves entirety of the controversy) [ripeness rule built in]  (5) all interested parties must be made part of the proceeding  (6) the controversy must be capable of final adjudication as presented (not going to speculate about hypotheticals – quasi-ripeness requirement to prevent parties from presenting courts with a multiplicity of hypos/change facts)  The facts as presented permit the court to decide what happened and reach a legal conclusion based on the facts P wants a judicial declaration that a particular state tax shouldn’t apply to them because statute unconstitutional – want a DJ before they fail to pay tax Issue for SCOTUS is whether there's a case or controversy (can’t proceed unless there is one)  Similar to an INJ, just not having the order issued  Why do DJs rise to the level of satisfying the Constitutional requirement that it be a case or controversy?  A DJ terminates the issue  Not a hypo, a true set of facts –can tie to the 6th element. RR Co is planning on having their cars go through state of TN & TN is planning on taxing them  definitely have adverse parties seeking determination of rights  This is the type of matter that’s typically litigated and kind of thing court resolves  Note: if you can’t get an injunction, might be able to squeeze it in under declaratory judgment (different standards)  If an INJ would be ok, certainly a DJ would be ok because it satisfies the reqs of the DJ act  Just a different procedure, but the judicial power is identical to that exercised for INJ as long as it meets the controversy reqs  Like an INJ, but don’t need to show irreparable injury

What would the P get in an INJ that they wouldn’t get from a DJ and vice versa? See chart below Injunctions What does the P have to prove? 1. Case + controversy 2. Ripeness 3. Irreparable injury rule Wallace is ordered to refrain from levying tax on RR Hold in contempt Declaratory Judgment 1. Case + controversy 2. Adjudication would terminate the controversy (quasiripeness) 3. NO IRREPARABLE INJURY NEED BE SHOWN Judge: The RR tax is unconstitutional (legal conclusion & it stops there)

What does the order say?

What if the D ignores it?

P gets an injunction enforcing the declaratory judgment (on a matter of law) with contempt power behind it (way around the irreparable injury rule) o Even though a legal matter, suspend the irreparable injury rule --BIG GAPING HOLE around rule o Res judicata as to these facts -- not held in contempt, but easiest case to re-litigate (takes care of itself)


Notes: o Do have to show ripeness, but not irreparable injury can get something like an injunction (but don’t get injunctive order) without showing irreparable injury o In timber case, P could have gotten a declaratory judgment o Halfway house case: court could declare that having the house is not a nuisance  Statute for DJ allows for a little bit more fragmenting of discrete issues that themselves can have DJs  In practice, courts have allowed Ps to break cases down to sub-issues that can be resolved by DJs – since not asking for an order, P is free to ask the court to rule on less  What if DJs were in the picture?  No ripeness for INJ – ripeness still applies, but might be able to parcel off into smaller issues that are ripe  Here, only thing would be building the house – might be at Ps risk  D might get a declaratory judgment that it’s ok to build the halfway house Cardinal Chemical Co. v. Morton Int'l Inc.: The court of appeals refused to decide a counterclaim by Cardinal seeking a declaration that Morton's patent was invalid after Cardinal prevailed in Morton's infringement suit Rule: Courts may not refrain from deciding a counterclaim for declaratory judgment regarding the validity of a patent in infringement cases o A party seeking a declaratory judgment has the burden of establishing the existence of an actual case or controversy o Class Notes:  SCOTUS: DJ not moot  Strong public interest for resolving this  finality of patent judgments  Mootness = court is unable to provide a remedy to the parties  Fed. Cir. Was using mootness in more colloquial sense  Here, could have gone further b/c live controversy over whether there's a patent that can be litigated  There was still a different remedy that could be provided – DJ would be a separate remedy that’s not duplicative  Value for finding patents invalid has separate value to CC  affirmative defense is not the same as a counterclaim  Plus, would be wasteful to relitigate this  DJ truly is a separate remedy with different values from liability and $ damages & ct must find whether DJ is appropriate  cant back off like ct did here On exam, distinguish between case being over on mootness and a separate claim for DJ o If party asked for DJ + injunction on the same set of facts, there would be an argument that there's mootness there  Is this duplicative? Does the determination of one render the 2nd one moot?  Irreparable injury  Timing issue What you can sometimes do with a DJ that you can’t with an INJ o Can ask for more broader observation about rights and obligations  cts seem to be more comfortable doing this in context of DJs o As a matter of procedure, not quite the same so P can ask for both  Rarely litigated when they overlap because from Ds perspective, they lose just the same (so why waste $ litigating?)


Reformation Reformation v. Rescission o Reformation: when there's mutual mistake/meeting of the minds and document doesn’t reflect this, courts will change the K to reflect the agreement  Court will declare that K exists and reform K to match meeting of minds  When there's a meeting of the minds, there has to be reformation. If there's no meeting of the minds, might be reformation if it’s impossible to recapture the bargaining position of the parties as result of poor bargaining of one of the parties (See Hand) o Rescission: no meeting of the minds + mistake  court says there was no K Hand v. Dayton-Hudson: Hand was a lawyer at a legal department at Dayton-Hudson. DH fired Hand and DH made an offer to pay him $38,000 as part of the severance package; however, Hand had to agree to release the companies from all claims relating to his employment. Hand did not want to accept it at first, but the company drafted the agreement anyways, Hand took it home and changed a provisions in the contract (he is releasing all claims except breach of contract or age discrimination) other than that contract looked exactly the same and DH signed it w/o reading it. Hand gets the 38,000 and then sues for age discrimination and breach of contract, DH argued that Hand had fraudulently procured signature and asked for reformation (asking the court to re-write the contract to be along the lines of what DH thought it was signing). Hand claimed that reformation is not the appropriate because there was no mutual mistake as required but only a unilateral one, instead he wants rescission meaning he would give back $38 thousand but get to keep his rights to sue. Court recognizes the exception to the mutual mistake rule and rules against Hand. (DH could have also asked for recession but reformation was more profitable to it) o Reformation = change the K to reflect what parties thought they were signing o Rescission = K never existed o ct reforms the release and says there was an agreement to waive  But Hand argues that there was no meeting of the minds b/c he never agreed to K  This arg is rejected because of fraud  Ct finds that reformation is proper because while fraud is not mistake, it belongs in the same category b/c he intended to defraud the other party – he tricked the other side, so ct is going to hold him to it Nominal Damages Purpose:  A suit for nominal damages might resolve an underlying dispute (e.g. location of a boundary, the rights afforded by due process, etc), when:  Declaratory relief is not available, or  Plaintiff has failed to prove actual damages.  The nominal damage award shows that there has been a wrong/harm in a symbolic sense, since the D is found liable by a court of law. There needs to be a harm for a suit to go forward (i.e. there has to be damage to be remedied). Therefore, if you’re alleging a constitutional violation (generally for procedural or substantive due process cases), then a court will award nominal damages (like $1) so the suit can go forward. Carey v. Piphus (US Sup. Ct. 1978): High school student with [what looked to be] a joint in his had was automatically suspended by principal. Held: Court affirmed lower court’s findings—namely, that the school did violate the student’s due process, but that nominal damages of $1.00 were appropriate given P’s failure to prove actual harm. Rule: Damages are not presumed from a violation of a constitutional right. P has to prove damages, by alleging facts as to an actual injury that resulted from the wrong. Rule: If actual damages aren’t proven, then P can only recover nominal damages.


Quo Warranto Quo Warranto = Specialized writ for determining the right to hold a public office or corporate franchise. Purpose:  Raise almost any ground that renders an incumbent ineligible for his office (e.g. not a resident of the area, criminal record, defective nominating petitions, etc).  Question whether the office itself exists (e.g. testing whether an office of special prosecutor could be created, whether a school board exists, etc).  Test municipal annexations (e.g. whether the municipal corporation is authorized to govern in the annexed area).  Forfeit corporate charters as penalty for illegal conduct. This remedy may have the effect of ousting someone from office (or off the ballot), declaring that something may or may not happen (e.g. the office of special prosecutor may be formed), or as justification for levying fines or damages on the D. Coram Nobis     Literally, ―in our presence‖ A writ by which a ct could correct clerical errors in the entry of a judgment after the usual time for appeal or corrective motions had expired. In US, writ was expanded to reach fundamental errors deemed too important to leave uncorrected Writ has been abolished in federal civil case b/c FRCP 60 codifies the grounds and procedures for modifying judgments o But it survives in federal criminal cases, and SCOTUS recently held that Military Cts have CN jx

Intro Main sources of civil liability: o K o Torts o Unjust Enrichment  not remedy  substantive area of law wholly independent from tort and K law  Don’t have to do something wrong for someone to be unjustly enriched. It happens when someone gets something they don’t deserve, whether rightfully or wrongfully  Enrichment that lacks an adequate legal basis  AKA restitution: synonym for the substantive field of liability  Source of liability v. remedy  Restitutionary remedy is available for any tort or K that transfers UE from a P to a D AND it's a remedy for UE  Remedy sometimes produces startling results for Ps in areas of K and torts (sometimes measure of remedy in restitution is bigger than in damage)  If a D is unjustly enriched, a P is entitled to restitution of that amount o Called restitution, not damages (didn’t do something to person to damage them) o Recovering D’s enrichment, not P’s damages


Review of Neri: o Buyer breached K and wanted his deposit back. His breach caused damages less than deposit. Seller didn’t do anything wrong  Buyer wants excess of deposit on grounds of unjust enrichment. Seeking restitution to have restored to him that which he conferred on the seller Equity v. law o Look at the form to see whether it's legal or equitable o LAW: 2 basic fact patterns in legal (one or the other) will dictate what form restitution will take:  Title to the property  Ejectment: refers to real property  Person who is suing has title to the property to get D off the property  Legal remedy because you don’t need an order of the court  Replevin  For personal property/moveable items  Neither of replevin nor ejectment are equitable because having the sheriff execute the legal finding, rather than ordering the D to do something  No title to the property  Intangibles (money, liquid assets)  Legal, restitutionary remedies for getting them:  Assumpsit  Basically return of money  Quasi Ks  Quantum Meruit  Money paid for services provided (in absence of K)  Spectrum: need right level of intent  Good example is K both parties thought existed, but was invalid  Not legal remedy, restitutionary remedy of QM  not in K law, in unjust enrichment law – only measure is value received by D  NOTE: P has no option to claim restitution where he has fully performed and the D owes a liquidated sum of money


EQUITY  Constructive trust  P needs a CT when she seeks to recover a specific asset or from a specific fund  Can have money in a constructive trust if you can trace that money being part of a fund (res) o More difficult/impossible to impose if simply a payment of $ due. Most courts will say you can’t get a CT for the payment of money due o Not traceable to any asset that was taken unjustly, just money o Exception to this: o A CT can be imposed when there has been a breach of trust, specifically when there is a fiduciary relationship o The traditional remedy is an imposition of a CT to the extent that there has been UE o Can impose a CT for amt that person has been UE by breach of fiduciary duty, even if funds can’t be traced to you (see Snepp)  Restitutionary measure is bigger than in any other context, so good if available  Ct can look at innocence & has discretion to fashion remedy in equity  Equitable lien  Situation where the P isn't entitled to get title back, they're entitled to have property sold to satisfy some restitutionary claim  entitles P to have D sell property for cash (entitled to cash value, not to property itself) o e.g. foreclosures are equitable liens on property


Subrogation  Third kind of equitable restitutionary claim -- enforceable through contempt proceedings  D is in debt and P pays off debt for D -- P becomes the new creditor and is entitled to exercise all restitutionary remedies as if they were that creditor o It's pretty much substitution, i.e., P stands in shoes of creditor o Equitable nature of this is that we're changing people -- P now holds the ID of that creditor (we don’t do this in law) Constructive Trust v. legal restitutionary remedies Assumpsit 2 main characteristics: o On assumpsit legal side, the measure of restitution if the gains are ill-gotten, the appreciation goes to P as well o If D is bankrupt, P has no priority over the other creditors Constructive trust (more beneficial to P) o Get gains in the value of the property whether or not there was wrongdoing by D – level of innocence of D irrelevant o Get priority over creditors if D owes money to others  Because they technically don’t have it – holding something that belongs to P (bit of a legal fiction)

Law Title: Ejection Replevin No title: Assumpsit Quasi-k Quantum meruit

Equity Constructive trust Equitable lien Subrogation

Assumpsit  getting money back Blue Cross Health Services, Inc. v. Sauer: Ex of innocent restitution b/c mistake was made o Wrong person gets sent insurance checks because of hospital's mistake & Blue Cross asks for money back. Ds cashed checks knowing that they didn’t belong to them. BC realizes mistake & sue for recovery of the money.  BC sues in equity asking for a constructive trust to be composed based on UE  Directing person to give thing back to rightful owner (sounds like replevin)  Ps are wrong to ask for a constructive trust. This is not a constructive trust case  This isn’t an equitable case – it’s a legal case because Ps just want money  BC asked for constructive trust because they don’t want a jury trial (not clear why they didn’t want one). But it's really an UE for money had and received  It was an assumpsit case (CA) (getting money back that belongs to you) = legal remedy  Constructive trust = getting a thing back that belongs to you (e.g. a watch, inheritance)  Could be money when it’s from a specific place/account (e.g. all the money in Uncle Js bank acct – don’t know how much is in it)  Exists independently of how much money is in it o Court says it’s an action at law  It’s a SJ/directed verdict case so wouldn’t have gone to a jury -- court affirms notwithstanding no new trial Level of culpability o D's level of culpability or knowledge is irrelevant, but we look at how careless the P was o But D with notice has to return gains as well

Hypo: what if Ds were on vacation and checks were direct deposited? They would still be on the hook – not looking at D’s conduct or culpability/who breached, etc  Not necessary that D wanted to keep money When might Ds level of culpability matter?  Affirmative defense of change of position (see below)


In this case, Ds knew they weren't entitled to money to so change of position defense unavailable If the knowing D profits/gains from the UE, gains also have to be returned. An innocent D would not have to return gains  if lack of notice + gains, person gets to keep the gains 

BC entitled to get the money back, but up to a certain point  don’t allow Ps to get UE recovery when there's actual notice that their conduct will result in a loss  There needs to be a mistake, can’t have inaction in the face of loss  There can be mistake, inadvertence, but there can’t be mistake in the face of actual notice o If P doesn’t do anything to stop, they can’t claim restitution b/c no longer unjust enrichment, its voluntary!  But do allow a high degree of inadvertence, or even negligence on the part of the P  Here, don’t really know how much notice the Sauers had, but recipient without notice still has to give back. But a D with notice is liable to return it & the gains they got from it  If Ds had notice + had gone to Vegas and doubled money, all would go back to Blue Cross  Goal = Putting D back in their rightful position, i.e., nothing. If Ps get a windfall as a result that's ok because only being done to Ds who knowingly took something they're not entitled to  RESTITUTION BASED ON D's GAIN Interest: The Rest. (Third) says that interest should run against an innocent recipient from the date she had notice of P’s rights; i.e., interest runs against innocent recipient from the day they learn they've been unjustly enriched. Change of Position (applies to both legal & equitable rest): o Unusual amount of money  Majority position is that station of life is relevant (subjective poor D v. Paris Hilton) o Unusual expenditure as a result  Paying off debt wouldn’t count that would be a usual expenditure you couldn’t afford so defense wouldn’t work  Elective v. non-elective: if person was going to spend money anyway, it doesn’t qualify – there needs to be a casual connection  Ability to pay doesn’t matter/not considered o Cannot plead defense if culpability rises to a certain level. If not culpable, no longer fair to D to recoup money due to Ps mistake (makes more sense for P who made mistake to bear burden than for innocent D)  Notice requires only knowledge of facts sufficient to make it reasonable to conduct a further inquiry that would have revealed the truth (Rest. Third)  If the circumstances of the enrichment would lead a reasonable person to inquire where the money came from, that's considered sufficient notice  If there's a change of position and it wouldn’t lead a reasonable person to inquire, person can keep $ The Preference for K + No Forced Exchanges Restitution is generally unavailable to a claimant who should have made a K with the recipient but failed to do so. Would-be Ps cannot deliver unrequested goods or services and then demand payment for the benefit (officious intermeddler) o In the law we prefer that there be a K (rather than quasi K)


Closely related to the preference for K is a strong presumption against forcing an innocent D to pay for benefits she never requested and might not want. Such forced exchanges would present problems of valuation, liquidity, and autonomy  That an item has a MV of $1k is no evidence that it is worth that much to the recipient (valuation), that she has the resources to buy it (liquidity), or that she has any desire to buy it (autonomy). o And prefer whenever possible not to force an exchange between P & D  When form of unjust enrichment isn't cash, the preference is to not have a forced exchange, but sometimes there's no choice (See Sommerville) Not cash, actual building on property: Somerville v. Jacobs: P had a survey done of land (not clear whether it was done incorrectly or if they misread) & constructed building on their land. D discovered they had built on their land & leased building o D says it's his under theory of annexation (improvement of land)  It belongs to his property, but P pleads unjust enrichment o P made a mistake & D is also innocent (2 innocent parties)  Innocent D suffers just as much as one who had notice of its construction– has to give it up  But D with notice might not be given option. Court might decide which remedy is appropriate o Ps claim is being brought in equity  Equitable remedy because it’s a constructive trust: want the building back (or money for the building) & converting the thing to money (like a bank account)  Ps want a forced exchange: D buys or gives up the lot o Court lets the D decide  must buy or sell land  This is the rule in almost every jurisdiction including CA  Mistaken improvement principle: land owner must sell land or buy the improvement o Court’s reasoning: good faith improvement of land, so improver entitled to the value of improvement or exchange of the land o Dissent: this is a private taking b/c innocent D forced to sell his property  Would also give D option to have it removed, but this would go against restitutionary principles (loss to P and gain to D) o Valuation: value the improvement by the lesser of improvement and the increase in value of land  innocent D is on the hook for whichever is cheaper o Culpable D must pay the more expensive (increase in value of land or the value of the improvement) o Unjust enrichment exists independently of culpability  Certain levels of negligence will bar UE o From a societal perspective, this is the right result because making it so no one loses anything  From D's perspective, loss isn't avoided  Market prices aren't where D would set price If innocent P + D, becomes a valuation question No claim for damages possible  all that’s left is a claim for unjust enrichment State v. A.N.W. Seed Corp: Seed was sued by the state for a violation of a statue & it turns out, on appeal, that D was innocent. Default judgment entered against D & D appeals o If you appeal, you have to put up a bond for the amount of money owed o D didn’t put up the assumpsit bond, i.e., bond that would stop the judgment from being executed (a purchased stay)  P executed on judgment in case where they were wrong: seize Ds farm equipment and sells it (Sold for cheap - $57k equipment sold for 16k)  P did nothing wrong, followed judgment o D sues the P for restitution  Note: restitution a cause of action/substantive law  D asks for property back, or FMV of property taken + reimbursement for lost income as result of not having the property



State has to give back $16k because they sued in restitution and D did nothing wrong  this is what the equipment turned into, so that’s what D gets  If they had seized $57k in cash, they would have to give it all back  No profits/loss of use because no damages since Ps did nothing wrong o Since P did nothing wrong, there’s nothing in K or tort that D can claim against the P Since property was sold prior to it being concluded that there was unjust enrichment, all that’s left is proceeds from the farm equipment  Measure of restitution = $16k  This is the degree to which the ct has been enriched as a result of taking the equipment o Note: if they had sold above market value, would get all of it if disgorgement case, i.e. right level of intent. Here, would get FMV  To take FMV would be to take more from innocent D than they were enriched  Don’t have the farm equipment anymore and can’t go after the innocent buyer

See notes for problems [rescission of K for mistake (4-1); substantive UE case, not K + change of position (Best); officious intermeddler + valuation if innocent P + D (Kaufmann); mistaken improvement (Waddell); tracing (Polnitz); K breach that works in buyers favor –no damages, but restitution of down payment (Vincent); Client breaches before K fully performed by P & P gets more out of restitution than the K (Pfeil)] Tracing Money o 2 basic principles:  (1) tracing through direct physical exchanges (scenario in Polnitz)  Trace the item as it takes different forms and whatever value it ends at (depreciation or appreciation) belongs to the P  Ex of another variation: wife had land + 200k in a CD (certificate of deposit). If the money from the farm is squandered, can we go after the 200k left to Amy? NO. Can if it’s a legal claim for damages, but cant if it’s a restitutionary claim for UE  If you can elect damages v. restitution & Amy did a harm (squandered the money) better measure would be damages b/c then can go after the 200k  (2) Comingled property: wrongdoer's $ comingled with P's. Follow 2 presumptions:  (1) wrongdoer spends his/her $ first  If we have a checking acct where D has taken 5k from P and puts the UE $ in acct. At time 2, D adds 5k of his own money (5k from P + 5k from D). If D spends 6k on items that despite your best efforts at tracing, $ has dissipated, the presumption is that the first money spent is the unjustly enriched party's $, so P gets 4k  P has the burden of tracing  (2) unjust enricher successfully invests the Ps money first  e.g., 5k of each; 6k withdrawn and 4k left in acct 3k invested into Apple and 3k goes to Merck. Apple stock appreciates to 30k, Merck depreciates to 1k  RULE: find the best possible scenario for the P, and the P is entitled to it  In this circumstance, give as much of the Apple fund and give that to P P gets all 30k of Apple stock. P can successfully avoid the losing stock if the D had enough in acct to purchase it (here, he had $5k so yes)  P gets 30k + the 2k left over in the acct = 32k  Culpability doesn’t matter if we're imposing constructive trust on purchases of stock


Disgorging the Profits from Opportunistic Breach of K What to do when there's breach of valid and enforceable Ks o P has claim for breach on the K o Note: always explore what P would get under an unjust enrichment analysis P is suing off the K and asking for restitutionary remedy Snepp v. United States: Snepp was a CIA operative in Vietnam. Signs agreement not to publish confidential info w/out prior approval. Two parts to K: never to divulge classified info + not to publish any info, classified or not, without first obtaining clearance o Govt concedes that there is no classified info in document and that P willfully published without prior clearance o Harm to govt  CIA loses ability to regulate these Ks  If employees can with impunity ignore K, people may be less likely to provide info to CIA agents if possibility of being outed o P seeks injunction that he seek prepublication clearance (ripeness + irreparable harm shown) + profits from sale of the book in the form of a constructive trust  Constructive trust because avoid jury trial  Entitled to future profits as well (order for profits arising from book) o Ct of appeals says constructive trust is inappropriate – Dissent (Stevens) agrees  Duties under K (confidentiality + clearance (K obligation))  Not divulging classified info = fiduciary duty/obligation of trust. If fiduciary relationship & breach, ct can impose constructive trust  But if you just breach a K, not clear that constructive trust is available. Remedy is damage, maybe assumpsit, but not something that you can turn person into a trustee  Appeals says no fiduciary duty when no classified info. No breach of trust = no constructive trust  Gman says could have been argued better so that facts showed both parts of K were breach of trust  Maj gets it wrong because they say they can do this regardless of breach of trust, otherwise D gets off scot free  No deterrence if only nominal damages. Punitive damages after jury trial speculative and unusual, so the only thing left is a constructive trust  Not in op, but gov’t admitted that punitive damages in this case would have served as a sufficient deterrent going forward – parties said it was fine, but SCOTUS says it’s not (odd result)  SCOTUS says without a CT, there would be no reliable deterrent against similar breaches of security  Gman: this is wrong! CT isn't for deterrence!! Misunderstanding of CT + other remedies that are better suited for deterrence o What is the UE here as an initial matter?  Ct said too speculative to measure – can we argue for UE going forward? 60k not UE because would have gotten anyway  How is the gov’t enriched by his failure to get pre-publication clearance? Snepp would say none in dollar figures because they would have approved the book (conceded this)  Counter that there was UE: Gov’t could say that he accelerated the prepublication time period so they should get interest on the money he got in advance during the time it would have taken for him to vet the book o Note: can argue apportionment  get creative with UE (MGM, Bette Davis movie ex) Law is a mess in regard to whether a CT is a proper remedy for a simple breach of K o Sometimes it can be a proper remedy o Live conflict is whether CTs are available in the absence of a special, fiduciary relationship


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traditionally reserved for ppl with special relationships, but in some cases CT will be imposed in the absence of such relationship If breach of fiduciary duty, CT always available, but if just breach of K, no CT (Stevens dissent)

Breach of K –Valuation based on D’s Level of Culpability May v. Muroff: No breach of fiduciary duty. K for the sale of land. Seller sells fill, which drastically reduces value of land before turning it over. Q becomes appropriate measure of the remedy o Sale of fill for $240k o Removal of fill that comes out to reduction in value of $122k o Ct says the right amount = 240k because of Ds level of culpability  Sellers breach was deliberate, and therefore the purchaser is entitled to the fruits of the wrongfully received windfall  Pure breach of K case  no fiduciary duty here, but full measure of restitution based on most aggressive calculation of UE  Controversial because reason for breach shouldn’t matter (esp. controversial w/ Law and Econ school of thought) o Maybe this isn’t a good representative case because this was a K for sale of land  If the P had gotten an INJ and stopped beforehand, he would have been able to get the 240k o Modern view: labels are meaningless. Disgorgement (max calc of enrichment + profit) is to expand to any K when the Ds level of culpability when Ds level of culpability is somewhat higher than innocent  The modern remedies movement has been to look at the reason behind the K breach in the context of UE to decide what amount to award  What this level means is in disarray but Rest. Third attempts to offer clarification/rule: o ―If deliberate breach of K results in profit to the defaulting promisor and the available damage remedy affords inadequate protection to the promisee’s contractual entitlement, the promisee has a claim to restitution of the profit realized by the promisor as a result of the breach‖ o This is a rule for intentional breach of K, typically motivated by the potential for extra profit. These deliberate breachers treated as conscious wrongdoers, just like those who commit intentional torts or breaches of fiduciary duty  But this is only a draft rule – courts still in disarray  Leaves big gray area: what about people who breach for business reasons? Fit description, but what about inadequacy o Usually includes fraud, higher level of culpability Restitution is meant to take away what D wrongfully gained  purpose is to prevent the inequity from occurring – frequently involves overcompensating the P o We prefer overcompensation over under-compensation for P

RESCISSION Mobil Oil Exploration Co. v. US: When there's been repudiation, can ask for restitutionary remedy of rescission + restitution or ask for damages. Rescission is the more simple remedy o Legislation passed that forces gov’t to breach K with Mobile – but NC would have denied permission anyway (turned out to be a losing K) o K was repudiated, so Mobile has the option of rescission as a remedy, i.e., get money back  If they had sued for compensatories would have gotten nothing because losing K  Purely legal remedy o Rescission usually thought of as restoring the status quo  here, it did a lot more o Criticism: P shouldn’t be able to get back more than expectancy


Beyond K law, we always provide a disgorgement if there's been bad conduct or displacement of UE – cant recalculate K after the breach

Rescission when restitution is impossible (can’t be returned) & result = MAJOR WINDFALL FOR P Boomer v. Muir: Muir is a breaching party – hired by municipality to build dam. Hires Boomer as sub-K to build. Boomer builds 95% of dam o Cost overruns are huge during building b/c Boomer messed up calculations  Only needs $29K more to finish dam. Abandons work and claims that Muir breached b/c difficult to get supplies, his conduct o Since he claimed breach, he can sue on or off the K  By suing off the K, what should Boomer get? o Ct says rescission is OK since there was breach (can argue repudiation)  QM services provided. Value of services = $571k!!!! o What would normally be the remedy if repudiation of K + rescission? One side would get $333k back (give back to Muir) + Muir would have to give Boomer the 95% completed dam  obviously can't do this, so under a theory of QM, ct measures by the services provided  Why should Muir have to pay $500k on $300k K? Unfair, but ct might have been doing rough justice (makes horrible law)  Ct probably put him on hook because found cost overruns were result of breach  but this is bad law because so severe.  Doesn’t have to be the value of the services…could have measured as value of damn to Muir (= 300k: what he bargained for, so good evidence); value on open market o Convenient that it was 95% complete because if fully complete, Boomer would only be entitled to K price  No logic or rationale to this  Can’t sue in QM before there has been a breach because enrichment would not be unjust because it has been bargained for by the parties o This isn’t a rescission case  forced to be a QM case, but called rescission case because suing off k (but can’t be rescission unless you can exchange back the goods)  When rescission is impossible, we're not calling it rescission o Boomer is the majority rule, but the new restatement rejects Boomer  New proposed rule: limit recovery in restitution when there is incomplete performance, limit to value as contemplated by parties in K

Exxon Shipping Co. v. Baker: The Court ruled in a 5-3 decision that the punitive damages awarded to the victims of the Exxon Valdez oil spill should be reduced from US$2.5 billion to US$500 million. o A ratio of no more than one-to-one between compensatory and punitive damages is generally appropriate in maritime cases. Since Exxon has paid about $507 million to compensate more than 32,000 Alaska Natives, landowners and commercial fishermen for the damage caused by the spill, it should have to pay no more than that amount in punitive damages o Punitives aimed not at compensation, but principally at retribution and deterring harmful conduct  None of the remedies we've studied are supposed to be retributive or deterrent – punitives don’t remedy anything. P is already getting what they deserve if suing in compensatories  Ps don’t need money  Some argue the $ should go to directly to govt, since purpose isn’t to compensate P, but rather to take away from Ds  Rationale for going to P:  Will encourage P to sue in certain situations -- incentive to litigate underlitigated cases. By adding punitives, get lawyers interested in area that they wouldn’t otherwise be  Also degrees of blameworthiness  punitives proportional to blameworthiness of D



Don’t want Ds to make intentional harmful calculations -- don’t want costbenefit analysis in certain circumstances Principal argument for punitives set out in case  compensatory damages by themselves tend to yield insufficient deterrence  Particularly true in the tort context  Tend to come up only in the tort context because this is where they're more often undercompensatory  CAN come up in Ks in right situation-- no a per se rule  When damages undercompensatory can get puntives b/c otherwise would have insufficient deterrence  Ex of a situation: Indifference curve in wrongful death -- pt of indifference of suffering harm or getting money -- victim's pt is infinite (more than what juries would be willing to award)  Society can’t afford right level of compensatories, so punitives fill in  Problem is that punitives are dangerous and subject to abuse as far as amt paid out on the part of Ps 2 purposes of punitives  (1)Compensatory damages are undercompensatory -- meant to remedy undercompensation  (2) Meant to serve as deterrent  These are not mutually exclusive ideas One of their important functions is retribution  With restitution, there’s no punitives -- pt is to deter D by taking away all their gains. How we measure gains is determined by level of culpability, so quasi-punitive element in restitution  In compensatories, we have undercompensation if no restitution -- the culpability element manifests itself in compensatory world through punitves  Measured by how much the P suffers --but D's culpability doesn’t affect how much the P suffers -- to suddenly throw in Ds culpability is kid of a mismatch Exxon is not THE rule -- many states, including CA only have outer limits -- not much out there to tell juries how to come up with punitives  We have outer limits but not substantive rules  1:1 ratio is one way of doing this  Hard to take seriously b/c we'll have a lot of different rules for different categories of cases -- but if they apply ratio across the board, doesn’t make sense to talk about categories  1:1 here is specific to maritime  Take away isn’t the rule, it’s the reason for and spirit of punitives  basically that they're a clusterfuck + policy arguments




Constitutional Limits on Punitive Damages If the rule is that this goes to a jury, Q becomes how much is too much When does it rise to the magnitude of a Constitutional violation? What are the outer limits of punitives? Standards of Review: o If a jury comes up with a punitive damage award that’s constitutional, the std of review on appeal is abuse of discretion  The appeals ct will not reverse a trial ct's determination that the figure is correct unless it finds the TC abused its discretion  pretty hard to get a reversal o Challenging the awards on the basis of unconstitutionality  Last thing you want to argue is unconstitutionality – this is a last resort!


History: o Constitution doesn’t mention punitive damages, so how do you claim its unconstitutional?  8th A -- excessive bail shall not be req'd nor excessive fines imposed nor cruel or unusual punishment --> arg that this was an excessive fine  Browning case -- first in line of cases to argue 8th A -- rejected by majority  Rejected because only applies to govt fines (something you owe the state, not a private D)-- punitive damages are not fines  But CO (at least one state) takes some of the pot -- maybe 8th A should be a limiting factor. In CA< all goes to P, so in CA 8th doesn’t apply  Ppl who tend to oppose bills to get state some $ is Ps lawyers -- don’t want punitives limited + want P to get all the money  Dissent -- nothing in Con that says that fines cant apply to judgments -- ct passing fine along to P o Pac Life case ('91)  Insurance K claim -- 1mil punitive damages claim upheld --> true that PDs are starting to run wild, but state law in AL (list of factors for jury to consider in assessing PDs) passes Constitutional muster  CA has this law too  O'Connor dissents -- doesn’t like punitives, factors are too big o TXO (93) -- 19k compensatories + 10 million in punitives -- upheld by SCOTUS  No majority, plurality opinion -- punitives not disproportionate to the level of harm TXO may have caused  Not really a rule -- not reviewed de novo b/c not constitutional violation -- harm TXO might have caused in other states  If you find that there is no violation of law in verdict, all you can argue is abuse of discretion --hard to win on appeal. If you raise a constitutional argument, you earn yourself de novo review at the appellate level just by raising the arg -- defense earns the right for appellate ct to review the case de novo (start over)  improves chances of winning dramatically  But there is no std at this time for what's a constitutional violation -- new issue -but chipping away at the will of SCOTUS -- reading records closely and finding it more difficult to justify these large awards  Tide is turning -- fractured plurality is all the ct can come up with -- this is because the standard of review changed o Honda (94)-- first reversal of PD judgment by SCOTUS  OR constitution violation argument -- DP violation on the basis that OR con at that time precluded judicial review of the amt of a damage award -- jury's award cant be reviewed by a court  Reversed as violation of DP -- procedural defect (that has nothing to do with the amt of award)  Still good law  Honda set up Gore BMW v. Gore (96) -- for the first time the majority invalidates punitive damages as excessive  Look at figure de novo from a constitutional perspective  Comes out of AL again -- AL rule doesn’t work (from Pac Life -- Gore supersedes)  Repainted cars sold as new w/out disclosure  A single P who sues for compensatory damages --$4 + 4 million in punitives  4k per car x # sold throughout country = 4 million was what it would take to punish for fraud  Ct found that there were only 14 cars sold in AL + no evidence presented to show what happened in other states was illegal -- AL law was violated, but no evidence that other state's laws were violated  Doesn’t seem appropriate for P to get all given punishment for out of state conduct  SCOTUS says needs to be limited to what occurred in AL – we get the 3 guidepost rule on remand to AL  violated substantive DP rights of D  3 guideposts for assessing constitutionality of PD figure



(1)Degree of reprehensibility (from societal perspective) (2)Ratio between PDs and compensatories (3)Existence of civil and criminal penalties -- if there are penalties imposed by state, tends to show this is behavior that should be punished + can show what the figure should be  Jury cant punish more than the legislature sees fit to punish  Consideration of factors inform the value of punitives  Low reprehensibility  Initial ratio was 1000:1. reduced to 500:1 by state ct --> still too high  Max fraud in AL is 400  As a constitutional matter, 2 million is grossly excessive Take away: Not permitted to consider evidence outside of state + guideposts o Substantive DP argument -- SCOTUS prefers this as the mode of analysis  Reviewed de novo

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State Farm v. Campbell (2003, UT case): Family of deceased and injured agreed to settle the case for the 50k max and state farm refuses to settle and sue Campbell -- blew it for client bc lose -- 186k judgment against Campbell o State Farm tells D to put up house to pay for judgment and refuse to post a bond on the judgment pending the appeal. Campbell settles on his own with the Ds  Agrees that he will give victims 90% of his judgment against state farm -- he was planning on suing state farm o At trial, it turns out state farm has a policy showing that goal was to cap claims regardless of merit  False docs, removed/destroyed docs o Campbell gets 2.6 million in emotional distress as compensatories + 145 million is punitives  Upheld on appeal by UT Supreme Ct under Gore guideposts  Clandestine activity -- lucky to have learned about this -- happened several other times before caught o Not unreasonable for jury to come up with verdict + did not violate DP o Reversed by SCOTUS -- turned the 3 guideposts into very strict pro-D test  Elements test now, not factors o Campbell gets $2.6million compensatory damages –NOTE: Cant reduce compensatories unless measured incorrectly or incorrect use of per diem, etc. Remittitur process does this. Remititurs are NOT proper for punitives -- judge cannot reduce punitives through the remititur process (kind of like a settlement offer -- propose that Paccept reduced amount or order new trial)  Remititur based on jury process, not trial o Campbell also got $145mil in punitives  Considered that it was a massively wealthy D, clandestine (so exploit chance to get D)  Campbell case adds teeth to BMW factors  applied in very pro-D way  Can only punish D for treatment of the Campbells -- can only look at the level of campbells to set #  cant punish civil D for actions not suffered by P  Ratio: single digit OK, double digit isn't  10:1 probably too much (Gman says this is judicial activism)  Ct says few awards can exceed a single-digit ratio o Lower cts will be afraid to violate this b/c don’t want to get reversed  (3) criminal penalty was only 10k  145mil too large when compared to criminal penalty  UT tried to create a test for this -- rare case should be punished. SCOTUS said this is irrelevant and rejected it. Only care about harm done to P at Ds hands o Matching punitives to the wealth of the D: after Campbell, it has nothing to do with the analysis anymore (Ct doesn’t expressly say so, but it doesn’t fit in the 3 factor analysis anywhere) o The only thing wealth might be relevant for now is to limit punitives -- might be a positive fact for D to limit


States are permitted to have juries to award punitives -- little methods enforced as matter of law, but there are constitutional limits  Most states have adopted Gore guideposts as a guide for juries o This is the rule in CA o If the 3 factors weigh heavily against D, ct will find it violates substantive DP Gore guideposts: 1. Reprehensibility 2. Ratio 3. Civil or criminal penalties Phillip Morris v. Williams: Ps estate suing PM for fraud (advertising in old days; e.g., doctors endorsing cigs) o Ps attorney asked the jury to consider all the smokers in OR that were deceived  As good of a fact pattern as we're going to get with similar facts -- could get good evidence of # of ppl who took up smoking in this period and were exposed to ads o Jury comes up with a bunch of compensatories and 79.5 million in punitives  obvious jury considered smokers in OR similarly situated  State court found that we weren’t punishing out of state conduct; Ps similarly situated; single digit ratio not a rule, but a suggestion o SCOTUS: Due Process bars punitive damages for harm caused to individuals not involved in the litigation  (Breyer) says it is appropriate to consider potential harm and can show harm to other victims because that’s relevant to reprehensibility but jury can’t use evidence to punish conduct towards others o Can use to look at Ds reprehensibility but can’t use it to punish o This doesn’t make sense to Gman -- how can you consider it w/out considering it?! o Dissent (Stevens): why wouldn’t you consider it for reprehensibility + doesn’t get the difference between what's ok according to majority and what's not ok o Gman: impact will probably be not to consider other harms (avoid altogether) Punitive Damages in Contract Independent tort requirement: it is still the general rule that punitive damages cannot be awarded for breach of K. But if an independent tort is committed in a contractual setting, punitive damages can be awarded for the tort. o That the breach can be described with epithets -- deliberate, willful, malicious, in bad faith -- is not enough. There must be fraud. Formosa v. Presidio E &C (Texas): D acted fraudulently by taking bids from contractors that were artificially low b/c of their misrepresentations – basically a scheme to defraud a bunch of contractors o Well established that the legal duty not to fraudulently procure a K is separate and independent from the duties established by the K itself o Tort damages are recoverable for a fraudulent inducement claim irrespective of whether the fraudulent representations are later subsumed in a K or whether the P only suffers an econ loss related to the subject matter of the K  The mere failure to perform a K is not evidence of fraud. P must present evidence that D made representations with the intent to deceive and with no intention of performing as represented + evidence presented must be relevant to Formosa's intent at the time the representation was made o Formosa rejects a requirement, at least for fraud cases, that the tort do some damage independent of the K damages o Class notes:  Cause of action:


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At complaint stage, P sues for breach of K because the K itself didn’t reflect the manner in which the D agreed to perform (D breached)  There's also fraudulent inducement of the K (based on misrepresentations)  And fraudulent performance of K  Jury finds that there is fraud and that it caused damages of 1.5 million (compensatory). K breach damage = 1.267  P breached in minor ways that offsets amt of damages  After remittitur, fraud damages reduced to 700k and K reduced to 500k  Double recovery: can get both as long as not getting based on the same facts  Plead in way that damages for each measured differently  There’s a rule against double recovery – ct has to decide how much overlaps, give one instead of both + excess P picked the damages for the tort (plus under facts, no independent money under the K breach that’s not covered in the tort)  Plus with tort can get punitives The independent tort basis is a hook for bringing in punitives Take away from case = find a tort hook so you can get punitives  no punitives for breach of K because we don’t exact retribution for breach of K  Find a dollar of tort -- watch out for double recovery 

Duplicative damages: on the facts of Formosa, every $ that was given to P for breach of K were going to P for tort – no separate damages  If there is a complete overlap, the P can’t get more than the higher measure -- P elects, but would go with the higher measure  Assuming there are punitives available, want to maximize tort figure as much as possible  waive the K and sue in tort: ratio will be the tort measure of damages for punitive analysis (700k v. 500 k in Formosa)  When it comes to the initial pleading filed with the court, complaint needs to say whether P is suing under a theory of restitution or in compensatories. In this case, don’t need to choose in advance/ plead in alternative – can ask for both because they're both compensatory  What if there was also a possible compensatory claim? Can, in the initial pleading stage  have to give D notice of cause of action  CAN sue for unjust enrichment if also suing in K and tort if sued in the alternative, i.e., K + tort and in the alternative, UE  The only requirement at the pleading stage (Constitutional and FRCP) is notice  Don’t have to chose early, reserve your right to elect remedy  If you get reliance damages, but no expectancies+ UE, those go together – can argue that you're entitled to reliance in addition to restitution -- UE doesn’t depend on you spending $ in reliance -- as long as there's no double recovery, can combine (sue in K only for reliance)  Can be a case where there are different damages  Ex. of case where you would need to chose between assumpit and constructive trust = attorney who steals money


The 3 Kinds of Contempt   Not actual remedies – Methods for helping to get remedies We think about contempt most often when there is a court order (i.e., injunction) that hasn’t been obeyed o Not about failure to pay damages o We only care about contempt with injunctive situation. If judgment owed and not paid -collection, not contempt power  If we stretch INJ into restitution, contempt power can be used for ex if someone refuses to pay a constructive trust


Civil coercive contempt  Designed to force the D to comply with an order  Not trying to punish for failure to comply (not punitive); rather, goal is to get a result o It’s a civil contempt order  Could occur in a criminal proceeding (e.g. civil witness that doesn’t testify)  Ways to enforce  Money -- can make progressive, but this is dangerous (Bagwell)  Can fine a person until they cooperate  The money DOES NOT go to the P -- goes to the court/state treasury -- but judge has discretion to order money to go to P (up to judge, but what's important is that it coerces the D. Usually, the ct keeps the $)  Jail  Doesn’t work with corporation, but can work with a person  At courthouse, not with the general prison population  Harsh, b/c person hasn’t been charged, but nonetheless the court has the power to imprison for contempt -- hold them in jail until they cooperate  These are ministerial orders -- judge running the ctroom -- seen as minor  No need for a jury because not a cause of action, judge commanding person to follow their order  Don’t get reasonable doubt as a std -- usually just a preponderance  Occasionally, a civil coercive order can become so extreme that you can argue it has become punitive  if successful, can get due process protections  jury trial, evidentiary standard Criminal contempt  Meant to punish  There can be a criminal cause of action for willful decision to disobey act order accompanied by the act of disobeying + evidence that D is able to comply, D can be convicted for criminal contempt  case brought by prosecutor  Get a jury  If penalty is too minor, may not be entitled to jury trial, beyond reasonable doubt  There's a continuum -- if common law, need to argue case by case (I think Gman said there are some statutes) Civil compensatory contempt (not available in CA)  If the D violates the injunction, in most jx, the court can go to the inadequate legal remedy -eg force D to pay the P damages  In CA, we force Ps start over -- could be good case for criminal contempt + still have civil  Don’t want judge to finish the case (decide damages) --> relitigate damages with new judge, case but can still ding D for contempt



Int'l Union, United Mine Workers v. Bagwell


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The UMW were ordered to pay $52 million in contempt fines that the ct characterized as civil and coercive Rule: contempt fines for widespread, ongoing out of court violation of a complex injunction constitute criminal sanctions entitling a penalized party to a jury trial  Due process requires that criminal laws provide prior notice of both the conduct to be prohibited and the sanction to be imposed. The fines imposed here are more analogous to fixed, retrospective criminal fines. The fines assessed were serious, and thus disinterested fact finding was essential. The Union was entitled to a criminal jury trial

The Collateral Bar Rule o The rule applies only to criminal contempt o CBR: you can’t challenge the validity of an INJ when you are in a criminal contempt case (different case from initial case litigated)  If attacking a criminal contempt order, cannot attack the validity of ct order violated as a defense Walker v. City of Birmingham o Ct held MLK and several others in criminal contempt for violating a ct order  Decision to withhold permit was later held unconstitutional, but cant violate contempt order -- need to appeal, follow procedure o CA does not have the collateral bar rule  If you receive a criminal contempt finding for violating a ct order, you can get out of it if you prove the order violated was illegal/void  If the protest in Walker had occurred in CA, MLK would have been able to have order lifted b/c it was unconstitutional -- but take the risk o Exceptions:  If the ct lacked jx to issue the order, can violate and defense can be that it wasn’t an order  If the order is clearly frivolous, then you can disobey, and in proceeding to invalidate the criminal contempt (vacate it) can use as a defense – can’t say it was unconstitutional or illegal/contrary to law  Why would you not extend this same principle to an unconstitutional order?  On its face the denial was unconstitutional, yet CBR applied  CT said they needed to appeal and have reversed  Should we have a CBR that forces ppl to suffer the criminal contempt order when a patently invalid order has been issued? US v. Shipp o Ship charged with aiding mob that lynched his prisoner rather than protecting him Is the CBR a good idea or not? o Most ppl who are violating a ct order are getting it wrong -- we normally don’t want D to take law into their own hands and cause irreparable injury  Do we let Ds like Shipp and MLK make the decision or let the ct process work?  Easy to be on MLKs side, but he was right about order -- very few cases like the Walker case  Should we really want to put in the hands of Ds the calculation for whether they will win? (In CA yes, but is this a good idea)  Arg for CA rule is that allocation of risk will be done properly by ppl who we want to break (MLK types) while others (who are likely to violate anyway) will probably lose on appeal o D is allowed to break the law in CA if the underlying law that’s being violated is unjust  But is a lawyer allowed to advise client that they can break the law? What are you allowed to do as a lawyer? Remedies touches upon PR in this area -- don’t know, hard Q Reason for collateral bar rule: It is not to protect the rule of law generally but it is about protecting the court’s power. The threat of crim contempt is itself a coercive tool that the court has and the Court does


not want to see that power undermined. If you do not agree with the injunction issued, you have to go through the appellate process. Possible exceptions to the collateral bar rule mentioned in Walker: (1) If D had attempted to directly attack the injunction but was met with delay or frustration. The threat of crim contempt is itself a coercive tool that the court has, that the Court does not want to see undermined. (2) If court that granted the injunction had no jx, the injunction can be ignored. However, the court has jx to determine its own jx. Thus, while it is deciding whether it has jx, a court can preserve the status quo through a court order and that court order has to be obeyed. (3) If the injunction is transparently invalid or has only a frivolous pretense to validity, it does not have to be obeyed. [This exception does not seem to be a viable one. The injunction in Walker was transparently invalid because all it did was incorporate a statute which was plainly unconstitutional. If the order is not ―transparently invalid‖ in Walker, then it seems an order will never be ever be transparently invalid.


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