Remedies

Prof. Reynoso Remedies Class Notes, Fall 2001 Page 1 of 44 Warning: some days are missing. Warning: more than one ? means I wasn't sure about what was said. Warning: this isn't really an outline, it's just class notes. Monday, August 27, 2001 Remedies Exam half essay half multiguess (objective) No Class Sept. 4 and Sept 26 Make up Thursday maybe lunch TBA Nov 8 and 15 at noon makeup classes 1) Remedies: posted the assignment  anyway, clients wants the remedy. They don’t care about the cause of action, they want a remedy. a) Con Law, statutory law, admin law. Common law all influence remedies b) Focus first 5 chapters of the book i) Equity  (1) Injunctions ii) Damages  often unsatisfactory for the client (1) Contract (K) (2) Tort iii) Restitution iv) Unjust Enrichment v) Declaratory Relief c) Maybe also speakers, handouts 2) First Chapter was Assigned  Intro to Remedies a) Remedies can be divided into categories i) Specific Remedies  (1) EG Return of property, ask court for order returning converted property ii) Substitution Remedy  usually substitute money for what litigant lost iii) Declaratory Judgment  difficult because runs up against constitutional prohibition on advisory judgment, need for case in controversy. (1) Declaration is Judgment for Declaratory Relief under Contract Example: court declares the rights of the parties under the contract, so it’s a case in controversy about the meaning of and rights under the contract. (2) EG Brown v Board of Education US sup ct declared school segregation unConst. In the U.S. this was a declaration of constitutional law b) Actions are either actions at law or in equity, which came from the English Common Law. Early on it was local judges enforcing local customs. Eventually (1300s) the economic situation changed from decentralized feudalism to consolidated power in the crown to facilitate trade, and the king instituted national legal standards and appointed circuit judges who would travel around and adjudicate disputes that centered on trade. Uniformity of law is important for commerce. Under these new national courts  Writs became more and more formal, complaints had to be pled according to the writ, statute of limitations may have passed, so people started appealing to the king. People asked king to use sovereign powers to administer justice. He channeled this power to the chancellor, chancellors were trained in cannon law. Chancellors appointed judges. i) Equitable Remedy  Usually a specific order against a person or entity (1) Came from the chancellor’s courts of equitable cannon law. (2) Issued equitable judgments. (a) Personal orders to do or not do something  Injunction. (b) Contracts for land were in the courts of equity because $ is not a remedy because land is unique. Example: A sells land to B for 50$ per month and if B refuses to pay then the land reverts to A. This is not “fair” so they developed the concept of equitable title. They paid, they have to have a chance to bring their payments up to date, can’t just have land revert if one payment is late. (c) Judges who are sitting in equity feel they have more options than when they are sitting at law. ii) Legal  Usually money judgement (1) Was the original national court designed to consolidate power and facilitate commerce through uniformity of law. Prof. Reynoso Remedies Class Notes, Fall 2001 Page 2 of 44 (2) Eventually courts of law only issued money judgments, not equitable judgments. (3) Third party, such as sheriff, often enforces the judgment. (a) Can find contempt for failure to obey order. (b) Can Jail for failure to obey order. c) Unification of courts of law and equity. Conflicts arose: what if the buyer B defaults on the payments, but the court of equity issues an order prohibiting the seller A from taking possession of the land? The court of equity wins over the court of law… There has been an effort at reunifying the courts. The municipal courts and the superior courts are mostly unified now. But since the problems came up over conflicts the courts of equity and law were joined. i) BUT you must be clear if the remedy is at law or in equity!!!! Cause of action must state if it is at law or in equity to satisfy the notice requirement. ii) Person is generally entitled to a jury when it is a remedy in equity? What if you ask for an injunction and money damages? If the dominant portion is in equity, then you can get a bench trial. BUT if you can logically sever the remedy at law, then a jury should be brought in to decide the issue at law. d) Remedies we won’t talk about.. this class won’t cover everything i) “The Great Prerogative?? Writs”  (1) Cuo Warranto??? Example  suit that says that a person is in an official position illegally (2) Mandamus  requires govt to do what it is statutorily or otherwise required to do (3) Writ of Cert (4) Habeas Corpus ii) Workers Compensation e) Unjust Enrichment 3) Tuesday, August 21, 2001 Class Two a) Equitable Remedies i) Usually resulted in an injunction personal to the individual. ii) Most commonly against an individual (incl. Corp.) but could be against a govt entity etc. iii) Sometimes a person wants a protective order iv) Sometimes a court may retain jurisdiction  Tahoe injunction denied and stay denied and city cut down trees over the weekend before the appeal could be filed. v) Order of Child Support vi) EG crop ready for harvest, disputed easement for access, ask for TRO to allow harvest. Concern is for constitutional rights of the person resisting the easement. vii) Temporary Restraining Order (TRO) (1) Usually around 10 days (2) Used in emergency situation. viii) Preliminary Injunction (1) Preserve the status quo (2) May combine with hearing on permanent injunction by stipulation of parties ix) Permanent Injunction b) Temporal aspects i) Injunction is for FUTURE HARM ii) Money Damages are for PAST HARM 4) Clinton v. Nagy 411 F. Supp. 1396 (1974) TRO Case a) Facts: i) π Girl wants to play football with the bulldogs, mother and coach agree. ii) City argues no irreparable harm, girl answers that there are only two games left. iii) Concept of law: people must act in a timely fashion. Why didn’t the court say you should have acted earlier? Court doesn’t say, but it is clear that there are only two games left. iv) b) Requirements for TRO (there are more for Prelim. Injunction): i) Irreparable Harm (1) What important rights are being taken away from the π if she doesn’t play? (2) Right to participate, teamwork, development, etc benefits of football ii) Substantial Likelihood of Success on the Merits of the Case (1) There really isn’t a dispute on the material facts here. Prof. Reynoso Remedies Class Notes, Fall 2001 Page 3 of 44 iii) TRO is not appealable c) Who does the order COVER? i) In this order it covered the ∆, its agents, and anyone with actual knowledge of the order were covered. d) Mandatory vs. Prohibitory i) Prohibits interference, says enjoined from prohibiting. ii) Historically rules are different for Mandatory Injunctions so courts are careful to phrased them in the negative. iii) COA was for a TRO based on violation of Constitutional rights. 5) Adams v. Baker 919 F. Supp.1496 a) Facts: π Girl wants to wrestle. i) ∆ arguments: parents object, embarrass guys if they lose to a girl, fear of sexual harassment lawsuits (note: waiver here), boys are stronger  safety factor (note: some boys are more frail than others and frail boys are not prohibited from wrestling, and weight classes takes care of differences), moral objections (too ambiguous contrasted with clear Const. Right), disruption, boys learn to dominate girls b) Preliminary Injunction Requirements i) Likelihood of success on the Merits (1) Constitutional right is clear to equal protection and so burden shifts to ∆ to show that they didn’t violate ii) Irreparable Injury Unless the Injunction is Issued (1) Not able to play sport and get benefits, (2) Equal protection is important for other reasons iii) Threatened Injury to the Moving Party Outweighs whatever Damage the injunction will cause to the enjoined party iv) Injunction will not be Adverse to the Public Interest 6) Fogie v. Thorn Americas Inc. 95 F3d 645 (1996) a) Facts: is “rent to own” contract usurious? b) Procedure: on appeal from court order granting summ judgment for π class permanently enjoining ∆ from usurious practice. c) Conclusion: Appellate court agrees with the trial court. d) Irreparable Harm. i) Can’t make π keep suing for damages over and over, only makes sense to permanently enjoin future usurious practices. ii) Cant identify harm to future victims and unidentified victims. 7) Injunctions: a) Balancing the Harms: i) Inadequacy of Legal Remedies: money won’t solve it (see irreparable harm above). ii) Burbank Airport  neighbors keep suing saying that the noise is exceeding the noise levels. (1) Court denied the injunction for reasons of public necessity, balanced the harms, etc. (2) So they had a harm but still didn’t get an injunction. (3) They have a remedy at law  money damages. They all started suing the airport for money damages for past harm. The airport said you can’t do that, you must get an injunction and that failed. The supreme court of CA said no, they CAN sue for money damages. The airport settled with the homeowners. b) Irreparable Harm i) The courts often equate inadequacy of legal remedy with Irreparable Harm. In other words, to see if the harm is irreparable, ask “Will money damages solve this for the π?” 8) Summary of Yesterday a) Stds for TRO and Prelim Injunction same i) Irreparable Injury not even reached it remedy at law is adequate but courts often talk about them as if they were the same thing ii) Substantial Likelihood of success on the Merits iii) Balancing the Harm applies in all injunctions but in TRO they rarely discuss it iv) Public Interest applies to all but courts rarely talk about it in TRO Prof. Reynoso Remedies Class Notes, Fall 2001 Page 4 of 44 v) Notice to Opposing party even required in TRO but low standard and might not even have to attempt under certain circumstances?????? vi) Bond required in TRO and Prelim Injunction if harm to D might occur if granted Bond on Perm Inj if appealed vii) Appeal Prelim and Perm yes TRO No viii) Hearing under oath TRO due process concerns but less stringent in TRO than Prelim and Perm Injunction Emphasis at the permanent inj hearing is the merits but they do look at the other factors b) TRO c) Prelim. Injunction d) e) Permanent Injunction 9) Little Tor Auto Center v. Exxon Company USA 822 F.Supp.2d 141 (1993) a) Facts  Little Tor seeks ex parte prelim injunction seeking to prohibit Exxon from terminating the franchise. P calls D (Exxon) and they make an agreement to keep the franchise but Exxon didn’t have to give any more gas. b) Judge granted the agreement and issued it as an Order of the court. Federal judge decided to publish this Order. c) Why did the P call the D when the judge is authorized to sign the TRO without notice? Judge said I won’t sign it unless you try to work it out with the other side. d) Constitutional Concern of the Judge  didn’t want to sign it absent notice because of 5th/14th Amendment. i) Historic concern: labor unions/TROs/ 1st amendment rights ii) Imperial County Judge ordered farm workers to stop picketing  flat injunction  they kept picketing and were arrested e) Note: lawyer has an ethical obligation to explain all of the law both positive and negative when the lawyer sees the judge ( Federal only??? ex parte only????? There is a duty in Federal court to disclose adverse law but not in California) f) Note: local rules probably require at least a phone call to the other side on a TRO. g) Irreparable Harm? Might be. Vested interest in the ongoing business. h) Substantial Likelihood of Success? Maybe. i) Balance of Harm to the P and the D? In favor of P because D doesn’t have to do much and it’s only 10 days j) Public Interest? Stability of business. 10) Ahmad v. Lond Island Univ. 18 F. Supp. 2d 245 (1998) Note: other circuits are more lenient than this. a) π has a claim based on Federal and NY state statutes, P files a complaint and a Order to Show Cause which was filed on the same day as the complaint  Notice to Show Cause why the court should not issue the TRO/ b) Irreparable Harm. Not shown by π in this case. π can still work in profession, will not be bankrupt or on the street. Note: Damage to reputation may prevent this professor from getting another job. c) Remedy at Law is adequate. $ will fully remedy the alleged injury. Note: π is not seeking $ damages, is seeking to prevent termination. Court is sort of wrong here. d) Compare: π here the right is based on statutes, π in Clinton v Nagy right is based on Const. Equal Protection  judge doesn’t care because judge says $ will make you whole. e) Balancing of Harm. Why does the judge say that $ is an adequate remedy? Because the employer is in a harsh position if every employee can stop a termination merely by filing a harassment/discrimination/Title VII claim. 11) Ross-Simons of Warwick Inc v. Baccarat Inc. 102 F.3d 12 (1996) a) Facts: Complaint COA is interference with K by Δ. Δ appeals a preliminary injunction that requires Δ to continue selling crystal to π b) Preliminary Injunction Standard i) Likelihood of Success  easy because does appear to be interference with the K because of nondiscrimination clause in K ii) Irreparable Harm  Compare to other cases we have looked at 12) Tuesday, September 11, 2001 Missed class last time Tuesday last week a) Class cancelled again tomorrow, should be back Wednesday Prof. Reynoso Remedies Class Notes, Fall 2001 Page 5 of 44 b) We were still finishing up the class action case 13) Hoxworth v. Blindter, Robinson & Co. 903 F.2d 186 (3d Cir. 1990) page 55 a) Contd from last Tuesday See Quote top of p 56  trial court said no danger of monetary loss and chilling effect on π to require a bond, and app. Ct overturned, and yet app ct even quotes 3 rd cir case saying okay not to require bond when no risk of $ loss to Δ b) Ct of App simply disagreed with trial court’s determination that there was no risk of loss to Δ in this case. Deference to the facts found by Fed. Trial ct. in Fed. App ct. but can reverse if clear error. c) Should π have to set up a bond is the issue here, and π are arguing fraud and rico violations in penny stock… one of the riskiest stocks possible, so if they have the $ to invest in risky stocks, then they should have the $ to put up a bond. Is that the way the court should look at bond issues? i) Prof. thinks not, that really app court should ??? 14) Borough of Palmyra Board of Educ. V. F.C. 2 F.Supp.2d 637 (N.J. D.C. 1998) a) Hearing before ALJ parents prevail and ALJ finds ADD/ADHD  child entitled to special edu. Also ALJ ordered school dist to pay for private school until school bd. Sets up special program in school for the child. Plus, must pay for past tuition. b) School Bd’s Right of appeal is to dist. Ct., Ct of App (Dist. Ct.) says no bond required. Seems to be a pretty clear case where a bond should be required, why not? i) Barrier to vindication for Federal rights for indigent litigants if bond requirement is inflexible ii) Injunction is for tuition $ and parents don’t have the $ for bond or tuition iii) πs seem likely to prevail on this coa iv) Board failed to show substantial losses because board could seek reimbursement from the indigent plaintiffs  doesn’t make sense except that bond requires money right away and includes interest, whereas they might be able to pay the district back over time v) Ct cites extraordinary circumstances c) Public Policy: boding requirements for indigent plaintiffs i) Public interest lawsuit that will benefit more than the parties plaintiff ii) Δ is usually a government agency being sued to require the govt to carry out statutory duty or Δ private party being sued to enforce a statutory duty iii) Eg CRLA suit against large grower with substandard conditions in farmer camps. π are enforcing a public interest (as a “private attorney general”) iv) See top of page 63 top of page “permissive language of rule 65(c)”. Then see p 54 for text of rule “65(c)” “No tro or prelim injunction shall issue… in such sums as the court deems proper.” is the only quasi permissive language. How do they get away with this? Statutory construction: (1) Must expressly take away common law/traditional/past powers of the court. When the legislature passes a statute, if the legislature wants to change an existing practice3 they must so state expressly. Courts have had the power to issue bonds or not issue bonds and determine the amount, and since the rule doesn’t expressly say that it takes away the equitable power of the court to decide when and if to issue bonds then it is not part of the law. (2) Avoid absurd result: legislature could not have meant that under these circumstances. (3) Last resort: unconstitutional provisions can be ignored. d) Injunction Bond Rule p 63 i) US Sup Ct in footnote adopted the Injunction Bond Rule in Russel v. Farley 105 U.S. (15 Otto) 433, 437, (1882) ii) If you get a bond and there are no damages, then Δ gets no $. iii) The bond is the maximum that the Δ can get if the Injunction was erroneous. (not always true) e) Notes on Stare Decisis: IN CA THE TRIAL COURTS MUST FOLLOW THE APPELLATE DECISIONS ALL OVER THE STATE, WHICH IS UNLIKE THE FEDERAL SYSTEM WHERE YOU HAVE CIRCUITS. f) Parker Tampa 2 Inc. v. Somerset Develop. Corp 544 So.2d 1018 (Fla Sup Ct 1989) note: in Fla. the cases get to the sup ct of fla in a weird way: gets question certified by the app. Ct. ?? i) θ wanted injunction for district not to issue sewer permits to another development. ii) Q before the court: Was the amount of the damages for a wrongly issued injunction limited to the amount of the injunction bond? (1) Here everyone agreed that the damages way exceeded the bond amount Prof. Reynoso Remedies Class Notes, Fall 2001 Page 6 of 44 iii) Arguments for exceeding bond: (1) θ Parker were not a party to the suit when the bond was set and so should not be limited to the bond amount. (a) But θ Parkerdid make a motion for a hearing on the bond amount, and court denied it so they did have an opportunity to contest the bond amount. The court denied it on the merits of the motion. (b) Potential taking issue: must give due process, must have a chance to convince the trial court judge that the bond should be higher. Here, θ Parker had a chance via motion to increase the bond amount. (2) Somerset, on cross-petition, said θ Parker wasn’t entitled to recovery on the bond because it wasn’t an expressly enjoined party. iv) There are exceptions to the bond damages limit: (1) Malicious, bad faith when setting the bond amount v) Policy: (1) π needs to understand ahead of time what the damages will be if the injunction is dissolved and they have to pay. They need this info to weigh the risks when seeking the injunction. (2) Need to protect Δ, yes, but bond does that to some extent. g) Provident Management v. City of Treasure Island, 718 So2d 738 (sup ct fla 1998) page 70 i) Facts: Owners of condos were renting out short term in violation of residential zoning. City sought injunction and said they were exempt from bond. Judge didn’t require bond from City after city said they didn’t have to post bond. Statute says city doesn’t have to post bond ii) Procedure: trial court found for city, app ct reversed, (1) Court agreed with city that it was an improper use, issued Temp Injunction for all renting by agencies (2) City sought permanent injunction, was granted in part and denied in part iii) supreme court of Fla said (1) On the bond issue (a) Bond not required for public entities undefr rule 1.610(b) state statute (i) Most states have the no bond statute for govt. πs seeking injunctions (2) Damages: Majority However, when they refuse to post bond the public entity is liable for full damages because we let them waive bond (3) Wants to protect the interests sought to be protected by the no bond requirement (a) Delay, inconvenience (b) Assumes govt will not improperly use extreme remedy of injunction (c) Normally govt has resources to pay for damages (4) Maybe bonds are advisable so the parties know where they stand iv) Dissents (1) Sovereign Immunity from suit  can’t sue the govt without the govt’s permission (waiver). Has this statutory scheme waived the sovereign immunity? (a) Dissent by Overton says no, sovereign immunity is waived only for torts and K. this is the MAJORITY view. Dissent says if there is no bond, have to sue here under a (i) malicious prosecution or (ii) takings COA (constitutional claim) or (iii) estoppel (b) Concurrence by Wells says yes, when they invoke EQUITABLE jurisdiction of the court, they waive their sovereign immunity. Also (2) Here we are talking about damages because the city got a temp. injunction that got appealed. In retrospect, it’s easy to say the lawyers make a mistake because there was already a court of appeals case that said there could be damages. What else could the city atty have done to minimize the risk? Other ways to enforce the ordinance: (a) Litigate (permanent injunction) rather than temporary injunction. Usually Δ will NOT be entitled to damages if the appeal on the PERM Injunction is won by the Δ. (b) Declaratory Relief. City atty should have advised seeking declaratory relief. Once the judgment came down they could have enforced the judgment. Prof. Reynoso Remedies Class Notes, Fall 2001 Page 7 of 44 (c) City could fine them, they appeal, and then it’s decided either way who is in the right. v) Tort Theory Allows Damages Ct of Appeals says it’s a TORT to get a wrongful injunction so sovereign immunity is waived. h) Wednesday, September 12, 2001 i) Tragedy  be careful in jumping to conclusions about who is responsible for the disaster. ii) Provident Management case continued (added Above iii) Alternate Remedies EG: rule changes to allow city manager to take office voted on [by person who now holds office] some years earlier when that person was on the city council. Prosecutor is filing criminal charges, should probably be a civil suit. i) Nintendo of America Inc v Lewis Galoob 16 F3d 1032 (9 th Cir 1994). i) F & P  bond had issued and bond had increased several times. Galoob was seeking declaratory relief, Nintendo then filed for a prelim injunction for copyright infringement for Game Genie ii) Trial Court decided that the damages easily exceeded the bond iii) Nintendo’s appeal (1) One Trial court failed to weigh equitable considerations before deciding to execute the bond. DE NOVO REVIEW by 9th Cir on the decision to execute the bond and the equitable considerations. (a) Good Faith. Nintendo said they proceeded in good faith (Public Policy argument, rejected by most courts), and Nintendo would be harmed by these competitors (b) Quasi Bad Faith. Galoob didn’t raise all of their defenses at the prelim injunction hearing and Nintendo and the court were suckered into thinking that Galoob had a weaker case than they really did have. (c) Long line of cases in the 9th cir protected intellectual property as a matter of public policy, shouldn’t be any damages. (i) Court says that only comes into play with at PERMANENT INJUNCTION. Doesn’t really apply to the preliminary injunction. More procedural protections and fuller hearing with permanent injunction. (2) Improperly found that the injunction harmed Galoob. Rebuttable Presumption that there are damages according to 9th Cir. (a) Nintendo said that the NES units were still being used so that Galoob wasn’t really harmed, in fact, they could sell MORE game genies because there were more NES out there. (b) (3) Nintendo disputed the way that the damages were calculated on several fronts. CLEARLY ERRONEOUS STD of review by 9th cir. (a) Looked at economics, took lower ends of the range, said that’s roughly the amount of the bond, gave the full bond amount. (b) 9th Cir says that’s a very traditional way of doing it, not clearly erroneous. j) Walgreen v. Sara Creek Property Co. 966 F2d 273 (7th Cir. 1992) Posner case i) Walgreen is a “discount” pharmacy store and they have a K with Sara Creek that says that Sara Creek may not put another pharmacy in the mall. Sara Creek is going to put in a “deep discount” store and will probably drive Walgreen out of business. ii) Walgreen seeks an injunction, this is beyond the breach of K COA, Walgreen can still sue for breach of K (1) Are $ damages (at law) adequate? (a) Δ Sara Creek says damages are traditional and adequate according to a line of cases (b) Court says there are also lots of cases where the court HAS issued injunctions see p 86 (c) Court says damages are normal for other than non-permanent injunction, which is a different analysis (2) Court says for Perm. Injunction, should look to see if it is better for both parties to substitute permanent injunction for the normal damages. iii) Monday, September 17, 2001 iv) When should judge issue an injunction according to Posner? Prof. Reynoso Remedies Class Notes, Fall 2001 Page 8 of 44 (1) Cost shifting from court to parties when injunction can be issued without further judicial supervision. (2) Costs and damages are hard to calculate. (3) Injunction will still allow parties to negotiate for a solution. Parties can still enter into an agreement. (a) With the injunction the party with the K right being enforced has an extra bargaining chip. Maybe walgreen’s deserves the injunction because they had a k right. (b) This assumes that there will be a negotiated settlement based on market forces. The market should determine the value of the injunction, not the court. He says this is a bilateral monopoly, and so they will settle. (c) But if they were really going to settle, wouldn’t they do that before trial? (d) Isn’t the market value harder than that to calculate? Also, is this really a market, or is this a situation in which only the three parties are interested in the commodity (the lease)? (e) There are considerations beyond $, some companies care about jobs for employees, service to community etc. (4) Do you have to agree with Posner to agree with the result of issuing the injunction to Walgreens? (a) Sitting in equity the court can issue the injunction if the injunction meets the factors. (5) Boomer cement case… (a) Posner says bad case for injunction for homeowner because the homeowner would have too much leverage and there are too many parties (homeowners). (b) Posner says too many rounds of negotiations. Too much at stake, too many parties. k) Balancing the Equities  cost benefit analysis i) In Boomer, cost of shutting down the cement factory too much, society needed the cement factory. ii) In Walgreen v Sara Creek, what is the analysis on issuing the injunction (don’t just look at the (1) Cost  creates bilateral monopoly for bargaining purposes(is this a cost or a benefit???), better bargaining position for Walgreen, new round of negotiations (according to Posner, prof. disagrees that it will necessarily follow or that it needs to be considered.) (2) Benefits  no more judicial supervision, damages too hard to calculate, fairness because Walgreen’s probably has a right to a specific performance equitable remedy when they have a K and they relied on it. (3) But what about the fact that Walgreen may not negotiate and the mall fails other than Walgreens? Posner (and Megan Smith) may be wrong. Walgreen’s may NOT be willing to negotiate any more. But the result is the same here l) Smith v Western Electric Co 643 SW 2d 10 (Mo Ct App) 1982 i) Trial court denied the injunction and dismissed the case. App Ct judge Dowd reversed and remanded the cause. ii) Note: no statute needed, Common law duty in New Jersey? Missouri? to provide a safe workplace under Shimp v. New Jersy Bell Telephone Co iii) Damages for continuing injury is sort of like a continuing trespass, you could compensate every time after the injury, but that’s not what courts do when there is a duty not to injure. iv) Requirements for Permanent Injunction (1) Win on the merits at trial and show need for injunction eg here Duty and Breach (2) Irreparable Harm aka Show that remedy at law is inadequate  continuing injury means usually don’t require them to come back over an over for compensation. When injury will likely result, should issue injunction. (3) Balance the Equities (a) Costs (b) benefits m) Hypo  constructive termination. Employee says they can’t stand it any more and they quit. i) Remedy at law is probably better for these reasons: (1) Doesn’t need the protection any more, probably won’t ever work there again. (2) Only money will work to compensate. (3) Too hard to repair the employer employee relationship. Prof. Reynoso Remedies Class Notes, Fall 2001 Page 9 of 44 (4) Damages are pretty easy to calculate based on lost wages (5) Note that if they seek reinstatement then that is an injunction. 15) Matlock v. Weets 531 N.W. 2d 118 (1995) Sup ct IA a) Basic stalking case, π wants temp and perm injunction. Δ jailed for violating TRO. Judge at trial found π/he was following π and issued injunctions. Δ appealed b) Requirements for Permanent Injunction i) Merits  injunction warranted on the Facts ii) Dominant Issue: Irreparable Damage. Usually when there is a criminal offense (at law) that is considered sufficient, and injunction (in equity) will not issue. But here police had not been willing to get involved (crim) and $ wouldn’t help here. iii) Balancing the Equities (1) Cost  justice system will probably have to be involved in the future. Supervision. One of the costs of an injunction is supervision. Normally it’s not true, but here it’s likely that these two people will end up in court again over this injunction. This is a PERMANENT injunction. This Δ may push the limits of the injunction. (2) Benefit  There is no other remedy. 16) Citibank N.A. v. Citytrust, 756 F.2d 273 (Ct. App. 2nd Cir. 1985) a) Defenses to inunctions: LACHES b) F: City Bank of New York started 1812 (π Citibank). Citytrust started using “City Trust” in Connecticut in 1929. Citytrust moves to c) Prelim Injunction i) Merit  Liklihood of Success on Merits due to similarity of names ii) Irreparable Harm  not shown. Waited to file suit, can wait a little more d) Specifically said not laches, why? Because laches dismisses coa. Too drastic. 17) Citibank N.A. v Citytrust 644 F. Supp. 1011 (1986) a) Permanent Injuction i) Merits  Citibank ii) Irreparable Harm iii) Balancing the Equities b) Laches i) Knowledge by π (1) Did Citibank know that Citytrust was entering the market, and if so when? (2) Newspaper (3) Citibank went to Con. where Citytrust was based (4) Same industry, Citibank should know ii) Delay by π (1) Did Citibank delay? Yes, at least somewhat iii) Prejudice to Δ due to the delay (this is an affirmative Δ) (1) Reliance  Citytrust invested in the move. But here not enough to find laches. (2) When weighing the prejudice, must weigh against the coa itself. Trying to determine if the prejudice is enough for laches, must look at weight of coa. c) Policy behind laches based on equity i) Reliance ii) Stability  won’t fear suit forever, encourages business iii) Won’t protect rights if people sit on their rights 18) Dangerfield Island Protective Soc v. Lujan 920 F2d 32 (1990) ct app a) Facts: i) 1970 exchange agreement (EA) With Fairchild for Dyke Marsh environmental protection in exchange for a right to an easement to access property behind the marsh. ii) National Park Service iii) Easement granted pursuant to the 1970 EA iv) 1986  original v) Lujan is secretary of the Interior, and is the Δ because π is trying to get Dept. of Interior to enforce environmental regs/not let go of the EA b) Procedure: i) District court dismissed the coa on summary judgment for two reasons: Prof. Reynoso Remedies Class Notes, Fall 2001 Page 10 of 44 (1) Laches based on: (a) Delay (b) Purpose of the original K (EA) was to protect the environment by preventing the land (2) No undue prejudice (a) Don’t just look at the dollar amount, look to the total projected project amount. (b) Laches is disfavored in environmental cases because you have to see if the damage can be undone. There was nothing to undo here. (c) The expenditures were preliminary, no construction had started. (d) Laches is very strong, it’s like a SOL. Your COA goes away. (e) This was a really long delay, but still didn’t find enough prejudice to wipe out the π who are trying to protect the environment. (f) Want to hear the case on the MERITS unless the environmental damage can’t be undone. 19) Unclean Hands 20) North Pacific Lumber Co. v. Oliver (19) a) Δ Oliver had a NCA (no competition agreement) with π NPacLumber in his employment K. He quit and went to work for a competitor. He violated NCA. While Δ Oliver worked for π he engaged in unfair business practices. b) Δ raises affirmative defense of unclean hands. Here Δ wins because Δ says he QUIT because of the unfair business practices. c) Note that if π could prove that Δ Oliver also had unclean hands, court would refuse to get involved. d) Note that if it was just a general policy and Δ was not affected, court would not allow the affirmative defense. Δ has to be affected by the policy. Here Δ was personally involved in the bad policy. e) Hypo: can you use the Δ of unclean hands for a prelim injunction, or does it involve only a final judgment? It’s all equity so court can apply whenever court feels like it if court is acting in Equity. 21) Original Great American Chocolate Chip Cookie Co. v. River Valley Cookies, Ltd. 970 f2d 273 (7th Cir 1992) a) F  franchizee Δ hired a manager who didn’t keep store clean. Franchise π terminated K. Δ got batter from another company and kept selling cookies. b) P  π franchise sues, Δ counterclaims saying breach of k. c) Trial court grants prelim injunction, yes Δ you can continue to sell cookies with name and using batter from other company. i) Merits  probable success on the merits, trial judge thinks breach of K ii) Irreparable Harm  need to keep making cookies. iii) Balancing the Equities  d) Court of Appeal. Posner says Unclean Hands i) Court of Appeals says Δ had unclean hands, rather than seeking legal remedy on their breach of K claim, they went out and got other cookie batter. ii) Responsibility to resolve in court by legal means, should have sought an injunction. iii) Assume that there was an improper breach of K. Now Δ is in the right. Why do they have unclean hands? Because of improper self help. iv) This is a powerful affirmative defense. Maybe the π really was unfair! Maybe the Δ didn’t have the $ to bring the suit at that time. v) This is a Raise it or Waive it defense. In your answer you must raise all Yes But (affirmative defense) in the Answer unless the local rules allow you to amend your complaint to add a new aff defense. 22) Choice of Remedies a) Right is to be made whole but not to receive double indemnity. i) Assume injury and entitled to 100,000, you have joint and severally liable Δs. You don’t get full amount from each of them 23) Wednesday, September 19, 2001 24) Estoppel has been so successful in equity that it is even applied at law now. 25) Bright v. Michel 242 Miss 738, 137 So2d 155 (1962) a) Unclean Hands  π might have unclean hands for bringing the suit, but estoppel is much better Prof. Reynoso Remedies Class Notes, Fall 2001 Page 11 of 44 b) Laches  Knowledge, Delay, Prejudice due to delay. Maybe here, but the expenditures and reliance probably isn’t enough for laches. c) Estoppel  9th cir. Elements i) Estoppee must know the facts ii) Estoppee must intend [misleading] conduct to be acted on OR Estopper has right to believe such intent iii) Estopper must be ignorant of true facts iv) Estopper must in fact rely on Estoppee’s conduct to Estopper’s INJURY d) Estoppel  Arnold v. Melani Elements (1) Admission, statement, or act inconsistent with the claim afterward asserted (2) Action by other party on the fait of such admiss/state/act (3) Injry to party resulting from allowing repudiation of admiss/state/act e) Classic Estoppel, assume Δ is trying to estop π based on something π said or did. i) π said or did something ii) Δ relied on π’s statement/conduct iii) π knew or should have known that Δ would rely on π’s statement/conduct f) Often see Estoppel as an affirmative defense in both law and equity 26) Election of Remedies 27) Forster v. Boss 97 F3d 1127 (8th Cir. 1996) a) Δ Promised in K to Obtain Boat dock permit, remove swim dock, didn’t do it. π wants better access to the lake. Didn’t get it. b) Trial Court Awarded i) Injunctive Relief  must comply ii) $ Damages (1) Compensatory (2) Punitive c) Problem with the damages: damages are supposed to be figured based on the value of the land as offered and the value of the land as actually sold. Since the K failures came after the sale, the land was conveyed as offered and the delay can be cured either by damages or injunction, shouldn’t be both. d) Ancillary damages… Could they have sued for damages on a breach of K theory? Damages for loss of use of property during the delay PLUS injunction. e) Could the court have remanded for a new trial on their proper damages, or is that what the court meant when they said remand for proceedings consistent with this opinion? Jx differ on this. i) Some courts would just give the injunction and the punitive damages. ii) Some courts would allow π to amend their complaint and have further proceedings. Appellate court would probably have to say so in opinion. f) Judges depend on the lawyers to structure the case. The lawyers have to structure the proposed remedy. g) Fernandez-Roque v. Smith 671 F2d 426 (1982) i) We have before us an appeal of a TRO. A TRO is not appealable. However, the appellate court can consider the appeal a request for a writ of mandamus. If the court finds that the TRO should not have issued, they will tell the judge what to do. ii) Writ of Mandamus  govt official is not doing what should be doing or doing what shouldn’t be doing. Can be used to force judge to do what appellate court thinks judge should do. iii) Facts asylum case, cuban refugees, TRO enjoining the govt from deporting Cuban detainees pending further action of the court. iv) App ct is saying NO discretion on the part of the judge. Must rule on the jurisdiction first. Ct of appeal says must rule on jx before TRO or anything else. v) In dealing with immigration matters, most courts have said its EXECUTIVE only and courts can’t hear it. No jx. vi) Second, petition for habeas corpus, and must exhaust administrative remedy first. 28) Nutrasweet Co. V. Vit-Mar Enterprises Inc. 112 F3d 689 (1997) page 124 a) π Nutrasweet filed suit 5/14/96 and applied for emergency TRO enjoining Doe Δs from dealing “NutraSweet Pre-Entry Product.” b) TRO was issued, court treated it more like a prelim. Prof. Reynoso Remedies Class Notes, Fall 2001 Page 12 of 44 i) TRO was extended, was of indefinite duration, more than two months ii) Usually TRO is very limited duration so no appeal, but when more than 10 days will usually be converted to Prelim. Injunction. iii) Since TRO is long term here, must give same safeguards as in prelim injunction. Becomes appealable. iv) Can also appeal TRO if treat appeal like a writ of mandamus. v) Sent back to trial court for full prelim injunction hearing. vi) Trial court should have had a prelim. Injunction hearing because TRO is supposed to be limited duration. c) 29) Makeup Thurs sept 27 Noon 30) Monday, September 24, 2001 a) SCFC ILC Inc v. Visa USA Inc 936 F2d 1096 (10th Cir. 1991) i) Visa said no to Sears for visa and said retailer like Sears can’t get Visa. SCFC wholly owned by Dears who also owns Mountainwest bank who has K with Visa. MountainWest then asks for a ton more visa cards. Sears alleges antitrust violation (Federal) and fair trade practices (State?) violation by Visa. ii) Prelim Inj. Granted by dist court. Why? (1) Irreparable Harm  miss market opportunity to issue visa cards. Just the right time to issue the visa cards. Need prelim injunction to not miss window of opportunity. (2) Merits  Doesn’t analyze the merits. (3) Balancing the Interests. (4) Not adverse to Public Interest iii) App ct says it was error to issue prelim injunction., (1) Abuse of discretion because the injunction altered the status quo so the burden shifted to MountainWest/Sears to show that the 4 factors “weighed heavily in MountainWest’s favor” 1.5 million visa cards is not status quo according to app ct. Heightened burden “compelling” “weighed heavily” (2) Note that District court would say that the status quo is that MountainWest has a K RIGHT to issue the cards, that is the status quo. Number of cards doesn’t matter. (3) Abuse of discretion here: gross misunderstanding of the facts that rises to the level of wrong application of the law to the facts. Isn’t the appellate court supposed to defer to the trial court’s factual determinations? Well, if the app ct wants to mess with the determination of the facts they just say “abuse of discretion.” b) Appeals go to 3 judge “panel” issue is whether there will be protection pre-appeal. Must ask court to stay application of the prelim or perm injunctions. Discretion by judge. If parties want a stay, then court denies, then can ask court of appeal to issue a stay. i) Appellate courts have power to ask for a stay. The reason for the stay is to protect the status quo and to protect the subject matter of the appeal. Appeal may become moot if the stay is not granted. c) FRCivPro 62 (a), (c) (d) (g) Stay of Proceedings to Enforce A Judgment i) 62 (a) Automatic Stay: Exceptions: Injunctions, Receiverships, Patent Accountings (1) Unless otherwise ordered by ct inj not stayed until appeal is taken or until ii) 62 (c) Injunction Pending Appeal iii) 62 (d) Stay Upon Appeal iv) 62 (g) Power of App Court Not Limited d) Fed Rule of Appellate Procedure 8(a) Stay of Injunction Pending Appeal i) Stay must ordinarily be sought in the first instance in district ct, motion for stay in app ct..appellate court. ii) e) Michigan Coalition of Radioactive Materials Users INC v. Griepentrog 945 F2d 150 (6 th Cir. 1991) i) Δ seeks stay of judgement after court granted summary judgement in favor of π. (1) Δ are heads of agencies in other states that have administer waste disposal sites. MI was required by statute to develop its own disposal sites but wasn’t complying and so wouldn’t have its own sites ready as required so the other states sued to deny MI access to waste disposal in their states. Prof. Reynoso Remedies Class Notes, Fall 2001 Page 13 of 44 (2) MI was not complying with Federal Regs for Radioactive Waste disposal. Perm. Inj granted in favor of MI. Recipient of the waste was unhappy, asked for a stay. (3) App ct said they were entitled to a stay in this case. ii) Dist Ct vs App Ct (1) Success on the Merits (a) Dist Ct. (b) App Ct. Looks like Δ will probably win. BUT don’t need to be convinced that the side will win, just must be a serious question as to the merits. (2) Irreparable Harm (a) Dist Ct  Harm to MI (b) App Ct  Prelim. Injunction = no irreparable harm to MI (i) Yes, MI has waste, but once other states take the waste the other states Δ will have to keep it. (ii) Also MI didn’t show that MI couldn’t hold it until the case was decided. (3) Balancing the Harm (Harm to Others here) (a) Dist Ct (b) App Ct (i) MI can hold on to it for now. (4) Public Interest (a) Dist Ct (b) App Ct (i) Strong public interest in proper disposal of the waste. iii) Full hearing only on Permanent Injunction, so courts are careful and don’t want to grant them lightly. They are pretty extreme because they order parties to do or not do things. App ct is deferential but will balance the equities anew and call it “abuse of discretion” if need be. 31) Prior Restraint of First Amendment Rights a) Carroll v President and Commissioners of Princess Anne 393 U.S. 175, 89 S.Ct. 347 (1968) Justice Fortas 1st A Prior Restraint case i) Rally  TRO for 10 days upheld by app and sup ct, 10 month Prelim Inj reversed. ii) Ex Parte Order for Prior Restraint of 1st Amendment Rights  (1) Notice: Why is notice so important here? (2) Adversary Proceeding before restraint is issued iii) Heavy presumption against prior restraint of speech. iv) Order restricting speech must be narrowly tailored, and must have notice and adversary proceeding to determine how to narrowly tailor the restrictions v) State said that under the law, even with ex parte order can get a hearing within two days, but the rally was supposed to be the next day, have a right to have the hearing BEFORE the restraint is imposed. Judge must assure consideration of the entire matter. 32) Tuesday, September 25, 2001, no class tomorrow, Makeup THURSDAY at noon a) National Socialist Party of America v. Village of Skokie, 432 US 43, 97 S.Ct 2205 (1977) Per Curiam p 147 i) Procedure: (1) How did this get to Justice Stevens from the denial of the stay by the Ill Sup Ct.? The country is divided up: Stevens in this case, Brennan in the next case, can get one supreme court justice to decide not on the merits. Here, though, the court treated the application for a stay that they applied to Justice Stevens, Justice Stevens referred it to the supreme court and they decided to treat the application for stay as a writ of certiorari… (2) but must be a FINAL ORDER in order for it to go to the supreme court. (a) Sometimes even a trial court order can be a final order for purposes of referral to the supreme court if there is no appeal. Why? (b) Because it is separable from the merits, a timing issue, are they entitled to have the rally WHEN they want to, in other words before the trial is over… they declined to issue a stay which impinges on the 1st A rights of the π National Socialist Party of America. The restraints must be reasonable and here they were going to be delayed for the whole time during the court case, and so this is a final ruling on their right to have the parade or rally during the trial. Prof. Reynoso Remedies Class Notes, Fall 2001 Page 14 of 44 (c) See page 147, cites to Cohen v. Beneficial Loan Corp 377 US 541, 546, 69 SCt. 1221, 1225 (1949). (3) Merits: (a) When it is a PRIOR RESTRAINT of 1st Amendment rights: (i) Must have immediate appellate review OR (ii) Must instead allow a stay (b) What should they do if they suspect violence? Well, have a hearing, maybe require a buffer zone, or something, and provide for immediate appeal of that order. b) M.I.C. Limited v. Bedford Township, 463 US 1341, 104 S.Ct. 19 (1983) i) Matter could have been resolved more quickly, instead delayed and didn’t give immediate appellate review. ii) Appellants had exhausted avenues for relief iii) The delay would only be a few months here, but Brennan says that since they didn’t give them the most immediate appeal available and MIC didn’t have a chance to prove that the films aren’t obscene… iv) Rule stated here: When state wants to restrict based on content, must provide strict procedural safeguards including immediate appeallate review v) Issues a stay pending disposition of the appeal in the Michigan courts 33) Modifications of Permanent Injunctions a) FR CivPro 60(b)(5): On motion and when just court may relieve a party from a final judgment for the following reasons, jump to reason 5, it is no longer equitable that the judgment should ave prospective application or 6, any other reason justifying releif from operation of the judgment. b) Doctrine of Changed Circumstances c) Bellevue Manor Assoc. v. United States, 165 F3d 1249 (1999) i) πs, landlords of section 8 housing, had a written K with HUD (govt) that said how much $ they would get. Govt (HUD) wanted to use a new formula for calculating compensation. π says we have a valid K, that’s breach to change the formula. ii) Why did landlords lose this battle? (1) District Court: said that HUD met the most stringent test so district court didn’t need to decide what standard should apply. (a) Statutory Amendment  Section 8.01 now said HUD had to take into account market values. (b) Rufo was more flexible than Transgo case, allowed HUD to take into account market values because of the new law. (c) Equity: there was only so much $ to go around and giving too much to certain landlords was unfair to others and to prospective renters. Rule 60(b)(5) Equity standard. Three Part Test: (i) Substantial change in the circumstances or law since the order was entered, (ii) Extreme AND unexpected hardship in compliance with the order AND (iii) a good reason why the court should modify the order. (d) But isn’t it unfair to change the K and to change the order of the court? Isn’t the past order of the court sort of like a K that the parties agreed to? (e) Is a 9th cir case interpreting Federal rules, not necessarily tied to a summary judgment. Really says that the courts have the power any time if fairness requires a change to change an order. iii) Penn Township case  (1) Consent decree between parties, is like a K. Municipality alleges zone violations between parties, parties entered into a consent decree saying how the business person will use the area, not violate zoning regulations. When it goes before the trial court, the trial court changes the final consent decree order, says we think that Δ should have the right to dump vegetive waste on some of the properties. We think that Δ doesn’t need the 100,000 bond before he dumps this vegetative waste. (2) City appeals, goes to sup ct of Penn, and sup ct of Penn reverses. (3) Why did sup ct of penn reverse? Because consent decree should be treated like a K. since there was a consent decree on the injunction, it’s not fair to later be changing the Prof. Reynoso Remedies Class Notes, Fall 2001 Page 15 of 44 injunction because they sat down and agreed to it. this is really akin to a K between the parties. This court is saying once the folks agree it is not equitable to let them change. (4) This is the Pennsylvania rule and is different from the federal rule enunciated by the 9 th cir in the Bellvue case. (5) There are a few jx where they say treat as K, interfere only if Fraud Accident or Mistake, can interpret cannot interfere. 34) Enforcing Injunction Make up late Thurs noon 9/27 a) Contempt i) Types (1) Direct  in presence of judge, can find contempt immediately (2) Indirect  out of presence of the judge, usually this type for injuctions (3) Civil  (a) Fine, can send to jail if it will make them talk (b) Only supposed to be civil if judge thinks it will make them talk (c) Main purpose: to force person to follow the order (d) Secondary Purpose: Remedial, for the benefit of the complainant (see Wronke case p 176) (e) Can hold indefinitely because can get out of jail by complying with the order. (4) Criminal  (a) defined time in jail. Cannot give an indefinite sentence. (b) Due process, but not jury not bail, not full trial. (c) Punitive, to vindicate the authority of the court (Wronke case p 176) (d) Must give jury trial if holding for more than 6 months and criminal. ii) US v. Wilson, 421 U.S. 309, 95 S.Ct. 1802 (1975) p 163 (1) Immunity granted to Wilson and Bryan for T in bank robbery. No legal right not to I (2) Judge held them in contempt, direct b/c right in front of judge. (3) Summarily sentenced to 6 mo in jail, said he might reduce the time if they did T later. (4) App Ct says Defined time = criminal contempt. (a) Due process required for criminal contempt: (i) Notice (ii) Hearing (iii) Jury (iv) Bail (5) Sup. Ct says yes, criminal contempt but Due Process as listed above isn’t required when applying Rule 42(a). Constitutuion permits judge to impose judgment when the judge knows all the facts and the conduct is sufficiently outrageous. (6) Rationale: must give judges the power to control their courts. Don’t need the kind of hearing for protection when this all happens right in front of the judge. Judge must have the power to punish right away or the (7) Since they were already in jail, can’t the judge just suspend the other sentence while they serve their contempt sentence? (8) But can’t just suspend the trial until they decide to testify, and they don’t seem like they are going to testify, all you can really do is punish them criminally. Civil contempt is permissible here but he tried to make it sort of civil by saying he would resonsider if they would testify. iii) Right to a jury in “civil” contempt cases: iv) Shillitani v. US, 384 US 364, 86 S.Ct. 1531 (1966) (1) W refused to T before a grand jury. Judge did say they would be released immediately if they testified, said that it was criminal. (2) Supreme court reversed the CHARACTERIZATION of the contempt, said it is civil because the witnesses “have the jailhouse keys in their own pocket.” (3) Since civil then it is civil due process not criminal due process. No jury, no bail. v) Famous case, Irish lottery, civil contempt, held him until judge became convinced he wasn’t going to comply. Then judge ordered a new hearing, criminal, sentenced him. He served the sentence. Went and got his money. vi) Eventually ct of app will say must find criminal contempt if the person is never going to talk. Prof. Reynoso Remedies Class Notes, Fall 2001 Page 16 of 44 vii) Codispoti v. Pennsylvania 418 US 506, 94 S.Ct. 2687 (1974) p 169 (1) Δs were pro se/pro per with appointed advisory counsel (2) Judge had a contempt hearing at the END of the trial and sentenced them to one or two years for each count of contempt to run consecutively (3) Supreme court faced with issue: when is person entitled to a jury in a criminal case. (4) If the punishment is over six months then they should get a jury trial, and here where counts were aggregated and the hearing happened at the same time, the Δ should also get a jury trial. Look at the aggregate sentence. (5) Six months is just traditional, it’s “petty” and more than six months is “serious.” (6) Dissent says no need for jury. Why does the majority disagree. (a) Some issues are so serious that the abridge the rights of the parties and so you have a right to a jury… this was a pretty long sentence here. (b) Here the judge waited to the end of the trial, so presumably could give more due process. (c) A lot of time the judge ought to give the criminal due process even if they might impose civil contempt because might be criminal. (d) Juries prevent judicial abuses. viii) Ervin v. Iowa Disctrict Court 495 N.W. 2d 742 (1993)page 172 (1) Criminal contempt: must show not only violation of a court order, must also show willful failure to comply. Here quasi criminal for the initial 20 days. (2) Civil Contempt: don’t have to show that it was willful. (3) Burden of proof on willfulness shifts to the alleged contempter to show that it was not willful. The BOP according to this case is a burden of persuasion or production? (a) Persuasion (b) Production (4) Δ Ervin claims physically and financially impossible to comply. (5) Court says must at least attempt to comply, here Δ Ervin must at least start to open the fire lanes. ix) Wronke v. Madigan, (1998) page 175 (1) Divorce case in Federal court on writ of habeas corpus under 28 U.S.C. § 2254. Also ordred to pay back child support and remove a sign with names of his children. (2) Contitutional issues: wronke argues (a) In jail for more than six months so entitled to a jury trial because criminal =. (b) Indefinite sentence (3) Court says (a) Can hold for more than 6 months without a jury trial if civil and this is civil. True that if criminal must give jury trial if criminal. (b) Indefinite sentence okay because could comply and get out of jail x) US v. Tennessee 925 F. Supp. 1292 (1995) (1) Facts (a) TN runs a hospital for DD people. (b) Finding that hospital violates minimum stds. (c) Court Asks parties to submit a remedial plan (d) Court accepted the remedial plan, plan becomes a court order (e) Noncompliance with the remedial plan. (f) New orders ordering compliance. (g) Judge issues emergency order, orders comissioner to spend every 4 th weekend at the hospital until compliance with certain provisions. (2) Problem for the court: (a) Judge ordered the US govt file a brief suggesting to the court what other options the court had. Said TN may also submit a brief saying what other options the court had. (b) This is a common problem, comes up in hospitals, prisons, jails, schools where there are minimum standards. Legislature doesn’t approve the money to improve the situation. (c) Legislature and the governor has control of the money, so why is the court dealing with the commissioner of the hospitals rather than the legislature and the governor? Prof. Reynoso Remedies Class Notes, Fall 2001 Page 17 of 44 (d) Lack of $  TN never raised the defense of impossibilty because they could just tax more. Constitutuional violation cannot be excused by an agency saying no $. (e) Good faith is not a defense. (f) Intent is not a defense. (g) Why not hold gov and legis in contempt? Respect from one branch of govt to another. Usually have a writ of mandamus, goes to the last person who must act on it. not a good procedure to hold the highest officials responsible or order them to do something. Usually goes to the person who writes the check (treasurer) to order them to write the check, hopefully the governing body will relent and approve the $. (h) Fine in this case was $1000 per day but was mostly symbolic. (i) Fines don’t work, what will work? Pretend you are the US/AG (i) Order that the governor go to the hospital every 4 th weekend. (ii) Order that the hospital hire a specific psychiatrist (iii) Order that the administrator be fired (iv) Order that the state pay the fines and not fed govt (v) Order all the top officials to take a con law class (vi) Order the top officials to write a weekly essay on their duties (vii) Order that funds be diverted from some other fund (j) Receivership  common way to enforce is to appoint a receiver to report back to the judge, to run inspections to see if the court order is being obeyed. (3) This case is a hearing on partial compliance and relief from order to spend time in this hospital. (4) Purging contempt b) Intl. Union, Untied Mine Workers v. Bagwell 512 su 821, 114 SCt 2552 (1994)page 186 i) Long bitter strike, pickets, orders saying no pickets, allow ingress/egress ii) Found 72 violations of the court order. iii) Fined and said extraordinary fines if later violation of the court order but set aside later because should have been criminal procedure. iv) Later hearing, finds 700 violations v) Civil discovery, imposed reasonable doubt std on the BOP, no jury, fined union 64 million vi) There was a settlement and asked the judge to dismiss the case and the contempt orders. vii) Judge said have to pay the $ ordered on contempt. viii) US sup ct said this is a criminal case and so must comply with criminal procedure. ix) Tuesday, October 02, 2001 (1) Factors: (a) Could define ANY criminal rule as: if you break this in the future, you will go to jail. Prospective, future act. But not that useful because civil orders also say obey or else I will charge you. (b) Amount of the fine  maybe a factor, but not that useful. (c) Competing interests, decide where the interest lie. (i) Economic interest of company and everyone who depends on it (ii) Employment rights and conditions, union interests (iii) Court interests in respect for court orders (d) Here, the main interest is in respect for judicial authority, so it is criminal in nature. Court wants to punish the parties for past conduct despite the settlement, so it is criminal in nature. x) The union will probably be destroyed by this fine. If the step is this serious, then the union is entitled to criminal procedure. This isn’t really expresed in the case. xi) Scalia  concurrs, takes a different view. Says you must have factfinding, too much power to judge to issue finding of fact when the result is this serious. You have to be sure of your facts and the jury is needed to make sure that the factfining is fair. This is a constitutuional right to a jury. xii) Ginsberg concurs, she agrees with maj and says when you have a purely coercive order (can easily comply with it) then it is civil. When the judge’s order says I will automatically find you in contempt if you do this and as here they already did the act, then it is criminal. But the Prof. Reynoso Remedies Class Notes, Fall 2001 Page 18 of 44 original order said don’t be involved in violence… not really the way Ginsberg laid it out because she made it seem like they had already done the violence when the corder was issued. xiii) Court can still enforce the dignity of the court, but when that is the only interest then must provide criminal procedure. xiv) Note that you can’t tell until the end if it will be found civil or criminal because here the end result was criminal only because the sanctions were so huge because the union violated the order so many times. xv) Historically judges had used their power to break unions and so there is a historical sense that unions should be entitled to a jury to make sure that the judge is being fair. xvi) Prosecution: Federal, must be a public official. State: sometimes permit non-public official to prosecute because many are domestic relations and burden on state if req public official. c) Cancer Research Institute v. Cancer Research Society Inc. page 203 i) Trademark infringment case, required Δ to send out notice to publishers to not list them in publications ii) Δs said we asked our ad agency to send out notices and it isn’t our fault. We tried to obey the court order iii) But π said: (1) Δ didn’t check to see if the ad agency complied (2) Ad agency normally waited till the last minute iv) problem for the court: Δ had complied but π still had damages (1) how do we make the π whole? π submitted speculative evidence as to what dmg might have been but had no hard evidence on dmg (2) nevertheless, the judge came up with damages  ordered discovery based on theory for figuring the damages. Theory for figuring damages: Unjust Enrichment (a) issue is how much did the defendant profit from the failure to comply (b) courts call it Unjust Enrichment v) judge denied atty fees (1) negligence not enough for atty fees in this jx (2) Δ not willful so no atty fees vi) Punitive dmg denied (1) Judge said no punitive damanges, compensatory only vii) Why civil not criminal? (1) Not going to put the Δ out of business (2) No great danger to the Δ, just must give up improperly obtained $ (3) Judge can assess damages ancillary to the injunction that was violated, it is established judicial equtiable power to allow this d) Jones v. Clinton page 204 i) Original case: Allegation of improper sexual advances by Gov. Clinton. ii) Contentious discovery, judge sits in but usually they have discovery magistrate. Judge had to make rulings all the time during discovery, it was exceptional in that regard. iii) In a depo the Δ was asked about a potential W (monica) and later judge became convinced that Δ had lied about that potential W iv) Case had settled, Δ had been tried and acquitted by the senate v) Judge issues order w/o a hearing (1) Direct contempt: Contempt took place in front of the judge. (2) No need for fact finding, can say contempt took place. vi) Interest: preserving dignity of the court, prevent lies in court. vii) Civil or criminal contempt? In the end it was civil because she fined Δ and it was substantial but not outrageous. The sanctions were traditional civil sanctions. viii) Could have said “this might be criminal, I will hold a criminal hearing.” ix) Problem with publicity in cases: if the pool of jurors has been tainted then general rule is you can get a change of venue. But: not always, and often people just don’t follow any news at all. e) 35) Missed class 36) Contempt Continuted Prof. Reynoso Remedies Class Notes, Fall 2001 Page 19 of 44 a) People v Conrad 55 Cal. App. 4th 896 (1997) First District App ct page 228 i) App ct. disagreed with trial court that Δ acted “in concert” with first group. P 231 ii) Could infer that they were acting in concert if the groups had the same aims and there were a whole series of groups coming in b) US v. Hall 472 F.2d 261 (1972) famous desegregation case 5 th circuit i) Facts: desegregation ordered. Order quite detailed and had both mandatory and prohibitory language, enjoined from and prohibited from a number of acts. (1) The order enjoined students and other persons actin independently or in concert with them and having notice of this order… (2) Hall tresspassed on school property ii) This Δ, Hall, appeals saying (1) Not a party to the original Mims litigation, not subject to order under common law that nonparty who violates an injunction solely in pursuit of his own interests cannot be held in contempt (2) FRCivPro 65(d)  limits the injunction order to “parties, etc or people acting in concert with them” and who have actual notice iii) Court says (1) If can’t enforce against community, then court has not power to enforce the order and thus no power to make a binding adjudication of the parties properly before the court. (2) Theory: At common law the courts could issue an order that protected certain geographic areas (In Rem). EG prosecutor could get an order against a house of ill repute or gambling, and it was an order against the whole world. Then noone could go in that place. (a) The constitutuional problem: NOTICE. Those types of orders have been issued concerning a courthouse… no picketing at the courthouse… the courts have cut back the use of In Rem Jurisdiction, (b) But here they were protecting the student’s constitutuional rights (c) And here, he did get served with the order, see p 233 (3) FRCivPro 65(d) can’t be read as preventing judge from rendering a binding judgment. iv) This is one of the few cases that uses an In Rem theory. What other theories could the court have used to reach the Δ Hall? v) What other remedies could the court use against Hall? Could use trespass (probably). (1) If this were a modern case, court would probably say “use criminal law and issue order against Hall.” Notice is the concern. (2) Maybe a court today would do the same thing… they could. Here he had been served, so maybe could use In Rem theory. vi) Not that different than conrad where they also said they knew about the order. c) Collateral Attack Rule i) Must obey order until it is dissolved or set aside, even if it is an improper order. ii) Can’t raise defense that the order is improper if charged with contempt. iii) Exceptions: (1) Lack of jx of court. (2) 1st A Prior Restraint iv) Bandera Downs Inc. v. Alvarez tx (1992) (1) Injunction: don’t hold a race. They have the race. Order: hold the money. They don’t hold the money. (2) Bandera Downs argues: didn’t exhaust administrative remedy, so not entitled to orders. Court didn’t have jx to issue the injunction in the first place. (3) Can an order be issued without proper jx? NO (4) Administrative Remedy (a) Don’t bother us with this if admin agency can make parties whole. Here the racing commission actually had the power to make the racetrack hold the $. (b) What if π could show that the $ would disappear and admin agency couldn’t protect? Maybe court TRO. Prof. Reynoso Remedies Class Notes, Fall 2001 Page 20 of 44 (c) Burden is on the party asserting that the agency doesn’t have the power to make the parties whole. v) Walker v. City of Birmingham, 388 U.S. 307, 87 S.Ct. 1824 (1967) page 239 (1) Facts (a) Permit for gathering required by City of Birmingham. Δs had no notice at all that π (city) was going to seek the TRO. TRO issued (b) Demonstration held, there was some violence (c) Order to show cause before trial court  why didn’t follow injunction (2) Δ Argues / Petitioner argues (a) Δ says couldn’t get permit, City wouldn’t give it to them, had no notice (b) Δ found guilty of criminal contempt, sent to jail (c) Constitutuional Argument  (i) Order facially violates 1st A. it is a prior restraint (ii) Vague  hard to tell what you can legally do (iii) Equal protection  city won’t let black people protest (iv) Notice on original hearing for TRO (3) Court Majority says (a) Must obey until you can get the order set aside by writ (b) Had several days to try to get trial judge to change mind or clarify the order vi) Tuesday, October 09, 2001 Walker Case continued (1) Dissents: Warren, Brennan & Fortas join (a) Status quo per majority is peaceable streets. Status quo per dissents is 1 st amendment that protects our speech. (b) TROs have been used to do away with rights of people who need to have constitutuional right protected now, not later eg labor cases, especially in 1 st A context. (c) Officials took exact wording of local ordinance put inot a court order. Power of the court was being used to allow officials to (i) turn a civil violation into a criminal violattion (contempt) (ii) and to turn it into prior restraint. (2) Douglas, Brennan and Fortas join (a) Can ignore unconstitutuionally vague (transparently invalid) court order, that’s not contempt (3) Brennan, Warren Douglas and Fortas join (a) Court refused to hear evidence of Δ attempts to obtain a permit properly (b) The injunction was unconstitutuional, violates the 1st A, majority agrees with that (c) Disagreement of dissent: balancing the constitutuional right against the public policy of the state court enforcing the order. Constitutuion should outweigh the order, not only that, court should hear the arguments. (4) This case is still important con law doctrine, but… vii) In Re Providence Journal Co 1st circuit ct app 820 f 2d 1342 (1986) (1) Tapes of mafia type guy  embarassing to him and his family. Son of deceased got an order against the newspaper saying don’t publish it. Newspaper published anyway. (2) Other case: Private secrets involving crimes in sierra county  local paper republished even though some facts were published earlier, family won suit for invasion of privacy. (3) Court hearing: newspaper was in contempt of the order. (a) Why criminal contempt? Already done, can’t undo, can’t be remedial. (b) 1st Amendment  (i) Looks at Walker case, valid court order must be obeyed even if it might be unconstitutuional prior restraint. Walker 1st Am analysis doesn’t apply because of modern 1st A doctrine in NYT v. Sullivan (ii) Court says this is obviously invalid because it is unconstitutuional prior restraint (See NYT v. Sullivan, prior restraint is unconstitutuional.) (iii) Cause of Action for damages will suffice for privacy and defamation, prior restraint won’t do because 1st Amendment is too important. (iv) Best remedy for familyis prior restaint, but you just can’t get that. Prof. Reynoso Remedies Class Notes, Fall 2001 Page 21 of 44 viii) If you need an emergency order you call the clerk and say the trees will be cut down or the person will be put to death, the judge will come out and give you a decision. It’s not common so if you need an emergency order you have to ask for one. d) Damages, Chapter 3 i) Tort Damages  Court is balancing making the person whole with fairness to the Δ ii) In K can only give $, give the benefit of the bargain. What would they have gotten if the K went forward, with a few exceptions. iii) Rejectment iv) Replevin (getting property back) v) Chapter 4 – restitutuion  looks not at what you have lost but at what the Δ has gained. If Δ got something improperly, π will get what the Δ got improperly. Many lawyers don’t understand that restitutuion is a viable concept in every jurisdiction. Sometimes better remedy for client that damages. 37) Monday, October 15, 2001 a) Daanen Inc v. Cedarrapids Inc p 270 i) π has machinery that doesn’t work, sues person who sold the machine to person who sold the machine to the π ii) Note: this is Federal court certified question of State law -> must decide how state court would decide. Fed court can certify back to state court if Fed court can’t figure out how the state would deal with it. (1) Some states say too much like an advisory opinion, won’t do it. (2) Some states will answer the Fed. and say there is a matter properly before them. iii) Question of the Case Tort COA  damages here, or limited to K COA? (1) Here, π doesn’t have privity of K with the Δ (2) Can only sue the person who sold them the product/machine on K theory iv) Tort theory of Economic Loss COA barred because π didn’t get express warranty from seller (Cedarrapids). Δ Cedarapids did have warranty from Aring (mfgr) that applied to Δ v) Majority says (1) When product damages only itself, policy favors only K theories and not tort because in K people are free to allocate risk. In tort we ask the court to intervene. (2) Sue the person who sold the machine to π and let π seek indemnity or counterclaim against the negligent mfgr (3) Exceptions: [Tort law] When the defective product damages another product or causes personal injury, the economic loss doctrine is not barred for lack of privity. (a) Policy: don’t have to allocate risk in the K for damage outside the K relationship. vi) Page 276 Hap’s Ariel Enterprises Inc. v. General avaiation corp (1992) (1) Negligent maintenance of aircraft, had to re-do the work, π brought lawsuit against corp who did the negligent repair. (2) Good COA for economic loss in Hap’s, why here and not in case above? (3) Court says service not product is the reason but it makes no sense. (4) Real reason to award the damages here: risk of damage to innocent θ is too high with aircraft parts to find that the risk is internal to the K. (5) Certified Public Accountant, architect, (6) But Wisconson expressly disapproved of parts of Hap’s that disagreed vii) Debate about confining to K relationship (1) Public Policy  minority says rationale should apply in tort to mfgr despite lack of privity because should encourage mfgr not to make defective product (2) Majority answers  shouldn’t give them remedy outside of K because want to encourage parties to allocate risk within the K viii) Aikens v. B&O RR (1985) Penn Sup Ct. (1) π sued for derailment that destroyed place of business which caused π s to lose their jobs. (2) Δ demurred (so what) and court agreed, no good COA (3) Economic loss  Tortious interference with a Kontractual relationship [employment] (a) cannot sue under common law for economic loss for negligence, must show intentional tort or special relationship between the parties Prof. Reynoso Remedies Class Notes, Fall 2001 Page 22 of 44 (b) Foreseeability helps determine if the tort is merely negligent or rises to the level on intential tort. Foreseeability helps determine if Δ knew or should have known that the event would occur. (c) Tort Px Cause. car accident near a bridge, cars all back up and everyone is ½ hour late for work. Can they sue the person who caused the accident for being late for work? No, too attenuated even though foreseeable. Have to cut it off somewhere. (d) EG of intentional tort of interference with K  offering one party to K a bunch of $ to break the K??? (e) EG of special relationship  In some jx if there is a special relationship as with General Contractor and subcontractors to the builder, the builder might be able to sue the subcontractor. Calif allows, see below. (4) All or at least most jx agree with this case. (5) Policy considerations in this case (a) Undue burden on business to protect against this type of loss (b) K parties should allocate risk within the K, could say if our business burns down we will pay you for two months afterward or buy you unemployment insurance or whatever ix) J’aire Corp v. Gregory Cal. case subcontractor (HVAC) didn’t finish on time restaurant didn’t open on time, interference with prospective economic advantage, coa for negligent and intentional interference. Different from case above (B&O rr) because the relationship between the K and the subK. Here subK has K with the county and not with the restaurant. Special Relationship majority view or minority view. x) Aikens? Airplane case hypo  negligent mfgr (1) Tort theory suit for damage to reputation as safe airline. Negligent maintenance, K exists, (a) Δ wins on demurrer because π has a K COA (2) Hypo: passenger sues mfgr in tort for fear caused in near crach (a) Δ wins on demurrer because π does not have privity of K with the mfgr. The passenger should sue the airline, the airline can sue the mfgr if they really caused it. xi) Erlich v Mendez page 279 (1) Breach of K COA and add emotional suffering damages (2) Jury finds Breach of K (3) Jury awards 50,000 each for pain and suffering (π husband has heart condition) and 15,000 for lost earnings (4) Question: negligent Breach of K enough for tort pain and suffering damages? (a) Ct App agreed with the lower court, said can have a tort resulting from a breach of K (b) Sup Ct says  yes can have tort from breach of K but must rise above negligence. The conduct must be intentional, not merely negligent. (i) Fraud would result in tort damages. (ii) Insurance company who fails to pay a claim, often π argues breach of K and tort of failure to fulfil statutory duty. Legislature has created the statutory duty as a matter of public policy, wants insurance carriers to fulfil obligations. (iii) Physical injury would result in tort damages. (iv) In this case, sup ct says  will the mere breach of K based on negligence lead to tort damages or special damages? NO because cost of doing business will be too great if tort damages are possible for mere negligent breach. Not foreseeable that you will end up with additional costs. (c) Basic Policy  resolve in K law not tort law. If that is really their dream house, then they should provide for special damages if the house isn’t done on time. If all you have is negligence, then you are limited to K damages. (d) Even if you stick to a K, can you show special damages for a breach of K? Not unless there is some special factor in favor of special damages. You only get traditional K damages. Damages must be predictable on the face of the K absent some special circumstances. (e) In CA VERY tough to end up with tort coa when you have a K, unless it is separate tort such as fraud, is with insurance company, or other special circumstances. (f) How do you protect yourself by K? Prof. Reynoso Remedies Class Notes, Fall 2001 Page 23 of 44 (i) If you are the builder, you can K to exclude tort causes of action. (ii) If you are the landowner, you can K for special damages. (g) Arguing for the other side  If you want to find a tort COA here, you want to hold contractors responsible for the negligence, and the only way to make them comply with the building codes and so on, then hold them responsible in tort. xii) Johnson v. Baker KS (1986) p 285 (1) General Rule  damages much have some element of certainty. Speculative damages are disfavored as a general rule. (2) Legal malpractice in divorce case. Improper filing of documents. Daughter was supposed to get four years of education paid. (3) π wants damages for daughter for education. Trial court reduces award by amount received in scholarships and grants. (4) Why only two years rather than 4 years of education? Two year program, four years is too speculative. Π has the burden of proof, and the two years is proven but the four years is too speculative. Court could have reached a different factual inference. (5) Collateral source reduction in damages  she got the $ from the university, doesn’t mean that the Δ should profit from that. Still gets the full damages despite grants and scholarships. xiii) Speculation, certainty of damages etc by preponderance of the evidence is going to be a concern of the court. May run factual inferences, and lewis it is more complicated xiv) Lewis River Golf Inc. v. OM Scott & Sons sup Ct Wash 845 P 2d 987 (1993) page 287 Role of Expert in determining damages. (1) Facts previous suit over bad sod. Π was awarded over a million $, reversed on appeal, retrial, π had sold the business. Now looking at losses in the sales, loss of good will due to bad sod. (2) Generally, exerts are allowed to give opinions that lay witnesses are not permitted to give (once qualified as expert W and on topic helpful to trier of fact) (3) Expert testimony as to value of good will  sup ct says experts can differ on special damages. Expert assumed certain facts, such as ability to sell sod, how much business there would be, costs. (4) Not too speculative just because experts differ. Here experts considered similar factors but used different multipliers, such as 4 for one and 9.5 for the other. xv) Related problem not in this case: how to value good will when business is new. Hypo: 2 business people come up with an idea for equipment in shopping centers (Jukebox that actually delivers record rather than music?). (1) How would a plaintiff prove lost profits? (a) Look for similar products. But here part of the value is the novelty! (b) Look at how records are sold? (c) Look at the business projections and the market plan. (d) How did they get this financed, they must have convinced a bank that they would profit. (2) Arguments against π: (a) Lots of businesses fail (b) Too speculative (c) Maybe the financing was out of the financier’s speculation fund, might use it as a write off. (3) Judge decided this was too speculative. xvi) Notes: the pig that never made it to the fair. (1) If π proves that the pig had a 1in3 chance of winning $1000, the damages should be $333 because the pig did lose the chance…. But authority is split on this xvii) Note 4, accepted methods of calculating lost profits (1) History of profitability (2) Actual existence of lost contracts (3) Dissent says uncertainty is more important in determining the existence of liability. There can be some uncertainty in the amount of damages. The burden for proving damages is lower than the burden for proving liability. Judges differ on how they approach this, and Prof. Reynoso Remedies Class Notes, Fall 2001 Page 24 of 44 the lawyer should argue that once loss due to negligence is established, should lower the burden. (4) Burden of proof is certainty by a preponderance of evidence. More than 50%, for sure, but how much more than 50% differs from court to court. xviii) George H. Swateck v. North Star Graphics, 587 A2d 629 (1991) N.J. (1) Issue: Prejudgment Interest  can it be awarded when the damages are unliqudated? (2) Court says that we don’t consider the damages liquidated or unliquidated because the current case law (in some jx) authorizes prejudgment interest when the damages are certain even if tort damages rather than K damages. (3) When damages are liquidated, then may award prejudgment interest (a) Theory: π was entitled to that $ for the whole time that the suit was pending, so π gets the interest. (4) When damages are unliquidated, usually don’t award prejudgment interest because the right to the money wasn’t vested in π until the judgment was pronounced. (5) Some Jx allow prejudgment interest in both Tort and K and others allow prejudgment interest on K only. (a) Theory is that in K π is entitled to $ on breach, but right to the $ doesn’t vest in π until Δ is found liable. (6) New theory for prejudgment interest in torts: you are entitled to the $ from the date you are injured. (7) General rule: must have certainty in both K and tort for prejudgment interest. (8) Post Judgment Interest is established by statute. xix) Whisper Corp. V. California Commerce Bank 49 Cal App 948 p 299 (1996) page (1) π Whisper sued Δ for negligently allowing Employee of Aurich, (Aurich was hired by Whisper to manage apartment complex owned by Whisper) Benitez to open an account. Benitez had a past conviction for embezzlement. xx) Monday is on paper xxi) Tuesday, October 23, 2001 xxii) When is it a Collateral source? (1) Gifts from family, including employer if family. (2) Benefits unrelated to litigation such as employer program that applies to all employees. Examples include lost wages and medical benefits. (3) Insurance that the π purchased. xxiii) When is it NOT a collateral source? (1) Public benefits such as food stamps that are intended for all poor. (2) Employer paid medical bills in anticipation of some liability. (3) Employer pays lost wages anticipating liability. (4) Employer’s insurance pays anticipating liability.?? (a) Worker’s compensation? b) Minpeco S.A. v. Conticommodiy Services Inc (1987) p 315 i) Π Govt. of Peru (Minpeco) harmed by Δ’s manipulation of the silver market. ii) Π sues and Δ claims that Δ is entitled to set-off of amount that π benefitted from Δ’s tortious and illegal manipulation of the silver market. iii) π gained $ due to Δ’s illegal acts, and are not entitled to doubly benefit from Δ’s actions. (1) Minpeco actually HAD silver, and so they could sell the real silver at the artificially high price ($25) per iv) π lost profits on the silver market because the price was artificially high and Minpeco was trading futures and “betting” that the price would go down (?) and it went up instead (1) Minpeko had made K for sale at maybe $8 (2) Silver is trading silver at $25 (3) Minpeko has to honor the K and they lose 17 $ each time v) Limitation on offset (1) Same circumstance and same activity vi) Treble damages for π for actual economic loss vii) See case mentioned concerning Oakland Raiders. Rules said can’t move w/o permission but rules also said you get a monopoly which benefitted them. Setoff for benefit of monopoly. Prof. Reynoso Remedies Class Notes, Fall 2001 Page 25 of 44 c) Snead v. Hollowman (1991) i) Failure of Δ to mitigate damages by following doctor’s exercise regimen ii) Judge did not instruct on duty to mitigate damages. iii) Error: must let jury decide if it was reasonable to refuse to exercise to mitigate damages. d) BMW v. Gore (1996) i) Compensatory 4,000 and 4 million punitive. ii) Nov 8 and 15 at noon makeup classes e) Wednesday, October 31, 2001 i) Punitive damages in K are not allowed unless you associate a tort with the breach. ii) Liquidated damages in K are normal and courts approach has shifted somewhat. f) Truck Rent A Center v Puritan Farms Case page 344 i) π said Δ didn’t take proper care of the trucks, judge said not true, π had performed the K ii) Δ had substantially performed iii) Δ liable for the 50% due under the K, about 88,000 and affirmed on appeal iv) What test was used by the trial court to see if the liquidated damages provision was enforceable? Judge decided it was enforceable (1) Were the damages reasonable in the context of the breach. If grossly disproportionate the court will not enforce. (2) At the time that the K was made, was it a fair estimate of the damages if there was a breach in the future? (3) Damages were not certain at the time the K was made. If the damages are really clear when the K was made, then liquidated damages are not appropriate. Because if the damages are really clear then use the ACTUAL damages, not the estimated liquidated damages. v) App court says enforce unless unconscionable and contrary to public policy. Why are liquidated damages when the damages are clear and certain contrary to public policy? (1) Because it’s like punitive damages if you let them K to make huge liquidated damages when actual damages will do. (2) Under common law the parties couldn’t get liquidated damages because it was seen as the role of the court to set the amount of damages. Damages were supposed to be public and not subject to the private contracting. Now courts say parties know better than the courts what the damages might be. (3) Punitive damages or forfeiture are against public policy because it will make people afraid to K if they might be subject to punitive damages or forfeiture. Breach of K isn’t a tort, there isn’t wrongdoing, and the person probably thought they were going to perform. We don’t want to punish people when there was no wrong. If there was a wrong then bring a tort cause of action. (4) Note that the amount of liquidated damages may be bargained for and so courts are more deferential now. vi) Dissent (1) BUT you could say that since we know the actual damages here, then we should just award the actual damages because anything more is just a penalty. (2) All we should do is make the π whole, and there isn’t uncertainty in the damages here. You could figure them out even at the time of contracting. (3) This was a printed form, and so maybe the liquidated damages were not really looked at to see if the damages were certain. vii) What if the K said that renter had to pay 100 % rather than 50% of the rent due if there was a problem and the K was breached? (1) Would be unfair because they would get to keep the trucks and still get full rent. g) Kelly v. Marx (1999) page 348 i) %5 down on the house and liquidate damages if they didn’t buy the house. Δ says can’t buy the house because not able to sell other house ii) Trial Court  Summary Judgment for Δ iii) App court reverses  iv) Sup ct mass  no actual damages, looked at the actual damages rather than damages at time that the K was made Prof. Reynoso Remedies Class Notes, Fall 2001 Page 26 of 44 (1) This court looked at TOC to see if fair, and said under the facts of this case where there were no actual damages it wasn’t fair (2) Π can’t show that they actually had any damages and liquidated damages are to compensate for damages actually suffered (3) So why did they say ? (a) Because don’t want courts to second guess every K (b) Still look at fairness, so in this case have to look at the time of K and it was fair (c) Δ would have to make an unconscionable market argument but most courts agree that %5 is reasonable in RP Ks. (d) Note that buyer can condition the purchase on sale of own house and that seller won’t get 5% or liquidated damages if buyer can’t sell own house. (4) Could look at liquidated damages as insurance that the other person will not breach. Should probably argue uniqueness of the item or service if you are going for this argument for huge liquidated damages. (5) Hypo: will be one day late with payment under the K, should π get 100% of the provided liquidated damages? Court might say trivial breach and not entitled to liquidated damages. h) Monday, November 05, 2001 i) Alyska Pipeline v. The Wilderness Society (1975) p 352 (1) Injuction issued against the pipeline construction co based on action by the wilderness society and others. (2) Π said they were entitled to atty fees because they were acting as a private atty general and vindicating a public interst., and app ct agreed. (3) Sup ct said no, not entitled to atty fees. General rule is that winner doesn’t get atty fees. Note that in england and in other countries winner does get atty fees. (a) Statues Sup ct said statutes allow atty fees in certain cases. (i) Anti-trust , equal employment Title 7 (to allow π to get justice lack of resources, fee shifing only if you win,note that can technically lose the case but win something important enough to get atty fees anyway.) (ii) Access to courts, encourage lawyers to take the cases. (b) Common Law Can also get atty fees without statute if opponent advances a bad faith argument. (i) Common trust in class action shareholder suits(???) (4) Prior to this case you could often get more fees if the case was complicated. Now the lodestar percent of the award is starting to be used more. Lodestar discourages litigation in the public interest because if you lose you get nothing and if you win you get a limited amount. Only if there is a statute or a clear common law doctrine such as bad faith will you get the atty fee. ii) Bell v The Birmingham News p 358 in note 3 (1991)  city council was holding meetings in private and suit was to say no and ct awarded atty fees based on private atty general theory iii) CA Case  civil engineers said can’t contract out, must use civil service employees in CA. Award of atty fees. iv) Distinguishing both bell and the ca case from Alyeska  one distinction is statutes in CA and alabama seemed to authorize fee shifting. v) Calculating the fee amount (1) Lodestar % of the fund calculation  percent of award (2) 5th circuit 12 factor determination  number of hours spent times reasonable atty fee per hour for this type of case. (complexity, experience of lawyer, customary fee, fee fixed or conteingent, time limitations imposed by client or other factors, awards in similar cases. (3) Assume atty has a contingency agreement to get 40% of the award, court might not allow that to be the amount paid by the losing party. (4) What if the original law firm associates a few more law firms to help them… vi) Evans case page 352 note 8 (1986) settlement offer said we will settle only if you wave atty fees. This is pretty unfair because π lawyer has to communicate the offer to the client. Brennan dissent says shouldn’t allow Δ to make an offer with waiver of atty fees because will discourage lawyers from taking cases. This case is out there but Δs don’t tend to make offers Prof. Reynoso Remedies Class Notes, Fall 2001 Page 27 of 44 that require the π to waive atty fees. Instead, the amount (Lodestar) has been limited and that is having a limiting effect on public interest suits. 38) Chapter 4 Unjust Enrichment and Restitutuion a) Note: don’t just focus on what the π lost, also look at what the Δ gained. b) Assume that tort is conversion by fraud, Δ stold a car worth 10,000 and sold it for $20,000 i) Recover in tort  10,000 for loss of π ii) Recovery in equity  20,000 for unjust enrichment c) Minor defrauds you in K i) K remedy: NONE, minor can’t enter a k ii) EQUITY  restitution is a cause of action to which minors can be party d) If the action or the remedy is at law, this is often called “quasi K” e) If the action or remedy is in equity, often called “constructive trust” f) Kossian v. American National Insurance p 366 (1967) Unjust enrichment i) Π and Reichert have a K for π to clean up debris after a fire and turns the property over to Δ and goes bankrupt ii) Δ owns a deed of trust on the property, and submits a claim to ins co for cost of cleanup iii) K gets nothing from Reichert and so π contractor sues Δ iv) Trial court dismisses because no K between π and Δ, app ct reverses, finds equitable obligation based on unjust enrichment. Δ can’t get ins $ and debris cleanup too. v) Δ did not commit a tort, Δ did not have a K with π, but it’s still unfair to let Δ get the cleanup and the ins $ too. However, Δ only has to pay back the amount that Δ profited via the ins $. vi) But for this theory of unjust enrichment the π would get nothing. g) Bastian v Gafford (1977) 369 i) Trial court entered judgment for Δ on the grounds that Δ was not unjustly enriched. ii) App ct says no, only look for unjust enrichment in quasi k but here the analysis and the pleadings support implied in fact K. iii) In K implied in fact you look to see what was offered, what performance was tendered, and and how much the compensation should be. Here the owner said prepare plans and the π said okay and did prepare plans. This was a traditional K and trial ct misunderstood what to look for. iv) If the Δ had actually used the plans, then the court could easily find a contract implied in law because π benefitted. v) Here the K was implied in fact h) Moses v. Macferlan (1760) King’s Bench p 370 note 1 i) Moses endorsed notes to Macferlan so that Macferlan could collect $ that Jacob owed to Moses instead of Moses paying Macferlan directly. Macferlan agreed not to come after Moses. ii) Macferlan got $ from Moses in law suits and court in those law suits said can’t look at the indemnity. They did not have the power to look at an affirmative Δ. Macferlan took the $ iii) Π wins despite the agreement. Why? Because Moses shouldn’t have had to pay Macferlan because of the indemnity and so was unjustly enriched when Macferlan got the $. i) Crawford’s Auto Center v. Menn. (1995) p 374 i) Crawford towed and stored vehicles for the penn state police (PSP), vehicles were evidence ii) Crawford had vehicles for a long time and the PSP only paid for part of the time iii) Crawford asserts implied in fact K for the time the vehicles were stored and the court agrees. (1) K was not written out, but did agree upon request of PSP to pick up and store the vehicles (2) PSP knows that crawford tows and stores vehicles for a fee (3) However, the terms were different than prior agreements because prior calls from PSP were for wrecks and the owners of the vehicles were billed. Usually in these cases PSP would sell the wrecks for scrap metal which would compensate them for the towing. iv) What should the price for the service of storage be? Resonable market value, lower court must determine. v) Could this be a contract implied in law rather than in fact? Yes because police would be unjustly enriched by free storage. However, K implied in fact also supported by these facts. vi) Note: coa accrues when PSP refuses to pay invoices because can’t sue until they breach. j) Olwell v. Nye & Nissen (1946) p 379 egg washing case. i) Machine was in storage because labor was scarce during WWII. Prof. Reynoso Remedies Class Notes, Fall 2001 Page 28 of 44 ii) Δ used the machine a few times a week from 1941 to 1945 without permission iii) Π finds out, offers to sell it for $600 and Δ says no, $50 and they can’t agree iv) Δ had committed the tort of conversion, improper use of the property of another (1) Damages are a forced sale of the property to the Δ v) Π wanted $ for the use instead, $25 per mo for use, and won in the lower court vi) Δ says no way, this should have been a tort coa for conversion not a coa for use of the machine. vii) Court says no way, π has a choice between a tort coa or a coa in asumpsit on the implied K. (1) This is implied K and so π must show harm, damages. Since the machine was in storage there was no damages, π didn’t even know that Δ wasuing the machine (2) Court says damages are loss of use of machine, doesn’t matter that they never tried to use the machine. (note: what about wear and tear on the egg washing machine?) this is a quasi k, so must look at what the reasonable K amount would have been if there had been a K.? NO, the court looked at the profits that the defendant derived from the use of the machine, not clear how they determined that profit. Probably would look at the rental value of the machine. You look to the benefit to the Δ because it is unjust enrichment. Then you assume that the loss to the π equals the benefit to the Δ. (3) However, the court exceeded the amount prayed for in the award so must reduce the award to the amount prayed for. The rental fees would have been $10 per week according to the court but can’t let the judgment be higher than the prayer. viii) In Calif. You could proceed with both causes of action and not decide which coa to pick until the end. ix) Maglica v. Maglica (1998) p 382. (1) Husband owned a business. The success of the business was largely due to the efforts of the wife. They weren’t really married but lived as if married. (2) Π wife sues, and court says can compensate based on (a) How much it would have cost to hire a person to do her work (b) How much the corporation benefitted (3) Jury says based on quantum meruit, $84 million. (4) App ct reverses. Reversal, no fiduciary duty, instructions were wrong to jury should be based on the value of the services performed and not the “benefit conferred” because it should have been based on cost of her work if they hired someone. court said quantum meruit should look at how much it would cost to hire a person for the position. 84 million is too much for wages, must have decided that she was entitled to a share of the business itself./ (5) App ct says Quantum meruit is not the benefit to the Δ but rather the value of the services rendered by the π. (6) Can you get more than the market price? Maybe yes if past relationship supports it. (7) Prof thinks this case is just plain wrong. Shouln’t limit to the market price as the court did. (8) Court did say that if there was an agreement that she should get over market price she can get it. (9) The court must have concluded that there was a K in fact so look at quantum meruit as the traditional limited sense, so only the value of the services rendered on the market and ignoring her special skills and imagination. (10) Basic concept of quantum Meruit is that you don’t have actual K terms so you have to figure out what the value of the thing is or should be. Courts themselves are sometimes confused about how they should figure out the value. Prof disagrees with court in this case because of how they applied the concept. (11) Use quantum meruit for K in fact (not this case) (12) Usually use quantum meruit for K at law because it is unfair for the person not to get paid who did work or whatever. Hard to figure the value to the π so they look at the benefit to the Δ. (13) Court said that the common law marriage doesn’t mean that they agreed to share property in california because we don’t have common law marriage. Court seemed to think that the jury considered common law marriage. However, the fact that they lived Prof. Reynoso Remedies Class Notes, Fall 2001 Page 29 of 44 together might be one fact among other facts that supports the conclusion that there was an implied agreement in fact to share profits. (14) App ct is saying that the trial court should not have allowed the jury to find a K implied in law, should only have instructed on k implied in fact. (15) The measurement of k implied in fact usually is quantum meruit, and using a traditional formulation of quantum meruit only look at market value of her services. (16) K in Law  unfair to let person profit from the labors of another unfairly. x) Fuller v. Seater p 386 (1999) (1) Lease, tenants can’t pay, owner lets them stay anyway. Tenant lets some other people put some soil on the land to improve the yard. Δ had only agreed to hold them harmless, had not agreed with the people bringing in the soil to pay them. The tenants left and didn’t pay the rent and were forced out. Soil people billed about 17,000 to the owners. (2) Trial court said there is no written K, cant even find a K implied in fact because owner never ordered the soil. However, Δ should not get the profit from the services for free. Therefore, K implied in law. (a) Quantum meruit, this is services and the soil itself. Judgment for the π for 17,000 plus costs. (3) Ct of app says wait, this is a K implied in law. Isn’t the value received by the Δ the way to figure this out? (a) Market price for delivery of the soil is one way. Maybe quantum meruit market price is a good way to go! (b) Another way is the increase in value to the property (4) Note: Δ FAILED to raise trespass and dirt removal as an affirmative defense. xi) May v. Watt p 389 aprox (1) Home designer has a K to design a huge condo complex. This is going to be his legacy. Included an artists veto in the K. (2) Things never go the way you plan, the plan changes, and the architect complains and later sues. (3) π sues for recission and breach of K. trial court says I will instruct the jury only on the breach of k (4) app ct says no, must give an instruction on recission. The k is worth nothing to the π without the artist’s veto. (5) Why should there have been an instruction on recission of the K? (6) K implied in law found, quantum meruit “at law” used. That means use benefit to defendant. (7) K implied in fact makes more sense, because cut rate for artist’s veto. Benefit of the bargain. Value of the services shouldn’t be market value because discounted what normal charge would be for artist’s veto was given here. k) Makeup Tomorrow noon with Canned Immunity Tuesday, November 13, 2001 l) We have been looking at remedy of $, either damages or constructive trust. 39) Equitable Restitution a) Hunter v. Shell Oil i) Facts & Procedure: Δ Hunter told confidential info to people in exchange for various stuff, including property. (1) Trial court set up advisory jury rather than a regular jury. The jury was to make factual findings that judge won’t be bound by but will help determine facts. Equitable COA so not entitled to a jury. Judge will use power of equity to decide the case. (2) Judge finds: 59 of 74 pieces of property subject to constructive trust (3) Innocent Bona Fide purchasers get to keep RP but π gets the $ (4) If purchaser knew about fraud then not innocent and π gets the property ii) Why did shell go after equitable coa for constructive trust rather than simply damages? (1) Maybe the value of the property went up (2) Court has power to declare constructive trust only in equity, and not at law. (3) More difficult to collect on a $ judgment. Have to file against the property to collect if damages are at law rather than in equity. iii) Why did the court find that the constructive trust was proper Prof. Reynoso Remedies Class Notes, Fall 2001 Page 30 of 44 (1) RP was purchased with the ill gotten gains… Hunter either got the RP directly in exchange for the info or used the $ (2) The interest in the company was also granted to Shell (3) Concept of Tracing  info or $ stolen from you was used to purchase something, you can get that thing in constructive trust. (a) What if the $ Δ stolid is commingled with Δ’s own money? Can still get constructive trust on the entire piece of property. Policy is to not reward Δ, but seems unfair. More often than not the judge will order an accounting and divide the interest or limit it to the portion purchased with your $. (b) What if sold to bona fide purchaser before the judgment is rendered? No constructive trust on that property but you are entitled to the $. If the house is sold for more than stolen, you might get the excess but Δ might get to keep costs associated with the sale. (4) π many COA and went after different pieces of property. Court said that can mix remedies: quasi K, equitable lien, equitable trust, tort (breach of fiduciary duty) (5) equitable lien  you get how much you put in or how much of your $ was used to buy it iv) Bender v. Centrist Mortgage (1) Π bender is former employee (2) S&L taken over by RTC (Govt) (3) Bender seeks Constructive trust (4) App ct says not entitled to constructive trust (a) Cannot reach assets unrelated to litigation when not acting in equity (b) Must at least trace your $ to the asset in the case of fraud or tortious breach of fiduciary duty (c) All π is saying here is “we are entitled to $” (5) Π will become a judgment debtor v) GM (1) Embezzling 78 million $ (2) Life insurance purchased for embezzler’s wife with $ (3) Trier of fact decides that 10% of ins premiums were embezzeled $ (4) What is employer entitled to now? (5) Trial court said constructive trust on PP and RP and 10% of life ins proceeds (6) App ct said only entitled to repayment of $ stolen plus interest and not ins proceeds (7) Cup ct Oklahoma OK  purpose is to prevent unjust enrichment for Δ. question here is θ benficiaries. The rule is the stolen $  π gets % of the proceeds. But technicality: only prayed for embezzled amount in the complaint and cant get more than you pray for. vi) In Re Mahan & Rowsey p 402 (1) Only entitled to lowest amount (that the bank had even though cheated out of more than 42,000 (2) What theory would the court use to award the entire 42,000 (a) Constructive trust  debtor was trustee of the $ (b) There was some $ there depspite the bankruptcy (c) Debtor argued for expressed trust (3) On what theory would the court use to give less? (a) Money was comingled (b) Use the lowest amount in the bank account since the 42,000 was deposited and before the bankruptcy (c) The money that is in trust for the π is not part of the bankruptcy estate (d) Π still has judgment for the rest of the $ but has to get in line with the other debtors. (4) Probably makes them trace the $ because there are all those other debtors out there. b) Equitable Liens i) Verity v. Verity page 405 (1) Facts: married, RP in husband’s name, wife spend about 1,400 maintining the property. She also did the accounting, paid the taxes. (2) Wife sues for constructive trust on the property for value of the work she performed. She wanted the title transferred to them as tennants in the entirety for each of them. Prof. Reynoso Remedies Class Notes, Fall 2001 Page 31 of 44 (3) Married Woman’s Property acts  husband could pay wife for work or not and woman could own property. It was her wifely duty to do the work. (4) Constructive Lien  she did put money into the property and she must have worked for someone to get that $. NY is not a separate property state. (5) Lien vs partition  (6) Hypo: assume this case was filed last year, what would help this woman? (a) K implied in fact based on promise he made “don’t worry about it” (b) Constructive trust  might work now based on the wrongful inducement to put in this labor to enhance the value of the property ii) VRG Corp v GKN Realty (1) K between shopping center and realtor. Getting tenants means getting part of the lease proceeds (6%) to go to realtor (2) Facts are unclear as to exaclty when but shopping center owners sell the shopping center and buyers knew about the K. buyers insisted that sellers would have to hold buyers harmless for the rent owed to the realtor (3) Realtor tries to establish an equitable lien on the 6% of the rents due (4) Court says no equitable lien because suit should be for money damages under the K. (a) Equitable lien can be based on either express agreement between the parties or on equity and fairness (b) Realtor should sue seller for 6% of the rent as provided in the K.? (c) Realtor should sue buyer for 6% of the rent and let the buyer go after the seller? (d) Court says there was no agreement to create a lien and no unjust enrichment (5) Should you look at the unjust enrichment issue? (a) Court says that the buyer paid market price and so no unjust enrichment. Prof says way did they try to get the hold harmless clause? (b) The buyers also knew about the K for the 6% of the rent. (6) Dissent says liens are about equity and the lien should be granted because equity demanded it not because of express agreement (7) Thursday, November 15, 2001 c) Subrogation i) Classic Example: Insurance. Car accident, ins co pays to driver of other car, but the ins co probably gets money if you are at fault and other ins co pays some too. ii) Equitable Subrogation can happen if you have a judgment that says someone owes you $ and iii) Cedar Lake Case page 413 (1) Purchase of house, payments made, default because the buyers can’t pay the balloon payment. Action by sellers against buyers, Δ in that action for forclosure say that they have some equitable rights during the foreclosure. Assume they have been paying on this for a long time, they have an equitable right to try to pay the remaining $ and not lose the house after all that time. Π says you can’t get equity when you bought the house with stolen $ (embezzled from American Roofing). (2) This lawsuit: π sues to quiet title. The person from whom the $ was embezzeled filed to be subrogated for the buyers. American Roofing (3) On remand, everything including the payments are on the table for the court to look at in equity. (4) Judge will look at what is fair to the seller. The innocent party who normally would be able to take over (the seller) would normally get to quiet the title, but the person who was embezzeled from (american roofing) also has an equitable defense. (5) The court uses subrogation but not as to the “dirty hands” for the embezzlement. (6) Did subrogate as to the payments made but not subrogate the “dirty hands” for the embezzlement (7) For unjust enrichment you need enrichment for the person against whom the court will rule. Is there really unjust enrichment here? If they get to keep the embezzled money that was paid to them AND the property, that is unfair to an innocent buyer and to the person embezzled from. The equitable defenses by the embezzlers Prof. Reynoso Remedies Class Notes, Fall 2001 Page 32 of 44 (8) What will the judgment by the court look like by the end of the case? Probably the trial court will have a hearing and issue a judgment. The court will impress an equitable lien on the property held by the π. (a) Now the π will file the judgment. (b) Now there is a notice against everyone else that there is a lien against the property. (c) If your lien is the first one you will come before everyone else. (d) If you want the $, you have all the rights that a person with a mortgage has. If they won’t give you the $, you can foreclose and force a sale of the property. (e) If you want to know what to do with the judgment, look in the practice books for your jurisdiction. (f) Money judgements are different, but you can do what is called a “judgment debtor examination” and ask them what assets they have and execute against them. (i) Exceptions: homestead, car, one mule and so on. (ii) Other than that, you can execute. You can attach/garnish their wages. (9) Equitable Subrogation is important when you need to step into the shoes of another. 40) Defenses to Equitable Remedies Ch 4 continued. a) Review Types of Equitable Remedies i) Liens ii) Constructive Trust b) Property Development inc. v. Sto-Kent Lanes page 417 i) Facts: π and Δ agreed to split the cost of widening the street. City is going to require it. bowling alley owner made clear they didn’t want to pay 50%, offered to pay 20,000 only which was only a small fraction of the cost. π paid to expand the pavement and it improved the value of the bowling alley. Δ was benefited by the activity. ii) Π argues PE (promissory estoppel). Δ had withdrawn the offer to split the cost and so reliance wasn’t reasonable. Also, π was required by the city ordinances to widen the payment so the reliance argument also fails. iii) Court does see the benefit to the Δ, but there was no unjust enrichment because the Δ did induce the π to rely and because π had to pave the street anyway. iv) How could you argue that it was unjust? π would have to show that they wouldn’t have gone ahead with the development plan absent promises of Δ and based on reliance on the discussion with the Δ bowling alley to split costs. c) Hi Land v City of Hillsboro page 420 i) City wasn’t doing job and so neighbors got together and fixed the problem and then sued the city for reimbursement ii) Trial court ruled for π. Duty of city to fix potholes and remove the snow. π probably talked about safety and necessity. π probably argued they weren’t volunteers and they had paid property taxes and so on in order to get the benefits of living in city limits. iii) App ct reversed. Ct of appeals said that the action was voluntary and so they weren’t entitled to reimbursement. They engaged in self help and public policy says if you allow people to engage in self help and then get reimbursed then there will be a flood of people doing this. Also, this will only allow people with $ to get their streets fixed. iv) There is another legal remedy when the city wont’ do their job: WRIT of MANDAMUS. Court will order public officials to do their jobs. Judge will take into account if the city has the resources to fix the problem and what other problems are there and how serious the problems are. v) Can’t let people cut out the considerations the court would look to in considering the writ of mandamus. d) Issue here: were services rendered with expectations and what were those expectations? i) Courts can disagree on how to interpret the facts. e) Vorit v Chevron p 422 i) Π seeking quantum meruit based on joint venture (implied in fact) K. π gave confidential info to Chevron, Δ Chevron drilled. ii) Trial Ct. agreed with π on some findings of fact, including that Chevron and π would enter an joint agreement for production of oil and gas. iii) App ct diagreed b/c no expectation on the part of π for payment for the info and the work. Prof. Reynoso Remedies Class Notes, Fall 2001 Page 33 of 44 (1) How can app ct disagree with trial court’s finding of fact? (a) Error of law (b) Facts are so clear that as a matter of law can’t so rule or so find or give such instruction. No reasonable person could interpret the facts the way the trial court interpreted the facts. iv) Sup ct of TX reversed, said that the expexted payment doesn’t have to be $, can be any form of compensation. What was π’s expected payment? (1) To have Chevron drill and refine the resources and for π to share in the profits becaue π shared information that facilitated drilling? v) Dissent says could not be an expectation of compensation under these facts. f) Dusenka v. Dusenka (1946) p 424 i) H was married, had kids, remarried. H owned ½ interest in his business. H transferred his 1/2 interest in the business to son of 1st marriage IN CONSIDERATION OF son’s promise to care for and maintain H. W2 does not know about this transfer of interest. W2 cared for husband and also worked at business. W2 was not paid for the work and sued for services rendered. ii) Trial court enters summary judgment for Δ. iii) Sup Ct MN? (Minnesota) Court says W2 would have cared for H anyway so no compensation. Court characterized the services as a sort of gift or charity or wifely duty. iv) Question is did Δ wrongfully and knowingly permit π to confer services to Δ due to π’s mistake of fact as to the ownership of the business. In other words, she has to show Δ intentionally misled her in order to prevail on the theory of unjust enrichment. v) Assume you are the app ct, how do you frame the issue so that she would win? Could argue that Δ is not entitled to the value of her services since he contracted with H for those services. Also, π got paid after H died. She is entitled in quantum meruit if you look at the K that Δ entered into with H. Did Δ profit from π’s services in a manner that makes it unjust for Δ to keep the profits? This way you don’t have to look for wrongdoing by Δ. all you have to show is that services were rendered and that under the circumstances it would be unjust to allow Δ to keep the services. vi) Restitutuion Claim  she didn’t expect to be paid at the time so no unjust enrichent. She was a volunteer. Court says that she only thought of getting $ after her husband died, so she must not have expected $. But what if she expected to own the business after her husband’s death, or at least a third of his half. g) Pyeatte v. Pyeatte (1982) p 427 AZ i) W and H married in 1972. W would work and H would go to law school. H graduated, he would work and she would go to school. H’s job didn’t pay much so she kept working. When he finally gets a job that pays enough for her to stop working, he leaves her. She was working all along and so not entitled to alimony. She was not a “dependent spouse” because she worked. ii) π argues express K. If not express K then unjust enrichment. iii) Trial ct says no express K because terms too indefinite so unenforceable. iv) Trial ct says is entitled to some restitutuion on the unjust enrichment but not value of her services but rather what she was expecting. K in law, $23,000 damages v) App ct says K and execution of the agreement. Quasi K recovery. (1) Look to benefit to Δ or value to π? Here look to the anticipated benefit to the π. She was going to go get the degree she was planning to get under the original agreement. Shouldn’t give her more than she bargained for in the first place. (2) What was the benefit that the Δ got in this case? An education, law school. (3) Why not calculate the worth of the legal education in wages etc? Too speculative. Also, it’s not really fair to Δ to give that much (I think). (4) Why not calculate the actual cost of the legal education? Could have done that. (5) Court did something different. Said figure out the what H got, but also look at what W had bargained for and don’t give her more than that. vi) H had to pay quarerly payments, H says doesn’t want that. Too bad, court is acting in equity FAMILY LAW and so can order whatever payment options court wants to within reason. h) New case, H went to vet school i) W sued for quasi K, breach of K, unjust enrichment, child support Prof. Reynoso Remedies Class Notes, Fall 2001 Page 34 of 44 ii) App ct agreed with trial court that there was no K COA (1) Spouse has duty to support other in marital relationship, that’s all that W did. Based on common law. (2) Why does court in general find this way? Doesn’t want to intrude into the marriage. Private relationship, court doesn’t want to get involved. iii) Dissent says there is a general rule but that is just a rebuttable presumption. Here it is unfair to let H be enriched by W’s hard work. What could W have done to rebut the presumption? iv) Is this fair? Should be a rebuttable presumption and was rebutted here. v) Marvin v. Marvin case in notes: Prior to this case and even in this case Calif. courts say it is against public policy to have unmarried cohabitation so court would not recognize common law marriage. However, this case says can enter into agreement in fact or law or divide the property based on quantum meruit or constructive trust. vi) Note 1 page 435, Berelli case, H agreed to leave nonmarital proerty to W and she took care of him. The property was not left to her. vii) Duty and relationship: modern courts might be more willing to find equitable principles. i) Mitchell case p 437 i) Same gender couple, one person moved to work on farm and got rents. ii) Lawsuit by the π who moved and crossclaim by owner of farm for rent and benefits received by π iii) Jury verdict for π based on unjust enrichment iv) Appeal, App ct (superior court of PA) says like a familial relationship so presumption of gratuituous services. Not clear and convincing evidence that Δ was unjustly enriched. v) Trial court emphasized the unconscionability of the deal in a broad sense (because the guy moved a long distance) while the ct of appeal focuses more narrowly on services. vi) Standard in light of the presumption is “clear and convincing evidence” (1) If trial court had instructed on clear and convincing evidence, this app ct might have overturned because otherwise the app ct would have remanded. (2) Hypo: child works on farm. Child sues parents, parents are going to win because the presumption is so strong. j) Watts case p 440 i) Unmarried couple lives on farm for 12 years, 2 children, business and W worked there, business increased in value. Once H made a will leaving 10% to W. In fact H changed the will. ii) Unjust enrichment and K implied in fact iii) Judgment for 10% to W iv) Court said no K but gave unjust enrichment instruction, and there was a SOL issue on the wages which had run if wages (1) No presumption of duty of W to provide services because not married. (2) Is it okay for jury to value the unjust enrichment by looking at how much H aparrently thought that the services were worth based on the value he left her in the prior will…. (3) She sued for 50% of the increase in the value of the property v) App ct says that must instruct on K implied in fact on remand k) Comparing cases: why didn’t trial court here say presumption of family like in the Adkins (same sex partner farm case)? Courts are just different. Wyoming is Adkin’s case. Maybe it was just the different judges, especially in equity. Note that in Watts we have more of a business relationship. i) Defenses to unjust enrichment is based on theories of equity and so just argue fairness. 41) Defenses to Unjust Enrichment: Defense of Change of Position a) Mes. V GT Murray (the overpaid stock case) i) Facts: gets extra 9,000 in Aug. and not discovered until Oct. invested in home and other things. Trial court said change in position is a proper Δ but not under these facts. ii) Sup ct Wyoming said don’t see damage to Δ in this case so resitutuion is called for for π (1) What is the reliance with damage if you want to argue it? she probably took out a loan, she has to repay it, she relied on the $ (2) court said it’s not a change of position (still has value) it’s merely a change in form. b) see notes: i) remodeling house, court says no Prof. Reynoso Remedies Class Notes, Fall 2001 Page 35 of 44 ii) medical expenses: ins co said would cover and went ahead with operation. Unjust enrichment? Should argue that wouldn’t get operation without the coverage and can’t sell the operation back to doctor. Se page 447 note 2 Also, this is an insurance company and so they have a higher duty in the relationship with the insured not to induce reliance on coverage. The analysis depends on the fiduciary duty of the insurance company to the insured. iii) Note, though that you could argue the facts both ways. Test is not if there is merely a change in form but rather reliance and damage to Δ to assert the change in position Δ to unjust enrichment. iv) Question: why not just work out a payment schedule? Answer: you will have a judgment but you get post judgment interest. If acting in equity CAN order payments. If acting in law must issue judgment in an amount. Parties could work out payments on their own. v) Question: can’t person cross-claim for amount it will take to repay, in other words, the amount of damage to Δ due to reliance on π’s error? vi) St. Mary’s Med Center v United Farm B Ins co page 448 (1) Ins co goes after the hospital for providing services on a theory of unjust enrichment and MOF (mistake of fact) because insurance had lapsed. Ins co had no obligation to pay because ins had lapsed. (2) Patient didn’t have $ to pay and didn’t have right to have ins pay hospital. (3) Court says ins co must go after the patient. No unjust enrichment because hospital did provide the services. As a matter of public policy, the person who can prevent the error is the one who suffers the loss despite innocence. vii) What if patient says I wouldn’t have that elective surgery but for the approval of the insurance? Court could go either way, say that you have the $ in the bank and must pay back or might say can’t force them to pay back because they relied to their detriment. viii) Hypo 3  Δ uses software without proper authorization. Δ packaged and marketed the software and sues Δ for improper use of the software. Now Δ says no unjust enrichment because Δ did all the work. π has a coa for use of software without autorization only for the value of the software as used? Better read the note because I think I got the facts all wrong here. Just look at the note, there must be something else going on here. 42) Equitable Defenses a) Remember, we looked at some earlier in the semester b) Monday, November 26, 2001 c) Creditor Collection Service of OC v Cstaldi (1994) cal app 4th dist i) SOL for unjust enrichment. Legal or equitable? (1) Legal defense to coa is SOL. Said SOL was 2 years which had passed. (2) Can also assert equitable Δ to equitable COA. Here court says legal coa so can’t assert equitable Δ of Laches. (a) Laches was asserted here. Δ said depended on the $ for that time, should have acted earlier. ii) SOL was 3 years for fraud or mistake in Cal CCP § 338(d) rather than 2 years for Cal CCP § 339 for quasi-contract cause of action. d) Restitution as the only COA i) Classic grounds for Restitution COA page 459 (1) Material breach of K (2) Mistake, duress, undue influence, fraud, misrepresentation (3) Violation of relationshp of trust and confidence, breach of fiduciary duty, (4) nondisclosure ii) Remember the “Bakersfield Inn case” the only real coa was resitutuion iii) We do speak of restitutuion as a remedy for tort or K, but sometimes they will accept restitution as a COA in its own right. iv) π in resitution COA also in breach of K (1) BaileyAllen Co Inc v. Kurzet Utah ct app (1994) p 456 (a) Facts and Procedure (i) House construction underway, owner of land fired construction co because construction co breached K for failure to get insurance. Prof. Reynoso Remedies Class Notes, Fall 2001 Page 36 of 44 (ii) Trial court said π was entitled to $11,141 for work done, which was 10% of the K minus costs to Δ for repairs and materials for fixing mistakes by π (iii) no tort coa for π and no K coa for π because π breached the k (iv) Unjust enrichment theory for π based on work done, which was 10% of the K (b) App ct says is entitled to recovery in Quantum Meruit on the unjust enrichment theory but not for recovery in quasi K. (i) Internally inconsistent to say K basis for damages. Trial court based π’s damages for unjust enrichment on 10% of the K (ii) Also said prejudgment interest was not proper. Lack of mathematical certainty generally precludes prejudgment interest. (2) Herrmann v. Gleason 6th Cir (1942) (a) Rent amount not decided, no rent paid for 20 months. (b) Once rent was decided, the owner of the land said I should get interest for the rent for that time (c) Trial Court says there is nothing in the K saying interest is due. (d) App Ct says can recover interest. (i) COA is for assumpsit (money had and received) really, because Δ got the benefit of keeping the money all that time. (e) Other arguments why shouldn’t get interest (i) Not unjust, no wrongdoing. (ii) Not clear that π was entitled to the $ until after the rents were worked out. (but it is clear that π was entitled to the $, just not HOW MUCH $ π was entitled to.) (iii) If party could have protected itself from the loss, then it’s not unjust for other party to keep it. here, the π could have had an interest clause in the K for disputes in the rents. (f) Still, the lease is for 99 years with rent re-negotiation every 10 years, there is an implied provision that the re-negotiation will be in timely fashion. (3) Fordice Construction Co v. Central States Dredging Co (1986) Miss. SD Fed Dist ct (a) Facts and Procedure (i) π is 2nd lowest bidder who lost to lowest bidder who claimed small business preference and “enterprise mfgr” under Walsh-Healy act (ii) π lost administrative appeal to SBA (iii) Statute said couldn’t appeal to federal court so appealed to state court, but got into Fed court on diversity. Since statute did not specifically bar state causes of action, could sue on the state cause of action. (iv) State COAs were fraud and unjust enrichment by the lowest bidder. The case book focuses on the unjust enrichment COA, maybe the fraud stuff was edited out? (b) Unjust Enrichment analysis (i) If lowest bidder Δ wasn’t really entitled to certification as small business and/or enterprise manufacturer under, AND if π proved that because of that π was entitled to the K, then π can get the profit that the Δ got. What if Δ got greater profits than the π would have gotten? Unlikely because Δ was the lowest bidder. (ii) What if Δ lost money in the K because the Δ underbid? Maybe quantum meruit. (iii) NOTE: can’t look at how much the π could have gotten, will look at how much the Δ was unjustly enriched. v) Relationship between restitution and punitive damages (1) Ward v. Taggart Sup ct cal (1959) (a) RE Agent taggart fraudulently said he had a listing on a property. Ward offered Taggart $4000 per acre. Taggart said it was too low, Taggart bought the land for 4000 and later sold it to Ward for 5000 per acre. (b) This was not a tort because the land might have been worth 5000 per acre. (c) This was unjust enrichment, and punitive damages will discourage a realtor from the improper action, so it’s okay to award punitive damages without a tort. (d) Unjust enrichment is NOT based on tort or K. (e) Unjust enrichment is a COA and can be the basis for punitive damages. Prof. Reynoso Remedies Class Notes, Fall 2001 Page 37 of 44 43) Declaratory Judgment a) Important doctrine for organizations that have ongoing relationships b) Must show case in controversy and ripe for adjudication c) Common defenses are that not in controversy or not ripe, whatever the court does will not finalize the issue. d) Quite effective as remedy in litigation e) Aetna Life ins v. Hayworth Ch 5 p 476 (1937) 1 st case under Declaratory Judgment Act i) π ins co Aetna sued for declaratory judgment against Δ Hayworth (1) Δ Hayworth said didn’t have to pay premiums any more since he became disabled. (2) Δ Hayworth continued to submit claims which included affidavits and certificates of disability by physicians ii) District (trial) court dismissed on the ground that there was no controversy set forth in π’s complaint. iii) App ct bought π’s argument that controversy included (1) Existence of permanent and total disability as defined in the insurance policy (2) Continuance of obligations asserted despite the nonpayment of premiums. iv) Question of disputed facts will not bar the action for declaratory judgment. k v) Question of what law applies will not bar the action for declaratory judgment. Courts decide what law to apply all the time, and the legal consequences of facts. vi) If insurance company wins this case, it is res judicata and Δ Hayworth can’t sue for payment on policy. vii) If insurance company loses this case, it is res judicata and ins co can expect to have to pay. f) Other case says: i) Declaratory action is constitutional, judge can issue a final judgment. g) Note: Declaratory Judgment act is not a federal question, it’s a remedy. h) Gryczan v. State 1997 Mont. P 447 i) Deviant sexual conduct statute criminalizes same sex sexual conduct. ii) πs declare in the complaint that they have engaged in the activity and will do so in the future. Is there are case in controversy here is the question. πs claim that the statue is unconstitutional under the montana state constitution. iii) iv) State says that (1) without a discrete factual context there is no injury in fact YET so no controversy because not ripe. (2) State says πs have no standing because they haven’t been charged with violating the statute (3) Should seek remedy in the legislature because it is a political question i) Trial court and App ct and Sup Ct of Montana disagreed with state and allowed action to continue i) State atty general refused to promise that they would not be prosecuted ii) Is this issue real or theoretical? It’s real because they suffer because of the statute. (1) Must show existing and genuine as distinguised from theoretical rights or interests (2) Controversy must be one upon which the judgment of the court may effectively operate, can’t be just debate or purely academic conclusion (3) Controversy must be one that the requested judicial determination will have effect of final judgme in law or decree in equity upon the rights, status, or legal relationships of one or more real parties in interest, or lacking that must be overriding public interest. iii) The court can determine constitutuionality of the statute. iv) Standing requires (1) Must clearly allege (show) past present or threatened injury to a property or a civil right (2) Injury must be peculiar to the πs rather than to the public generally but doesn’t have to be exclusive to π v) Challenged the statue as APPLIED rather than facially because facially invalid must apply to everyone. j) McGillivray v. State 1999 mont p 483 i) Staute said for some offenses only got a jury trial after a court trial and an appeal Prof. Reynoso Remedies Class Notes, Fall 2001 Page 38 of 44 (1) Mont sup ct said that the law was unconstitutional because Δs had to endure 4 separate court proceedings in order to get a jury trial. Expense and time. (2) Had to be convicted before you could access a jury. (3) Why not injunction? Can’t show that remedy at law is inadequate. (4) For remedy of declaratory releif don’t have to show that remedy at law is inadequate. (5) Could ask for a writ of prohibition but probably not necessary if the supreme court of the state already said was unconstitutional. k) Wednesday, November 28, 2001 Test: i) Case names can be used to describe a concept in essay but don’t have to know them ii) True/False and Multiguess will be half the exam, hasn’t written yet iii) Multiple choice: sometimes best answer rather than 100% correct answer iv) Will give us access through library to exams from ucla, may be DIFFERENT subject matter but will be similar types of questions. v) Hour and a half of essay, 2 or 3 essay questions, maybe even 4. Will just be shorter if more questions. vi) Weakness in student answers: syllogism of problem and answer and doesn’t explore alternate answers. Wants us to explore alternate issues and alteranate answers. Should say which answer is best. Won’t give a zero if you don’t but would like to see alternate answers. vii) Try to show that you grasp the concepts, that you understand the big picture and how the concepts fit with the rest of the semester. viii) Open everything. Can bring whatever you want to the exam. ix) Half/half grading l) Back to cases i) Med-Tec page 494 (1) Facts/Procedure (a) Letter saying you’re infringing on our patent, we want to know how much you’re mfg respond by certain date, pending litigation (b) π gets the letter, they didn’t wait to respond to the letter they filed a complaint seeking declaratory judgment (c) Δ files a motion to dismiss, says no controversy just on the basis of the letter. Based this on theory that the letter was an offer to negotiate for a licensing agreement on the patent. (d) Controversy is a continuum, if they are still at the talking stage then motion to dismiss should prevail. It’s like a demurrer at this stage, it’s a so what, even if everything π said is correct don’t have a controversy (yet). (2) Two part test to determine if there is an actual controversy yet (a) Conduct of π  had reason to wonder if there really was patent infringement. Reasonable apprehension that a lawsuit would be filed and had a right under the cases in this jx to find out if they were infringing or not. (b) Conduct of Δ  gave π reason to believe that an actual lawsuit would be filed. Demanded documents and information that would be used at trial if there was patent infringement. (3) Court said this is not mere negotiation, see analysis above (a) Want to prevent “in terrorum” (in fear) litigation – in other words, don’t want to make π act out of fear, want to make rights and obligations clear. (b) If the π was infringing and didn’t quit immediately π would build up huge damages (c) If the π wasn’t infringing and did quit immediately, π would lose a lot of $ (d) π needs to know where π stands in this case. ii) Declaratory Judgment (1) Is there a ripe controversy (2) Can the court’s order resolve the dispute 44) New assignments: can get through chapter 8 by the end of the semester. a) Merger of superior and municipal courts is probably similar problems arising when courts of law and equity merged. b) Merger of Law and Equity Prof. Reynoso Remedies Class Notes, Fall 2001 Page 39 of 44 i) Common law said equitable coa dominant, the judge sitting in equity could decide all issues even issues of law. ii) If it is principallly an equitable action such as injunction plus damages (at law) the same judge could decide both iii) coa for reinstatement is equitable, but can also ask for back pay (at law damages $) judge can still decide it. iv) However, if you were illegally terminated and were not asking for reinstatement but only back pay, it was at law and not in equity. If you filed in the court of equity on this one your case would be dismissed and the sol might have run. v) The merged court judges would, when acting as a judge acting in equity, still make some of the decisions at law even though you normally would get a right to a jury for the remedy at law. c) Constitutuional concept of juries  i) At common law (1) Equity was decided by judges (2) Cases at law, you get a jury ii) The courts started saying wait a minute, when we’re acting in equity can’t we recognize the right to a jury for all decisions at law, even when the dominant cause of action is in equity? (1) The evolution of the doctrine has been toward recognizing the right to a jury. d) Ross v. Bernhard p 1177 i) Facts and procedure (1) Derivative SH suit (2) Stockholder suit for huge payments to brokers by corporation (3) SH allege that BOD has interest in the brokerage firm and that’s why the payments are so huge. ii) Trial court says entitled to jury because remedy is at law. iii) App circuit court says not entitled to jury because derivative action is 100% equitable, issues such as remedies at law can be decided by the judge under the common law. At law the SH can’t bring this sort of action against the directors, but the courts in equity said it’s not RIGHT to let the directors breach fiduciary duty to SH. Will allow in equity a derivative suit. iv) Why did the supreme court take this case? (1) SOA between the federal circuit courts, district courts in that circuit have to obey their circuit court v) Sup ct says that derivative SH suit entitles them to jury when the corporation itself would have been entitled to a jury. (1) Corporation would have been entitled to a jury for issues that were at law. (2) Which COA(s) entitles the corporation to a jury? (a) Repayment of the excessive brokerage fees is a remedy at law for $ damages (b) Constitutuion entitles you to a jury when the remedy is for $ (???) (c) If there are equitable remedies such as accounting to be ordered, judge can order that. (3) What is the equity here? The entire derivative COA by the SH in behalf of the corp e) Monday, December 03, 2001 f) Santiago-Negron v Castro-Davila (1989) page 1187 FIRST CIRCUIT has said jury can decide back pay (this case). i) Facts and Procedure (1) Puerto Rico Employment claim, due process and association, § 1983 claim, (2) Under the old political system in this country, civil servants could be fired at any time and were fired when new administration came in, new appointments would follow. (3) In this case, the employees had been working there so long that they had a sort of vested right despite at will nature. It’s an implied (in fact???) contract that the employees will only be fired for cause. (4) Jury found reinstatement and back pay, question arises if jury is able to make that sort of decision ii) Question: LEGAL or EQUITABLE (1) Issue of reinstatement is generally equitable. (a) BUT it was a question of fact for the jury if the tradition in that city was to keep the people or fire them. Prof. Reynoso Remedies Class Notes, Fall 2001 Page 40 of 44 (b) What bothered the court here is that reinstatement is equitable in nature. The court will have to issue an injunction ordering them to hire or not hire someone. (2) Issue of back pay is generally legal. (a) This is much like a tort case where you get a judgment for a $ amount. (b) The court did say that the back pay was legal in nature. (3) Court says give to the jury. (a) Practical reasons: damages for back pay and other damages, more efficient to have the jury think through the back pay and other damages. Difficult to give jury only part of the damages and have the judge do the other damages for back pay. (b) Just because it’s always been equitable, doesn’t mean that we have to have the whole thing be decided by the judge. (c) Weigh in favor of giving things to the jury, constitutional right to a jury (i) This case, back pay (ii) $ Damages (iii) $ Damages plus some other factual determination that is appropriate for the jury to decide. (d) Weigh in favor of bench trial or judge deciding it rather than jury: (i) Reinstatement only such as title 7 COA, equitable only, no $ damages (ii) Remember, this isn’t the old system where the judge determines legal issues if ancillary to equitable issues. (iii) Judges can let jury make findings of fact and then issue equitable order when acting in equity. iii) Question: Free speech, freedom of association (with “wrong” political party.) iv) Prof said he’s not sure if all the circuits agree with this case but majority seem to. g) Amoco Oil Company v Torcormian (1983) 3 rd circuit page 1194 i) Facts: (1) π Amoco wants to terminate (see p 1194) K with Δ (a) ejectment injunction (legal because it’s traditional exception to equitable nature of injinjunctions) (b) permanent injunction as to use of station and logo (equitable) (c) damages for lost profits (legal) (d) damages for mense (could be either) (e) atty fees (legal, but traditionally if equitable COA judge could decide) ii) Jury finds for Δ and wants to enjoin π from breaching the K with Δ iii) Question: Right to jury. (1) Are they entitled to a jury, specifically is Δ entitled to jury here. (2) Trial court says no right to jury. Theory: equitable causes of action, judge can decide legal issues. iv) App ct says (1) Damages and ejectment are legal (2) Says tried to get rid of legal COA and app ct says so what, the court order included damages so if you wanted the order to be equitable should have removed the lost profits legal remedy (3) Counterclaim for injunction and lost profits, court says this is really a breach of K and so legal. (4) Court says mixed bag, so right to jury on the legal matters. (5) Reality is that it’s up to the lawyers to argue and the judge to decide what is proper for the jury and when there is a right to a jury. v) Hypos: DISCRETION to judge (1) injunction sought and damages sought for improper use of a logo for 3 months. (a) Probably right to jury trial on the damages (2) Only $100 damages and a permanent injuction (a) Probably bench trial (3) 10,000 in damages (a) probably jury trial Prof. Reynoso Remedies Class Notes, Fall 2001 Page 41 of 44 (4) Hypo: bench trial and injunction with damages of 10,000. Now, θ sues for unfair business practices and damages for improper use of the logo. Right to jury? Yes BUT the judge in the first case already decided the improper use of the logo, probably res judicata and collateral estoppel. (5) (6) Question becomes ancillary damages or mixed bag. vi) Bankruptcy: 7th Amendment doesn’t extend to bankruptcy. Purely equitable. (1) Hypo: Δ is in bankruptcy and creditor claims that the estate is owed $ that is in bankruptcy and wants $ off the top, creditor thinks they should come first. (a) Demand is specific and it is for $. Entitled to a jury? (b) It’s NOT a question of how much $ of damages to award, it’s a matter of equity as to who gets to put their claim first and to what extent. (2) Hypo: you have $100,000 and you don’t want it to go into the bankruptcy estate. Right to a jury? (a) Depends on what your argument is. If they are saying fraudulent removal of the $ from the estate, then that'’ not equitable, it'’s not in bankruptcy court yet because the $ isn’t in the bankruptcy court’s jx yet. (b) fraudulent conveyance is like a tort and is a legal coa (c) But if the $ is in the estate and you’re trying to say it shouldn’t be then it’s eqitable. vii) Federal circuit court decisions are the fed cts trying to get away from the common law on this issue. The common law was based on the old separation of the courts of law and equity, and the common law had stretched to allow the judges acting in equity to decide things. h) Prof says not a right and wrong way to look at this. i) Could say that constitution meant to keep that separation because that was the tradition when const was written ii) Could say that const was new stronger right to jury trial. i) STATE CASES start here i) Pelfry v Bank of Greer p 1201 south Carolina (1) Facts and Procedure (a) Ct said right to jury (b) Derivative action by SH (c) Trial Court’s analysis (i) Derivative action is by nature equitable (ii) But remedy is for damages and corporation had a right to a jury so SH acting for corp has right to a jury (2) Sup ct of south carolina says no right to jury (a) state constituion does not guarantee right to jury other than rights guaranteed at the time that the state constituion was enacted. At that time (b) 7th amendment right to jury  this provision of constituion not applied to states by supreme court so look to state constituion (i) could follow federal constitution if they want to but don’t have to ii) Tuesday, December 04, 2001 iii) Santiago revisited: SOA in circuit court decisions (1) Most circuits consider a coa for back pay equitable despite the Ross case (2) In Ross the court found that the coporation’s COA was legal itself. (3) Big debate in the courts: look to the COA or the REMEDY to determine if right to jury (4) Santiago looks at the remedy and says that back pay is compensation which is legal (5) Mere fact that supreme court in Ross said look to COA and that determines right to jury or not has not precluded circuits courts from looking a the remedy and finding a right to a jury on that basis. (6) The cases in the case book don’t cover everything. (7) What if you sue on an equtiable coa and a counterclaim that is legal, right to a jury? Another SOA here. iv) View of state courts: Pelfry case continuted, different view from Ross (1) Review of facts: this traditionally was equitable and did not entitle parties to a jury, and we are going to look at the law at the time the South carolina const was ratified. Prof. Reynoso Remedies Class Notes, Fall 2001 Page 42 of 44 (2) Fiduciary duty of BOD  that’s an equitable COA (3) Stockholder suit is in equity, not entitled to a jury. (4) This is the same issue as Ross but different conclusion despite the Ross case being sup ct u.s. v) Hypo: SH suit for declaratory relief to interpret K that they have with Δ, Δ will be enjoined from competing with the corporation if π wins. Is this legal or equitable? (1) Injunction is usually equitable remedy (2) Declaratory relief is considered legal (3) South Carolina would probably say no jury because remedy is equitable vi) Hypo: State statute that says employment discrim not permitted and is silent on the issue of right to a jury (1) Reinstatement and back pay traditionally equitable, but now back pay might be considered legal, particularly in federal court after Ross. (2) Punitive damages are also in the statute, traditionally legal because not traditionally equitable (3) What would south carolina do? Can’t be sure which way it would go. j) C&K Engineering v. Amber Steel Calif. case page 1206 i) Facts and Proceedure (1) COA by π is breach of K, seems to be a coa at law (2) Δ wants a jury, court says not entitled to a jury (3) Promissory Estoppel theory, which is equitable, is what π is really relying on. The K COA fails but for the promise upon which the π relied, this is an equitable basis for the COA. (4) Remedy sought: Damages! This is a legal remedy (5) Question of Historical Fact k) State ex rel William v. Sloan Missouri adheres to the old equitable formula that judge will decide damages. “Clean Up” doctrine i) π seeks to enforce a no competition clause of a K between the doctors ii) court decides that anticompetition clause of K was violated iii) Δ asks for a jury trial for issue of damages only iv) Court decides that despite the fact that it’s damages only Δ can’t have a jury, court agrees that the COA was equitable only but that was taken care of. On remand judge doesn’t have to empanel a jury even though the only issue left is legal. l) See note 1 i) π wants injunction, actual damages, and punitive damages for surface water run off. Δ wants a jury because of the damages. π wants a bench trial because it’s properly equitable because of the injunction. ii) what would Missouri do? Say it’s equitable m) assume NY jx, see note 2, same facts as note 1 i) π asks for a jury, court focuses waiver of π in NY: if π has both legal and equitable coa the π waives right to jury in the legal coa. ii) Δ asks for jury in NY. Probably Δ will get the jury because Δ did not waive the right to the jury by combining legal and equitable COAs. Δ is there against Δ’s will. n) Note: can waive right to jury via failure to observe procedural requirements o) Farmer’s Band and Trust v. Ross Indiana case i) Δ counterclaims based on breach of K ii) Was Δ entitled to a jury under these circumstaces? Court says no, even if there is a counterclaim in law if the case is in equity then the Δ is not entitled to a jury. This is a very Traditional view of the separation of law and equity. p) Tomorrow section on punitive damages, also read 1169-1176 Arbitration q) IHP v. 210 central i) π got Injunction, compensatory damages, and punitive damages ii) Appeal by Δ arguing that punitive damages are not available traditionally available to a court acting in equity iii) Acillary (punitive) damages for merger, can they be issued by the court even though traditionally court acting in equity couldn’t do that? Prof. Reynoso Remedies Class Notes, Fall 2001 Page 43 of 44 iv) Appellate court said since there was a merger of the courts of law and equity, the court acting in equity can order legal remedies. Courts have all of the power of the other type of court. The law permits punitive damages and the court acting in equity can use a remedy at law. v) The only issue here is the right to a jury, and in NY there was not a right to a jury under these circumstances. Thus, the court can use any remedy it wants, even a legal remedy when acting in equity. vi) This is accepted by most jx. NO division in remedies available to the π. r) When must judge provide a jury? i) When the only issue is $ and the judge has already decided that an injunction is not proper. 45) Chapter 8 Lists: Equitable vs Legal Causes of Action and Remedies a) Causes of Action (COAs) i) Legal (1) Torts in some cases this includes fraud, see ? case (2) Declaratory Relief (3) Breach of K (4) K implied in Law??? Or is this equitable? ii) Equitable (1) Derivative Action by SH (but see Ross, may still be entitled to jury in Fed ct.) (2) Promissory Estoppel (theory to get breach of K COA in Calif.) (3) Breach of Fiduciary Duty (4) K implied in Fact? (5) Bankruptcy who has a right to the $ (6) Divorce/Dissolution of Marriage b) Remedies i) Legal (1) Damages (2) In some jx back pay is considered legal now ii) Equitable (1) Injunction except ejectment from RP (2) Reinstatement (traditionally, but may not be dispositive) (3) Back Pay traditionally c) Compulsory Counterclaims 46) Page 1169-1176 Arbitration a) Case first i) π files for ii) Δ says K requires arbitration iii) Trial court stayed the proceedings and said must arbitrate under the K (1) π won the arbitration including 400,000 punitive damages iv) Δ appealed saying that K said that NY law applied and the NY law said that Arbitration could not impose punitive damages v) Dist ct and ct app agreed with that argument by Δ vi) Supreme court said everyone else is wrong, the punitive damages were proper (1) Courts at common law were resistant to arbitration (2) Unless the statute authorized the public function of the court proceeding to be carried out by private parties it wouldn’t be allowed (3) Now, though, there is more respect for arbitration (4) Why since NY law said can’t send punitive damages to arbitrator? (a) Unclear if the K said that punitive damages WOULD be submitted to the arbitrator, that is a contractual agreement (because said national board of arbitrators rules would apply). So, at least, there was no provision saying you couldn’t, and so construe against the drafter… (b) If the K said that punitive damages would not be submitted to the arbitrator, court would respect that too. (c) Public policy in favor of arbitration Prof. Reynoso Remedies Class Notes, Fall 2001 Page 44 of 44 (d) The NY law provision is a choice of law provision not a strict application of all the laws of NY. Genereral NY law applies, not specific arbitration provision, and general NY law is what court would do and court would apply punitive damages. (5) Court didn’t deal with the Federal Arbitration Act preemption issue (a) Law in NY did not permit punitive damages and Fed act said okay (b) This court would probably find that the Federal act preempted if they had to since there is a federal preference for rememdies, prof said this but I’m not sure if I got what he said right. He seems to think that they would have found preemption if they didn’t find the other reason to allow the punitive damages. (c) See also case in notes. b) Arbitration and Mediation can be very useful for resolving disputes c) Two types of arbitration: i) Any issue will be submitted to arbitration ii) Only some issues will be submitted to arbitration d) Arbitrators have a lot of power i) $ ii) specific performance e) Other Remedies: i) Administrative ii) Legislative iii) Not on final iv)