Question #1 – Spring 2005 Remedies Example #1 Part A -- Arguments against Injunction
An injunction requires four elements: Merits, Irreparable Injury, Balance in favor of Plaintiff, and Public Policy concerns.
Cubs is seeking a preventive injunction here. Before a consideration of the elements of injunctive relief, BC might raise some preliminary arguments about the request. Ripeness -- As demonstrated by Nicholson v. Halfway House and Humble Oil, Cubs needs more than just a suspicion that BC's conduct will prove to be a nuisance. Here Cubs has some evidence that BC's Thumpum facilities in other areas have exceeded local noise limitations, so that is something. BC might argue that the facility isn't even open yet, and Cubs hasn't demonstrated that this facility will cause a noise problem. The determination here will depend on how certain the court feels the harm is to occur. In Nicholson, the court held that the fears of the local homeowners of increased crime were speculative. In contrast, the opening of a dump nearby would have presented a sufficiently certain threat of vermin and disease. The determination of how likely the harm is to occur will decide the ripeness question. Scope -- Several problems with scope here. As in Goodyear, the scope of injunctive relief cannot exceed the scope of the harm sought to be avoided. In Goodyear, the court could not issue a nation-wide injunction based upon no more than local conduct. Here, the injunction likely is overbroad in at least four areas. First, the injunction seeks to enjoin
operation of the entire facility, not just the Thumpum area. There is nothing in the facts to indicate that the other areas of BC's facility (auto repair, used cars, parking) would pose a threat to Cubs. Second the injunction (in alternative form) draws an area that is too large. A five-mile radius is more than Cubs has proved is necessary to protect its napping babies (see below). Third, the injunction does not seek to parse out which particular activity is problematic here. BC's installation of radios is not the only problem; people also come to "hang out" and demonstrate how loud their stereos are. The injunction might be tailored to visitors' conduct more than BC's installation and still be effective (See Milliken; contra Bailey v. Proctor). Finally, the injunction might be tailored to specific times of the day (i.e., nap time) and still be effective. Enjoining the operations 24/7 has not been proven necessary to Cubs' future operations.
On the elements of an injunction, several other claims might be raised: Merits -- We assume Cubs can prove the merits of their claim. Trouble spots might be parsing out how much business is lost due to construction noise or anticipated Thumpum racket, but that isn't really the issue here. Irreparable Injury -- Generally a court will not issue injunctive relief if there is an adequate remedy at law (i.e., damages -- See Pardee v. Camden Lumber). Here, BC might argue that money damages will compensate Cubs for lost business, but Cubs would likely counter that money damages will not compensate for the imminent collapse of their business if people keep taking their kids elsewhere. Nonetheless, courts have found damages to be sufficient in ongoing nuisance cases (see Boomer), and it might order periodic payments or
even a lump sum here to compensate Cubs if the balance comes out right. Balance -- As in Boomer, a court sitting in equity to make a ruling on injunctive relief will balance the hardship on the plaintiff against the hardship on the defendant and the court. (See CIS v. Argyll, LaClede, Ariola v. Nigro). Here, BC is not a willful wrongdoer, as in Ariola, because it acted to put its neighbors on notice of its plans. Hence BC will be entitled to consideration in the court's balancing. The court will weigh the concerns of young children who need a restful environment against the concerns of BC, who is investing a lot of money in a new facility to sell cars. Here, most of Cubs' children are young, but BC is 75% done with its construction, and 2 months away from opening. As in Argyll, enjoining operation here would create a substantial hardship on BC. It also might constitute a burden on the court for ongoing enforcement. One thing the court might do in consideration of the conflicting interests is take a Del Webb approach, and force BC to move its operations, but require Cubs to pay for the move. Chilid care is important, but maybe it is easier to move a day care than to relocate a three-block auto complex, especially when a move from the ground floors of a 70-story building to something higher up might solve the noise problem. Public Policy -- This is a densely-built commercial area, and a big car lot might be in the public interest. Increasingly, courts are sensitive to increased jobs and tax revenue as a "public good."
BC might also raise affirmative defenses. Equitable defenses include Unclean Hands, In Pari Delicto, Unconscionability, Estoppel, Waiver, Laches, and the Statute of Limitations.
Only some of these are applicable here: Estoppel -- Estoppel requires an Act, Reasonable Reliance, Injury, and sometimes, Knowledge by the defendant of the likely injury. Here, BC has a strong claim for estoppel. As in Geddes, BC went the extra mile in putting its neighbors on notice to ensure that any potential problems with the zoning and construction plans were resolved prior to approval. Not only did BC post a notice, it also distributed flyers to its neighbors, including Cubs. The fact that Cubs received this flyer and failed to act would likely satisfy the Act requirement of estoppel. BC was reasonable in relying on Cubs' silence, and now faces substantial injury, perhaps even greater than re-routing a golf course. Cubs probably cannot claim ignorace, because, as in Geddes, the court likely will hold that they knew or should have known when they received notice of the plans what sort of noise would result (they certainly seem to be experts on it now). As was the case in Geddes, so here. Between BC and Cubs, Cubs is more at fault and should probably be estopped. Waiver -- Waiver also might fit, though estoppel is probably the better argument. Waiver requires intentional surrender of a right. As above, Cubs was on notice of the plans and did nothing. This probably is enough to satisfy the intentionality requirement as established in Bimco. Laches -- Laches is also a good argument here as an equitable defense to a request for an injunction. As demonstrated in NAACP v. LDF, laches focuses on the delay in bringing an action, and asks if it was reasonable. The primary concern is the balance of the reason for the delay against the resulting prejudice to the defendant. Here, Cubs delayed more than seven months between when it received notice and when it filed suit. Though not as long
as the 13 years at issue in NAACP, the delay is still substantial, and has prejudiced BC. BC now has a 75% complete facility and two months to go before opening. There is no evidence of ongoing negotiations here, nor of fraud.
BC has a number of good arguments to raise.
Part B -- Should the court grant injunctive relief?
The court's concern in granting injunctive relief focuses on the elements as described above, and any applicable defenses. In the end, the court probably should not grant the type of relief Cubs is seeking. Either form of relief sought is overbroad in scope, and BC has a number of affirmative defenses. Estoppel, Waiver, and Laches all might be raised, but as above, Estoppel is probably the best fit. A court ruling on an injunction sits in equity, and here Cubs slept on its rights and waited too long, while BC did everything reasonable to place them on notice.
The scope of relief sought is overbroad, in time, nature of activity, percentage of BC's operations, and space (5 miles). The harm is not necessarily ripe, because the level of volume here has not been proved. The court might force Cubs to wait until something happens, as in Nicholson, rather than granting relief based upon the "speculative fears" of worrisome parents. The balance of interests here is in favor of BC, as it would be very difficult for them to
change things now, and it would have been much easier had Cubs brought their claim timely. Further, Cubs' failure to act promptly exposes it to affirmative defenses of Estoppel, Waiver, and Laches.
See also part A for reasons why Cubs is not entitled to an injunction as a matter of equity. On the whole, BC's arguments and defenses are compelling.
Part C -- BC's actions in response to alternative relief
While a TRO is not appealable, both preliminary and permanent injunctions are (Sampson v. Murray). Here, the court has granted some sort of injunction, so BC should appeal. It could also ask the trial court for a stay of the injunction during the course of appeal, in order to allow it to open its facility as scheduled. The court may or may not grant a stay, but any denial would also be appealable.
The nature of BC's appeal should focus primarily on the scope of the injunction. There is simply nothing in the record to demonstrate that the Thumpum area must be 5 miles away from Cubs in order to remedy the problem here. As in Goodyear Tire, Milliken, and Lewis (prison library case), the scope of the remedy must be tailored to the harm. Here, at the very least, BC could have the injunction trimmed down to allow them to relocate the Thumpum area somewhere else in the facility. (On a side note, relocating the Thumpum
area in the facility might expose BC to further litigation from neighbors on 18th, 19th, and 20th streets, who were given no notice before approval that the Thumpum facility would be nearby. This would further tip the balance in favor of BC here -- see above). If BC is required to move its Thumpum facility, the court could require Cubs to pay for the expense, as in Del Webb.
BC should also focus on the other weaknesses in Cubs' claim, as above, in an attempt to have the entire injunction reversed.
BC should not violate the injunction. Violations here would expose BC to contempt proceedings, both compensatory and coercive. BC should ask for an injunction bond (see below) and abide by the injunction until it is reversed.
Part D -- Recovery for BC on appeal
Fed. Rule Civ. Proc. 65 requires an injunction bond for any TRO or preliminary injunction. If an injunction bond is available, BC has the burden of requesting it (Coyne-Delany). Rule 65 by its terms mandates an injunction bond, but often judges exercise their discretion to require a nominal bond ($1), or in some cases, no bond at all, if the plaintiff is very rich, very poor, or public policy favors maintaining the suit. If BC obtains an injunction bond and proves compensatory damages on appeal, the bond must be paid to BC in an appropriate amount. Under the majority rule from Coyne-Delany, Cubs' liability is limited
to the amount of the bond; if BC feels it is too small, it must appeal that up front. In a minority of jurisdictions, Cubs might be liable for an amount greater than the bond; the bond demonstrates only an ability to pay some amount of damages in these jurisdictions.
Provided BC obtains a bond, it can see lost profits, per Coyne-Delany. Prevailing parties often can move the court to award court costs to the prevailing party as well. Attorney fees, though, are a different matter. Under the American rule, each side pays its own attorney fees. Here BC is probably going to have to pay its own fees, unless there is an exception to the rule. Common exceptions to the American rule are: Family Law, Statutory Exceptions (as in section 1988), Bad Faith litigation, Contempt of Court, Contractual Provisions, and Collateral Litigation. None of these seems to apply on the face of the facts, though if Cubs' suit involves BC in litigation with its other neighbors (say someone else on 19th sues to enjoin BC from moving the Thumpum area), and BC ultimately prevails, it might obtain attorney fees for the 19th stree litigation from Cubs. In that case, we go with the rule from Rivera, and award BC an amount based upon the prevailing hourly rate x a reasonable number of hours spent on the case ("lodestar"). On the whole, BC is not likely to win attorney fees.
Question #1 – Spring 2005 Remedies Example #2 Part A= C v. BC, BC's defenses to the injunction
Ripeness: Since C is requesting a preliminary and permanent injunction, C will first have to prove that C's claim is ripe. That there is an immediate and irrreparalbe harm. BC can defend against this based on the fact that BC's facility isn't even built yet. BC will argue that C's claim if for future harm that is not yet certain (like the half-way house case.) Since D's store isn't open yet, it is uncertain how the sound will really effect the daycare.
Mootness: Construction noise is the only complaint so far, and an injunction against that is moot because construction is ending (BC is geniuely done with construction, the effect of stoping construction is no more noise, and their is not other evidence that BC has continued construction on stores in the past and result in noise violation from that.) Therefore the only existing noise harm is moot.
Scope Also, BC can argue that the scope of the injunction is overbroad. THe scope of the injunction must be limited to addressing the harm in the cause of action (Goodyear tire case, where nationwide inj. was invalid, and prison law library case where statewide inj. beyond scope.) In this case there is no evid. that BC's entire store operation would cause harm to C,
so it is unlikely the court will allow an inj. for closing the entire store. C would only be allowed an injunction against the activities causing the noise. Also BC should argue that the alternative inj. asked for is beyond the necessary scope. A the 5 mi. radius goes beyond protecting C from BC's noise. It would only need to be in a 1 block radius to address C's harm. The inj. against the Thumpum area should also be argued as overbroad, especially since there is no evid. of the harm yet. BC can also argue that these harms are not present at other stores, therefore the scope is too extreme.
*BC should anticipate that C will try to argue that the harm and scope can by ascertained by looking at BC's other stores operating in other towns.
Injunction elements: C also has to prove that their claim has substantive merit (from prelim. inj. liklihood of success, for permanent inj. this requires winning on the merits at trial), there is immediate irreparable harm, balancing of hardships (hardship on BC to comply, and burden on P if inj. not granted), and finally any public policy concerns. BC can argue C has no liklihood of success on the merits, by looking as ripeness, mootness, and scope, and also no liklihood of success because BC operates in other towns without these restrictions because BC is operating within legal limits. BC can also offer evidence that BC will succeed based on BC's approved zoning permits. Next BC can argue that there is not immediate irreparable harm. Looking at ripeness above, BC can again state that there is no harm being caused yet, it's in the future and uncertain. Also, BC can argue that money damages are available to C
if the harm occurs, therefore the harm is not "irreparable." BC can point to revenue from C's books to ascertain the damages. BC can also argue a that the balancing of harms falls in BC's favor. Since BC's building is 3/4 of the way complete, BC will lose millions$ by not being able to operate it's store. C, on the other hand, is unlikely to suceed on the merits so they will be losing nothing anyway win the permanent inj. is denied. Finally, BC can argue that for public policy reasons, the inj. should be denied. BC relied on the City's zoning permit, gave the required notice, C didn't respond, and therefore it would be against public policy to grant C's injunction.
Defenses:
BC can defend against hte inj. by arguing Waiver. That C waived their right to an injunction when they intentionally choose not to enforce their right to oppose BC's building to the CIty Zoning committe. Waiver does not require any reliance on the part of BC so this would likely work.
BC can also argue Laches. That C caused unreasonable delay in bring the action. BC must show that there was unreas. delay by C, that C knew of BC's wrong (the noise), and that D was prejudiced by C's delay. BC could win on this since C had notice that BC was putting in a store and what would go on there, and that since C didn't respond D built. Therefore D would lose a lot of money by C's delay in bringing the cause of action (should have brought it before construction.) However, it may not be unreas. delay since all this occured in less
than 1 yr. and maybe C didn't have time to consult and attorney fast enought before construction began.
Finally BC can argue Estoppel. That C's affirmative actions caused BC to rely on them, and BC was harmed by that reliance, and C knew or should have known that BC would rely on C's actions. This is similar to the laches arguements except the focus is more on C's act (like the golf balls case where the course was reconstructed based on P's actions.) Here BC relyed on C's silence in opposing the building. C should have known that by not speaking up to oppose the store, that it would be built... and it was. Therefore BC was harmed by C's actions so C should be estopped from bringing an injunction.
BC could stretch things and aruge the injunctions violate BC's first amend. free speech rights. The injunction would silence BC, therefore public policy dictates the injunction should be denied.
BC cannot argue unconscionability b/c there is no evid. of a K between C and BC.
PART B: Should C win?
Looking at the Preliminary Inj. first, C will have to prove the elements listed above for an injunction. The biggest difficulty for C will be proving that the harm is immediate and irreparable. Again, this is a future harm that has not yet occured (unless C argues
construction noise, which will soon be moot.) In the domestic bear case, the court granted an injunction based on future harm, b/c although the harm was speculative, the harm so great that public policy dictated the need for the injunction. Basically the court looked at the elements for an injunction on a contiuum. If one element was weak, the inj. could still be supported by other stronger elements. In this case the harm wouldn't be great (only noise, not death or bodily harm), it's not immediate because the building is not yet built, and there not evidence that money damages would not be sufficient. Therefore the preliminary injunction should be denied.
The permanent injunction has more of a chance than the preliminary, since the harm will be continuing once the building is built. Again, looking at the elements of an injunction listed above, C will still have difficulty proving irreparable harm. The harm is in the future and money damages may suffice. Therefore the issue is mostly likely not yet ripe for the court to hear (see argument above.) And if it is, the scope of the injunction, including the alternative injunction is overbroad (see scope argument above.)
ALso, BC has strong arguments for laches, estoppel, and waiver (see arguments above), so it is unlikely C will suceed on the merits. In short, the court should not grant the injunction for C. C needs to return once the harm is occuring, and needs to have a more narrowly tailored injunction that targets the harm being caused to C.
PART C: Action against alternative injunction
BC has three options if the preliminatry injunction is granted for the "alternatie relief." BC can appeal the preliminary injunction to a higher court (Sampson v Murray case), or BC can petition to have the injunction removed by the court that granted the injunction, or BC can violate the injunction (Granny Goose case, but this was a 10 day TRO where 10 days had passed.) I would advice BC NOT to violate the injunction because then BC could be held in contempt. Instead BC should appeal based on ripeness, mootness, and scope to a higher court. Also, I'd advice BC to stop doing the actions prohibited by the injunction, and petition the court to remove the inj. b/c the harm is gone. The court will then look at the bona fides of BC's action in stopping, the effectiveness of it in stopping the harm the inj. addresses, and BC's past actions and harms. The court will likely remove the injunction since there is no evid. BC is not genuining in stopping, and stopping remedies the noise problem and there is no evid. BC has stopped and then re-violated an injunction in the past.
PART D: Injunction Bond
Since C is filing for an injunction, it is likely the court will require and injunction bond. The judge has the discretion whether to grant one or not. Judge looks at 1.) The harm the injunction will cause to D, the 2.) The burden it will cause P to post $ for a judgment bond, and 3.) the wealth of the D. SInce the harm will cause thousands of dollars in lost business to D, and P has it's own business so it can likely pay something (not destitute), despite the fact that D likely has enough money to cover for the lost business if P doesn't post a bond,
the judgement bond will likely be required to be posted by P for BC's lost profits if the injunction was wrongfully granted. The judgement bond will be required to be paid if P loses, but P will most likely be limited to the amt. of the bond. Unless P acted wrongfull in brining the cause of action, or there's a statute allowing more $ than the bond, or P is simply wealthy enough to pay more.
The American Rule is that the winner of a case doesn not win attorney's fees, only costs (filing fees, etc.) There's no evid. of a statute, or a K b/w the parties, or a civil rights action, or a private atty general action, etc. to merit the winner getting attorney's fees. Therefore if BC wins, BC will gets costs and the judgement bond but NO attorney's fees.
Question #2 – Spring 2005 Remedies Example #1
A. Restitution
Restitution is used to prevent the unjust enrichment of a defendant. It can be used to P's benefit when D has gained more than P lost. Generally, the different measures of restitution are quasi contract, disgorgement, rescission, and constructive trust. Equitable liens may be available in some cases. First, Vicki might want to begin with rescission. Rescission reverses a transaction, putting both parties back in their original position. The court is likely to find rescission justified based upon the fraud of D. (Consider Cherry where the house had termites, the court said the buyer could rescind the sale and get purchase price back OR get damages) V would get her $200,000 back, and D would get the property back. First, Vicki should use tracing and its presumptions to impose a constructive trust on D's assets. Tracing provides that if you can follow an identifiable asset taken by D, you can impose a constructive trust on that asset, assuming some wrongdoing on the part of D. A constructive trust splits ownership into legal title (held by T) and the right to beneficial enjoyment. The tracing presumptions can be used to the Plaintiff's advantage. They are: 1. D spends own money first 2. D invests P's money first 3. Deposits are treated factually Erie Trust provides that all cash accounts may be treated as a single fund for tracing,
another benefit. And the lowest intermediate balance rule states that the P is entiteld to the lowest intermediate balance reached in those accounts. Here as demonstrated below, the LIB is zero. At the end of the day, there is no cash to be had based on the following analysis.
Beginning with direct tracing:
1. Dub had $102k in his account to begin 2. Dub deposits V's 200,000, now D owns 102K and V owns 200K 3. D buys bottle of wine, presume he spends own money, now he only has 100k left, V has 200 4. D spends 175,000 a mix of his and V's money on medical expenses, leaving him with O and V with 125K 5. D deposits 10k of his money, he owns due to factual treatment of deposits 6. D remodels 100,000 on business, could be seen as investment, presume he invested V's money BUT business burns, so, presume he spent his money first, since no benefit to retaining investment 7. D buys new barber chairs -- treat as investment in business, and only V's moeny remains anyway 8. Business begins to do well after rebuilding on borrowed money, deposits own money of 100,000
Deposits Owned by V 1. 2. 200,000
Expends
Owned by D
102,000 102,000
200,000 3. 200,000 4. 125,000 5. 10,000 10,000 175,000 0 2,000 100,000
125,000 6. 35,000 7. 0 8. 0 100,000 100,000 35,000 0 100,000 0
Thus, the tracing fictions do not really help Vicki that much in imposing a constructive trust. She definitely could say that she owns the barber chairs, since they were purchased with her money. This might lead to an ability to call for an accounting of profits or disgorgement - she might say that she has a right to the savings generated by use of her
barber chairs as in Olwell with the eggwasher. This would bring up disgorgement, where a party is forced to disgorge profits gained by wrongful behavior. If she could prove that the barber chairs led to a significant savings in labor, she might be able of force disgorgement of the savings. This is a bit of stretch under Hamil or Sheldon, but ti might be worth a shot. Since the behavior was wrongful, there is no need to limit the recovery just to fair rental value. But at least she could use a forced sale. At the very least, she has constructive trust over the chairs, since her money purchased them. And she should at least try to get disgorgement of the profits coming from use of the chair. This would be a Quasi-K, where the D has to pay for the benefit rec'd, regardless of whether he intended. This would be unusual because, the disgorgment would be based on a constructive trust. However, D is a wrongdoer, and his fraud, especially considering past behavior of defrauding other widows, makes it likely that the court could go along with this type approach. Rescission might be the best bet since she could get at least the 100,000 that D has in the account. If D were insolvent, the constructive trust would be good because it gives V preference over other creditors. Or does it? This might be like N. Am. Coin where customers paid their money, assuming the risk. But there, there was no wrongdoing, here there is. So CT is ok. Therefore, if insolvent, definitely want to use constructive trust.
B. Breach of Contract
Damages for breach of contract are generally limited to money damages. Compensatory damages seek to place the P back in her rightful position - in V's case with $200,000 worth of something. Consequential damages are available where a party knew what those damages would likely be (or the types of) at the time of contracting. Buck. V's direct damages from the breach are based on her expectancy that the land would be worth $200,000 and would soon appreciate to $230,000. V spent $200,000 and got only $40,000 in value in return. Chatlos states that expectancy is available as damages and is measured by the difference in what was received and the value of what was warranted or promised. V was promised that the land was worth $200,000 and that it would appreciate to $230,000. The land is actually worht $40,000 with no possibility of appreciation. V should be able to recover at least $160,000. The additional $30,000 is likely too speculative, because it cannot be proved with reasonable certainty (Hatahley) that the appreciation would ever have occured. However, there are additional expectancy damages -- she expected to live off the income from renting the property. Now, she is destitute because there is no way to rent the land because it is close to the dump and unrentable, leaving her no way to mitigate damages. Therefore, V should be able to recover these expected rents as well, since D knew that this was what V expected. If V suffered any consequential damages from the breach, she might be able to recover them by showing that D knew about them at the time of the K, like if she told him
that she was relying on this property being good to get a loan, which then she could not. Emotional distress and similar special damages are generally unavailable in contract cases. Punitives are generally not available in contract cases unless there is an independent tort. Here, there is likely an independent tort - either fraud or breach of a fiduciary duty. Either might qualify to allow V to recover punitives, which are considered below more fully. Finally, V should be able to recover interest on all sums awarded under the K claims. Even under the common law, pre-judgment interest was available in contract, and post judgment interest is also available. V should therefore recover interest from time of the injury until time of collection.
C. Tort
In tort, again, V will again go after direct damages based on D's fraud. She may also pursue expectancy damages and consequentials and punitives as well. The torts are likely breach of fiduciary duty and fraud. Her direct damages will be measured by what she lost as a result of the fraud, directly. She spent $200,000 to purchase the land and only go $40,000 worth of land in return. She will sue for the $160,000 as compensatory damages. That is the direct injury she suffered as a result of the fraud. She could sell the $40,000 land and with a $160,000
money judgment, she would be made whole, brought to her rightful position. Any consequential damages might be recoverable as long as they were shown to be reasonably foreseeable from the injury. These would be injuries that she suffered which were caused by her loss of the $200,000 through fraud. There is a split of authority as to expectancy damages in tort. Under Bolles, expectancy damages are not available in tort even for fraud, but this is a minority view. In the majority of jurisdictions, expectancy damages are available when a tort involves fraud. Thus, V might claim that she expected $30,000 more, but again, she still must prove her damages with reasonable certainty. And it is unlikely that a court will allow an award based on the expected appreciation of property. Generally, FMV at time of injury is the proper measure of damages. But, as in K, her expectancy damages would include the expected rental income of the property. She might also be able to recover emotional distress, hopefully she woudl be able to show physical manifestations since this transcation left her destitute, and it happend right after the death of her husband. PUnitives would be available in tort, subject to the consideration in CL like Grimshaw which add wealth of the defendant and deterrence to State Farm's constitutional guideposts of ratio between compensatories, reprehensibility of D's conduct, and criminal/civil penalties. D's conduct was extremely reprehensible. We do not want people preying on helpless widows, and with a ratio in single digits, V could have a punitive award upheld. There are civil and criminal penalties for fraud, and the award would need to bear those in mind (not be too far out of line).
D. What to Award
Likely V should go with a tort award because of the punitive damages award. Even if expectancy was not allowed (the rentals), she still might be able to get $160,000 in compensatories and then up to 9 x $160,000 in punitives. She might end up with over a $1 million award,and if she recovers the expectancy of the rental income, that would be even higher. Add on the additional emotional distress, and she could have a nice sum for her old age. She could then garnish D's wages or levy on his property to collect the judgment. Also, with a tort claim, she gets a jury which is likely to be sympathetic, since she is seeking money damages. Contract does not provide enough recover. No emotional damages and possibly no punitives. The punitives likely provide the biggest bump in recover. Although under K, she does get expectancy of rents for sure. With restittution, she does not get a jury trial. Restitution would be better if there was a chance that D was insolvent because then V would get preference over general creditors. Rescission would only put her back in the original position. And even a constructive trust does not provide a large enough measure of damages due to the failure of tracing -- basically he spent all her money. She would, in case of insolvency say that she owned the chairs at the least -- she could maybe get her $35000 out of them and then get in line with the other general creditors for the rest of her award. She would also (barring rescission) be able to sell the property for $40,000. *****
Question #2 – Spring 2005 Remedies Example #2 A) Rest. V can recover in Rest using a legal fiction (Q-K, A for P, CT, Eg.L.). Here, the most suitable is a CT. See Hicks, that in the end of the analysis a Eq.L. may be appropriate see below. The CT. treats V as the owner of the house and allows her to trace (direct and commingling) and to get a preference. Take it step by step.
-D swindles house = cT, at least to start -D sells and gets cash = V can trace to cash. -D puts 200k in account V= 200/ P=102/ Acc. = 302 (LIB) -D spends over 2k 1st on wine, this helps V so we’ll use the rule. V = 200/ O= 100/ ACC= 300 -D spends $175 medical expense) = we use 100 of his 1st, the 75 of V’s. V= 125/ D=0/ ACC LIB= 125 -D deposits (Lib, treat factually) V=125/ D=10/ACC LIB = still 125 (ACC at 135) -D invests 100k in bus= normally we invest __ V’s $ 1st, but this would hurt her, so we disregard it (irrelevant at this point)
V=35/ D=0/ lib 35 -D invests 35 in chairs ACC = 0 LIB is 0 -100k deposit (factual) LIB still at 0
Here is where it matters if D is solvent (which he maybe, due to 100k in Bank. She can’t get any $ from account if insolvent, V lost 200k, so the cap is 200, but that is not implicated here, b/c funds are depleted now and investment aren’t = to loss. So, CT will allow V to “own” the fancy chairs at the shop. However, this is a little like (Rogers case or Robinson case, don’t know which) b/c V doesn’t own the shop, just the chairs. If insolvent, she may just want an eq. lien. This would be best b/c the chairs will likely go down in value, so eq. L. will aren’t lien that won’t go down. (Ct would go down if prop down in the value). Eq. L also allows V to couple it with a $ judgment. -If D is solvent, best bet for V is to rescind the K, which is allowed and get the recession + restitution in the form of a $ judgment. V would also give back 40k property. Ct. could do this due to unilateral mistake by V due to D’s fraud. They would then order the profits back to V. If solvent, D’s gain was 200k and he argue that.
B) K Unless she sued in rest. (off k) to rescind, etc (due to elect. Of Rem. Doc.) she can sue for breach of K. Normal measure if she sues on the k is expectancy. She expected
230k fMV in 2 years, but instead got property worth 40k. See Chatlos, she get gen. of bargain, and will get 190k. She could also get consequential dem. foreseeable by D, which could be emotional. Distress (V wouldn’t be barred by ec. Harm rule), and often creative conseq. Dam. (esp. incidental dam.) Also, under k theory, she is barred from pun. Dam. (see Fosmosa) though she can get them if she sues for the tort, off the k. (if ind. Tort) (d could at best argue avoidable conseq. to V, but weak due to her age 80)
C).
Tort Suing for fraud opens up other options. In a maj. she can still get expect. Of 190k.
Cf. Smith in min. where tort only allows reliance, her out of pocket expenses, which are 200k – FMV of 40= $160k. Again consequetional possible but no facts in fact pattern, see above for possiblilities. -B here, punitives are allowed. Awarded with torts like this (willful), and C/L factor (see Trimshaw) -Rep -Dates -comp. fines -D’s wealth -Deterrence -D’s profit -Other St. interests
The SCt, (see St. Farm) left out all but ratio, rep. and fines. No facts here, but D not that wealthy, but very rep. conduct. Note: No pun. dam. in K, although this tort is independent, as it preceded the K formation. (see Formosa)
D. Recommendations If D is insolvent, I go for Eq. Lien (to protect vs. decrease in value) on the chairs. If solvent I go for k damages of 190 (230-40)k (exp.) b/c unlikely to give a lot of punitive under other theories (elect. if rem., V must pick). If I though punitives (actually now I think this is best = most likely) were going to be high, and D is solv., I sue off K for reliance (in min Smith), exp (maj.), consq., and punitives. To sum up if solvent: Rest = Rescind and 200k back [Okay] Exp(k) = 190k + prop(40k) but no punis allowed probably best unless involvent Tort = maj. 190 min 160, but punis allowed
then rest (eq.L. on chairs) = $ judgement