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					REMEDIES OUTLINE
TRAVIS FALL 2011

  I.   INTRODUCTION
          a. THE BASIC REMEDIAL TOOLS
                  i. Why Do People Sue:
                        1. Money, validation, enforce a contract, get D to do something, prevent D
                            from doing something, protection of an interest/right/valuable, tool to
                            prompt behavior, prevent unjust enrichment, clarity, change policy/law,
                            gain leverage in other suit or as a discovery tool
                 ii. Overview
Legal                                           Equitable
Damages                                         Coercive Orders
    Compensatory (from injury to $)            Injunctions:
    Nominal (Symbolic award)                        Preventative
    Punitive (punish or deter egregious             Interlocutory
       behavior)                                     Modern
                                                (+ contempt)
                                         Restitution
Quasi-contract                                  Constructive Trust
Quantum Meruit                                  Equitable Lien
                                                (+contempt)


            b. LAW V. EQUITY
                 i. Overview
                             Legal                              Equity
Definition                   Damages ($)                        Injunctions (Action/inaction)
Decision Maker               Jury                               Judge
Flexibility                  Mechanical (treated as right       More flexible with relief
                             less discretion)                   (more discretion)
Priority                     First Option                       Fall back option (when legal
                                                                remedy is inadequate)
Defenses                        Fewer defenses                  More defenses because it’s
                                                                about justice as a whole
Subject of Judgment             In rem (about thing/item,       In Personam (orders to D as a
                                money)                          person and contempt power)




                                                                                                      1
II.   DAMAGES
        a. COMPENSATORY DAMAGES
             i. CONTRACT DAMAGES (can Prove Breach of Contract)
                  1. Three Different Measures
                        a. Expectation:
                                i. the goal is to complete the contract from the plaintiff’s
                                   perspective, put the plaintiff in the position they would
                                   have been in had the contract been completed, plaintiff gets
                                   the benefit of the bargain
                                       1. Difference between the perfect world (proper
                                          performance) and actual world
                               ii. Eastlake Construction Co. v. Hess (Wash 1984)
                                       1. P Hired D to build condos. D breached by not
                                          installing specified kitchen cabinets, court found
                                          damages by: value of cabinets specified – value of
                                          them installed. The court could also have measured
                                          the FMV of the condo with installed cabinets –
                                          FMV of the condo with specified cabinets.
                        b. Reliance (P)
                                i. The goal is to undue the contract from the plaintiff’s
                                   perspective
                                       1. Difference between the world before the contract
                                          was formed and the actual world (P can pay money
                                          to 3rd parties here)
                        c. Restitution (D)
                                i. The goal is to undo the contract from the defendant’s
                                   perspective
                                       1. Difference between before the contract was formed
                                          and the actual world. Make sure the D was not
                                          unjustly enriched (undo what flowed to D)
                        d. Liquidated
                                i. Liquidated Damages Clause
                                       1. Contracting Parties can stipulate to a specific sum
                                          on money that would be payable as damages to a
                                          non-breaching party for a material breach of the K
                                       2. Requirements
                                                a. Damages must be difficult to ascertain at the
                                                   time of the K
                                                        i. Can Show 3 ways:
                                                       ii. Foreseeability Problem
                                                      iii. Uncertainty Problem in Proving
                                                           causation/fact of damages and/or
                                                           amount
                                                      iv. Proof of damages problem
                                                b. Amount must be a reasonable approximation
                                                   of damages



                                                                                              2
                                     i. To determine if reasonable estimate,
                                        can compare it to actual harm or
                                        potential harm.
                                    ii. Hard to prove damages can be taken
                                        into account to say the estimate is
                                        reasonable.
                    3. Factors to Consider
                            a. Terminology Matters
                                     i. “Penalty” is not Liquidated Damages
                                        Clause, but can still get ordinary
                                        measure of damages
                                    ii. Must be express not implied in K
                            b. Intent of the parties
                            c. Unequal bargaining power
                            d. Fixed sum regardless of gravity of the
                                 breach
                            e. Recovery always greater than actual
                                 damages cost (more like a penalty)
                            f. Recovery in specific facts greater than actual
                                 damages cost
                            g. Reasonable if LD acts as a ceiling because P
                                 could get more under the contract
                            h. Equity, should courts enforce?
             ii. Mitigation
                    1. Mitigation is not considered here, get entire LD
                        amount
           iii. Burden
                    1. Burden of Proof on person challenging clause
            iv. Alternative Performance Argument
                    1. One side can argue, LD not breach so no damages,
                        just alternative performance
             v. Truck-Rent-A-Center, Inc. v. Puritan Farms 2nd., Inc. (N.Y.
                 1977)
                    1. K, D leased 25 new milk delivery trucks from P for
                        a term of 7 years. D would pay weekly fee and had
                        option to buy after a year. LD cause said ½ of all
                        rental fees due in the K period. D terminated after 3
                        years.
                    2. Damages Difficult to ascertain, could P re-rent
                        trucks? It was a reasonable estimate because trucks
                        used by D, so makes sense that the rental value
                        would be cut in ½, was a dying market so allocated
                        risk, no disparity in bargaining.
            vi. Lake River Corp. v. Cardorundum Co. (7th Cir. 1985)
2. No Double Counting




                                                                           3
      a. No double counting or else P will be put in a better position than if
         the K had been completed
      b. What can you get at the same time?
               i. NO Expectancy + reliance
              ii. YES Reliance + Restitution (as long as no double counting)
             iii. YES Expectancy + restitution (as long as no double
                  counting)
3. How to Chose A Theory
      a. P can chose which theory they want
               i. If you have a losing contract, you would be happy about the
                  breach
                      1. If losing K (and no expectancy damages) try for
                          restitution or reliance
      b. If you cannot chose expectation damages with reasonable
         certainty, try for restitution or reliance
4. Buyers Breach/Seller’s Remedies
      a. Basic Measure’s For Buyers Breach
               i. Expectation
                      1. Remaining K price – variable costs saved
              ii. Reliance
                      1. Variable costs expended – portion of K price
                          received
             iii. Restitution
                      1. Value to D directly at P’s expense – portion of K
                          price paid
      b. Basic Measure for Buyers Breach (This one or above?)
               i. K price –
              ii. market price/resale price –
             iii. already paid k price +
             iv. incidental damages –
              v. variable costs saved
                      1. If no FMV, can’t resell, or lost volume seller then
                          don’t subtract market price/resale price
      c. Basic Rules
               i. Seller can get incidental damages, but NOT consequential
                  damages
              ii. Incidental Damages
                      1. Direct harm that the seller suffers, usually a cost
                          necessary to mitigate harm from the breach
                              a. Transportation, storage, adjustments to make
                                   a sale
             iii. Consequential Damages
                      1. Indirect harm to seller, usually the seller’s lost
                          profits from some other transaction




                                                                            4
                                                         a. Foregone employment with someone else,
                                                            profits would have been made from prestige
                                                            if K had been performed
                                 d. Policy
                                           i. We don’t want buyers insuring the sellers on their entire
                                              business.
                                                  1. If the K is going to make or break the business, the
                                                      seller should be on the hook.
                                          ii. We want to encourage efficient breach.
                                 e. Sprague ? Or Under Nominal Damages?
                         5. Seller’s Breach/Buyers Remedies (Especially in Construction)
                                 a. Basic Measure (Dif than above basic damage measures why?)
                                           i. Cost of repair/replace/complete +
                                                  1. Unless clearly disproportionate to the value of the
                                                      repair, then get diminution in value
                                                  2. Cost of Repair
                                                          a. Costs of material + labor
                                                          b. (Lost profits not subtracted here)
                                                  3. Diminution in Value
                                                          a. Difference between value as is and value if
                                                               it conformed to the K
                                          ii. Incidental damages +
                                                  1. Delay In Construction
                                                          a. Lost Use/reasonable rental Value/Interest
                                                               (No double counting)
                                        iii. Consequential damages –
                                                  1. Lost business opportunities with 3rd parties
                                         iv. Costs saved
                                                  1. what buyer did not take out on the contract price,
                                                      other expenses saved like advertising
                                          v. When is cost clearly disproportionate to the value of the
                                              repair?
Ratio                       Cost of Repair v. Difference in Value of Item
                            Cost of Repair v. Difference in Value of entire K
                            Cost of Repair v. Overall K
                            Cost of Repair v. Assets of D
Personal v. Commercial      Personal, more likely to get cost of repair
Use
Aesthetics v. Functional    Aesthetics, more likely to get cost of repair
Bad Faith                   Courts informally consider this, if bad faith, more likely to get cost
                            of prepare
Repairs Already Done        If P already repaired and wants reimbursement, likely to get it
Size of K/ Other Damages Likely to get award cost where damages are large and cost of repair
Awarded                     is small, less likely if K was cheap but repair is very expensive
Uncertainty                 If value of repair is uncertain, usually give the benefit of the doubt
                            to the buyer


                                                                                                            5
6. Lost Volume Seller
      a. When the seller would have sold another good to another party,
          just giving him damages for the first good is not going to make
          him whole.
               i. Note: allows seller to recover for both goods, applies to Ks
                  for services and lease agreements too
      b. Applies in two other situations
               i. No FMV of the good
              ii. Cannot resell the good
                      1. Do not subtract the resale or rental price in these
                          situations either
      c. Requirements
               i. Seller would have to solicit the additional sale even if there
                  had been no breach
              ii. Seller would have succeeded in the solicitation
             iii. Seller would have been able to perform both Ks
             iv. Possible fourth requirement, the addition sale would have
                  been profitable.




                                                                               6
ii. TORT DAMAGES
      1. Purpose:
            a. To make the injured party whole by substituting money for their
                losses. Putting someone in the same position they were in before
                the tort occurred. Most similar to reliance in the contract context.
      2. Types:
            a. (3) Injury to personal property
            b. (4) Injury to real property
            c. (5) Physical Injury to person
      3. Personal Property
            a. Destroyed
                     i. Default Rule
                            1. Pre-tort value (FMV at time and place right before
                                destruction ) – scrap value (what could get for
                                property as scrap) + loss use (maybe applies. Like
                                sub. Or interest or what someone could have rented
                                that for that time, or if damage is income producing,
                                actual value to P. For rental and actual value to P,
                                need to subtract costs).
                                    a. FMV = what a willing buyer would pay a
                                         willing seller on the market when both have
                                         all the info. Most common, can always get
                                         this. Want to always argue for actual value
                                         to P or sentimental value to P. Argue actual
                                         if no market for item.
                                    b. Actual Value = original cost, replacement
                                         cost, cost to reproduce, depreciation in
                                         condition. Objective.
                                              i. Clothes/household items.
                    ii. When?
                            1. Only has scrap value (perm. Damaged has more)
                   iii. Lane v. Oil Delivery, Inc. (1987)
                            1. Family fire in home caused by oil delivery
                                company. Remanded and said P may not be entitled
                                to full replacement cost because condition of items
                                matters. P must prove such certainty as the nature of
                                the case permits. Owner may give an opinion of
                                worth although he or she is not an expert. The basis
                                for opinion cannot be mere speculation and witness
                                must establish grounds for any opinion given.
                   iv. Carbasho v. Musulin (W. Va. 2005)
                            1. P hit by D, P’s injuries settled , but D killed her dog
                                – element of a tort. Held for FMV, wont even give
                                actual value. P wanted court to use sentimental
                                value but court says valuation problem with this.
                    v. Sentimental Value Issue



                                                                                    7
            1. Usually actual or intrinsic value to P (not
                sentimental value)
            2. Sentimental value to P only to items generally
                capable of generating “purely sentimental feelings”
                ( no other worth), not just emotions peculiar to the
                owner. Objective standard.
                    a. Can include racing rings not wedding rings.
                        Heirlooms, trophies, photos.
     vi. Other Issues:
            1. Wholesale v. Retail
                    a. If owner is merchant or consumer makes
                        difference in how to measure value.
            2. Clothes/Household Items
                    a. FMV unless holding them for business
                        purposes.
            3. Pets
                    a. Maj. FMV
                    b. Min, Actual to P
b. Damaged Permanent
      i. Default Rule
            1. Pre tort value (fmv) – post tort value (fmv) + loss
                use (maybe applies. Like sub. Or interest or what
                someone could have rented that for that time, or if
                damage is income producing, actual value to P. For
                rental and actual value to P, need to subtract costs).
                    a. Dim in value = change in value of property
                        or pre tort – post tort.
     ii. When?
            1. Property is permanently damaged where the repair
                is not possible or economically feasible
                    a. Maj: if cost of repair exceeds pre-tort value
                        of the property.
                    b. Min: if cost of repair exceeds diminution in
                        value
c. Damaged Temporary/Reparable
      i. Default Rule
            1. Reasonable cost to repair + loss use (maybe applies.
                Like sub. Or interest or what someone could have
                rented that for that time, or if damage is income
                producing, actual value to P. For rental and actual
                value to P, need to subtract costs).
     ii. When?
            1. Repair is possible and economically feasible, can be
                brought back to original value. P can get cost to
                repair if:




                                                                    8
                             a. Maj: if cost of repair does not exceed pre-
                                tort value of the property.
                             b. Min: if cost of repair does not exceed
                                diminution in value
            iii. Limit
                     1. Property owner who holds property for personal
                         reasons can recover reasonable restoration costs
                         even if those costs exceed the diminished value of
                         the property and the pre-tor value of the property.
                     2. The “reason personal” rule allows an owner to elect
                         to recover restoration costs rather than diminution
                         in value in appropriate cases where restoration is
                         reasonable = reason personal must be objectively
                         reasonable and restoration costs must be objectively
                         reasonable in light of P’s reason personal and the
                         diminution in value of the land.
             iv. If cannot be repaired to its original condition
                     1. P is entitles to recover diminution in value of the
                         land, measured as the difference between the market
                         value of the property immediately before damage
                         and market value immediately there after
              v. Hewlett v. Barge Bertie (1970)
                     1. Barge owner sunk barge, finds some uses for it,
                         another barge hits it court awarded $2,895,
                         damaged temporarily and used majority view to cap
                         at pre-tort FMV, although the $2,895 did not go
                         over it.
      d. Permanently and Temporarily Damaged Property need to no?
               i. Rule
                     1. Cost of repair + diminution in value + lost use
                         (unusual)
      e. Limits to all Above 3 Categories? (Can be unfair to P)
               i. Reasonable Cost To Repair:
                     1. Majority caps this at pre-tort FMV (P’s want this)
                     2. Minority caps this at drop in FMV (Diminution in
                         value)
4. Real Property
      a. Miller v. Cudahy Co. (10th Cir. 1988)
               i. Facts:
                     1. P owns land used for farming. D, a Salt Co., has salt
                         seeping into P’s property in an under ground aquifer
                         which was used by P for irrigation. P’s soil ruined,
                         could no longer grow lucrative crops. Tort harm to
                         real property.
              ii. Holding:




                                                                              9
                      1. Court held that the damage was temporary and
                          repairable (fixable) so applied cost of repair + lost
                          use. However, here, P did not repair and cost to do
                          so was infeasible (salt will be there for 200 years)
                          so court awarded P lost crop profits/ongoing lost
                          use (corn – wheat), which as $3 million.
                              a. P wanted temporary repair because can re-
                                 sue every time new injury. Also gives D an
                                 incentive not to harm again.
                              b. D wanted damaged permanently as to bar
                                 the SoL claim and only pay once.
      b. Measures are The Same as Real Property
               i. Destroyed:
                      1. Pre tort – scrap value + lost use (maybe)
              ii. Permanently Damaged
                      1. Diminution in value + lost use (maybe)
             iii. Temporarily Damages
                      1. Cost of Repair + Lost use
             iv. Permanently and Temporarily Damaged
                      1. Cost of repair + diminution in value + lost use
                          (maybe)
      c. When is P entitled to Cost of Repair/ Court’s always question this:
               i. Majority: When cost of repair less than pre tort value
              ii. Minority: when cost of repair is less than diminution in
                  value
             iii. Reason Personal
                      1. P can get cost of repair where there is a personal
                          reason for wanting it fixed (objective)
      d. Distinguish Between Temporary and Permanent
               i. 2 Approaches
                      1. Economic
                              a. Is it too expensive to repair?
                      2. Formal
                              a. Can the injury be abated?
              ii. Classification Affects the outcome
                      1. Affects Measure of recovery
                      2. Also Affects SoL
                              a. Perm: runs when P learns of damage
                              b. Temp: has not started to run
5. Personal Injuries (Bodily Injuries to Persons)
      a. Note:
               i. Nature of D’s conduct only affects the amount recoverable
                  with regard to punitive damages for the most part they are
                  independent from the basis of the claim.
              ii. However, there is a distress component for physical harm,
                  which includes the mental suffering in addition to the



                                                                             10
          physical harm. Not considered special damages because no
          need to allege these in the complaint, understood.
     iii. Consider periodic payments
              1. Less uncertainty/more litigation
              2. Economically inefficient
              3. Requires mechanism to deliver funding
                  cost/administration
              4. Would drop contingency fee basis (how would
                  lawyers get paid)
              5. Option of long-term annuity payment
              6. D won’t pay more than P’s actual costs
              7. P likes this if lives longer than life expectancy
              8. Good if P is bad at money management
              9. D may be insolvent, not able to make payments in
                  the future
              10. More difficult for courts to enforce
              11. P wants closure/made whole
              12. When would attorney be paid?
     iv. Both minors and parents have claims
              1. Child: pain suffering and lost earnings
              2. Parent: Loss of earning of child during minority,
                  travel, lodging, telephone
b. Categories of Damages
       i. Lost earnings
              1. Money from existing job that P lost/will lose
                  because of temporary absence
      ii. Lost earnings capacity
              1. Money from a potential job that P lost or will lose
                  because of an injury
              2. Calculate:
                      a. Job P would have had x earnings capacity
                      b. (Diminished capacity)
                               i. Job P would have had – job P does
                                   have x work expectancy
              3. Factors:
                      a. Race/Gender (windfall v. mistakes)
                      b. Geographic Location
                      c. Likelihood of Latent Disease
                               i. Demonstrate with reasonable
                                   possibility
                              ii. Usually have to bring claim for all
                                   past/present/future before SoL runs
                      d. Likelihood of Degree
                               i. Siblings/Parents
                      e. Costs Saved
                               i. Degree



                                                                    11
               f. Taxes
                        i. Award should deduct taxes would
                           have to pay
               g. Present Value
                        i. Award reduced to this usually
                       ii. How does one calculate this?
               h. Inflation
                        i. If present value should account for
                           inflation.
                       ii. Since Frankel, know that without
                           inflation, people left badly
                           undercompensated.
iii. Medical expenses
       1. Past (to trial) and future (trial and forward, what
           will need x life expectancy)
       2. Rely on medical bills (Insurance doesn’t take away
           from recovery)
       3. Parents can recover for paying for child
       4. Future medical expense: rely on expert testimony
       5. For future expenses must show more likely than not
           will need procedure, 51%
       6. “Single Action Rule” – must be able to show future
           harm at once, if develop later can’t collect.
iv. Special expenses
       1. Institutionalization
               a. Show reasonable necessary
               b. Public v. Private (chance of recovery)
       2. Tools/Equipment
       3. Special Education
       4. Money management
       5. Home remodeling
       6. Transportation/accommodation
 v. Pain and Suffering
       1. How should this be calculated:
               a. Per Diem Argument:
                        i. Daily value for pain x life
                           expectancy
                       ii. Allowed in CA
               b. Job offer, Per Diem argument
                        i. Can Be both per diem (suggest a
                           number) and golden rule
                       ii. unfairly prejudiced the jury.
                      iii. There is no market for this
                      iv. Illusion of validity
               c. Golden Rule approach: how much would
                   they want?



                                                           12
                      d. Lump Sum arguments, many jx permit this
                               i. Best estimate of future expenses at
                                  trial
                              ii. Inaccurate?
                             iii. Allowed in CA
                             iv. Anchoring a number that is close to
                                  what jury should chose, tactic
                      e. Willingness to pay arguments
                               i. most jx rejected
              2. Should These Arguments Be Allowed?
                      a. Yes
                               i. let adversarial system play out
                      b. No
                               i. Illusion of certainty in calculation
                              ii. Golden rule shifts jury’s attention
                                  away from evidence, to what they
                                  would want
c. Frankel v. United States (E.D. Pa. 1970)
       i. Facts:
              1. Automobile collision with car driven by Army, P
                  sustained serious irreversible personal injuries. Her
                  guardian brought suit for medical expenses and
                  personal injuries.
      ii. Holding:
              1. To calculate lost earning when someone does not
                  have a job, Job P would have x work expectancy.
                  Frankel after college would have made $5K per
                  year until age 65.
              2. Also do not reduce to present value because P
                  would get windfall then, so institutionalization will
                  be reduced to present worth.
d. Wilburn v. Maritrans GP Inc. (3d Cir. 1998)
       i. Facts:
              1. P injured when swept off the deck of the tug during
                  a storm
      ii. Holding:
              1. Use “shockingly excessive standard to review jury
                  verdicts. Loss of future earnings is subject to
                  mathematical calculation. P was 38, was receiving
                  $44K as barge captain could receive $50k,
                  assuming retirement age of 65 = $162,000. One
                  million dollars for physical and psychiatric
                  disorders was not excessive.
e. Debus v. Grand Union Stores Vermont (1993)
       i. Facts:




                                                                     13
              1. P was injured while shopping at D’s store when a
                  pallet of boxes, piled high and imbalanced, toppled
                  over and fell upon her. Boxes contained cans of pet
                  food. Had 20% permanent disability. During closing
                  argument P suggested that jury think about P;s
                  injury in terms of daily pain and suffering,
                  suggested an average daily figure then multiply by
                  days P would live. “Per Diem” argument.
      ii. Holding:
              1. Per Diem arguments OK if made under the ordinary
                  supervision and control of trial court. Told them it
                  was only a “suggestion”.
                      a. Judge can explain to jury difference between
                          evidence and argument
                      b. Jury instructions counsel the jury that
                          arguments of counsel are not evidence and
                          guide the jury to estimate the proper amount
                          based on the evidence
                      c. Defense counsel can anticipate per diem
                          arguments and be prepared to counter them.
     iii. Dissent:
              1. Suggesting a time-unit calculation technique for
                  fixing damages for pain and suffering is O.K. but
                  prohibit any suggestion by counsel of specific
                  monetary amounts. Also should give a specific
                  cautionary instruction.
                      a. Illusion of certainty
                      b. No evidentiary basis for formula
                      c. Juries are misled and deceived by effect of
                          multiplication
                      d. Defense counsel put in difficult position
f. Remittur and Additur
       i. Amount of a damage award is an issue of fact for the jury
          however, most jx provide only deferential review allowing
          a reviewing court to disturb a jury verdict only when it is
          excessive or shocks the conscience or is obviously the
          result of passion or prejudice.
      ii. Remittur:
              1. Reviewing courts, if determine award is excessive,
                  generally does not set-aside entire verdict. Instead
                  sets aside portion concludes excessive. In many jx P
                  has option of accepting the remitted verdict or
                  seeking anew trial on damages
     iii. Additur:
              1. P may also seek review is think jury verdict is
                  inadequate. Usually only found inadequate if fails to



                                                                    14
include an element of damages that was proven or if
view in light most favorable to D fails to award
substantial amount of compensation for pain and
suffering. Additurs incursion into jury so should
only be done with great caution. Courts less likely
to do this.




                                                15
iii. LIMITS ON DAMAGES
        1. Two Approaches Courts Can use To Limit Damages
              a. Substantive
                      i. No Cause of Action
              b. Remedial
                      i. P can state cause of action but courts will only award a
                          certain amount
        2. Types of Limits
              a. Distress Damages/Emotional Harm
              b. Economic Loss Damages
              c. Foreseeability
              d. Certainty
              e. Duty to Mitigate
              f. Collateral Source Rule
                      i. C – f , can be discussed in all claims
        3. DISTRESS DAMAGES EMOTIONAL HARM
              a. Contracts (remedial): Contract claim will not support distress
                  damages
                              1. Kwan. V. Mercedes-Benz of North America, Inc.
                                  (1994). Problems with car and getting them fixed
                                  gave car owner lots of distress about safety of
                                  family in his car. Court said no emotional distress
                                  damages because Consumer Act comparable to
                                  provisions normally available to a buyer for a
                                  seller’s breach of contract for the sale of goods.
                                  Here, no physical harm so no emotional distress.
                                  Contract restatement required breach of contract
                                  that is very personal in nature, which s car is not,
                                  mental distress not foreseeable.
                              2. P cannot recover distress damages in contracts
                                  regardless of core injury
                              3. Exceptions
                                      a. Breach that causes physical harm/
                                           independent tort cause of action
                                      b. Emotional Interest Contract – where
                                           emotional component is the essence of the K
                                               i. Loved ones remains disposal
              b. Torts (substantive level): If there is no core injury, only emotional,
                  than there is no cause of action.
                      i. Policy
                              1. Bogus insurance claims
                              2. Judicial efficiency
                              3. Measurement Too Speculative
                              4. Floodgate of litigation
                              5. Causal connection between stress and injuries is too
                                  tenuous



                                                                                    16
              6. Inherent difficulty of proof in such cases requires
                  excessive reliance of P’s testimony
              7. Too speculative
      ii. Exceptions
              1. P suffers distress from viewing an injury to a loved
                  one, if they are in the zone of danger
                      a. 3 requirements
                                i. P is in zone of danger (exposed to
                                   risk of bodily harm by D’s conduct)
                               ii. Harm to an immediate family
                                   member
                              iii. Serious distress from witnessing the
                                   harm to family
              2. Parasitic damages, if able to state an action for
                  invasion of another interest, than can only be
                  limited remedially (foreseeability and certainty)
              3. Physical manifestation of emotional distress (emo
                  distress serious enough to cause physical injury)
              4. IIED, when D acts recklessly or maliciously to
                  inflict mental distress P may recover if suffers
                  severe distress without physical manifestations
                      a. Requires:
                                i. Intentional Act
                               ii. Outrageous conduct
              5. NIED
c. Crinkley v. Holiday Inns, Inc. (4th Cir. 1988) (physical
   manifestation of emo distress)
       i. Facts:
              1. Couple checked into hotel, and hotel bandits beat up
                  husband several times. Wife was bound and gagged
                  and stolen from too. Sued hotel etc. for inadequate
                  security of reasonably forseeable assault.
      ii. Holding:
              1. Found D’s were negligent in providing inadequate
                  security and that it caused injuries and that they
                  could get $500,000 in compensatory damages,
                  which included physical damage to wife, who
                  suffered heart issues after bing under the stress of
                  the incident.
d. Notes
       i. Thin-Skulled P
              1. Take P as found him, even if ordinary person not
                  this sensitive
      ii. Physical Pain can equal sever psychological conditions too
e. Goldberg v. Mallinckrodt, Inc. (2d. Cir. 1986)
       i. Facts:



                                                                    17
       1. D lied about spinal dye having no negative
          consequences and then P used it on two patients
          who were paralyzed from waist down etc. P sued D
          for fraudulent misrepresentation.
ii. Holding:
       1. P’s lost income for not doing procedures anymore is
          not a direct result of D’s alleged fraud.
       2. Emo distress not compensable.
       3. Emotional disturbance suffered must be serious and
          verifiable and must be ties as a matter of prox.
          cause to the observation of the serious injury or
          death of an immediate family member. Finally, P
          must himself have been in the zone of danger. Here,
          these things have not been meet.




                                                          18
4. ECONOMIC LOSS DAMAGES
     a. Defined
            i. Generally defined as damages resulting from inadequate
               value because the product is inferior and does not work for
               the general purposes for which it was manufactured and
               sold.
           ii. It includes both direct and consequential economic loss.
          iii. The former is the loss in value of the product itself; the
               latter is all other economic losses attributable to the product
               defect.
                    1. Damage to product itself of monetary loss caused
                        by the defective product which DOES NOT cause
                        personal injury or damage to other property.
     b. Substantive Theory
            i. Torts:
                    1. Traditional view precludes any recovery for
                        negligently inflicting economic losses absent
                        physical harm to person or property.
                    2. If core injury, P can recover pure economic loss
                        (parasitic)
                             a. Policy:
                                      i. Provides predictability in otherwise
                                         uncertain area of law and places
                                         reasonable limits on tort feasors
                                         potential liability
                                     ii. Such pecuniary losses are too remote
                                    iii. Encourages settlement.
                                    iv. Maintain fundamental distinction
                                         between tort and contract law
                                     v. To protect commercial parties’ (or
                                         party best situated) freedom to
                                         allocate economic risk by contract
                    3. J’Aire did we read this case?
                             a. P can recover for lost business in tort, even
                                 though purely economic harm.
           ii. Contract
                    1. NO DIRECT LIMIT FOR ECONOMIC LOSES IN
                        BREACH OF CONTRACT CLAIMS.
     c. Exceptions
            i. Special relationship that created a duty to protect from
               economic harm.
                    1. Factors to Consider:
                             a. K intended to benefit P
                             b. Harm was forseeable
                             c. Harm was certain
                             d. D’s conduct was morally blameworthy



                                                                           19
                       e. Public policy favors duty
                       f. Close connection between Ds conduct and
                            Ps injury
       ii. Intentional interference would permit recovery of pecuniary
           losses only.
d. Clark v. International Harvester Co. (Idaho 1978)
        i. Facts:
               1. Defective tractor manufactured by D. P alleged a
                   breach of implied/express warranties and negligent
                   design and manufacture. Damages based on
                   downtime when equipment was being repaired and
                   asserted that the tractor failed to function as
                   warranted.
       ii. Holding:
               1. The purchaser of a defective product who has not
                   sustained any property damage or personal injury,
                   but only suffered economic losses cannot recover
                   those losses in a negligence action against the
                   manufacturer.
               2. Manufacturer cannot be held for the level of
                   performance of his products in the consumer’s
                   business unless he agrees that the product was
                   designed to meet the consumer’s demands.
               3. Limited to physical injury.
               4. Econ loss only = no cause of action
               5. Injury to subject matter of K (tractor), is not enough
                   for core injury.
      iii. Note:
               1. Law of negligence does not impose a duty to build a
                   tractor that plows fast enough and break down
                   infrequently enough for P to make a profit. This is
                   not to say that such a duty could not arise by a
                   warranty – express or implied – by agreement of the
                   parties or by representations of the defendant but
                   the law of negligence imposes no such duty.
e. Defective Products Can Cause
        i. Physical Injury TO Person = recoverable
       ii. Physical Injury to Property = recoverable
      iii. Economic Injury from Loss of Bargain = Absent fraud,
           remedies governed by warranty law, no
      iv. Other Economic Injury = No recovery




                                                                     20
5. FORSEEABILITY
     a. Contract (Remedial Level):
            i. Liability
                   1. Kind of harm must be forseeable, and the degree of
                       harm must be forseeable (at remedial level)
                   2. The loss must be reasonably forseeable from the
                       perspective of the breaching party at the time the
                       contract was formed.
                   3. Forseeability at time K was made - “Hadley “ Rule
                       applied strict and general: Apply to torts below?
                           a. Strict = D “tacitly agreed, by implication or
                                expressly at the time of the contract to
                                accept the risk of the particular loss”
                           b. General = rejected tacit agreement test for
                                the recovery of consequential damages. Loss
                                must have been forseeable at the time of
                                contracting even if it was not actually
                                forseen.
                           c. General = those which flow directly and
                                immediately as a natural consequence of the
                                kind of wrongful act by the breaching party.
                                Presumes they were forseen by the D.
                           d. Special = Although actually caused by D’s
                                acts would not necessarily always follow
                                from such conduct. Liability attaches only
                                by reference to the special character,
                                condition, or circumstances of the non-
                                breaching party and the loss must be forseen
                                by the breaching party rather than implied
                                by law.
           ii. Policy
                   1. Party should be held accountable only for those
                       risks that were forseeable at the time of making
                       contractual promises.
                   2. Forseeability of potential risks should have
                       modified a persons behavior.
     b. Torts (Sub Level):
            i. Liability
                   1. Kind of harm must be forseeable, not necessarily
                       the degree of harm though
                   2. Once a duty is established, the actor is responsible
                       for all the ensuing harm proximately caused by
                       conduct in breach of that duty.
                           a. Polemis – all direct consequences are
                                compensable regardless of the
                                unforseeability of the consequences



                                                                         21
                      b. Wagon Mound – does not seem consonant
                          with justice that actor should be liable for
                          everything direct because some things are
                          extremely unforeseeable.
                      c. Palsgraph – once duty established, duty
                          arises from the foreseeability of harm to that
                          person. In absence of forseeabiliy, there is
                          no duty and thus no liability. “unforeseen
                          P’s” get no recovery.
              3. Thin-Skulled P
                      a. Forseeability does not limit damages in
                          cases where the extent of a personal injury is
                          greater than anticipated.
              4. Usually greater recovery in torts than in contract.
      ii. Overall policy
              1. Excluding recovery of damages that are too remote.
c. Redgrave v. Boston Symphony Orchestra (Pg. 630) (K breach
   about foreseeability but mostly certainty)
       i. Facts:
              1. Actress hired to narrate symphony but D canceled
                 their contract with her because she was politically
                 involved. P wanted compensation for the damages
                 of the cancellation which she alleged led to 3rd
                 parties not offering her parts.
      ii. Held
              1. Court held that it was forseeable that D’s canceling
                 of the K would lead to P losing other work
                 opportunities as well.
              2. But, court said P could not prove with certainty that
                 D’s conduct caused the harm.




                                                                     22
6. CERTAINTY
     a. Liability
             i. A limiting factor in contract and tort liability is the
                requirement that the injured party must prove damages with
                reasonable certainty.
                    1. Applies in showing that D acted in illegal
                         manner/(causation) should we know this causation
                         part?
                    2. AND the extent to which to which the D should be
                         held accountable for the consequences of their
                         misconduct (amount of damages).
            ii. A p may satisfy this burden upon producing a reasonable
                evidentiary basis that would allow damages to be calculated
                without speculation or conjecture. Mathematical exactitude
                is not required.
                    1. Must be flexible and pragmatic in order to
                         accommodate differences in torts and contracts and
                         broad categories that range of harms. Can
                         sometimes use opinion evidence. Usually all that is
                         requires is proof of actual or estimated costs.
           iii. If P fails to meet this, may still receive nominal damages.
     b. Policy
             i. Compensatory damages should be awarded to make an
                injured party whole but not to punish.
            ii. Balance difficulty in quantifying harm against the policy of
                compensating for the injury.
     c. Tort (Causation - substantive damages - Remedial)
             i. Rest. Second of Torts 912, - as the nature of the tort and
                circumstances permit.
            ii. Emotional damages etc. more inherent, so lower certainty
                required here than for contracts.
           iii. Higher hurdle for causation certainty than damage certainty
                because its an element of claim. Once D liable lower
                standard for damage certainty.
           iv. Wrongdoer bears the burden of uncertainty that exists in
                our system of settling differences. Esp when D’s actions
                prevented the P from making a just and reasonable estimate
                of the losses suffered.
            v. Where courts determine that no rational basis exists to
                measure damages, the task of calculating any potential
                recovery is considered insurmountable.
           vi. Youst v. Longo (Tort/causation)(Majority) (Cal. 3d 1987)
                    1. Facts:
                             a. P claims D, a harness driver of another
                                horse, negligently and intentionally
                                interfered with the owner of P’s horse



                                                                         23
                                                    during a race, thereby preventing the owner
                                                    from the chance of winning a particular cash
                                                    prize.
                                         2. Holding:
                                                 a. P must show a probable loss
                                                         i. Preponderance of the evidence
                                                            standard (more likely than not) (<
                                                            51%)
                                                 b. The chance of winning a contest is too
                                                    uncertain upon which to base tort liability.
                                                    No sufficient degree of certainty that the
                                                    plaintiff ever would have received the
                                                    anticipated benefits. Certain contests have a
                                                    higher probability of ultimate success than
                                                    others. This one does not. On the facts, it is
                                                    not reasonably probable that horse would
                                                    have finished higher than did. Winner of
                                                    horse race not always the leader, horses can
                                                    break the pack, even as a matter of strategy
                                                    and many race are won by a nose.
                                                 c. Policy
                                                         i. Would other wise open the floodgate
                                                            of litigation on alleged missed
                                                            opportunities to win various types of
                                                            contests despite the speculative
                                                            outcome of them. In fact, it is the
                                                            speculative
                                 vii. Lost Chance Approach (Causation or damages Minority):
                                         1. P gets the value of change in odds (change in
                                             percentage (%)) x (change in outcome ($))
                                         2. For adverse odds gets: (change in percentage) x
                                             (make whole amount of a full life)
What about damages?                                 Youst                      Lost Chance
                                        Positive Event
51 %                                                Yes c/a                    $51k
49 %                                                No c/a                     $49k
Likelihood of Adverse Event
                       Odds more than double of adverse event happening
                                                    Can recover full
                                                    amount

                           d. Contract (Causation and damages = Remedial)
                                 i. Higher level of certainty required here, than torts because
                                     tort elements like pain and suffering and emotional distress
                                     are inherently difficult to quantify into dollar amounts.



                                                                                               24
 ii. Can be determined in any manner reasonable under the
     circumstances.
iii. Two ways to prove lost profits
         1. Before and After theory and
         2. Yardstick test, compares similar businesses
iv. Cannon v. Yankee Products Co. Inc. (Mass. App. 1977)
     (contracts)
         1. Facts:
                 a. Worm discovered by customer of restaurant
                     in a plate of peas prepared by restaurant but
                     grown by D. Customer made a stink in the
                     presence of 50 or so customers. Supposedly
                     the word spread and P noticed a reduction in
                     the number of customers at his restaurant.
                     Noticed other customers eating elsewhere.
                     Made efforts to increase volume of business
                     but were futile. P brought suit against D for
                     breach of warranty and wanted damages for
                     lost profits.
         2. Held:
                 a. Cannot recover damages where they are
                     remote, uncertain, contingent or speculative
                     as not to be susceptible of trustworthy proof.
                     A claimant cannot prevail when any
                     essential element is left to conjecture,
                     surmise, or hypothesis.
                 b. Here, no evidence of diminution of receipts
                     or sales but no evidence of how much of this
                     constituted loss of profits. No opinion or
                     basis of one.
                 c. But, will get nominal damages.
                 d. nature of them that makes such competitions
                     interesting.
                 e. To allow recovery without proof of probable
                     loss would essentially eliminate the tort’s
                     element of causation.
 v. Where the value of a chance for profit is not outweighed by
     a countervailing risk of loss and where it is fairly
     measurable by calculable odds and by evidence bearing
     specifically on the probabilities that the court should be
     allowed to value that lost opportunity.




                                                                25
7. DUTY TO MITIGATE (Remedial Level)
     a. Components:
            i. Affirmative
                   1. Allows damages reasonably incurred to mitigate
                       damages.
                   2. Burden of proof on P
                   3. Component of damages
           ii. Negative
                   1. Precludes an injured party from recovering damages
                       that could have been averted by taking reasonable
                       steps following accrual of the harm.
                   2. No restriction on a party’s substantive entitlement
                       to damages but a limitation on the measure of
                       damages recoverable for a tort or contract breach.
                   3. Excludes damages that result from a failure to
                       minimize losses.
                   4. Burden of proof on D
                   5. Affirmative defense
     b. Policy
            i. An injured party is not expected to undertake extraordinary
               measures to suffer undue hardship.
           ii. Fairness, social responsibility.
     c. Contracts
            i. Can have both affirmative and negative in this context:
                   1. Affirmative:
                           a. P’s reasonable efforts to obtain substitute
                               employment increase damages
                   2. Negative
                           a. P’s failure to accept a substitute employment
                               reduces recovery, unless sub is inferior or
                               different
           ii. General rule is that party injured must make every
               reasonable effort to minimize damages and may not recover
               for damages which could have been avoided by reasonable
               efforts under existing circumstances.
          iii. Parker v. Twentieth Century-Fox Film Corporation (Cal.
               3d 1970)
                   1. Facts:
                           a. P was under written contract for her services
                               as an actress in a motion picture. D decided
                               not to make film P was hired for and offered
                               to employ her in some other film. D claims
                               P refused to mitigate D’s damages by taking
                               the other film offered to the P.
                   2. Holding:




                                                                        26
                    a. General rule is that the measure of recovery
                        by a wrongfully discharged employee is the
                        amount of salary agreed upon for the period
                        of service less the amount which the
                        employer affirmatively proves the employee
                        has earned or with reasonable effort might
                        have earned from other employment.
                        Employer must show however, that the other
                        employment was comparable or
                        substantially similar to that of which the
                        employee has been deprived.
                    b. Employees rejection of or failure to seek
                        other available employment of a different or
                        inferior kind may not be resorted to in order
                        to mitigate damages.
                    c. Here, other offer was both different and
                        inferior.
                             i. Ca v. Australia
                            ii. Song/dance v. Country western
                           iii. New K took P’s approval rights over
                                director and screenplay
              3. Notes:
                    a. If you do actually mitigate, you do not get to
                        recover twice.
d. Torts
       i. Lobermeier v. General Telephone Company of Wisconsin
          (Wis 1984)
             1. Facts:
                    a. P sustained a ruptured eardrum with
                        resulting hearing loss while talking on the
                        phone in his parents’ home. Phone installed
                        and maintained by D. P’s injuries caused by
                        a lightning-induced electric charge. P had
                        ear drops and was recommended to have
                        surgery. Dr. performed surgery on patient.
                        But Dr. then suggested another surgery
                        which patient declined because future
                        surgery was risky. D said P did not properly
                        mitigate his damages.
             2. Holding:
                    a. Matter of fact to be determined by jury
                        whether a reasonable person under the
                        circumstances would submit to a second
                        surgical procedure. Jury decides reasonable
                        course of conduct to mitigate the injuries.
             3. Note:



                                                                  27
               a. Approaches to refuse surgery
                         i. Doctor Decides
                        ii. Reas Person
                       iii. P decides
ii. Proof Needed
       1. D must prove that a person of ordinary intelligence
           and prudence under the same or similar
           circumstances would have elected to undergo the
           recommended medical procedure. If the defendant
           meets the burden of proof, the consequences of the
           injured party’s failure to mitigate damages is that
           the fact finder will not allow damages for those
           consequences of the injury which the plaintiff could
           have avoided by the exercise of ordinary care.




                                                            28
8. COLLATERAL SOURCE RULE
     a. About
             i. D’s sometimes make payment of undisputed some before
                trial. Such pre-trial payment to a P are then credited against
                the wrongdoers ultimate liability.
            ii. The collateral source rule states a negative corollary to the
                above mentioned situation:
                     1. Compensation or other benefits which an injured
                         party receives from a source unaffiliated or
                         independent of the responsible party NOT deducted
                         from the D’s liability.
                     2. It also serves as an evidentiary preclusion device:
                         the D may not introduce evidence that the P has
                         insurance coverage or has received gifts or benefits
                         from other source.
          iii. Difficulty comes in trying to determine if a source is
                independent.
                     1. Independent
                             a. Private things
                             b. Private medical insurance
                     2. Dependent
                             a. Public sector social (security) benefits
                             b. Medicare
                             c. Unemployment benefits
     b. Policy
             i. Injured person can end up receiving double compensation
                for a single harm.
            ii. Exception to the traditional goal of compensatory damages
                to place plaintiffs as nearly as practicable in the position
                they held prior to the harm.
          iii. Would have less incentive to purchase insurance if
                insurance benefits were viewed as an offset to tort liability.
           iv. Without the rule, P’s would be net losers because they paid
                the insurance premiums.
            v. If insurance provided for subrogation rights, the injured
                party may not in fact receive a double recovery.
           vi. This rule also serves as a rough offset for the attorney’s
                contingency fees.
          vii. Between the tortfeasor and the P, any windfall should be
                enjoyed by the innocent party.
         viii. Tortfeasor should not garner the benefits of the victim’s
                providence.
           ix. Policy encourages citizens to purchase and maintain
                insurance for personal injuries.
            x. Double recovery is justified only in the face of some
                exceptional, supervening reason, as in that case of accident



                                                                           29
          or life insurance. Where it is felt unjust that the tortfeasor
          should take advantage of the thrift and prescience of the
          victim having paid the premiums.
      xi. Most insurance provide for either subrogation or refund of
          benefits upon a tort recovery.
     xii. Also, generally the jury is not informed that the P’s
          attorney will receive a large portion of the P’s recovery in
          contingent fees or that personal injury damages are not
          taxable to the P and are normally deductible by the D.
          Hence P rarely receives full compensation.
    xiii. More policy (page 678).
c. Helfend v. Southern California Rapid Transit Dist. (Cal. 1970)
       i. Facts:
               1. Bus-auto collision.
      ii. Holding:
               1. Judgment for P in this tory action against the D
                   government entity should be affirmed. The t.c.
                   properly followed the collateral source rule in
                   excluding evidence that a portion of P’s medical
                   bills had been paid through medical insurance plan
                   that requires the refund of benefits from tort
                   recoveries.
               2. D’s should not be permitted to show that P had
                   received medical coverage from any collateral
                   source.




                                                                      30
b. NOMINAL DAMAGES




                     31
c. PUNITIVE DAMAGES
      i. Purpose
            1. Not available to redress all legal wrongs.
            2. Awarded to punish D’s for egregious conduct and deter defendants and
                others from future offenses. These damages are intended to make public
                examples of inappropriate behavior. They are also supposed to hurt D’s
                financially.
     ii. Available
            1. Not an independent cause of action but a derivative claim, so entitlement
                to an exemplary award is dependent upon the success of the underlying
                claim.
                    a. Jx divided over what type of showing is necessary to satisfy the
                         damage element of an underlying claim and therefore render a D
                         liable for punitive damages.
                              i. (Minority) An award of nominal damages cannot support
                                 an award of punitive damages.
                             ii. (Majority) An Award of punitive damages is O.K. if
                                 underlying claim only got nominal damages.
                                     1. All that matters is D has violated a right.
                            iii. All jx’s:
                                     1. Need at least an ward of nominal or compensatory
                                         damages.
            2. Generally available when a D acts with an evil motive such as spite, ill
                will, intent to injure or fraud or when a D acts with gross recklessness or a
                willful disregard for the rights of others.
                    a. Principal case describes this as:
                              i. Conduct giving rise to punitive damages is malicious,
                                 wanton, willful, or sufficiently egregious conduct.
            3. Ca Civil Code
                    a. Proven by clear and convincing evidence that the defendant has
                         been guilty of oppression, fraud, malice, the P may recover
                         punitive damage award.
                              i. Malice = conduct intended by the D to cause injury to the P
                                 OR despicable conduct which is carried on by the D with a
                                 willful and conscious disregard of the rights and safety of
                                 others
                             ii. Oppression = despicable conduct that subject a person to
                                 cruel or unjust hardship in conscious disregard of that
                                 person’s rights
                            iii. Fraud = intentional misrepresentation deceit or
                                 concealment of a material fact known to the D with the
                                 intention on the part of the D of thereby depriving a person
                                 of property or legal rights or otherwise causing injury.
                    b. There must be malicious intent OR reckless indifference
                              i. Malicious
                                     1. desire to do harm



                                                                                          32
                        ii. Reckless indifference
                                1. Known danger
                                2. Conscience disregard
        4. Never awarded automatically or as a right
                a. Trier of fact has discretion whether to award them at all and if so,
                    in fixing the amount.
        5. USSC said they do not constitute excessive fines but have recognized that
            at some point a punitive damage award may be so excessive that it violates
            a D’s right to due process.
                a. Due process also requires minimum procedural safeguards to
                    ensure that punitive damages awards are not arbitrary deprivations
                    of property.
                         i. Have been challenged under:
                                1. 8th amendment
                                        a. cruel and unusual
                                        b. rejected by USSC
                                2. procedural due process (Honda Motor Case)
                                        a. need meaningful judicial review
                                        b. must have some factors to restrict the
                                           discretion of the jury
                                3. substantive due process
                                        a. limit to punitive damages because it is the
                                           deprivation of property without due process
                                        b. award cannot be grossly excessive
                                           guideposts:
                                                i. reprehensibility of D’s conduct, can
                                                   punish D for acts to P but not anyone
                                                   else
                                               ii. ration between actual potential harm
                                                   and award, no more than 9:1 ratio
                                                   (can’t be ten times more)
                                              iii. other sanction generally; sanctions
                                                   for similar conduct as benchmark
        6. Other Jurisdictions
                a. Some allow for punitive damages based on a showing of gross
                    negligence
iii. Factors in Determining the Amount
        1. Nature and reprehensibility of the D’s wrongdoing
        2. Seriousness of the harm resulting from the misconduct
        3. D’s awareness that resulting harm would happen
        4. Relationship between actual harm and amount of punitive damages
        5. Total deterrent effect of other damages and punishment in posed upon the
            D
        6. Duration of the misconduct
        7. Any attempt to conceal the misconduct
        8. D’s intent



                                                                                     33
9. Actual and Potential harm
10. Recidivism
11. Relationship between the D and P
12. D’s financial condition
       a. Most common measure
                i. Net worth of D’s assets less the value of its liabilities
               ii. Usually evidence of wrongful profits standing alone is
                   insufficient to assess a D’s wealth (not ceiling of punitive
                   damage award)
       b. principal of diminishing marginal utility – requires us to see if
           award is excessive or proportional
       c. Such proof is not necessary to sustain an award for punitive
           damages.
       d. Bifurcation needed here, because jury may be biased if know how
           much money D has
       e. BMW v. Gore (USSC 1996)
                i. Facts:
                       1. Decision by national distributor of automobiles not
                           to advice its dealers, and hence their customers, or
                           predelivery damage to new cars when the cost of
                           repair amounted to less than 3% of the car’s
                           suggested retail price (fraud). T.C. awarded $2
                           million dollars in punitive damages to purchaser of
                           one of these cars.
               ii. Holding:
                       1. Fact that BMW is a large corporation does not
                           diminish its entitlement to fair notice of the
                           demands that the several States impose on the
                           conduct of its business.
       f. Campbell
                i. Facts:
                       1. Car accidents, Campbell’s insurance refused to pay
                           out and refused to settle case for $50,000. Instead
                           went to trial and got Campbell’s personally liable
                           for $185,849. Campbell’s sued State Farm for bad
                           faith, fraud, and IIED. State Farm had national
                           scheme to cap payout on claims company wide
                           which was stupid in this instance. Plus told
                           Campbell’s to sell their shit to move things along
                           quickly.
               ii. Holding:
                       1. Applies guideposts from Gore. The wealth of the D
                           cannot justify an otherwise unconstitutional
                           punitive damages award.
                               a. award cannot be grossly excessive
                                    guideposts:



                                                                             34
                                                      i. reprehensibility of D’s conduct, can
                                                         punish D for acts to P but not anyone
                                                         else
                                                     ii. ration between actual potential harm
                                                         and award, no more than 9:1 ratio
                                                         (can’t be ten times more)
                                                    iii. other sanction generally; sanctions
                                                         for similar conduct as benchmark
            13. Whether D profited financially from its misconduct
            14. Mitigation (other punishments/sanctions D has already faced)
 iv.    Procedures/Review
            1. An appellate reviewing court will not set aside an award of punitive
                damages unless it is so excessive that it appears to be the result of passion
                or prejudice. Look to abuse of discretion.
            2. Trial court review, shocks the conscience/passion and prejudice
  v.    Mass Disaster/Products Liability Issues
            1. Courts try to accommodate the goals of punishment and deterrence
                without imposing ruinous liability.
            2. At some point, the numerous awards based on the same conduct exceed
                the goals of deterrence and punishment and threaten the viability of the
                enterprise.
            3. Creates a race to courthouse among P’s
 vi.    Critics
            1. Punishes D’s for anti-social conduct without the benefit of the
                constitutional safeguards that apply in the imposition of criminal
                sanctions.
            2. Does not keep with the traditional compensatory goal of damages law.
            3. P’s receive a windfall in excess of what is necessary to compensate them
                for their losses.
vii.    Proponents
            1. Necessary to assess the true societal costs of D’s misfeasances
            2. Provides a fund from which P’s can recover attorneys fees and other
                litigation costs that are otherwise noncompensable.
viii.   Restrictions/Limits
            1. Many states have sought to restrict punitive damage awards through
                various legislative and judicial measures.
                     a. Some states require P’s to make a prima facie showing of liability
                         for punitive damages before they may plead damages for such
                     b. Other states require a showing before allowing discovery of D’s
                         financial condition
                     c. Many states require proof by clear and convincing evidence to
                         prove liability for punitive damages
                     d. Many states require punitive damages to be assessed in bifurcated
                         proceedings
                              i. Liability v. amount of PD
                             ii. Award of PD v. amount of PD



                                                                                           35
                e. Some states have placed ceilings on the dollar amounts allowable
                   as punitive damage awards
                f. Some states require a portion of punitive damages awards to be
                   paid to the state rather than to the P.
                g. Now clear and convincing evidence standard
                h. More specific jury instructions
ix. Contracts
       1. Usually punitive damages not allowed here regardless of how willful,
           intentional, or malicious the breach.
               a. Exceptions
                        i. But allowed if breach is also independently a tort (does not
                            include good faith and fair dealing)
                       ii. Special relationship:
                                1. Example
                                        a. Insurer’s bad faith to settle (Campbell)
                                            because has almost fiduciary relationship,
                                            unequal bargaining power, purveyor of a
                                            vital service, public trusts them, insurer in
                                            superior bargaining position, attempts to
                                            restore the balance in the contractual
                                            relationship.
 x. Wauchop v. Domino’s Pizza, Inc. (N.D. Ind. 1993)
       1. Facts:
               a. P died as a result of an automobile accident where her minivan was
                   struck by a car driven by Domino’s franchise employee. The
                   franchise agreement said the store will not offer delivery service to
                   any customer whose order cannot be delivered within 30 minutes
                   of the time such order is places. P alleged that delivery rule
                   warranted punitive damages.
       2. Holding:
               a. Reckless indifference
                        i. Known danger
                                1. Evidence that employees knew of known danger
                                2. Media criticism of danger
                                3. Franchise has hard time getting insurance because
                                    of policy
                       ii. Conscience Disregard
                                1. Never talked about safety of policy
                                2. Did not investigate the realities of guarantee
                                3. No mandatory safe driving instructions
xi. Corporate Context
       1. To prove state of mind
               a. Look to high up officials
                        i. People with managerial capacity acting within scope of
                            duties of corp. OR




                                                                                      36
                        ii. Participation or consent or after the fact gratification from
                            OR
                       iii. Retention of an unfit employee
 xii. Class Actions
          1. Court sets punitive damages for entire class with no opt. out chance.
xiii. Silverman v. King (N.J. 1991)
          1. Facts:
                 a. P house dealer at Casino. Dealt D wining hand, D gave dealer a big
                    hug and lifted him off the ground while doing so. P was
                    particularly susceptible to this type of contact because had
                    previous back problems.
          2. Holding:
                 a. D did not know of P’s condition so no known danger and therefore
                    no punitive damages.




                                                                                        37
III.   RESTITUTIONARY REMEDIES
         a. LEGAL RESTITUTION
                i. Introduction
                       1. Comparison
                              a. K deals with bargained for losses and gains
                              b. Tort deals with unbargained for loss
                              c. Restitution deals with unbargained for gains
                              d. FOCUS ON D’S GAINS NOT P’S LOSSES
                       2. Used
                              a. Can be used in place of contract or tort because you have no claim
                                 there or one fails
                              b. Can be used in addition to a contract or tort claim because the
                                 measure of recovery is not enough
                              c. Can be sole remedy or in addition to other claims
                              d. Restitution = an independent substantive basis of recovery that is
                                 allowed as necessary to avoid unjust enrichment.
                              e. LIMITED TO THE MEASURE OF THE D’S GAINS.
                       3. History
                              a. Developed separately both at law and in equity.
               ii. Quasi-Contract
                       1. Quasi-Contract
                              a. Common law courts developed restitutionary device called quasi-
                                 contract based on assumpsit.
                              b. The courts here, infer a contract where one perhaps does not exist
                                 because equity supposes there ought to have been one.
              iii. Types of Quasi-Contract Actions
                       1. Assumpsit
                              a. Action P’s used to recover for breaches of express contracts.
                              b. Fiction designed to oblige payment to the P of the amount of unjust
                                 enrichment.
                              c. Actions for money had and received or for money paid.
                       2. Quantum Meruit (“as much as he deserves”)
                              a. Value of services rendered without a K
                              b. Allows recovery of the reasonable value of beneficial services
                                 rendered or materials furnished under circumstances not covered
                                 by express contract where retention of the benefit would constitute
                                 unjust enrichment.
                              c. Without this, the D would be unjustly enriched at the P’s expense.
                              d. Used for reasonable value of services rendered to a D.
                       3. Unjust Enrichment
                              a. Court must find (no regard to the intention of the parties):
                                      i. An enrichment in the sense that the D has received
                                         something of value (at P’s expense) AND
                                             1. Benefit = any form of advantage
                                     ii. The enrichment should be disgorged from the D to rectify
                                         an unjust result (to P).



                                                                                                 38
                                1. It is not necessary to prove tortious, illegal, or
                                    fraudulent conduct by the D to establish that the
                                    enrichment is unjust.
                                2. Innocent people can be ordered to restore property
                                    to another in order to prevent unjust enrichment.
                b. Doesn’t Apply
                        i. In setting of a marital relationship. Where both spouses
                           perform the usual and incidental activities of the marital
                           relationship and upon dissolution there can be no
                           restitution.
                                1. Where agreement between spouses and
                                    extraordinary or unilateral effort by one spouse
                                    which insures solely to the benefit of the other by
                                    the time of dissolution, restitution is appropriate.
                c. Recovery
                        i. Award to appellee should be limited to the financial
                           contribution by appellee for appellant’s living expenses and
                           direct educational expenses. Appellee should not recover
                           more than the benefit of her bargain.
iv. Limits (Applies in failed contract scenarios)
       1. Limits recovery to what D actually got
       2. Limits recovery to what P bargained for
 v. Pyeatte v. Pyeatte (Ariz. 1982)
       1. Facts:
                a. Wife and husband entered into an agreement whereby husband
                   would go to law school and wife would support him through that
                   and then she would go and get her education and he would support
                   her. They divorced before wife got any support. Wife brought
                   contract suit but the terms of the spousal agreement were not
                   sufficiently definite to constitute a binding enforceable contract.
       2. Holding:
                a. But, affirmed T.C.’s award as an equitable award of restitution.
                   Where a person has rendered services to another or services which
                   have inured to the benefit of another, is entitled to restitution
                   therefor if the services were rendered.
                        i. Awarded wife $23,000 in damages for husbands “breach”.
                           Cost of wifes education. Wife did not get cost of husbands
                           education because her education was less expensive.
                b. Must show:
                        i. Received a benefit
                       ii. By receipt of that benefit was unjustly enriched at P;s
                           expense
                c. Here, court inferred a quasi-contract (constructive contract, no
                   valid K needed) by law as a matter of reason and justice from the
                   acts and conduct of the parties and circumstances surrounding the
                   transactions and are imposed for the purposes of bringing about



                                                                                     39
                justice without reference to the intentions of the parties. Quasi-
                contract inferred by circumstantial evidence rather than by express
                written or oral terms. Not a contract but more of a duty imposed in
                equity.
vi. Monarch Accounting Supplies, Inc. v. Prezioso (Conn. 1976)
      1. Facts:
             a. P leased an office building from the D. D subsequently executed
                another lease with an outdoor advertising company for purposes of
                installing a large sign on the roof of the building. P sued D for
                unauthorized use of the premises. Contract did not refer to the roof.
                But D did not reserve control of the roof so had no right to lease
                the roof premises.
      2. Holding:
             a. P entitled to damages for unjust enrichment of the D. D received a
                benefit to which he was not entitles to the detriment of the P (P had
                right to sublet or use roof as he wanted).
             b. Damages should be the benefit received. The benefit was the rent
                that was received by the D less his expenses.
             c. A prospective award is not properly includable within the concept
                of damages, only focus on benefit unjustly RECEIVED and
                RETAINED by D.
      3. Note:
             a. Since they both needed each others permission, should they split
                the sign rent in half?




                                                                                  40
b. EQUITABLE RESTITUTION
      i. Elements
            1. Same elements required as under law:
                  a. D enriched at P’s expense
                  b. Retention of benefit unjust
            2. Plus additional required elements:
                  a. Fiduciary/confidential relationship
                  b. OR fraud mistake duress undue influence
                  c. AND remedy at law inadequate
                            i. Since the remedy of constructive trust is equitable in
                               nature, the court must inquire into the adequacy of
                               available legal remedies to provide redress for the
                               claimant’s injury.
     ii. Two Types
            1. Constructive Trust
                  a. About
                            i. Method for disgorging unjust enrichment.
                           ii. Imposes an equitable duty on a defendant to convey
                               property acquired under certain circumstances to the
                               rightful owner.
                                   1. Circumstances include
                                           a. Title to property by fraud
                                           b. Various other wrongdoings
                                           c. Mistake
                          iii. Based on fiction that the D became an involuntary trustee
                               of the unjust enrichment for the benefit of the plaintiff. D
                               would be unjustly enriched if allowed to keep anything.
                          iv. Has nothing to do with an express trust, which is created by
                               the intention of the parties. The constructive trustee is
                               designated by the court in order to recover the enrichment
                               held by the wrongdoer.
                                   1. Implied by the facts surrounding a transfer or
                                       property. A constructive trust is created without
                                       reference to the intention of the parties.
                                   2. Similarity:
                                           a. Trustee holds title to property subject to
                                               equitable duty to hold it for or convey it to
                                               the holder of the beneficial interest.
                           v. Also used on insurance contexts, where there is a breach of
                               fiduciary relationships, has parted with misappropriated
                               property, or unique property wrongfully withheld.
                  b. Tracing
                            i. Where the D has exchanged the property by
                               buying/selling/transferring it and P can trace new property
                               back to the original property – P can recover the new form
                               of the goods!



                                                                                         41
       ii. Disgorges from the D anything traceable from unjust
           enrichment.
     iii. Can seem punitive in nature (like when property purchased
           with embezzled money increases in value and have to give
           that back). However, wrongdoer must return all profit.
c. Benefits
        i. P can get the increase in value of property
       ii. Rightful owner may compel conveyance of the property in
           specie. Therefore by obtaining specific enforcement of the
           trust:
               1. P gets priority against all other creditors
     iii. P can exercise rights against 3rd parties except bona fide
           purchasers for value
      iv. Can obtain specific restitution of property.
d. Disadvantages
        i. No deficiency judgment is value of property decreases
       ii. Will be denied if adequate remedy at law exists
     iii. Sometimes issues with no jury trial where equity takes
           urisdiction.
e. County of Cook v. Barrett (Ill. App 1975)
        i. Facts:
               1. P filed a complaint against D seeking a constructive
                   trust and an accounting for bribes allegedly received
                   by him while he held office. D served an elected
                   position of trust and duties of faith. Salary fixed by
                   law. D began receiving kickbacks from voting
                   machine companies to use their products. Payments
                   were approximately $180,000 in total.
               2. Previous complaint failed because County had no
                   damage and suffered none, so no unjust enrichment
                   at expense of county.
       ii. Holdings:
               1. Constructive trust arises not by agreement but by
                   operation of law and is imposed upon grounds of
                   public policy to prevent a person from holding for
                   his own benefit that which he has gained by reason
                   of a special trust or confidence reposed in him by an
                   innocent party. Purpose is to prevent unjust
                   enrichment.
               2. To make a case a P must allege facts which disclose
                   either actual or constructive fraud or an abuse of a
                   confidential relationship.
               3. Here, D was fiduciary of the people of Cook County
                   as an elected public official he held a position of the
                   highest public trust. Exact fiduciary perimeters of
                   his obligation are not necessary to locate. He was



                                                                       42
                         bound to act solely for the benefit of his principal.
                         So, when he got benefit, that benefit should be
                         recovered.
                      4. Absence of damage immaterial.
2. Equitable Liens
      a. About
               i. An equitable lien operate as a charge or encumbrance on
                  property. It is also available where the plaintiff can trace
                  misappropriates property to its product.
              ii. Treats the title to the property as belonging to the claimant.
             iii. Preferred when:
                      1. The property has declined in value and
                      2. When there is not a severable interest in the D’s
                          property against which the P is making an equitable
                          claim.
             iv. Grant security interest in property, rather than specific
                  relief
      b. Elements For EL on Specific Property (R. Section 161)
               i. A debt, obligation between parties arising out of an express
                  or implied agreement of the parties
              ii. Specific property or res to which the debt or obligation
                  attaches
             iii. A clear intent, express, or implied, that the property serve
                  as security for the payment or obligation; and
             iv. No adequate remedy at law
      c. Purpose
               i. To disgorge benefits unjustly acquired by the D.
      d. Tracing
               i. P can get the money interest secured by the new form of the
                  good if he can trace it back.
      e. Benefits
               i. P gets priority over creditors
              ii. P, as a general creditor, gets a deficiency judgment for the
                  balance of the claim if the property decreases in value of
                  some of the funds have been dissipated
             iii. If D insolvent, EL takes priority over other creditors
             iv. Gives a security interest to the extent of the benefits
                  unjustly held by the D.
              v. Remedies imposed against the particular property rather
                  than the D’s general assets
             vi. El holder obtains a priority position over general creditors
                  of the D
      f. Disadvantages
               i. P does not get the increase in value of the good itself
              ii. P cannot assert rights against 3rd parties




                                                                             43
     iii. Less expedient because requires foreclosure of the property
          in order to realize payment of the lien
     iv. Can’t collect from a bona fide purchaser of value
g. Middlebrooks v. Loans (Ga. 1980)
       i. Facts:
              1. P filed a complaint against D, her parents, alleging
                  that in reliance on their promise to repay, she loaned
                  them $25,000 which they had since used to build a
                  home on land which they owned, that they now
                  refused to repay said loan and that this constitutes
                  fraud.
              2. D said P’s claim failed to state a cause of action
                  because they never had an intent to repay the loan.
      ii. Holding:
              1. A promise made without a present intent to perform
                  is a misrepresentation of a material fact and is
                  sufficient to support a cause of action for fraud. If
                  this can be proven, P entitled to equitable lien on
                  the home and land.
              2. P has an inadequate remedy at law because D’s had
                  mortgaged the home and lot so could only take
                  subject to the rights of the mortgagee. In contrast if
                  P is given an equitable lien, P establishes
                  entitlement to right of a mortgage only if the
                  mortgagee is a bona fide purchaser.
              3. Judgment of T.C. reversed.




                                                                     44
c. LIMITS ON EQUITABLE RESTITUTIONARY REMEDIES
      i. TRACING
           1. About
                 a. Equity limits a person’s ability to obtain a constructive trust, or EL
                    by requiring the claimant to trace or follow the misappropriates
                    property into its substituted form.
                 b. Restitution of traced property may be asserted not only against the
                    wrongdoer but also against the 3rd party holding the exchanged
                    property provided they are not a bona fide purchaser.
                 c. If cant trace only remedy is a personal claim against the wrongdoer
                    and claimant may be forced to stand in line with creditors.
           2. Advantages of Tracing
                 a. A claimant may obtain specific restitution of property which has
                    been subsequently increased in value through imposition of a
                    constructive trust
                 b. Holder of equitable interest may receive a priority over the general
                    creditors of insolvent or unavailable wrongdoers.
           3. G & M Motor Company v. Thompson (Okl. 1977)
                 a. Facts:
                          i. D was an accountant of P until his death. During this time P
                             embezzled $78k from the company, a portion of which was
                             used to pay premium of various insurance policies insuring
                             the life of descendent.
                 b. Holding:
                          i. T.C. allowed to impress a constructive trust upon proceeds
                             of life insurance policies where a portion of the premiums
                             were paid with wrongfully obtained funds.
                         ii. Prevent unjust enrichment.
                        iii. Where wrongdoer mingles wrongfully and rightfully
                             acquired funds, owner of wrongfully acquired funds is
                             entitled to share proportionately in acquired property to the
                             extent of his voluntary contribution.
                        iv. Here, above principal applies because a portion of the
                             premiums were paid with wrongfully acquired money.
                         v. Company is entitles to a pro rata share of insurance
                             proceeds but not to exceed the total amount of embezzled
                             monies, interest and costs.
           4. Co-mingled Funds
                 a. Even in comingled accounts, courts will impose an EL on the
                    account to allow restitution of the amount which rightfully belongs
                    to the P.
                          i. Withdrawls: How to I.D. Whose Money (Without regard to
                             Actual Intent of Wrongdoer)
                                  1. First-In, First-Out Rule
                                          a. The first money put into the account would
                                             be presumed the first money withdrawn.



                                                                                       45
                                                     b. P benefitted or hurt under this depending
                                                         entirely upon the fortuity of how the money
                                                         was used. If the first out was claimants and
                                                         had dissipated, the equitable remedy was
                                                         lost.
                                             2. Jessel’s Bag Rule
                                                     a. The first withdrawals from the comingled
                                                         fund are presumed to belong to the
                                                         wrongdoer and the remaining balance is
                                                         subject to the equitable interest asserted by
                                                         the claimant.
                                                     b. Benefits the claimant, P can easily reach
                                                         money left in the account.
                                                     c. Bad for claimant when the first funds
                                                         withdrawn are profitably invested.
                                             3. Oatway
                                                     a. Modified Jessel’s bag to give the claimant a
                                                         choice between the assets traceable to the
                                                         funds drawn out first to those withdrawn
                                                         from the account at a alter time.
                                             4. Restatement Approach (majority in America)
                                                     a. Systematic application of the modified
                                                         choice principal. Gives claimant a
                                                         proportionate share in the fund and its
                                                         traceable products, enforceable through an
                                                         EL or CT.
                                      ii. Replacement Funds
                                             1. Majority view is that if the wrongdoer manifests an
                                                 intention to restore the claimant’s funds, the EL will
                                                 be extended to cover new deposits.
                                             2. Absent such proof, the general rule holds that the
                                                 claimant’s equitable interest in the fund cannot
                                                 exceed the lowest intermediate balance of the
                                                 account.
           d. Quick Comparison
                                 CT                                  EL
Rights                           Right to prop itself                Right to money secured by prop
Increase in Value                P gets it                           P doesn’t get it
Deficiency Judgment              Nope if value decreases             Yes if value decreases
Tracing                          Yes, right to new property          Yes, right to money secured by
                                                                     the new property
Rights Against Third Parties     Against 3rd parties, except bona    Against D only but superior to
                                 fides’                              all creditors




                                                                                                    46
i. EQUITABLE DEFENSES
     1. Laches
     2. Estoppel
     3. Unclean hands




                        47
IV.   COERCIVE REMEDIES
        a. PREVENTATIVE INJUNTIONS
              i. Professors Notes:
                    1. Usually preventative injunctions are to prevent future harms.
                    2. Multiplicity could be basis for injunction.
                    3. Some jurisdictions require irreparable harm in addition to an inadequate
                        legal remedy. (Very similar)
                    4. Courts consider when deciding to give injunction:
                            a. Practicality
                                     i. Negative injunctions preferred because more practical
                            b. Balance hardships
                            c. Public interest
                            d. Tribunal integrity
                                     i. Judges concerned, if giving injunction there will be
                                        problems, it will be used improperly.
                                            1. Problems with enforcement (impossible or unlikely)
                                                   a. For example, out of state conduct can’t be
                                                        enforceable, no jurisdiction.
                                            2. Improper use of extraordinary tool.
                                            3. First full paragraph page 72
                                    ii. Boomer/Walgreens (illustrate this)
             ii. Boomer v. Atlantic Cement Company (N.Y. 1970)
                    1. Facts:
                            a. D operates a large cement plant near Albany. Neighboring
                                landowners allege injury to their property from dirt, smoke, and the
                                vibration emanating from the plant (nuisance). Can get damages
                                for past harm. During trial a nuisance was found, and temporary
                                damages have been allowed. What should court do about future
                                harm to people?
                    2. Different Options Both Parties Fought For
                            a. P Prefers
                                     i. Issue injunction to shut plant down
                                    ii. Invokes public interest
                                            1. Taking without just compensation. Inverse
                                                condemnation. Private property can take property as
                                                long as they are willing to pay for it. Only the
                                                government can do this.
                                            2. Public health/Clean-air
                                                   a. Courts don’t think its their place to handle
                                                        public health issues. Legislative role will
                                                        impugn the courts integrity.
                            b. D Prefers
                                     i. No injunction, only damages (every few years)
                                    ii. Invokes public interest
                                            1. Provides jobs
                                            2. Lots invested in Plant



                                                                                                 48
       3. Held:
               a. Court granted injunction conditioned on the payment of permanent
                  damages to plaintiffs which would compensate them for the total
                  economic loss to their property present and future caused by the
                  defendant (redressing all of plaintiffs complaints based on their
                  economic loss). This may spur research for improved techniques to
                  minimize nuisance. The conduct that adversely affects the plaintiff
                  simultaneously confers a social benefit.
                       i. Injunction or permanent damages
       4. Dissent:
               a. Does not agree with majority that assessment of permanent
                  damages should be ordered in lieu of an injunction, where
                  substantial property rights have been impaired by the creation of a
                  nuisance. It has long been the rule in this State, that a nuisance
                  which results in substantial continuing damage to neighbors must
                  be enjoined, so allowing cement company to continue to pollute
                  upon payment of permanent damages compounds a serious
                  problem.
                       i. Full injunction with an 18 month delay, develop new
                          technology.
iii. Walgreen Co. v. Sara Creek Property Co. (7th Cir. 1992)
       1. Facts:
               a. Walgreen operated a pharmacy in mall since it opened. Its current
                  lease promises that landlord, Sara Creek, promises not to lease
                  space in the mall to anyone who wants to operate a pharmacy to a
                  store containing a pharmacy. Landlord feared anchor store would
                  go out of business and informed Walgreen that she intended to
                  buy-out anchor tenant and install in its place Phar-Mor a deep
                  discount chain. Phar-Mor would include a pharmacy same size as
                  Walgreen and a hundred feet from it. Walgreen brought breach of
                  K suit and T.C. entered permanent injunction. Sara said remedy at
                  law adequate (could calculate loses), sometimes courts should
                  allow efficient breach.
       2. Holding:
               a. The choice between remedies requires a balancing of the costs and
                  benefits of the alternatives. Person seeking injunction has burden
                  of persuasion, damages are the norm, so P has to show why his
                  case is special. Injunction here was O.K. because lower court
                  noticed uncertainty in determining lost profits to Walgreen over
                  the next ten years and cost for fact finding high. Essentially
                  damages are costly and inaccurate. Cost of judicial supervision
                  here, small, and would set of a continuous rounds of negotiations
                  based on lost profits. Cost of damages would exceed cost of
                  injunction.
                       i. Injunctions have benefits because cost less than fact finding
                          for damages. Hard to determine what price is adequate



                                                                                    49
                           compensation here because market is best judge of
                           economics.
                      ii. Injunctions have disadvantages, cost courts for continuing
                           supervision by the court. It also creates bilateral monopoly.
                           Buying injunction can lead to inefficient result when
                           bargaining range is that close. Can set of round of
                           negotiations.
               b. Professor Notes
                       i. Hard to tell if this is efficient breach, but if parties went at
                           it they could figure that out. However, this fact finding
                           could take a long time.
                      ii. Effect of injunction different in Walgreens, but applied
                           similar rationales.
iv. Golf-Ball Problem (Page 53)
       1. P wants:
               a. Injunction from court to relocate the ninth green
               b. Legal remedies inadequate
                       i. Small damages, no tangible harm
                      ii. No real drop in value
                     iii. Speculative
               c. Multiplicity of suits (keeps happening)
               d. Land, give land special status
               e. Can afford to move easier than family
       2. D wants:
               a. Slight interference
               b. Legal damages O.K.
               c. Not uncertain
                       i. Factors controllable
               d. Not irreparable harm
               e. Forseeable
               f. Ninth hole is what gives greens their value.
               g. Put up a safety net.
               h. Improves property value in area/jobs
               i. Green
       3. Should court issue injunction in this case?
               a. Discretion allows judges wide leeway to craft what the injunction
                  will be.




                                                                                       50
b. LIMITS ON COERCIVE REMEDIES: EQUITABLE DEFENSES
       i. Note:
             1. These four defenses apply to all equitable remedies like injunctions,
                constructive trusts, and equitable liens.
             2. Modern equity defenses preserved even though the system of law and
                equity has merged.
             3. The defenses still have a moralistic foundation: a court will not grant
                equitable relief if the plaintiff has behaved in a way prejudicial to the
                defendant or offensive to public policy.
      ii. Kinds
             1. Laches (Delay)
                    a. Bars a P who has not acted promptly in bringing the action.
                        “Equity aids the vigilant, not those who slumber on their rights.”
                    b. With legal claim = only SoL applies, with both claims = SoL and
                        laches apply and equitable claim only = laches only applies.
                    c. Laches is flexible and focuses on weather the claimant delayed
                        unreasonably in asserting the action.
                    d. Certain factors, like the loss of facts, may excuse or toll the
                        running of the period of delay. Also looks to weather the delayed
                        claim would likely produce a substantial prejudice to the
                        defendant, such as from loss of material evidence, faded memories,
                        or economic losses.
                    e. Encourages parties to act fast and considers the underlying policy
                        claim of bringing repose to a stale claim.
                    f. Usually applies as a defense to equitable claims, so P can still
                        bring a legal claim.
                    g. A party can be foreclosed from a right or remedy because the delay
                        may result in prejudice to another who has objectively relied to
                        their detriment on a certain state of facts.
                    h. Kohle v. Eastman (5th Circuit 1980)
                             i. Facts:
                                     1. P sued based on patent infringement and wants to
                                         impose the equitable restitutionary remedy of
                                         constructive trust on the proceeds of D’s use of
                                         SGK’s patented invention. D claims that P’s claims
                                         are barred by Laches and Estoppel.
                            ii. Holding:
                                     1. Laches elements are: 1) unreasonable delay and 2)
                                         delay resulted in prejudice to D.
                                             a. Presumed unreasonable if beyond SoL, and
                                                  P has burden of justification. When action
                                                  brought within SoL period, D must show
                                                  that the delay is unreasonable and that he
                                                  has suffered injury.
                                             b. Look to when P knew or should have known
                                                  of infringement.



                                                                                         51
                             c. Factors that constitute prejudice:
                                       i. Witnesses died
                                      ii. Witness memory dulled
                                    iii. Records destroyed/missing
                                     iv. D made heavy capital investments
                                          connected to alleged infringement
                                          article
                             d. Factors that excuse delay:
                                       i. Suing others in infringement actions
                                          is not a complete bar, P must at least
                                          inform the potential infringer of his
                                          intent to pursue his rights under the
                                          patent, here this was meet, sent
                                          threatening letters, sued only 3 years
                                          after suspecting infringement
                      2. Estoppel arises only when “one has acted as to
                         mislead another and the one thus misled has relied
                         upon the action of the inducing party to his
                         prejudice”.
                             a. Requires: 1) delay, 2) prejudice, and 3)
                                 misleading action by the plaintiff which
                                 causes the D to engage in conduct which
                                 would result in its injury if the suit were
                                 allowed to go forward.
                             b. Here, no misleading conduct to abandon
                                 patent claim.
2. Estoppel (Actions Inconsistent with the Right the Plaintiff Now Asserts)
      a. Like latches, is a negative bar to what otherwise may be a
          meritorious claim.
      b. A party can be foreclosed from a right or remedy because the delay
          may result in prejudice to another who has objectively relied to
          their detriment on a certain state of facts.
      c. The government as a D can more easily show prejudice to itself
          when it asserts equitable defenses.
      d. Geddes v. Mill Creek Country Club (Ill. 2001)
               i. Facts:
                      1. P filed complaint against D for intentional trespass
                         and intentional private nuisance based on errant golf
                         balls hit onto their property from D’s adjacent golf
                         course. D thought the P’s should be estopped from
                         bringing their claim.
                      2. P’s chose the fairway over other options, at a great
                         expense the golf course was redesigned to
                         accommodate the P’s, the contract between them
                         memorialized P’s requests.
              ii. Holding:



                                                                             52
1. General rule: where a person by his or her
   statements and conduct leads a party to do
   something that the party would not have done but
   for such statements and conduct, that person will
   not be allowed to deny his or her words or acts to
   the damages of the other party.
2. Party claiming estoppel has the burden of proving
   by clear and unequivocal evidence.
       a. Barred from asserting actions may otherwise
           have existed against the party who, in good
           faith, relied upon such conduct and has
           thereby been led to change his or her
           position for the worse.
3. Elements: Party claiming estoppel must
   demonstrate that (essentially that P misled D and D
   relied to his detriment)
       a. The other person misrepresented or
           concealed material facts
                i. Can arise from silence too, if have
                    duty to speak, had opportunity to do
                    so, and knowing the circumstances
                    keeps silent.
       b. The other person knew at the time he or she
           made the representations that the
           representations were untrue
                i. No intent to mislead necessary
               ii. Just can’t raise claim inconsistent
                    with previous declaration
       c. The party claiming estoppel did not know
           that the representations were untrue when
           they were made and when they were acted
           upon
       d. The other person intended or reasonably
           expected that the part claiming estoppel
           would act upon the representations
       e. The party claiming estoppel reasonably
           relied upon representations in good faith to
           his or her detriment and
       f. The party claiming estoppel would be
           prejudiced by his or her reliance on the
           representations if the other person is
           permitted to deny the truth thereof
4. Here, D’s estoppel defense is meritorious.
       a. (1-2)P’s by conduct encouraged building of
           5th hole would damage D’s now to change.
           Knowingly agreed to placement of fairway.



                                                     53
                              b. (3) D’s did not know at time of agreement or
                                 construction that P’s would act contrary to
                                 the agreement.
                              c. (4) P’s expected Sho-Deen would perform
                                 provisions of agreement.
                              d. (5) D’s reasonably relied on P’s conduct to
                                 their detriment. Adults, contracted with.
                              e. (6) D’s would be prejudiced if P’s were
                                 permitted to deny their conduct. Spent lots
                                 of money on plans, could of made money if
                                 houses were there instead.
3. Unclean Hands
      a. Legally sound claim that is morally tainted.
      b. Interest of the court and the public, rather than relative fairness
         between the parties, that creates this bar.
      c. Elements:
              i. This applies when the 1)party seeking relief has behaved
                 inequitably 2) with respect to the rights being asserted in
                 the case. Specifically related to matter before the court.
      d. Courts will not lend their assistance to wrongdoers.
      e. Marked by maxim: “he who comes into the court of equity, must
         come with clean hands.”
      f. The inquiry is whether the behavior is offensive to the court. If so,
         P will be left with a legal claim.
      g. Conduct must occur during accrual of the action, basis cannot be
         conduct which occurs during litigation.
      h. Equitable defenses against governmental agencies are strictly
         limited to instances where the agency’s misconduct is egregious
         and the resulting prejudice to the defendant rises to a constitutional
         level.
      i. North Pacific Lumber Co. v. Oliver (Or. 1979)
              i. Facts:
                      1. P hired D and under employment contract could not
                         compete with P for two years following termination
                         of employment. D voluntarily left and started
                         working for competitor. D submitted considerable
                         evidence of bad working environment. D claimed
                         unclean hands because employer had practice of
                         essentially stealing money through improper profits
                         on the resolution of claims, even though D
                         benefitted from this too.
             ii. Holding:
                      1. Justified in quitting and working for competitor.
                         Courts will not interfere on behalf of a P whose own
                         conduct in connection with the same matter or
                         transaction had been unconscientious or unjust or



                                                                            54
                        was bad faith, violated principles of equity and
                        righteous dealing.
                     2. Applied for the protection of the court. Has some
                        limits though
                            a. Misconduct must be serious
                            b. Bear relationship to subject matter of the
                                suit
                     3. Here, yes clean-hands rule invoked. A court of
                        equity should not lens its aid to an employer who
                        attempts to enforce a contract of employment the
                        performance of which involves participation by the
                        employee in such wrongdoing. Don’t want to get
                        involved with a tainted relationship.
4. Unconscionability
      a. Initially in equity, now codified in law primarily.
      b. Similar to clean-hands.
      c. Measured at time of K formation.
      d. This defense is specifically limited to contract remedies.
      e. The defense does not create rights to support a claim for damages,
         can limit effect of bad provision or make contract unenforceable.
      f. Look to procedural and substantive issues. Process: manner of
         contract formation – bargain struck was flawed with sharp
         practices, lack of meaningful choice. Substance: terms themselves
         to determine if the consideration exchanged was excessively
         lopsided.
      g. Senter v. Furman (Ga. 1980)
              i. Facts:
                      1. P executed warranty deed on his home for
                         consideration of ten dollars and other good and
                         valuable consideration when he was 74 and in poor
                         health. P claims induced to execute the deed by
                         fraud and undue influence at a time when he was
                         facing a malpractice claim which could of cost him
                         all of his assets. P claims D promised to give
                         property back to him after his suit was over.
             ii. Holding:
                      1. Equity will not enforce the alleged trust
                         arrangement. P essentially used a conveyance to
                         conceal assets from creditors.




                                                                         55
c. INTERLOCUTORY INJUNCTIONS
       i. What It Is
            1. Interlocutory relief is expedited relief for a short term that a court may
                 give before final adjudication of a case on its merits.
            2. Given when a P needs immediate court action to avoid irreversible loss
                 while awaiting a trial on the merits.
            3. Considered extraordinary relief that require a strong showing of its
                 necessity.
            4. A P must be prepared to compensate a wrongfully enjoined D for losses
                 unless P ultimately wins. (Deters P’s who doubt the strength of their
                 claims).
            5. Preserve the status quo while litigation is pending.
            6. Usually has to post bond to get the relief, which D can recover if P loses
                 trial.
            7. In personam.
      ii. Two Forms
            1. Temporary Restraining Orders (Emergency)
                      a. A TRO is a brief stop-gap measure for a truly urgent situation.
                      b. Can be replaced with a PI after the court has had a few days to
                         receive some greater amount of evidence.
                      c. Usually only lasts enough time to get parties in room together with
                         judge to decide.
                      d. Constitutional limits of First Amendment.
                      e. Show:
                              i. Likelihood of Success on the Merits
                                     1. Facts to look at:
                                             a. Lawyer given honest advice
                             ii. Irreparable injury
                                     1. Even if have high probability of success on merits
                                         and balance of hardships favors P, court should not
                                         issue an injunction without a showing of loss
                                         beyond economic loss compensable with damages.
                                     2. Facts to look at:
                                             a. Cannot recreate, replace, rebuild, unique,
                                                 historical, difficult to figure out monetary
                                                 value
                            iii. Also balance; balance of hardships and public interest as
                                 well as practicality and tribunal integrity
                      f. Approaches:
                              i. Traditional
                                     1. Here, need to have likelihood of success on merits
                                         and chance of irreparable harm
                                     2. D prefers this
                                     3. Policy
                                             a. Pre-discovery hard to know




                                                                                          56
                               b. Damage could happen if unlikely to win but
                                   does
                               c. Can be imprisoned, contempt, before we
                                   even know you have committed a wrong
                               d. Judge must find P’s claim is likely to be
                                   successful on the merits and that there will
                                   be irreparable harm to a significant portion
                                   of the orchard.
                               e. The strength of the claim must have a
                                   “probability” of success on the merits at the
                                   full trial
              ii. Alternative: sliding-scale jurisdiction
                      1. Need strong irreparable harm but we do not care if
                          likelihood of success on substantive merits of claim
                          is low
                      2. Court will grant preliminary injunction for a weak
                          substantive claim only if the showing of irreparable
                          harm is exceptionally strong.
                      3. P prefer this.
                      4. Policy
                               a. High chance of abuse by P, unnecessary trial
                                   and D will not be able pursue action
                               b. Un-doable so no going back, and can go
                                   back with likelihood of success on the
                                   merits
       g. Notice must be given unless:
               i. Impossible/difficult to provide notice
              ii. Good reason while notice would be harmful
       h. Duration
               i. Old: 10 days unless good cause for longer
              ii. New rule: 14 days unless good cause for longer
             iii. If no notice: hear on PI ASAP
             iv. D can seek to dissolve on 2 days notice
       i. Effect
               i. Binding on person who received actual notice AND parties’
                  officers, agents, employees, and attorneys
2. Preliminary Injunction (Pressing but not an emergency)
       a. A PI is appealable and can last until trial.
       b. Notice must be given, opportunity to show up.
       c. Duration, lasts until trial
       d. Security bond to protect D.
       e. Effect
               i. Binding on person who received actual notice AND parties’
                  officers, agents, employees, and attorneys
       f. Four traditional prerequisites for issuance of a preliminary
          injunction are (burden on movant for these):



                                                                             57
                          i. Substantial likelihood that movant will ultimately prevail
                             on the merits
                                 1. Indicates only a probability
                                 2. This factor huge with settlements
                                 3. Sub. Likelihood of success (30-50%)
                                 4. Probability (+50%)
                         ii. Showing that movant will suffer irreparable injury unless
                             injunction issues
                                 1. Narragansett Indian Tribe v. Guilbert (Ist. Cir.
                                     1991)
                                         a. Although alteration to real property is
                                             usually considered irreparable, here, court
                                             found the possibility of irreparable damage
                                             in the absence of an injunction was “very
                                             faint” because there had already been
                                             extensive site preparation work at the time
                                             of the suit.
                        iii. Proof that the threatened injury to movant outweighs
                             whatever damage the proposed injunction may cause the
                             opposing party and
                        iv. A showing that the injunction, if issued, would not be
                             adverse to the public interest
                g. Standard of Review
                          i. Standard of review for D.C.’s grant of denial of a PI is
                             whether there was an abuse of discretion by the trial judge.
                             Standard = deferential because decision is discretionary.
                                 1. “Whether the judge exceeded the bounds of
                                     permissible choice in the circumstances” not what
                                     appellate court would have done in trial court’s
                                     place.
                         ii. Factors Showing Error:
                                 1. T.C.’s decision must be based on relevant factors
                                 2. T.C. must apply the correct legal standard for the
                                     federal circuit.
                                 3. T.C. must apply correct law with respect to the
                                     underlying issues in the case.
iii. Federal Rule of Civil Procedure 65(c)
        1. Covers procedural requirements and courts have interpreted Rule 65 to
            incorporate common law substantive requirements.
        2. A P 1) must convince the court that an interlocutory order is necessary to
            preserve the status quo pending trial because otherwise irreparable harm
            will result. 2) P must also make some showing of the strength of the claim
            in the underlying suit.
                a. Bond security requirement in case the P is wrong.
                          i. Typically, in trial, everyone pays their own way, usually
                             only P has to loss cost of own attorneys fees



                                                                                      58
                                       ii. This really is not a litigation cost, is cost based on outcome
                                           decision, not litigation
                                      iii. Helps to address the potential abuse concerns, counter
                                           balance to extreme PI stance where someone can be held in
                                           contempt for no proven reason.
                iv. TRO/PI Motion in Siegel v. LePore
                       1. Court needed to consider whether the prospect of the vote recount could
                           do irreparable harm to Bush campaign. Court concluded that the harm had
                           not been shown.
                               a. Irreparable Injury must be neither remote or speculative, but actual
                                   and imminent. Speculative if recount may eventually place Vice
                                   President Gore ahead of Bush. Merely recounting does not equal
                                   cognizable injury.
                       2. Traditional Jurisdiction
                               a. Low chance of irreparable harm so no injunction issued.
                               b. P could still go to trial and win at trial
                               c. If only wanted settlement leverage, and don’t get this, then do not
                                   go to trial
                 v. Campaign committee for Bush sought to restrain the vote recount in Florida
                    demanded by the campaign committee for Gore. USSC intervened and ruled in
                    favor of Bush.
                vi. Actions
                       1. File
                               a. Can give supporting documents
                               b. Attach declaration of client
                               c. Survey map
                               d. Reports
                       2. Give Notice
                       3. Ready to Post Security
                       4. D can motion to get into court sooner
                       5. D CANNOT APPEAL A TRO ONLY A PI
                       6. Do not go to trial just appeal a PI
                               a. Abuse of discretion standard
                               b. Appellate courts are fairly differential (because trial court’s
                                   decision is fairly subjective)
                       7. D can change action as a result of PI

Wrap Up
      Wed. Nov. 30th Optional Review 630 – 830
OH
      Nov. 21       945 -1145
      Nov. 28       945 – 1145
      Dec. 1        945 – 1115
      Dec. 5        945 - 1115




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