Heather Burgess 8/12/2008
Remedies – Fall 2003 Prof. Nichols
I. Introduction Remedies are given in orders/judgments, ≠ in opinions. Must file a separate order for the remedy to be effective. II. Damages Compensatory damages are viewed as “corrective justice” A. Rightful Position o Definition: Putting the Π in the position if the K was fulfilled or before tort happened o Π’s Position: Claimed damages must be proven with some particularity United States v. Hatahley: Compensatory Damages for a tort. Case where the U.S. gov’t destroyed Navajo livestock because U.S. stated the animals were trespassing. The trial court awarded a lump sum, but the Court said it had to be calculated more specifically so remanded the decision for a more precise calculation based on below: 1. Loss of Use of the Horses: Navajo claimed that horses were specifically trained and irreplaceable. The Court said that in determining damage amount the Navajo must use the fair market value based on price of horses and cost to train them. [Nichols questioned if this is really more accurate way to give damages or just a more specific calculation] 2. Loss of Use of the Herd: Navajo had to value individually based on the age, sex, health, etc. of each animal. The flat amount assigned by the lower court for ∆s wrongful act ≠ right. 3. Emotional Distress: Court said arbitrary number because it the amount for the distress was evenly distributed between all members. NOTE: Jury Verdicts: Not susceptible to the Hatahley scrutiny because there is no requirement for a jury to set forth reasons. Options – remittitur or new trial. Law and Economic View: Approach says remedies adjust incentives for efficient business activity – therefore you can have an efficient breach, where the ∆ pays for breach, but still makes money. Π in rightful position and ∆ better off. 1. Value as Measure of Rightful Position a) Generally Fair Market Value Standard. Only in special circumstances is Replacement Value appropriate (1) Real Property FMV: Measure of just compensation is the fair market value of the property at the time of the taking:
1
Heather Burgess 8/12/2008 Contemporaneously paid in money except where the market value is too difficult to find;
OR Where application results in manifest injustice to owner or public o United States v. Fifty Acres of Land: US condemned city dump for flood control. Value of the land was $225K (fair market value) and the city claimed they needed $723K (replacement value) to buy the new facility. FMV o NOTE: Owner claims property is worth more than fair market value – must show how the subjective value is warranted and it must be reasonable. (2) Consumer Property Replacement Value: problem with FMV is the lemon effect kicks in and replacement value is closer to justice. o Lemon effect Undervaluation: sell knows the value, but the buyer does not. Replacement value might be more appropriate b) Special Purpose Property Replacement Value: Where there is no Fair Market Value, Replacement Value is the norm, unless it is so high as to be impracticable. o Trinity Church v. Hancock: Hancock built next to a landmark church and faulty excavation caused the church to break into three pieces. Can’t fix it, only replace it = takedown cost. No market for buying or rebuilding landmarks. The damage resulted in 69% loss of f(x) (was originally at 27% as is). Hancock must pay the replacement value. Hancock pays the decreased % (69% 27% = % responsible for) Policy: The money the church gets is not going to be used immediately to rebuild the church – what does the church do with the money? In tort: If someone else built right next to the church, resulting in the remaining % being at takedown level, then Nichols thinks that they would have to pay the whole amount because you take a Π as you find them in a tort (egg shell plaintiff) c) Farm Crops Fair Market Value: For agricultural products, the remedy is Fair Market Value at the time of Harvest o Reason: Set at harvest because the damage value is difficult to find otherwise – harvest is the first time it actually has assignable value
2
Heather Burgess 8/12/2008 Offsetting: ∆ is usually entitled to an offset for any reduction in costs incurred by Π as a result of ∆’s damage. o Decatur County Ag-Services v. Young: Farmer contracted with ∆ to spray crops which lessened the amount of crops the farmer had. The farmer waited a year to sell crops, however the court awards price at time of harvest bc farmer undertakes speculation himself. The court also did not require offset because the farmer expended no less effort or expense in harvesting the crops that were good. Only nominal amount if any – so no application of offset in this case. Time of speculation not used bc of proof problems – generally use time of harvest bc want certainty. Nichols questioned whether the farmer could have covered by buying other beans to hold onto for speculation. However – realistically farmers ≠ have money to do that court ignores the option. d) Stocks Conversion Issue: Wrongfully holding onto stocks (trust manager situation) = problems in determining remedy because the stock fluctuates o Options: Give Π 1. Value at the time of conversion or Loss; OR 2. Highest Value between the time of conversion/loss and the time of trial 3. Highest value between time of conversion/loss and the Rx amount of time afterward to file suit NY & Federal Rule Can’t wait – have to be Rx Restitution Theory: ∆ still has your stock and you want it back o Replevin: Sue for replevin – which is the specific performance of returning your stock. Example: o Shareholders were defrauded because they bought stock @ 80 when it was only worth 20. If the CEO had told the truth the valuation of the stock would have been lower Options for Remedies: But they have proof problems 1. Give Π the difference bw 80 and 20, but might make Π sell and go below 20 2. Purchase price minus actual value @ time fraud discovered 3. Purchase price minus current sale price
3
Heather Burgess 8/12/2008 General Valuation Re-Cap: Valuation works well most of the time when one can assess the value of the loss OR when the money can act as a substitute (used to replace what was lost) Generally: FMV of Loss K issues = FMV @ time of breach Tort issues = FMV @ date of wrongdoing Consumer Products = retail price Manufacturer Products = expected profits Exceptions: when not easily valued, might have different measure 2. Reliance, Expectancy, and Restitution a) Definitions Reliance Put the Π in the position Π was in prior to making the K Out of Pocket Expenses Expectancy Baseline: Benefit of the Bargain. What the Π would have gotten o Lost Profits Restitution o ≠ want ∆ to be unjustly enriched. Put ∆ in position ∆ was before the breach b) Contract Expectancy Damages: In K, the Π receives expectancy damages less anything appropriate. Nehri (Π) v. Retail Marine (∆): Π plans to buy a boat and puts a deposit down on that boat = a firm offer. Π then rescinds because the money is now needed for an upcoming hospitalization. Π sues to get the deposit back. ∆ counterclaims for ∆’s losses (storage and lost profits) Expectancy: ∆ had an expectancy of making X dollars in profit on the boat. Get lost profit even though another buyer takes the boat, because in theory that other buyer would have bought a boat regardless. Exception: If the boat were customized, Lost Profits ≠ apply. Reliance: ∆ had incidental damages for storing the boat at his shop in reliance on Π buying it. Restitution: ∆ ≠ get to keep the deposit – because that is a windfall – Π can get the deposit back Result: Π’s deposit ∆’s expectancy ∆’s reliance = $ to Π Rationales for Giving these Types of Damages 1. People should keep their promises
4
Heather Burgess 8/12/2008 2. Law & Economics Idea: Main economic incentive is that businesses operation business assuming that they have the profits from the sale and that make plans based on that Expectancy has present value because it goes onto the balance sheet and used in planning.
c) Tort All damages: Now all remedies available in torts as in K, so now can get expectancy Chatlos Systems v. Nat’l Cash Regist. Corp: Π paid 46k for a computer system, which if worked properly would be worth 207K. The goods delivered were only worth 6K. Π sued on breach of warranty bc ∆ warranted the 207K machine, but delivered 6K. Result: Ct awarded Benefit of the Bargain. 207K (promised amt) 6k (delivered) = 201K (put Π in position would have been if machine delivered) o Rationale: Certainty. We want certainty, which is accomplished by enforcing expectancy. Smith v. Bolles: Π bought stock thinking it might go up based upon ∆’s representations that it would go to 10. The stock did not go up from 1.50 purchased at. Π sued ∆ in tort for deception. o Minority Rule: Π got the purchase price of the stock and natural/proximate damages as a result. Would get 10 per share. o Majority Rule: Π would get expectancy – that would be the difference between 10 expected and 1.50 purchase price = 8.50 per share 3. Consequential Damages a) Contract General Damages: Difference between price K for and what you had to spend elsewhere Special Damages: Other costs incurred as a result of this breach of K o Consequential: must be Rx foreseeable @ time of K = natural and proximate result of the breach Normally courts try to stay away from these unless it is a clear case UCC = losses resulted from general/particular needs that breaching party had Rx knowledge of @ time of breach and ≠ able to be taken care of by covering. o Incidental damages: Don’t have to know them @ time of K it is the cost of mitigating or covering. UCC is where there are incidental damages Rx related to the breach what did it cost to cover?
5
Heather Burgess 8/12/2008 Buck v. Morrow: K for 5 year lease and the land was sold after 2 years. Clause in K that said if sold by end of 2 years then Π would be covered by Δ and all losses bc of the sale. Π sues for amount for lost cattle due to move to open range and cost of renting other property above what K’d for. o General Damages: Difference bw K price and Fair Rental Value of New Land (actual rental) o Special (consequential) Damages: Other costs incurred as a result of ∆s breach Put Π back in rightful position before breach Ct allowed specials here because of the clause in the K and it would not be too difficult to value Wrongful Withholding of Payments: Π can recover interest between when Π was paid and when Π should have been paid o Rationale: Limited to interest to maintain certainty ≠ want to have ∆s take on every possible risk under the sun in a business setting it would create uncertainty. o Meinrath v. Singer: K for computer stuff w/ provision for bonus compensation to Π. ∆ ≠ pay compensation on time and therefore Π could not pay for his other expenses and lost his business as a result. Π sues saying he is owed for the loss of his subsequent business bc of the late payments Ct said the even though the consequential losses are fx they were TOO REMOTE from the main injury and TOO SPECULATIVE to recover Maintain Certainty: ∆ did not K up front for taking on the risk that Π would lose his business Outcome Change: It might be different if the K involved a specialty item and had Rx knowledge of the effect. o Insurance Context: If insurer owes $ and withholds it, the Π will get more than interest. Possible tort action for bad faith and therefore other remedies, such as punitive damages are available. Efficient Breaches by Corporations: Generally not done because it hurts goodwill & reputation b) Tort Rule: Seems to allow recovery for expectancy damages and punitive damages. Texaco v. Penzoil: T interfered with P’s K with Getty Corp to acquire Getty. T took Getty from P, so what are P’s damages? o Meant to emphasize an extreme case
6
Heather Burgess 8/12/2008 B. Limitations Adequate Remedy: UCC allows limitation of damages liability – unless the limitation renders the buyer without an adequate quantum of remedy. Kearney & Trecker v. Master Engraver: ME bought engraving machine with a warranty that provided the exclusive remedy for the buyer was to fix or replace the machine, but there are not consequential damages allowed. The machine broke early and often. The court held that the provision failed in its essential purpose leaving the buyer with no remedy. o Ct held that while the remedy was not unconscionable under UCC 2719(3), there needed to be some remedy available o In such a case, the provision in the K becomes void and the buyer can recover. 1. Liquidated Damages Clause in K that is a Rx approximation of what damages will be if they will be difficult to figure out later Rule: LD can’t be a penalty and must be Rx approximate to actual damages (or bear a reasonable relationship to actual damages Rationale: Save litigation and trouble by establishing at outset damages Issues: o Is it a Penalty? Ashcraft & Gerel v. Coady: Managing partner in firm is fired for conspiring against the firm and stealing clients. The LD clause in his K was 400k, effective if he was fired for cause (it estimated loss of his expertise, knowledge, clients, and have to re-establish that knowledge). Actual business loss was estimated at 1-1.5 million dollars. LD turns on “for cause” firing, not any termination or quitting. Sounds like a penalty. The court said it was acceptable o Under liquidation: LD clause the exclusive remedy? Rule: When LD are below the actual amount, but within a reasonable range, the aggrieved part may not sue for the difference What if in Aschraft the loss was 500 million and the LD clause was for 400k? Can you go after the extra money? Possibility 2. Other a) Avoidable Losses RSTMT 350 Avoid: Damages are not recoverable for loss that the injured party could have avoided without undue risk, burden, or humiliation. o UCC establishes a requirement to cover. o No duty to mitigate damages – just can’t complain when you don’t Affirmative Defense Plead by ∆: o Π fails to make Rx efforts to avoid, Π can’t recover
7
Heather Burgess 8/12/2008 Rx attempt: Π makes Rx attempts to cover and can’t, then Π is ≠ penalized and can recover. b) Offsetting Benefits Offset: Lawful recovery will be offset by costs reduced or benefits gained by virtue of D’s wrongful conduct o Π ≠ have enough crops to harvest, so Π gets another job paying $10 p/h. o Π’s Damages = Amount of Π’s loss Amount received from job o Can be applied, but may be based on specific factors of each case c) Collateral Source Rule Still Recover: Money paid to Π for losses from a source independent of ∆ can still recover for those same losses from ∆. Exception: Insurance pays for loss and then ∆ pays for same losses – may have to repay the insurer if there is a subrogation clause. d) Scope of Liability Limitation: Legal definitions of ∆’s liability operate as limitation on the remedies available to Π. o Such as damages must arise out of the cause in fact and proximate cause of the ∆’s wrongful act. e) Certainty Limitation: The Rx Certainty Doctrine limits Π’s recovery to those damages that she can adequately prove under the circumstances. o P must prove: 1. ∆’s wrongful conduct proximately caused the harm 2. The amount of damages caused by that f) Substantive Policy Goals Limitation: A damage award can be inconsistent with substantive or public policy goals of the law o Ex: when the Π has unclean hands, might not allow for recovery. C. When Money Can’t Measure Value 1. Pain & Suffering (Non-Economic Damages) Options for assessing Pain and Suffering: o Per Diem: Per diem arguments in calculation of damages (what’s the disability compensable for daily – multiply by life span) are: Permitted in 1/3 of the states Prohibited in 1/3 of the states Allowed with cautionary instructions in 1/3 of the states
8
Heather Burgess 8/12/2008 Debus v. Grand Union Stores: Π injured in ∆’s store when cans fell on her and she suffered 20% permanent disability. Π argued for per diem award to the jury. ∆ argued it was prejudicial. o Lump Sum: Universally allowed except in PA and NJ o Golden Rule: How much would you want? Not allowed at all o No number at all Prove Non Economic Damages: o Testimony that shows Π’s life changed. o Can’t to bring in evidence of other verdicts with similar facts – but it could be useful if negotiating a settlement. Limiting Instructions to the Jury: o Judge can instruct the jury as to the attorney’s suggestions – but efficacy is questionable. Wrongful Death: 2 categories w/in states o Survival Statutes: Compensation for decedent’s losses that would have been compensated if the decedent would have survived – both econ and non econ Some states allow estate to be compensated for decedent’s pain and suffering before death o Death Statutes: Compensate family members i.e. – Loss of society, loss of companionship, loss of financial support Children, retired persons, and adults w/o dependents bring in the least amount of money Most jx ≠ allow for grief/emotional distress 2. Tort Liability Statutes that limit/cap damage amounts payable to the Π States are Split on Caps: o VIRGINIA: Etheridge v. Med. Ctr. Hospital: Π went in for jaw bone work and hospital negligently hurt her causing severe and permanent injury. The jury returned a verdict of 2.75M (both econ and non econ). The court reduced the award to statutory cap amount. Statute in place b/c insurance argument that it will increase premiums if there are big payouts, so the legislative fix of a cap protects society. Π challenged on 5 points: 1. Violation of VA constitutional right tot trial by jury: Ct said it does not override jury’s province. Jury is the finder of fact; Legislature has right to set the outer limits of the law. Remedy is a matter of law, ≠ fact. No assurances of full remedy in tort common law & right to jury is only for CL c/a. 2. Violation of Due Process: Ct said there was rx notice and opt to be heard, so ≠ procedural DP. Also, no presumption
9
Heather Burgess 8/12/2008 that damages can’t be more than cap, rather cap is a limitation – so it is ok 3. Separation of Power Problem: Ct said legislature allowed to determine what actions and remedies are allowed 4. Law Confers Special Privileges and Burdens Others 5. Equal Protection Violation: Ct said passes rational basis test that the legislature rx concluded the cap to promote legitimate state interests. Dissent: did create a special privilege bc the cap only applied to drs. o FLORIDA: Smith v. Dept. Ins.: By capping non economic damages there is restricted access for redress of injury, which is protected under FL constitution. Because it is a constitutional right in FL to be able to have redress and the cap infringes on that it does not pass the rational basis test especially with arbitrary cap #s. o CAPS on NON ECONOMIC damages more likely to be upheld FED: Upheld such caps CA: Has cap on non econ of 250K for injuries by drs. Policy Argument: o Good Idea? Statistics can cut both ways – is it the mean or the median being considered? o Tort Reform: Limit Recovery for Non Econ Abolish Collateral Source Rule (Π’s rtfl pstn) CA got rid of this for med. mal. Limit/Abolish Punitives (Π’s rtfl pstn) Provide that judgment be paid over the life of the victim – until death, but no more than amount awarded if live longer Abolish joint and several liability (∆’s rtfl pstn) CA uses comparative fault principles, not J&S Let ∆ get attorneys fees from Π when file frivolous or unjustified claims (∆’s rtfl pstn) Limit amounts charged for contingency fee cases Shorten SOL or accelerate the beginning point o Against Caps: Forces settlement Let jury decide amount and let the judge remit. 3. Dignitary/ Constitutional Harms Rule: Generally Π can get special/consequential damages (medical costs, etc.) and Non Economic damages (mental anguish) BUT Π must prove them Dignitary Harm: No real physical harm. Ex: Defamation, IIED, assault, false imprisonment. Constitutional Harm: Violation of civil rights by state action. Ex: § 1983, Due Process
10
Heather Burgess 8/12/2008 o § 1983: Const. claim (civil rights) brought against STATE ∆s Must be CLEARLY decided to recover If NOT clearly decided, you do not recover, BUT from this day forward if anyone does this again, there is recovery. (pg 194 for § 1983 language) o Bivens Claim: Const. claim brought against FEDERAL ∆s (can have state law claims as well) Damages Rule: Can get actual damages, but NO presumed damages for constitutional rights violations. [Ex of presumed damages would be in defamation where there is an assumption that some harm occurred even w/o proof.] o Carey v. Piphus: The fact that there is liability is enough of a deterrent, so there is no need for presumed damages. (both procedural and substantive const. rights) If damages are appropriate, must prove damages with competent evidence. Attorney Fees Rule: If a § 1983 violation gets at least $1 to prove liability, THEN the attorney can collect attorneys fees Remittur/Additur: o Additur Rule: Judge ≠ add $ to jury determination, but can grant a new trial o Remitter Rule: Judge can reduce award amount, BUT this gives Π the choice of accepting the reduced award OR having a new trial o Using Comparative Verdicts/Cases in assessing the instant case Levka v. City of Chicago: Strip search of a woman. A jury awarded her 50k for violation of her §1983 rights. The ct reduced to 25k based on the nature of the violation in comparison to other violations and awards in those cases. Court looked at the mean and the median in these cases Mean = average of judgments Median = middle judgment (half getting more/half getting less) D. Taxes and Interest on Judgments Taxes: o Personal Injury Awards: ≠ taxable (federal) Limitation: Physical Injury Tort recovery only; not K or other torts o How do you measure damages intended to = future earnings Majority Rule: Gross Income Approach = pre tax $ Start counting future increase from there o Rationale: Tax benefit to Π: ≠ know the future tax rates or where Π falls in the tax bracket or future appreciation of $
11
Heather Burgess 8/12/2008 Contingent fees reduce award amount Interest income earned on award IS TAXABLE Minority Rule: Net Earnings Approach = after tax $ Used in federal courts on federal issues (under federal tort claims act)
Interest: o Definitions: Pre-judgment Interest: Interest from time of injury to time of judgment for the Π Post-judgment Interest: Time from judgment to when Π collects o Use: Common Law: Pre allowed in K, but ≠ tort. K = firm #, unlike tort Modern: Pre allowed on both. If settlement offer rejected and Π gets more money at trial, then 10% from time of settlement CA: Uses post at 10% per year with simple interest (adding 10% off principle each year) E. Time and the Value of Money [present value] Discount to Present Value: Lump sum damage awards are discounted to present value o Money damages replace lost future earnings: 1. Need to determine what those earnings will be (what salary in those years); AND 2) Want to discount that amount for investment o Discounting puts the Π in the place she would have been BUT FOR ∆’s wrongful conduct, and not better off bc of extra interest OPTIONS: o Real Interest Rate: Take % interest rate entitled for a risk free future investment One component of rate = inflation (future expected inflation) The other component of rate = real interest rate o Total Offset Method: Assume future wages rise by the same discount % rate for interest, so ≠ discount with the idea they cancel each other out. Earnings: [Raises person to Π and Productivity raises ] [cost of living, etc] = award amount Equation: Earnings X Expected Yrs Worked (Don’t discount) Jones & Laughlin Steel v. Pfeifer: valuation case where money damages were used to replace lost future earnings. Court said the Π was entitled to a risk free future investment. Ct used total offset method.
12
Heather Burgess 8/12/2008 o Discounting w/o Inflation: Can discount bw 1-3%, and then ≠ worry about inflation. These numbers are based on # already fixed for inflation using certain measures o Discounting for Present Value: Analysis 1. How long is this person going to work 2. Figure out %s – inflation, productivity, etc. 3. Discount by appropriate rate of interest reduce lump sum by risk free investment % 4. Then take % interest on future productivity/inflation % = discounted rate. September 11th Victim’s Compensation Fund: o Capped Recovery: Limited Pool of Victim’s Recovery Funds o Assigned a Special Master to Distribute Monies Non Economic Loss: Award Amt: Pain and Suffering for living and dead = 250k Discount: Collateral $ is offset against Non Economic Amount (such as insurance money, etc) Economic Loss: Award Amount: Lost Earnings Calculation o Start with Age o Look @ last 3 years of after tax $ & fringe benefits o Expected Working Life (actuary tables) o Annual Income Increases Inflation Productivity Gains (national or industry) Personal Gains Discount: o Decrease for unemployment o Deduct/decrease for victim’s share of household consumption o Discount present value to get lump sum Mean Award: 1.4 M Median Award: 1.2M
13
Heather Burgess 8/12/2008 III. Injunctions Big Issue: Scope of the Injunction – how much injunction should Π get? Definition: Ct order telling ∆ to do or not do something o Affects the person Violation of the injunction results in contempt A. Preventative Injunction Prevent harm in the future Irreparable Injury: o Rule: Need more than potential irreparable injury Required Showing: 1. Actual or real danger of acts to be enjoined will occur; AND 2. ≠ other remedy available o Humble Oil v. Harang: Π seeking preliminary injunction to prevent ∆ from destroying documents demonstrating that ∆ acted to defraud buyers by using confidential scientific information to sell land and keep mineral rights. Π had general fear ∆ would destroy the docs bc ∆ was shady Held: ≠ sufficient showing of irreparable injury. Ripeness: Issue must be ripe for injunction to be decided Ex: Humble Oil ≠ ripe for dispute bc it had not happened yet. o 2 Kinds of Ripeness: Constitutional Ripeness: Does federal court have jx – actual case and controversy Remedial Ripeness: Don’t have a remedy available 2 Requirements: o 1. Planned; AND o 2. Imminent Propensity of ∆ to do the act: To demonstrate this, you can show o Past Conduct o Planned Conduct (i.e. arranged for a shredder) Amount of Proof: Need substantial proof that the injunction is needed NOW o Nicholson v. CT Halfway House: ∆ setting up halfway house for parolees and Π, ppty owners in neighborhood, sued to enjoin bc fearful of future crime and depreciating land value. HELD: Future crime fear and depreciation fear = too speculative Must prove with certainty that there is a nuisance, since the halfway house = lawful activity, it was ≠ ripe for adjudication Proving Substantive Law: to get an injunction must prove substantive law of nuisance. If it does turn into nuisance later can bring suit again Developer can get declaratory judgment as to the nuisance claim
14
Heather Burgess 8/12/2008 Various Tests can be applied with this mix of substantive law and remedy Actual nuisance Strong probability of nuisance It will result in nuisance Rx degree of certainty that nuisance will occur Violation of Injunction: Contempt o Civil: Damages, attorneys fees – motion brought by Π o Criminal: Go to jail – get prosecutor to bring charge o Coercive Civil: may jail you, but also might charge you Scope: The breadth or scope of an injunction must match or relate to the breadth or scope of the challenged action o ≠ issue injunctions to generally obey the law o Need specific purpose o Marshall v. Goodyear Tire: Π fired from 1 store based upon age discrimination. Suit was brought to enjoin this type of discrimination nationwide based on the ADA. However, there was no showing that discrimination extended to the entire chain of stores, just in that one Held: Injunction overbroad bc no showing of national problem An injunction is an extraordinary remedy, so need appropriate level of proof Voluntary Cessation and Injunctions: o If the challenged action is voluntarily ceased by the ∆, an injunction can still be issued if: Three Step Analysis: 1. The moving party must demonstrate relief is needed 2. ∆ can demonstrate that there is NO Rx likelihood the wrong will be repeated 3. Π needs to show cognizable danger, more that the mere possibility that the danger exists. Factors to Balance in Doing the Analysis: 1. Bona fide express intent to comply 2. Effectiveness of discontinuation of challenged behavior (can it be restarted easily) 3. Character of past violations o US v. WT Grant: US sued to enjoin company members from being on overlapping board of directors bw companies. The overlapping directors stepped down from those boards, so the problem no longer existed. Directors argued the issue was not moot. Question is whether the ∆s voluntary action to stop the challenged action was sufficient or whether an injunction was needed. Ct said there can be an injunction even when action voluntarily stopped. Dissent argues that the company no longer has overlapping members – end of analysis.
15
Heather Burgess 8/12/2008 Other Writs o Mandamus: Ct order to public official ordering that official to carry out ministerial duties ≠ against private person ≠ go to something requiring discretion o Prohibition: Order to inferior ct or agency to prevent exceeds jx or abuse authority. Different from injunction which acts in personam v. against agency, etc. o Habeas Corpus: Collateral review. Convicted in state court and ∆ takes it to the highest court possible. Collateral review – bring up things ≠ in the lower court case i.e. – IAC Conflict over whether have the right to collateral review Habeas is order to person holding ∆ and being forward to determine legal detention
B. Reparative Injunction Undoes harm that has already happened o Bell v. Southwell: Racial discrimination in voting for justice of the peace in a special election. Ct aid not only that blacks could not vote, but also that race was at issue right before the vote. HELD: ≠ forego the right to challenge the election bc it was ≠ done in advance bc 1. no way to know harm beforehand in this case; and 2. they did protest and timely filed. If there was enough certainty that harm would happen, then case where would have to file in advance instead of waiting for harm Reparative v. Preventative Injunctions o Both prevent harm Preventative: Harm ≠ yet happened Reparative: Harm already happened, BUT injunction prevents consequences of that harm in the future. o Election of Damages v. Injunction: Double Recovery? YES. Forester v. Boss: ∆ sold land to Π with the misrepresentation of the ability of a boat dock – when ∆ actually retained the permit. Trial court gave compensatory damages, injunction, and punitive damages. ∆ argued that = double recovery. Appl Ct Held: Can elect either compensatory damages or injunction. Punitives were ok bc of the fraud. NOT ALWAYS: Injunction and Damages are not always duplicative Look to see what the money is going for If not compensating the same thing, then ≠ duplicative [Note] o Permanent Injunction = final decision on the merits o Preliminary Injunction = based on probability of success on the merits
16
Heather Burgess 8/12/2008 1. Scope Three Approaches o Put Π back in rightful position o NO MORE THAN rightful position o NO LESS THAN rightful position Winston Research Corp. v. 3M: Division of 3M – developed a product and once prototype established employee who worked on it went to new co. and make same machine as 3M. o Trade secrets are protected as long as they are secret once 3M put the machine on the market, it was ≠ longer a trade secret. Even if there is not a noncompete clause, you still can’t use a former employers trade secrets. o HELD: Permanent injunction against ∆ for 2 years not to produce or sell. Put Π back in rightful position by giving them the same lead time but for the employee wrongly using the inside information. Holding them off indefinitely after the machine was on the market by 3M would be a penalty ≠ money damages bc: 1) too speculative as to what they lost; and 2) restitution would be proper for disgorgement of profits, but ∆ had not sold any machines yet Bailey v. Proctor: Trust situation with two types of investors – stockholders who were the control group and had the least amount at risk and debenture holders who had a lot at risk. S bankrupted the company by self dealing and fraud. SEC put the co. in receivership at which point the co. is bought out by another and the company becomes solvent again, with new board member. Trial ct order liquidation of company but the new people object bc the trust is now solvent. Ct. App. says this equitable action is reviewed for abuse of discretion – and just bc solvent ≠ mean problem fixed. Liquidation is followed o Jx issues: Does ct still have jx once solvent? Yes. Get jx at appointment of receivership and does not end until ct ends receivership, done at the discretion of court, bc equitable action – so even though solvent still in jx o NO LESS THAN rightful position Liquidation puts Πs in better position bc debenture holders did not expect their money back for a number of years and now have it. Factor to consider is the propensity of bad actions weighed against solvency at one pt in time. Issue that ct is acting paternalistic by watching out for the debentures to this degree instead of other options aside from liquidation. “roving commission of good” Prophylactic Injunctions: Fixing the wrong in the past, but to prevent some problem in the future
17
Heather Burgess 8/12/2008 o Preventing harm in future; keeping before the ct w/in jx. If it goes wrong – it comes back to the court Balancing Competing Interests: Abortion Clinic Case o Injunction keeping protestors 15 feet away from clinics to prevent the past harm of harassment of women. Balanced free speech rights with those of the women – set an arbitrary distance C. Structural Injunction Used when structure or institution itself is unconstitutional Definitions: o De jure = by law = unconstitutional By state or local officials o De facto = by fact = constitutional By other ways, private issues i.e. segregated housing leading to segregated schools is ≠ fixable by these types of injunctions School busing cases: o Swann v. Charlotte-Mecklenburg County: SC affirms TCs ability to desegregate by drawing pie shaped attendance zones Neutrally drawn attendance zones might ≠ be enough: even if de facto the court may still decide it Blurs line bw dejure and defacto but the remedy for dejure fixes both o Milikin v. Bradley: School district gerrymandered attendance zones to deliberately segregate schools. TC tries to bring in suburbs to fix the problem. SC ≠ allow that bc Π’s rightful position is desegregation w/in Detroit, not the surrounding areas. Can’t bring in suburbs UNLESS the dejure segregation in Detroit CAUSED the segregation in the suburbs. o Dayton v. Brickman: Limited segregation from a long time ago. TC required citywide busing. SC said scope of remedy (injunction) went beyond the scope of the harm Incremental segregated affect, so unless it was system wide segregation there should not be system wide desegregation (292-93) o Standard: School desegregation decree is held to a lesser standard for compliance Complied in good faith and achieved a Rx unification Prison Situations: o Hutto v. Finney: prison conditions were abysmal and the TC gave the prison system nine years to fix it before intervening. Isolated case where ct finally stepped in. Considerations by SC: Indeterminate time prison people can be subject to isolation Listed 3 things that had to change: No more than 30 days in isolation Limited # of people in cell ≠ more grue State concedes everything except the arbitrary 30 day limit.
18
Heather Burgess 8/12/2008 Rehnquist dissent: Thinks 30 day limit is weird, if 31 then unconstitutional – what is the difference really. Ct made bad law bc there were bad facts (no more than RP) NO LESS than Rightful Position o Lewis v. Casey: Class action by prisoners in AZ prison system saying ≠ access to law library and legal assistance Ct found only 2 instances of denial of access, so system wide injunction is too broad. Need more than 2 instances even though it was a class action suit. Rightful Position Only o Prison Litigation Reform Act (PLRA): Relief can not extend past necessity for the remedy Other: o US v. VA: VMI case where women wanted to go to VMI, so VA made a women’s version of VMI – ended up being separate, but NOT equal. HELD: Remedy of separate school was ≠ an adequate remedy. Remedy ≠ match constitutional violation. It doesn’t get Π to rightful position. Concurrence by Rehnquist: How you define the problem has an effect on the outcome Generally prison and other structural cases (w/public entities) the ∆ gets to take the lead to fix the problem bc they know the budget constraints and public entities are funded by tax money Injunction must end o MO v. Jenkins: Can address segregation by injunction, but eventually have to fix it. Allowing end of enforcement by fixing the problem Modification of Injunction: o Modification permitted in 3 situations: 1. Changed factual condition making compliance substantially more onerous 2. Decree proves unworkable bc of unforeseen circumstances 3. When enforcement would be a detriment to public interest o No modification allowed based on change of events that you relied on Rufo v. Inmates of Suffolk County Jail: Inmates had settled with prison system. After the settlement, inmates wanted to rely on a case that came out, but not allowed to bc they had already settled o Rufo controls in all situations except prison cases Prisons can have injunctions re-opened every year Injunction on Rights of 3 rd Parties: o Some limits on injunction on those who are not a party to the litigation but can be done Blacks in firehouse enter a consent decree based on discrimination not letting them advance. White employees upset bc now less promotions for them bc of the new system. o Additional Info:
19
Heather Burgess 8/12/2008 D. Elements 1. Irreparable Harm o Often courts rely on irreparable harm to say there is ≠ substantive law issue o Inadequate Remedy at Law Every jx has a different standard for issuing an injunction o What does it mean to have IH? General Rule: To compensate for harm ∆ can give money damages first, UNLESS that is ≠ adequate compensation. o Laycock ≠ think it works that way Injunction is issued in a case where $ damages are ≠ adequate. Things are ≠ replaceable by $ if it is unique or different Pardee v. Camden Lumber: Π sues to prevent ∆ from cutting down lumber on Πs land. Π ≠ have to wait for actual cutting down of the timber bc under the new rule: real estate = unique, so specific performance for breach. $ damages are ≠ adequate when: 1. Unique: o Π needs that specific thing; Heirloom, trained horses, etc. o Replevin v. Injunction Replevin: Getting back property taken. Narrower than injunction. Irreparable Harm is ≠ needed bc of uniqueness of property Enforcement: Violation of injunction = contempt Replevin = sheriff takes jx over the ppty and not the person Brook v. Cullimore: Replevin action where ∆ wanted to choose whether to return personal property or give $ damages. Ct said that it is up to Π to decide $ or property and ≠ an option for ∆. ≠ need for IH bc replevin is a law case where the c/a provides fro return on its own. 2. Insolvent: o whatever harm ∆ going to do the ∆ ≠ pay for it, so get an injunction 3. Measurement: o Cont’l Airlines v. Intra Brokers: Cont’l issuing discount coupons which were ≠ sellable, but CA
20
Heather Burgess 8/12/2008 told brokers that they were not enforcing the restriction. Later CA decides to enforce provision, so sue to enjoin brokers from using coupons. HELD: To hard to calculate prospectively or even retrospectively the damages in this case. Ct said controlling its own business was enough to establish harm 4. Repeat Offenders: o someone who keeps causing harms – end it once and for all Identical Nature: How identical does replacement have to be: Legal remedy is adequate only if complete, practical, and efficient as the equitable remedy. o Chokehold case: ∆ was in a chokehold once and wanted to enjoin police from using it. Held: ≠ enjoining bc ≠ irreparable injury. No real threat that ∆ going to be same situation and in chokehold again. Scarcity: In time of shortage/scarcity Π can get specific performance for personal property where normally ≠ allowed $ damages ≠ adequate when you ≠ replace what was lost and bc of scarcity $ is ≠ adequate o Campbell Soup v. Wentz: C make a K for carrots from W. W sold part of harvest to another buyer instead of all to C bc of increase in market price. Special kind of carrots that cannot be found in market, so can’t cover w/o spending A LOT more. K had LD clause, but C wanted specific performance bc damages would not be enough bc the cost was too high to cover. (ct fudged a little bc C was looking for THESE exact Chatney carrots) Ct got around IH by carrots being special and in limited supply ≠ just unique, but extreme scarcity Specific performance of a K = specialized form of injunction (tells ∆ to perform K) Economic Argument: Efficient Breach o When transaction costs low = injunction o When transaction costs high, $ damages better o Courts often ignore economic theory in determining SP or damages ONLY when goods are unique or in short supply does the ct grant SP
21
Heather Burgess 8/12/2008 o Preliminary v. Permanent Injunction Showing of IH Preliminary: Must show IH in time period Generally economic harm is ≠ likely to find IH. Cts get around by balance of hardships if lose business by economic harm. Permanent: Bc on the merits there needs to be a final judgment there needs to be irreparable harm o Why is there the IH rule? Injunctions: Impose a burden on ct; Are greater infringement on ∆’s liberties; Have different time frame then compensatory awards; Right to a jury trial 2. Balancing of Hardships Rule: If the hardship to ∆ is disproportionate to any benefit derived by Π as a result of an injunction, damages might be a better remedy o Caveat: If it is ∆’s fault through intentional conduct, then Π’s diligence will be taken into consideration Look at the relationship btw the parties o Van Wagner: ∆ canceled the lease Π had for billboard pace. Lease is canceled so what is the remedy? HELD: breach of a lease for real property can be compensated monetarily when Π’s damages are fairly certain and ∆’s hardship is very high. o Ariola v. Nigro: Case where gutters intentionally went over onto the other ppty by 6 inches and house 1 inch over. Gutters damaged Πs house. To fix it would pretty much require tearing down gutters and house. HELD: Π gets money damages for water damages and gets a mandatory injunction against ∆. This jx: any intentional misconduct ≠ get a balancing of the hardships. In reality = not going to tear down ∆’s house, the injunction gives Π bargaining power. In practice = mandatory injunctions rarely issued Minor Issue: Laches Defense: but would require one to sit on her rights and result in prejudice to other Fact Specific Analysis: o Boomer case: Cement plant giving off dust. Intentional but burden to high to stop plant bc of local employment, etc. Homeowner got less than full remedy Difference btw Boomers and Ariola: B: Doing lawful thing at the time A: Knew it was wrong at the time o Myers v. Capel: ∆ wants to build a levee. Protects ∆’s land, but water goes onto Π’s land. HELD: Π can get damages but can renew injunction if flooding damage gets worse than what originally thought. o Peevy House case: stripped land and was supposed to restore it back, but it would cost 29K to restore and it will only increase the land value by $300. HELD: ≠ damages bc of undue hardship. Let ∆ out of K.
22
Heather Burgess 8/12/2008 Balancing Π’s need for the injunction AGAINST burden on ∆ & secondarily burden on the court to oversee o Burden on the Court: Is a factor in the balancing. Not as big as Π and ∆, but still important o Argyll v. Co-operative: Π had Safeway store (∆) in its strip mall. ∆ breached K and wanted to leave. Π wanted specific performance to finish lease (for bargaining power). ∆ says SP too much bc losing $, and ≠ good business. HELD: Damages only: Lease price/yr – sublease/assn. 1. Damages only, ≠ SP bc ∆ losing $ o If SP, the Π would get a benefit and ∆ would be punished 2. Cts continued oversight is too much here bc of specific standards, etc. 3. Public Policy Fundamental Rights: Even if injunction proper, if it violates a fundamental right it may not be granted. o Injunction that constitutes a prior restraint of free speech will not be issued. Willing v. Mazzacone: Mentally ill woman protesting in front of law firm claiming they bilked her out of $25. All indications were they did not do that. Issues in balancing: 1. prior restraint of free speech; 2. ∆’s insolvency; 3. Damage measurements difficult; 4. Necessity of multiple suits in lieu of injunction; 5. Lack of jury trial on Const. Law issue. HELD: Even though ∆ insolvent, precluding money damages, free speech rights trump the injunction o Possible Exception: Laycock thinks prior restraint might be available when: 1. Injunction is sufficiently narrow; and 2. Speech is unprotected (obscenity, fighting words, clear and present danger) Personal Service Contracts: Courts are adverse to injunctions for specific performance of a personal service K. o If services are unique or extraordinary, a negative injunction may be issued prohibiting employment with anyone else o Failure of employee to work for a hated employer could result in the employee being held in contempt of court, resulting in possible imprisonment. Not good outcome o After personal service K expires, the availability of injunctive relief diminishes substantially American Broadcasting v. Wolf: Wolf signed a K with CBS before his old ABC K ran out. K had clause for good faith negotiation, which Wolf violated. HELD: No SP, but could get negative injunction
23
Heather Burgess 8/12/2008 o Negative Injunctions: essentially a non-compete effect, but a court will not prevent someone from making a living so only a little helpful E. Preliminary Injunction Four Prong Test: o 1. Strong Likelihood of Success on the Merits o 2. Irreparable Injury o 3. Balance of Hardships o 4. Public Policy Alternate Test: EITHER o 1. Possibility of success on the merits AND possibility of irreparable injury OR o 2. Serious Questions on the merits AND the balance of hardships tip sharply in favor of the Π Timing: Irreparable Harm is only that which will take place BEFORE trial o Ex: Failure of business before trial o Amount: The more likely Π is to win on the merits, the less IH must be shown o Harm that is reparable by damages SUBSEQUENT to trial, a PI will not issue LA Memorial Coliseum v. NFL: Raiders and Coliseum wanted to enjoin NFL from moving them from LA. Cts says merits are too close to call, and there is no IH that is not addressable by damages post-trial. Hardship falls on ∆ where P will have full redress w/o PI. HELD: No PI appropriate Stnd of Review: Abuse of Discretion Quantifying Balancing: Π ∆ o P x H(p) > (1 – P) x H(d) Π side: P = probability of erroneous grant (gives PI when later determined permanent injunction is ≠ warranted) OR denial (does not give PI when one is warranted) H(p) = Harm to P ∆ side: (1- P) = 1% chance total, so it is 1 minus the % on Π side to get the corresponding % for the ∆ H(d) = Harm to ∆ o Missing from the Equation is Public Interest: can add to applicable side o Problem: Not test for a long time, there is a fear of objectifying this is changing the standard of review Concern is it will be more de novo review, instead of the prescribed abuse of discretion
24
Heather Burgess 8/12/2008 FRCP Rule 65(a): o (1) Notice: No PI w/o notice to adverse party o (2) Consolidation of Hearing with Trial on the Merits: Cases: o Southwest Case (election): Two substantive claims Having vote count like everyone else. Ct said ≠ clear probability of success on the merits bc rx jurists could differ Statutory claim of using race as a factor. Ct said balance bw not having vote count and the reliance on having an election o Siegel v. Lepore: FL recount issue. Repubs tried to enjoin a second recount. Ct said no irreparable harm. R ≠ harm your winning. Voters ≠ precluded from voting any injury can be remedied later, const harm ≠ enough. o Lakeshore Hill v. Adcox: ∆ had a bear and Π said not allowed in subdivision. Ct applies the 4 factors to grant the injunction. Purpose of Injunction: Maintain the status quo. F. Injunction Bonds Provides for damages for ∆ if Π wrongly gets injunction o Provides certainty o Limited to bond - ≠ all damages, otherwise Πs ≠ need to bring suit o ∆’s responsibility to get bond o Bond tempered by Π’s ability to afford or societal importance Rule 56(c): “shall issue” indicates mandatory implication o HOWEVER, ct determines the amount so it can be nominal amount Amount of bond usually the cap, the maximum amount responsible for Compensatory: amount of bond = compensatory, ≠ punitive o Can only recover what damages are o Π acting in good faith, then bond is the cap for erroneous injunction o Compromise btw potential loss by ∆ and Πs ability to pay. Coyne-Delany v. Capt’l Development Bd: C had K with gov’t and gave bad values so the gov’t went shopping for another contractor. C moved for a preliminary injunction and the gov’t wanted a bond for 50k. Ct only gave 5k only. G. TROs Rule 65(b): TRO, Notice, Hearing, and Duration o TRO’s are NOT appealable. Up to attorneys and courts to enforce o Notice: Must how attempt to give notice to the other party and certify if you ≠ get the person. Must have actual notice for the TRO to be effective Dispense with notice: If you can’t find to serve, but can find at the time of the hearing (such as out of town) Physical Safety Showing of propensity of ∆ to destroy evidence immediately. o Hearing: Need to have all parties in adversarial proceedings
25
Heather Burgess 8/12/2008 Ensure TRO is as narrow as possible o Duration: TRO only lasts 10 days, but Question if that is rule bc the rule only says ex parte TROs can last 10 days. Length of Time: Sampson v. Murray: Probationary employee fired and sues to get a TRO to enjoin dismissal until supervisor can testify as to why fired. TRO last for three years. Question is if it turns into a preliminary injunction if it passes 10 days. HELD: = preliminary injunction SC turns into preliminary injunction so it can be reviewed bc if TRO then ≠ review allowed. Using preliminary injunction the ct found ≠ irreparable injury. Rule 65(b) is ≠ clear as to length of time for TRO w/notice. Expires after 10 days: Granny Goose Foods v. Int’l Brotherhood: contested TRO lasting more than 10 days. TRO violated by ∆. HELD: Still a TRO beyond 10 days, but not effective beyond that. Convert to Permanent Injunction: Possible to convert TRO into a permanent injunction – rare case o Where there is no facts left to develop Stay: Must apply for a stay of injunction to the court issuing the injunction. o Carroll v. President of Princess Anne: White Supremacist group was going to hold a rally and the town got a TRO to stop them. Town got a TRO for 10 days ex parte then extended to 10 mos. HELD: ≠ sustain either order bc they did ≠ give notice to party. Must give notice to a party TRO ≠ ex parte ≠ have hearing and ≠ tell the group about it Group ≠ bound by TRO bc there was no notice. If they could find them to serve them, they could have found them to have a hearing Final word: If you have a meritorious claim most likely can get past hurdle of IH and if you can’t get around it go to declaratory judgment IV. Declaratory Relief Another way of getting judicial decision in your favor with a much lessened showing of irreparable harm A. Declaratory Judgment o Ripeness Main concern: Is this dispute ripe for judicial decision. Not allowed to give advisory opinions 1. Need Case & Controversy: Parties must have a stake in litigation so that it is fully developed If ripe for injunction, then ripe for declaratory judgment 2. Uncertainty Π going to languish with controversy and ∆ is going to take action (want to publish x, but might be obscene, and ∆ would prosecute)
26
Heather Burgess 8/12/2008 Nashville v. Wallace: Question of whether new tax could be applied. Ripe bc the state it would prosecute if RR did not pay. If declaratory judgment is not going end uncertainty most likely ≠ going to decide bc it would be an advisory opinion Further relief may be issued to enforce declaratory judgment (i.e. injunction above) o Comparison Chart btw Injunction and Declaratory Injunction Declaratory Judgment -Ripeness (actual threat) -Ripeness Requirements -Irreparable Harm -Something other than IH rather than uncertainty -Specific Order to Do -Legal conclusion that Order of Court something applies to the case -Contempt -Get injunction if violation Violation of declaratory judgment -Have Res Judicata, do not have to re-prove the case or probably ≠ have to show IH Cardinal v. Morton: Patent infringement issue that kept going up and down, finally sides petition to have validity of patent decided. There was uncertainty for both parties that could be resolved by a judgment. HELD: issue brought on cc and w/in jx of ct unless party says moot – so it needed adjudication o 3 Most Common Uses for Declaratory Judgment 1. Statute, taxes – constitutional issue 2. Patent Litigation 3. Insurance defense (is the act covered under the policy) o Forum Federal Court: Federal Statute allowing declaratory judgments State Court: Uniform Declaratory Judgment Act (adopted by most states) B. Other Kinds of Declaratory Judgment o Quiet Title; Reformation of K;, Declaratory Judgment of Law (nominal damages held a real dispute and it can be decided by ct); quo warranto (right to hold office) V. Restitution Substantive and Remedial Components o Substantive: Quasi K; Quantum mertium o Remedial: Looks @ ∆ instead Π (putting ∆ in “rightful position” by taking away stuff ≠ entitled to) o Substance of Restitution: 3 areas of liability – tort; k; restitution Nehri v. Retail Marine: UCC 2-217 allows for restitution – Π sues the boat company for return of the deposit – only available way to sue bc the Π breached the K to buy the boat.
27
Heather Burgess 8/12/2008 Unjust Enrichment: o Must have contract formation: Can’t get restitution if bypass K formation = officious intermeddler o Recurring Examples when Restitution is Used 1. Mistakes ≠ want people to get more bc mistake (bank gives 2k instead of 200 – bank can get back extra money) 2. Actual or Supposed K Actual K voided bc of mistake or SOF; if services provided prior to void, must pay fair value for those 3. Judgments You win judgment, but then the decision gets reversed – must give the money back 4. Emergencies No promise made bw parties, but emergency trumps so must pay for services provided 5. Joint Obligations Indemnity, subrogation Collect from one ∆ - that ∆ can go against the other ∆s who did not pay 6. Wrongful Acts Theft, breach of fiduciary duty, conversion, etc. When ∆ intentionally causes something to happen and gain by it – can waive tort and sue in unjust enrichment o That allows Π to get ∆s gains and not the harm to Π Restitution Attractive to Π When: 1. No other c/a – Nehri case 2. When ∆s gain exceeds Πs loss 3. When Π wants to reverse transaction instead of letting it stand and measure damages by Πs loss or ∆s gain 4. When ∆ is insolvent and Π can get a preference using unjust enrichment as to specific property. A. Disgorgement of Profits Conferring a Benefit: a person confers a benefit not only where he adds to the property of another, but also where he saves the other from expense or loss. Rstmt of Restitution Disgorgement: Π gets to take the benefit of ∆s wrongful conduct. o Π may be in a better position, but that is fine because the FOCUS is on the ∆ being in the same position but for the wrongful act o ≠ a punishment to ∆ o However, if restitution gives far more than any c/a, a suspicious eyebrow is raised. In practice: when disgorging profits, the decision turns of ∆s culpability Olwell v. Nye & Nissen: O sold business to N, but did not sell an egg washing machine to N. Kept machine on premises for storage purposes. N used the
28
Heather Burgess 8/12/2008 machine for 3 years before O found out. O decided to sue under restitution for profits N made by wrongfully using the machine (vs. suing for conversion) o N did not rent elsewhere, so saved per week by using Os machine. So what was saved by O time the length of use = Amount disgorged to Π. (case gave consequential gains – total profits but for the wrongful act) o When deciding whether to disgorge the profits to N or to give O the fair rental value of the machine the analysis turns on the wrongfulness of Ns conduct. If N thought it was his machine, it would be different than taking the machine. o Restitution is generally available under Olwell – but there are exceptions to this rule o EXCEPTION: $ ≠ spent on safety. Negligence normally creates profits, but ≠ generally disgorge profits rather bring a c/a for actual injury Goes along with conscious wrongdoing. Negligence (product liability) is ≠ intentional o Other Potential Restitution Situations: Covenant ≠ to compete: More closer to fiduciary duty and may consider profits there Confidentiality Agreements: i.e. trade secrets, restitution might be available there 1. Quasi – K o Basics: Not a K – there is no offer, acceptance or consideration It is an implied in law K – with no promise made @ all Arises out of writs at CL o SOL: When ∆ can proceed in tort or Quasi K (unjust enrichment here) the longer SOL applies o Debate: Does it make sense to waive the tort bc you have to prove the same thing as in the tort Laycock: Prove tort and go for restitution remedy Cull: Substantive matter on its own o EXAMPLE:
2. Accounting 2 approaches on accounting for damages o 1. Majority: Accounting for Profits = Πs damages LESS profits, etc. o 2. Minority/Modern Trend: Equitable concept of restitution of unjust enrichment
29
Heather Burgess 8/12/2008 Maier Brewing Co. v. Fleischman: Π made BW label whiskey. ∆ made BW label beer. Π sued on trademark infringement. Ct said ≠ competition, but lead to consumer confusion o Use minority view and gave over profits made from beer under BW label. o Injury: Loss of goodwill and infringement on trademark itself – right to control own reputation. o Direct Competition: If there was direct competition btw the products, the look to diversion of sales by accounting for profits which satisfies the Lanham Act o No Competition: As in this case – there was still infringement so account for profits which serves the purpose of the Lanham Act 3. Constructive Trust Constructive Trusts act like a trustee for the benefit of someone else bc trustee got the money by wrongdoing. o Assets can be traced in a constructive trust o Insolvency: Get a preference bc ∆ is the “trustee” of Πs property – so the Π can get back HER property and ∆s creditors can’t touch it bc it ≠ belong to ∆ Snepp v. United States: Ex-CIA agent had emplymt K w/ clause that prevented publishing confidential information and requiring prepublication clearance before any material was released. Snepp publishes w/o govt consent. Govt sues even though no confidential info was used. S loses anyway bc S had a position of trust and by virtue of that by not submitting the work for prepub. clearance the govt was irreparably harmed. Even though no confidential information, S still obtained it in course and scope of his job. o K or Tort: Ct said this was not a K case, which would apply the rule of reason, but rather a breach of fiduciary duty case. Impt: Generally ≠ get restitution for K. By adding fiduciary duty in the mix, the court made it possible to get restitution. o Gov’ts Money: Ct gave all the $ to the govt bc S was the trustee of information for the CIA, so when he converted that info into cash – S was holding that money for the govt. NOTE: o Constructive Trust, Accounting for Profits, Quasi K are all legal fictions o Accounting for profits and Constructive trusts are both equitable remedies requiring irreparable harm o Bankruptcy: CT gets a preference in bankruptcy. Accounting for profits of a trust does not get preference. 4. Apportionment Rule: Apportion the amount of profits attributable to what ∆ added in value
30
Heather Burgess 8/12/2008 o Sheldon v. Metro Goldwyn Picture: Movie made based on a play, but did not receive approval to use the material for the movie. Ct said general historical facts were in general forum, but some specifics were taken from the play. The actor brought value by herself. Held: Apportioned profits to refund what was taken = 20%. o Approach: Π has the burden of proving gross receipts ∆ has the burden to prove receipts of costs that are to be deducted from gross receipts. What % is the star power, work put in by ∆ vs the material in the play o Proof: Expert Testimony: Can establish what portion of profits were based on infringement Can use varied means of proof. Ex: can try to show ∆s industriousness in promoting, finding a good star, etc. o Test: Rx approximation of the apportionment of profits ≠ give all to Π bc that is saying without play the ∆ would have not made any money ≠ want to punish ∆, but also don’t want to give ∆ the windfall for a bad act. Limitation on Π getting everything: Easier it is for ∆ to show apportionment – the closer the damages allowing a limitation on giving all the $ away to the Π o Traceability: If profits are NOT traceable, deny giving Π full profits AND ONLY award Πs demonstrable proximate cause amount UNLESS really egregious act by ∆ Rule: Gross profits overhead (variable and % of fixed attributed to wrongdoing) o Variable Overhead: Costs directly related to issue at hand (i.e. infringement) o Fixed Overhead: Regardless of issue at hand, costs that exist. Take % of those costs related to the issue at hand. o Hamil America v. GFI: Wrongful appropriation of floral fabric pattern. To make fabric, need the pattern, but also the thread, machines, etc. Held: Get variable overhead and part of fixed overhead. Fixed Overhead 2 step analysis: (2d Cir. Approach) 1. Categories w/ nexus to infringing action 2. Fair allocation of those costs Formula:
31
Heather Burgess 8/12/2008 Π must show gross sales of infringing goods; THEN burden shifts to ∆ ∆ must show costs that infringer proves attributable to the production and sale of those goods. Gross sales costs attributable Methods previously used: % of total product costs; % of total products $ sales from % of total sales $ Intentional Wrongdoer: Going to scrutinize fixed overhead costs closely to make sure there is 1) a nexus and 2) fair apportionment of those costs o Other approaches: Some circuits say an intentional wrongdoer ≠ deduct overhead Others say ≠ deduction at all ANALYSIS: o 1. GFI cost analysis: What do we mean by profit? How do we apportion costs? Π must show gross receipts ∆ must show costs Now have real profit #s – so then go to Sheldon o 2. Sheldon profit analysis: Did ∆ add value of own bc of ∆s efforts? o Look for: How bad is wrongdoing Desired deterrent effect Judge deciding the case bc there is equitable discretion
B. Rescission Contract Remedy; Not a legal fiction – it actually undoes the K o Fundamentally different than disgorgement. Nichols said could think of it in 2 parts: 1. Rescission of the K 2. Once undone, use restitution to get parties where should be Rule: Undoing a K – putting the parties back @ status quo before action/K happened o Mutual Benefit Life Ins. v. JPNR Elect.: Key company official got a life insurance policy and rate based on the assertion he was a non-smoker, but in truth he was a heavy smoker. After he died Mutual wanted the policy declared void, and transaction reversed because of material misrepresentation. Official’s estate argued that they should still be paid, but rather the difference bw the lower policy and higher policy amount. Ct denied this bc it is bad public policy – encouraging people to lie. Held: Transaction reversed, and since the official was dead there was no new policy issued. 32
Heather Burgess 8/12/2008 Rule: Since transaction reversed for material misrepresentation, the insurance company must repay the premiums plus interest. o Election of Remedy: Suing for Damages or Rescission Cherry v. Crispan: Seller committed fraud by concealing termite problem. Buyer can sue for: Damages: difference bw purchase price and FMV of house as invested with termites OR Rescission: Avoid having to calculate damages. o Public Policy Issue ≠ want seller to make fraudulent representations Buyer did not bargain for house w/termites Pgs 637-639 in book
o Rescission is allowed when there are bad acts or affirmative misrepresentations Fraud; Substantial breach of K; Mutual mistake of fact; Unilateral mistake, not relied on; Duress o Must act within rx amount of time when attempting rescission Doctrine of Latches: Longer you act in accordance with the K or that you are happy with the K – the more likely the ct will ≠ allow you out by rescission o Limitation on Rescission: ∆ had to engage in transaction Ex: I bought Enron stock and it tanked. I can’t sue Enron for rescission bc they are not the ones who sold it to me, despite the requite fraud, etc. being present o Irreparable Injury: Rescission is equitable remedy – in theory II is need Cts don’t talk about II when granting When denying rescission cts will use II, but what really saying is that breach of K ≠ bad enough there is an adequate remedy at law. o Rescission in K is about restoring status quo, ≠ disgorging profits Glendale Federal Bank v. US: S&L problem where govt offered accounting incentive for healthy S&Ls to merge with insolvent ones. Congress then outlawed that accounting treatment. G sued bc relied on that when merged with failing S&L. Sues for breach of K. (see10/16 pg 6) Rule: When there is a valid K you can rescind it, BUT when ≠ valid K courts talk about reliance and restitution – where ∆ is liable for the amount measured by the reliance.
33
Heather Burgess 8/12/2008 o Farash v. Skyes Datatronics, Inc.: No K bc SOF problem – so trying to get reliance damages based on quasi K for the amount of $ spent by Π in preparing for a take over of the building by ∆. Court discusses: Reliance: If you operate on reliance there is 1) a problem by ∆ and 2) Π takes some sort of action bc relied on this to his detriment and 3) ∆ should have fx this. Restitution: Takes away unjust gains from ∆ bc ∆ got some benefit Held: Take the case to a jury and if they find a promise then the risk of loss should be on ∆ for the renovated amount. Dissent: Π is actually in better position and ∆ ≠ gain benefit. C. Preferences/ Constructive Trusts/ Tracing 1. Tracing generally If particular property is obtained by ∆ from Π by: o 1) Fraud, misrepresentation, or mistake; AND o 2) Identify specific property of Π that ∆ has; THEN o 3) Impose a CT and Trace it o Note: If damages only, then ≠ CT Preference in Bankruptcy: Once CT imposed and traced by above, then Π had preference in bankruptcy bc it is Πs ppty, not that of ∆. o Hicks v. Clayton: C dupes H out of his home. Ct. App. overruled trial courts imposition of damages bc ≠ enough of a remedy bc it ≠ satisfy the mortgage and ≠ collect from C (insolvent). H on hook for liability while C has title to ppty. Held: H actual owner so ct rescinds transaction and imposes a CT H has the right to elect remedy bc of the gross abuse of fiduciary duty. Imposition of CT = equitable remedy Basis of Imposition of CT: Π still owns house, so by putting it in CT Π gets a preference in bankruptcy. Π jumps to the head of the line bc it is Πs ppty and not ∆s. o EX: Billfold stolen and thief run into courthouse and declares bankruptcy: I get bill fold back bc he stole it from me, it is ≠ part of his estate I didn’t take the risk the other creditor did, so I should jump to the front of the line Creditors did not expect ∆ to steal to repay them. o North American Coin: NAC bought and sold precious metals. Btw the time of talking about bankruptcy and declaring bankruptcy, all new customer money was put into a separate account. NAC thought that by doing this all money could be returned to the new customers if they went under. Held: ≠ give money back in a preference, rather the new customers are creditors like everyone else. To have a CT to
34
Heather Burgess 8/12/2008 get preference, and here there was no fraud, etc. so ≠ CT. Rather, this is a normal breach of K and as such Π is entitled to expectation damages and gets in line with other creditors Just bc you an identify ≠ mean automatic CT – need both components 1. fraud, etc. AND 2. Identifiable goods Constructive Trust Statutes: Can be prohibitory – in this case only when there is actual fraud can a CT be imposed. So even though set aside money ≠ use it Fraud victims have greater rights in insolvency o General Principle: Investors take knowing risks but fraud victims ≠ accept the risk of insolvency Fraud victims own their ppty that was taken wrongly, it is not part of the estate Can get CT for mistake – if you pay bill twice it is just a clerical error, not taking additional risk. Exception to Preference: Bona Fide Purchasers o Someone who buys for value w/o notice = BFP o BFP cuts the tracing chain – the BFP trumps all. o EX: Thief takes my cash and converts it into a bond and sells to Y – a BFP. Y trumps me as to the bonds bc Y is the rightful owner. But if I see the thief put the cash from Y into his pocket, I can get the cash bc it is my property and it has not been co-mingled Co-mingling: o Once the funds are mixed together in one bank account a different analysis is applied o Co-mingling Presumptions: Wrongdoer spends his own $ first Wrongdoer invest Πs moeny first o Lowest Intermediate Balance: Π can recover the lowest intermediate balance btw time of deposit and appointment of receivership Even if the account goes up after lowest point before receivership, Π can only recover lowest amount. Assumed that Πs money is already spent and ≠ getting it back even if more money comes in. o Several Bank Accounts: If co-mingled in several accounts look to total cash at bank and don’t need to trace to specific accounts In Re Erie Trust: Erie trustee took part of Πs $ wrongly and mixed that $ with other funds. Πs heirs were looking for his $. Held: Look at cash on had @ bank but ≠ have to trace $ to specific accounts. Π put in 26k and lowest amount btw that point and cts decision was 11K so the most Π can get back is that 11K EVEN if the amount goes up.
35
Heather Burgess 8/12/2008 BUT Π argued that $ was not really spent but invested, then can go after bonds/mortgage and retain the preference in bankruptcy at the 11k in cash and the remaining in bonds/mortgage. o Insolvency: CT ends @ point that $ lost If Π couldn’t argue that money went to investments, then Π would only have CT as to the 11K – the CT for the remaining money is gone. If ∆s acts were SO bad, might be able to get an equitable lien for the remaining Solvency: If Erie ≠ insolvent – Π probably would get all of the $ back Problems: See Problems in Book (682-83)– I have listed the principles discussed for each (10/23 pg 3) o 6-1: If ∆ ≠ commingle own money - ≠ touch it Π can trace her $ to apple stock and get preference bc she is the actual owner. Π can try to get at some of the remaining money owed her, but she must get in line with the other creditors – so probably only pennies on the dollar o 6-2: Election: Is it better for Π to argue money spent and gone OR that money used to invest and available. o 6-3: Π can split the election. Π can say that some of the money went to investment and some was spent. Try to get the best result possible. Re-Cap: 2 Methods for Use of Constructive Trusts: o 1. Directly trace the actual item or the amount gained from sale of that item; o 2. When D has co-mingled funds, utilize tracing fictions. 2. Tracing and 3 rd Parties Rule: An equitable interest holder in property of the decedent can prevail over third party who received that ppty by gift o Rogers v. Rogers: W1 was promised to be named as beneficiary in life insurance policy pursuant to a separation agreement. H let policy lapse and got a new policy. This time listed W2 as beneficiary. Upon H death, W1 challenged the proceeds going to W2. Held: ≠ strict tracing (bc lapse in time), but W2 ≠ entitled bc she was not BFP, rather a gratuitous donee. Direct Transfers o ≠ transfer ppty that belongs to bankrupt estate It can be given back to bankrupt estate bc insolvent person ≠ longer owned the ppty it gave away o ≠ transfer ppty if the intent is to get around creditors – Intent is key
36
Heather Burgess 8/12/2008 3. Equitable Liens Equitable lien can be an appropriate remedy when the property belongs to another, but improved by Π and it would be an unjust enrichment if that person got to keep everything. o Robinson v. Robinson: W and A build a home on W’s parents ppty. Anne’s money was used to build the house and lived off of W’s money. At divorce, the court valued the house at 71k minus 15k loan on the house = 56k Held: It would be unjust enrichment for W’s parents to keep the house, so A gets some value. Use an objective valuation – A gets ½ value =28k. A given an equitable lien against the house for 28k – could foreclose if she wanted the money. Generally: Equitable lien available when property belonging to owner is improved. o Π can chose bw CT or Equitable lien CT – value increases allows Π to capture added value EL – value decreases, keeps value at amount lost EL = pro rata share of CT Preference: Holder of equitable lien stands in line before all other creditors, like a CT 4. Miscellaneous: Mistaken Improver & Subrogation Mistaken Improver: o General Rule: Officious intermeddlers cannot recover for unrequested benefits conferred. o Old Rule: Mistaken improver can not recover for improvements to land unless the owner know of the mistake and did nothing to prevent the improver o New Rule: Owner must pay the good faith, mistaken improver the value of the improvements, BUT if the improver did it on purpose to be paid, he gets nothing. Remedy will be in equity so as not to burden the owner VI. Punitive Damages Rationale: Punish and Deter A. Common Law Governed by state law o Look to reasonable punitive damage awards by examining: 1. Degree of reprehensibility of ∆’s conduct 2. Amount of compensatory damages 3. Amount necessary to induce deterrent effect on ∆ and other similarly situated Goes to profitability of the wrongful affect Goes to ∆’s wealth o Punitives are appropriate when there is something like “actual intent” to cause the Π injury or disregard of a substantial probability that ∆’s conduct will result in Π’s injury
37
Heather Burgess 8/12/2008 Grimshaw v. Ford Motor Co.: Despite crash test failure, Ford departed from established industry procedure and put the fuel tank by the bumperwhich led to car explosions. Initially awarding full amount of Ford’s savings from the defective design at 125M, the court remitted to 3.5M bc Grimshaw was not the only one injured. o Ford factors: Ford tried to manipulate the system by using “after the fact” valuations AND could have fixed problem cheap and easy and didn’t o Stnd used in case: “conscious disregard of the probability that the actor’s conduct will result in injury to others B. Constitutional Supreme Court: Began to analyze punitive damages as implicating the constitution – specifically procedural and substantive due process 1991: Haslip: Established punitive damage awards can implicate procedural due process concerns. 1993: TXO: plurality – upheld award that punitives were close to the amount that would have caused if the plan went through. Seem to state substantive due process can be implicated 1994: Honda: Reverse= CL judge can set aside large verdicts 1996: BMW: paint damage to cars worth less than 3% of value – BMW sold w/o telling purchasers about the repainting of damage. Jury awarded 4000 compensatory and 4M in punitives which the AL SC reduced to 2M. SC reviewed the damage award and set out three guideposts to determine if an award was constitutional o Guideposts: 1. Degree of Reprehensibility 2. Ratio compensatory to punitives 3. Similar criminal penalty imposed for comparable civil misconduct o State’s Legitimate Interest: SC pointed out that punitive damages are allowed to protect a states legitimate interest, but the conduct in question could not include conduct that happened in other states. o HELD: Too excessive – reverse and remand 2003: State Farm v. Campbell o Next iteration of SC jurisprudence on punitive damages. Three important outcomes from the case: 1. Criminal and Civil Penalties: Nothing New 2. Ratio: Single digit ratio is probably OK. Each analysis is case specific. It must be a Rx and appropriate measure Might be 1 to 1 or on up 3. Reprehensibility: Ct said feds must make sure that UT only dealt with UT acts and not nationwide conduct. Scalia’s dissent: ≠ guidance, need principled application C. Contracts Punitive Damages are NOT available for breach of K o Even LD are ≠ punitive
38
Heather Burgess 8/12/2008 EXCEPTION: Can have punitive damages when there is a tort independent of a breach of K o Formosa v. Presido: F set out bid package to P who prepared bid based on representations in a bid package. P won bid. P went over the bid and limitations on time. P brought fraudulent inducement claim against F bc but for F’s misrepresentations P would not have been late and over… and F planned on screwing the contractor by under estimating. TC said fraud = breach K, so no punitives. Ct. App. HELD: Tort of fraudulent inducement was independent of breach of K. In this Texas case: once tort established then P can elect damages Different states do it differently. Nichols met 766-67 D. Other Punitive Remedies Statutory Remedies: Imposes minimum penalty o Anti-trust: Treble damages o FLSA: if willful, double damages o Truth & Lending Act: Payable to Gov’t: o Called ≠ punishment but just a civil remedy. Has normal civil procedure. Still overlaps with “excessive fines clause” applies. Ancillary Remedies A. Contempt 3 Kinds of Contempt o 1. Criminal Contempt Penalty Brought by Prosecutory Violation was willful Right to Jury Trial Double Jeopardy Vindicate and Punish for a Past Action: fixed fines or fixed jail time Collateral Bar Rule applies Barred from defense of bad injunction if you do not obey Must obey and appeal up o 2. Compensatory Civil Contempt Brought by Π, ≠ prosecutor Only for $ Compensate Π for the losses suffered bc ∆ violated the injunction Valuation problems – get injunction first place bc of IH Measure by amount of Π’s losses OR by ∆’s gains Standard: Clear and Convincing Evidence Not allowed in some states: ≠ allowed in CA, so have to bring suit for damages o 3. Coercive Civil Contempt
VII.
39
Heather Burgess 8/12/2008 Civil in nature Put ∆ in jail until ∆ complies ≠ punish bc not criminal ∆ can get out of court by complying Criminal or Coercive Civil: Int’l Union United Mine Workers v. Bagwell: An injunction preventing certain actions by striking people was violated and the court fined the striking people for violations and set up a fee schedule for future violations HELD: Sanctions for future violations is criminal in nature. Not compensatory bc not making Π whole and no evidence of losses to Π. Not coercive contempt bc the money should have only gone to the govt, but the ct split it bw Π and govt. Rule: If contempt is to vindicate authority of court and sentence/fines are punitive = criminal Rule: Remedial in purpose for benefit of Π = civil Coercive civil and criminal blend together Factors btw Coercive Civil and Criminal: Length of time in jail is set = criminal If ∆ can get out of jail = coercive civil If set, determinant fines = criminal If flexible fines = coercive civil CAVEAT: These are not absolutes, just guides to help figure out what is what Is there a substantial likelihood that continued incarceration will accomplish the purpose causing the person confined to comply with the order of confinement Anyanwu v. Anyanwu: H is put in jail until he gives his children back, but they are in Nigeria and he is unable to get to them. Tries to show evidence that can’t get the kids back. If he was left in jail even though he could do nothing to change the situation that would be more of a punishment. Must release when the coercion loses effect. Collateral Bar Rule: ∆ in criminal contempt proceeding cannot defend against contempt charges on the grounds the injunction was invalid. o Walter v. City of Birmingham: Civil rights march that was enjoined bc of failure to have a permit for the march. ∆s marched anyway and brought in on contempt charges. Ct said they did not go through the proper channels to challenge it. o HELD: You can’t violate an injunction and then defend it was invalid EXCEPTION: Two exceptions 1. Transparently invalid 2. Challenging the injunction w/in court met with delay and frustration
40
Heather Burgess 8/12/2008 These two exceptions are hard to determine when they apply Contempt Statutes: Can’t be held in contempt if you do the action you know is about to be enjoined, but there is no valid injunction in place yet. B. Execution Explanation: At the point you have the judgment and you want to collect the money. Judgment Proof Items: Things that are exempt from $ judgment (to ensure subsistence) o Principle residence o Retirement, etc. o California items protected 1200 interest in car House Equity interest in repairs to house 2500 equity interest in jewelry, heirlooms, etc Prosthetics and orthopedic stuff Personal property used in trade Social Security Public and Private retirement Welfare Cemetery Plot Financial aid Life insurance Proceeds from personal injury or wrongful death claims Homestead exemption: 100k equity in house What’s left to collect on? o Assets ≠ exempt o Garnish Wages Property: Collecting on Property o Process: Get a judgment Identify the assets File judgment with county clerk where ppty exists Get a judgment lien on ppty This puts you in line with all the other creditors Get sheriff to get ppty Proceeds: Figure out who is in line and pay those people Some $ for sheriff Pay those w/liens on ppty o Take before you: Bank, mortgage, mechanic liens, tax liens o Interveners: BFPs or Constructive Trust (someone else asserts it is really his ppty)
41
Heather Burgess 8/12/2008 Levying Lien: o Minority Rule: Get an execution, then have sheriff get the property by a constructive taking by asserting dominion and control over the property, with no need to take manual possession Credit Bureau v. Moninger: Sheriff took constructive possession over the truck by standing in front of it and announcing that he took possession o Majority Rule: You must take possession and exercise control This puts the public on notice that the lien is there and has been levied upon. Purpose: 1. control; 2. Notice o CA: Title stmt in filing system just like UCC Deep Pocket: If ∆ is employee acting in course and scope of employment and Π gets hurt – Π can go after employer Bankruptcy: Lawyers will declare bankruptcy for client to re-affirm old debts, but judgment gets discharged in bankruptcy (if it happened w/in 90 days before filing) o Exceptions: where bankruptcy cannot erase judgment Intentional Torts Drunk Driving Child Support C. Garnishment Explanation: Taking part of an individuals pay check/funds to satisfy a judgment against them Bank liable for $ bc they did not properly report the accounts the ∆ had with the bank o Dixie Nat’l Bank v. Chase: Π went to get garnishment of ∆s bank accounts and the bank only informed Π of one account. By the time the mistake was discovered ∆ had removed all of the money. Bank held responsible for the money not found Limitations on garnishment: Consumer Credit Protection Act o Limits garnishment to 25% of take home pay OR amount by which it exceeds 30 times the minimum hourly wage. Support for child or spouse can go higher. When garnishment ≠ work well: o If ≠ enough $ o Other debts precede garnishment. Keep in mind effects of bankruptcy as well Other Means to Collect in More Complicated Situations: o Post judgment discovery via written interrogatories to find additional assets. Need to ask just the right questions o Coercive Collection of $: Test: Individualized determination of what ∆ able to pay. If ∆ has money and does not pay, then held in contempt of court and sent to jail.
42
Heather Burgess 8/12/2008 Case where H owed W 27% of what he made. H did not pay and said it was bc SS was judgment proof. Ct looked to all assets, including those with new wife and ordered him to pay or else. Must cover bare living expenses of H and what is left over can be paid to W.
D. Attorneys Fees § 1983 Claims: o Attorney Fees: Large amount of attorneys fees compared to damages ok bc of the importance of protecting constitutional rights City of Riverside v. Rivera: 8 people got roughed up by police and sued. Won and wanted to recover attorneys fees as well. Damages = 33k and Fees = 245k. Majority of Ct said fine. o Settlement and Forfeiture: If an amount if offered to settle a claim and it is rejected, then the ∆ is ≠ liable for any fees after that point bc the ∆ made a good faith settlement offer. Lodestar Test: o (# of hours Rx expended) X (Rx hourly rate) Rx Rate: Market rates apply as a general rule Legal aid attorneys still get market rate, not legal aid rate BUT – Rx rate is commensurate w/ experience and expertise of attorney o Demonstrated by submitting affidavits Rx Hours: Tied to level of experience Contemporaneous time records: must keep and must be detailed Fee Shifting: o American Rule: Everyone pays own way o Fee Shifting Statues: Give incentive to bring suit Types: § 1988 cts read as 1 way fee shifting statute in favor of Π. For ∆ (the gov’t) it is the cost of doing business. (c) can also get experts fees Civil Rights Statutes Anti trust Statutes Caveats: Most statutes do not allow attorneys fees when Π’s claim is frivolous Family Law: Either spouse pays attorneys fees of other party so in roughly equivalent position (esp. in CA) o Equitable: Common Fund A pot of money for a group of people. Attorney representing the class representative can get fees out of that money o Private Attorney General: If the government doesn’t sue, you get to sue.
43
Heather Burgess 8/12/2008 o Contractual: Can K for fee shifting. In CA, one way fee shifting agreements are read as two way o Bad Faith: When opponent filing motions in bad faith, etc. then you can get attorneys fees o Contempt of Court: can get attorneys fees o Collateral Litigation: If ∆’s wrongful act makes attorneys fees in other litigation can get that money. o FRCP 54(d): costs can be given unless court decides otherwise Fees: attorneys fees v. Costs: filing, etc. Costs are awarded to prevailing party as a matter of course E. Other Things Quickly Covered Attachment: Prejudgment Remedy o Execution before final judgment 1. Heightened standard of you wining 2. Assets going to dissipate Prevents assets from going away and increases priority Freeze Order: o Injunction telling ∆ ≠ to get rid of assets Receivership: Pre or Post judgment o A person to run the ongoing concern while deciding who owns it. Ne Exeat: o Order for person to stay w/in jx of ct. Generally needs to be coupled w/ something else. VIII. Remedial Defenses Affirmative Defenses: Must be plead and proved – then ∆ gets out of liability even if Π can show ∆’s act was wrongful A. Unclean Hands/ In Pari Delicto o Difference: Unclean hands = equity In pari delicto = at equal fault and defense at law o Π has done bad things as well, so shouldn’t be able to go after ∆ Pinter v. Dahl: ∆ in oil and gas K with Π who is supposed to recruit others. Π ≠ get what was promised and wanted rescission based on failure to register with SEC. ∆ said Π at equal fault for brining these people in and knew ist was not registered and only became an issue after Π felt screwed. Ct said not enough facts to determine in pari delicto so remands. o Two Steps: 1. Π must be substantially equally at fault (comparative to ∆) 2. Other public policy reasons must support application of the defense B. Unconscionability o Two Step Process: 1. Adhesion K: Have to find the stronger party imposed a K on the weaker party; THEN 2. Two additional factors must be present:
44
Heather Burgess 8/12/2008 1) Procedural Unconc: Unfair surprise - Violates principle of Π’s Rx expectations o Ex: surprised by terms; beyond what you reasonably expect terms to be 2) Substantive Unconc: Unfair bargaining; too 1 sided Must have both procedural and substantive in some amount o Mandatory Arbitration clauses Minority Position: Mandatory arbitration clauses are unconc. Armendariz v. Foundation Health Psych.: Case were Π’s sued bc their employment K had a mandatory arbitration clause, which the Πs assert was unconc. ∆ wanted specific performance of the K. HELD: Clause is unconc. bc of 1) the lack of mutuality in the arbitration provision; and 2) also a lack of a rx business justification for it. Note: stronger case here if all jobs in the industry had required arbitration clauses bc then the Πs would have no choice. Majority Position: Favor arbitration clauses Federal Arbitration Act: Presumption that arbitration clauses are enforceable. Applied to the states by the preemption doctrine. SC enforces this all the time States get around the act by using state K law – looking first to see if unconscionable under K principles, rather than looking to favoring or disfavoring the clauses. o Common Law: Unconc. was an equitable defense NOW – UCC 2-203: deal with sale of goods, allows for legal and equitable remedies ≠ just specific performance. Unconc. was grounds for denying specific performance This has equity have some leeway in law C. Estoppel/Fraud Fraud: o Requirements: 1. Intentional Conduct 2. Reliance 3. Damages o Smith v. Boyle: sold stock and said price going up, but it wasn’t. Estoppel: o Requirements: 1. Act of some kind: misleading act by silence, conduct, etc. 2. Actual and Rx reliance on that act 3. Harm (injury) 4. Actors knowledge of reliance by other o Geddes v. Mill Creek CC: ∆ planned golf course w/ consultation and many accommodations to Π. Π sues because unhappy with all the golf balls in their land. ∆ defends with estoppel. o Affirmative Defense: Must be 1) plead at the right time; and 2) raise and prove it
45
Heather Burgess 8/12/2008 o Concealing Facts: Estoppel applies to this as well. Arguably in Geddes the Π concealed the fact they wouldn’t be happy o Reliance: Intentional Conduct (BIG factor) Waiver: don’t need reliance for a waiver – reliance is presumed Wavier = Intentional relinquishment of known rights More reliance by ∆, the less intentional conduct needed by Π for estoppel o Government: Generally government ≠ be estopped. Gov’t ≠ be estopped in $ damages cases Ex: Bureaucrat tells you something, later ≠ estop the govt based on the bureaucrats assurances. Constitutional Issue: US ≠ be bound by govt official bc the power of the purse is only controlled by Congress D. Waiver Definition: Intentional relinquishment of known rights US Fidelity & Guaranty v. Bimco Iron and Metal Corp: Π burglarized and ∆, the insurance co, said that only going to pay for door and not missing wiring bc the policy said damage to the building. ∆ defended against Πs suit by saying the time to bring the cliam had passed. However, after the time passed ∆’s adjuster told Π that they would pay for the door. HELD: That representation amounted to a waiver of the SOL in the policy. o Questions: How intentional was the waiver – did the insurance adjuster really mean to; How much reliance was there based on that representation? o Interplay btw factors: Known right asserted Known right to be given up How central to K How intentional must the relinquishment be Government: Gov’t can waive certain things o Waiver only effective by a person with authority to waive E. Limitations 1. Doctrine of Laches (missed class notes) Definition: Doctrine of Laches bars relief to those who delay assertion of their claims for an unrx time. o NAACP v. NAACP Legal Defense Fund: trademark infringement claim barred by laches bc continued on for so long w/o action and then tried to assert claim. Requirements: o 1. A substantial delay by a Π prior to filing suit; o 2. Π’s awareness of the claim; o 3. A reliance interest resulting from the ∆’s continued action causing prejudice. Prejudice = detrimental reliance, losing evidence, claiming ppty after ∆ bore burden of risk to develop (1000-01).
46
Heather Burgess 8/12/2008 Possible actions can negate the doctrine: Ex: ongoing negotiation or conscious fraud by ∆ Estoppel v. Laches: o Laches: Emphasis on delay o Estoppel: Emphasis on misleading o Wavier is also closely related Continuing Harm: Election cases o If you know something is wrong with election ahead of time and you sue afterwards – even if w/in SOL – won’t get reparative injunction o Harm was going to happen and you did not prevent it SOL and Laches Interplay: 1002-03
2. Discovery Rule Discovery Rule: When you know or should have known through due diligence starts the clock running o O’Brien v. Eli Lilly: Π alleges did not know she was exposed to DES until a certain time. Court said that by reading up on DES and her suspicions about being exposed, and knowledge of what happened made the SOL start at that point. When you know you have a claim, not when you have evidence to prove it. Claim barred. Object standard of rx to the subjective Πs knowledge 3. Fraudulent Concealment: Equitable Estoppel to SOL (missed notes here) Fraudulent Concealment: o Knaysi v. AH Robins: Dalkon’s shield litigation where it was asserted that fraudulent concealment caused her babies death. 11 th Cir. said that it is appropriate when the 1) ∆ has control and superior, or exclusive knowledge of facts necessary for Π to make out a c/a; 2) ∆ by affirmative misstatements conceals these essential facts from the Π. Court reversed summary judgment bc said not appropriate in equitable estoppel case to bar SOL bc issues for trier of fact. Dissent (Tjoflat) disagrees saying that Π did not meet burden in pleading that actual misrep and justified reliance. o Estoppel to assert limitations: if you tell someone they have 2 years to bring a claim (i.e. an employer telling an employee), but it is only really 1 year – you are bound by the 2 year limitation
47
Heather Burgess 8/12/2008 IX. Equity v. Law (Why does it matter: Choice of Remedy and Procedure) Right to a Jury Trial: o Need a legal c/a to have a right to a jury trial Chauffers Local No 391 v. Terry: Π suing ∆ for a dispute about seniority rules in union. Π sues under breach of fiduciary duty. The Supreme Court tries to figure out if this is a legal or equitable remedy. First try to make an analogy to malpractice, but says not close enough. Finds itself in equipoise – bw K and equitable. The court then looks to the remedy sought, $ damages and says that is what makes it a legal c/a. Dissent disagrees – says just bc the remedy is money damages, does not change the legal or equitable character of the c/a. o Exceptions where $ damages ≠ legal: Restitutionary $ damages (disgorgement, etc) o Federal Court Preference = Jury Trial o Mix Claims: Legal claim joined with equitable claim = JT Legal claim brought in equity = JT Legal element in equitable claim = most likely JT Issue in specific performance o Special Tribunals: Congress can send things to special tribunals (admin agencies, bankruptcy, etc.)
SUBJECT MATTER CONTRACTS LEGAL (Jury Trial) EQUITABLE (No Jury Trial)
Money Damages Specific Performance Rescission Reformation TORTS Money Damages Injunction PERSONAL PROPERTY Money Damages (Trover) Possession (Replevin) REAL PROPERTY Money Damages Possession (Ejectment)
X X X X
X X
X X
X X
RESTITUTION (Can be stand-alone or used with contract law) Money Damages (Quasi Contract) Constructive Trust Equitable Lien Profits from Fraud Disgorgement (Improper Profits) Restitution with Rescission X X X X X X
48