Compensatory Damages by aiowmnyv

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									Equity & Remedies – Outline

Compensatory Damages
o The principle of damages is to restore the injured party, as nearly as possible, to the position he would have been in had it not been for the wrong of the other party. In arriving at a fair market value of destroyed animals, the court should considered evidence of the availability of like animals, together with all other elements which go to make up market value. If the unlawful taking of the animals was the proximate cause of the herd reductions, the measure of damages would be the loss of profits occasioned thereby. Loss of use damages limited to the time in which a prudent person would replace the destroyed horses and burros. Pain & suffering is a personal and individual matter, not a common injury, and must be so treated.  Can be awarded without physical injury, only in extreme circumstances. No right to jury trial in tort suits against US. One satisfaction: П may be entitled to judgment on multiple legal theories and against multiple Δs, but he is entitled to one recovery for each item of damata. If П collects a judgment from one Δ, he cannot collect it again. Pro-tanto Rule: dollar-for-dollar credit.  If П settles with one Δ before trial, nonsettling Δs are entitled to some form of credit against any later judgment for the same damage.  Most JXs now base the credit not on the amount of the settlement, but on the settling Δ’s share of liability. GR: Just compensation is to be measured by FMV of the property at the time of the taking. o Exceptions: o Applicable when property seldom, if ever, sold on open market.  FMV not ascertainable, or  FMV would result in manifest injustice to owner or the public FMV constitutes "just compensation" for those private citizens who must replace their condemned property with more expensive substitutes.

Examples / Notes
Ex (Hatahley): The Navajo’s trespassed on public land where their livestock grazed. Without notice and as required by law, the gov tortitiously rounded up the П’s horses and sent them to a glue factory! П should not be made to suffer because of wrongdoing and if we restore П to his rightful position, he will not suffer. o To do less, would leave the harm unremedied o To do more, would give П a windfall. Economist view: o The law should generally encourage profitable activity, even activity that harms others, so long as law violators pay the damage they cause. o The function of compensatory damages is to force law violators to take account of the harm they inflict. o If the damages they must pay < the harm they inflict, potential Δs will violate the law even when is inefficient to do so.

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Ex: damage = $2.1Mil. 30% apportioned to settling Δ. 70% to non-settling. o Non-settling liable for 2.1*70% = $1.47 Mil. o Under pro-tanto, Non settling Δ liable for $2.1 – amount of settlement whether $1 or $1,000,000.

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Ex (50 acres): The gov condemned 50 acres with FMV of $225K that was used as a landfill. The city acquired 113.7-acre site and developed into a larger and better facility at a cost of about $724K. $225 is the right measure. When a local gov is obligated to obtain a substitute facility in order to provide an essential service, and the market value deviates significantly from the amount necessary to make the locality whole, the FMV measure is inappropriate under Just compensation.

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Equity & Remedies – Outline

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If the replacement facility is more costly than the condemned facility, it presumably is more valuable, and any increase in the quality of the facility may be as readily characterized as a "windfall" as the award of cash proceeds for a substitute facility that is never built. “cost of substitute facility” is not the measure of damage in takings cases when the market value of the condemned property is ascertainable. Typical Damages measures:  Value or property taken or destroyed  Proved by price quotations in an active market for similar property.  If unique or no active market, then expert witnesses  May award cost of replacing component parts of a larger whole. Sometimes value may exceed replacement cost. Where one who has arrived at a bargain of unique value to him is deprived of it by the fault of another, and where he can convince the court that its value to him was real and not speculative or later devised, he should recover for it.  Diff b/w value before damage and after damage  Diff b/w K price and market value of property promised GR: Market Value and not value to П.  Value to owner excludes any fanciful or sentimental value  But values verifiable in the market are not excluded sentimental values. Under takings law, incidental and consequential not compensated. In torts, when value is the measure, courts focus on the value of what П lost, not on cost of repair or replacement. П is entitled to be made whole.  Δ is entitled that П be made whole in least expensive way.  Cost of repair or value whichever is less. Capitalized Value: what sum of $ must be invested to produce a stream of income equal to the income that would have been produced by the damaged property over its remaining life? Book value is evidence of value – but is not controlling.  

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If don’t have to abandon whole, then cost of replacement of component part. o Ex: barge sunken; don’t have to abandon barge line. o Ex: boiler is essential to HVAC of a building. Ex: Mfgs, bldrs, etc expect to make profits. So, value ≠ replacement cost; value = FMV. Ex: Bought used barge for $30K. cost to replace = $232K. Uncontradicted expected testimony of value of barge and not other barges are available to replace. Replacement cost awarded.

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In some courts, even nonmarket values are recoverable if sentimental value is the only substantial value of the thing lost. Ex: Gov takes land with consequence that you loose your business. Gov compensates for land and bldg but not for the business. Ex (Helen B. Moran): П depreciated barge had remaining value = $16K – cost of repair due to gov negligence = $43K. Doesn’t make sense to spend $43K to repair barge worth $16K. o Court: book (depreciated) value is evidence of value but it is not controlling. Totaled car = repair cost > value of car.

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GR for measuring property damage is diminution in market value. o Exception: "special purpose property" o No generally active market from which the diminution in market value may be determined  The GR produces injustice. o Ex: property of nonprofit, charitable, or religious organizations, there will. o Methods used:  Cost to reproduce minus depreciation  Replacement or restoration costs o Reasonableness standard:  expenditures to restore or replace  replacement/reconstruction reasonable in light of the damage inflicted  depreciated-cost-of-reconstruction o o An injured party is not required to perform repairs in order to recover for diminution in market value of its property. Because many crops, in their immature state, have no market value, damages are computed at the time of harvest, when a market value first exists. o Speculating is not chargeable to the Δ. o Whatever the market value was at the time of harvest is the extent of П’s damage. o Costs of producing and marketing a crop should be deducted where it appears that costs were reduced by the lower yield. o Δ entitled to an offset for any expenses П saved.  But not if П did all the work himself. Value property at the time of loss. Fluctuating Values approaches: o Value loss at the time of the wrong. o Highest value b/w time of the wrong and time of trial. o (NY) Highest value b/w time П learned of loss and a reasonable time could’ve replaced the securities. WIP: whenever damages depend on the value of wip, damages based on costs already expended + a profit = damages based on finished value – cost of completion. Under UCC, the seller of goods rejected may recover his lost profits and incidental damages caused by the breach o Necessary to put П in the position it would have been in had the K been performed.

Ex (Trinity): Church was damaged by nearby construction. Church sought damages for the structural harm attributable to construction. o Church is a special purpose property.

Ex (Young): Decatur’s negligently applied insecticide resulted in 31 bushels per acre instead of the normal 50 bushels. Young was awarded damages based on the diminution in crop output and the price of the crop at the end of next year’s planting season. He usually held the beans until after the planting period the following year. Damage is at time of harvest.

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Ex (Bunn): award $500 for unproved but presumed inconvenience of finding another apt. Ex (Convoy): П recovered for the time its salaried EEs lost due to a defective computer.

This works when values are stable. o But produces arbitrary results when values are subject to rapid change. o Ex: investment securities.

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Reliance & Expectancy As measures of the Rightful Position
o Ex (Neri): Neri ordered a boat from Retail Marine and put a deposit of $4,250. While the boat was on the way to Neri’s from the mfg, he rescinded the K. Until Retail Marine re-sold it 4 months later for the same price and making the same profit of $2,579 it would’ve from Neri, it incurred $674 for storage, upkeep, finance charges and insurances.
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Compensating Reliance Interest: position П would’ve occupied if she had never made the K Compensating Expectancy Interest: position П would’ve occupied if the K has been performed. Restitution: Restoring Δ to position Δ would’ve occupied before K. Expectancy or Reliance cases: o Gross Expectation Interest: Reimbursement for what has been done + profit.  Essential Reliance: expenses necessary to perform  Incidental Reliance: All other reliance. o Loss of opportunity to enter similar Ks with other persons. o Breach of K results in loss of promised value + direct harm

≈ Out-of-pocket losses. Clear examples of reliance recoveries are rare; they consist almost entirely of cases where neither side could prove the expectancy. ≡ Benefit of the bargain. Gives П the option of focusing on Δ’s position – sometimes quite attractive for П. Trend seems to be that reliance interests are protected but expectations are not. П took acts essential to perf; Δ breaks or repudiates.

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for breach of warranty, the correct measure of damage is the difference between the FMV of the goods accepted and the value they would have had if they had been as warranted. K price is not necessarily the same as market price. What PPP might have gained is not the question. o But what he had lost by being deceived into the purchase. The proper measure of damages for fraudulent misrep in the sale of stock is the actual loss suffered due to the deception, not the represented value of the stock. o DDD liable for damages as naturally and proximately resulted from the fraud. o $ PPP paid + interest + any other outlay legitimately attributable to DDD’s fraudulent conduct. The conventional wisdom is that expectancy damages are recoverable in K and not in tort. Rest 2nd if Torts: o victim of fraud may recover his reliance damages: diff b/w what he paid and the value of what he received + any incidental reliance expenses.  If fraudulent misrep in a business transaction, PPP is entitled to the benefit of the K if the damages are proved with reasonable certainty. Lost future wages are recovered in Torts and are expectancy.

Ex: Dr. makes 1 appointment deprives himself of making similar appointment with another. Ex: Farmer bys cow warranteed to be free of disease but wasn’t killing other cows. Ex (Chatlos):Chartlos, and after long negotiations, K’ed with NCR for a system at a K price of $46K. When the system was delivered it did not meet its K specifications. o Chatlos did not order, nor was it promised, merely a specified model, but an NCR system with specified capabilities. Ex (Bolles): Smith fraudulently represented stock and sold Bolles $6K worth of it at $1.5/share. Bolles said that the stock was worthless but would’ve had a value of $10/share if it were as Smith represented. Bolles was awarded a total of $40K in his fraudulent misrep case (he did not sue for breach of K). Wrong measure – should be what PPP lost. Measure Of Damages For Fraudulent Misrepresentation (1) The recipient of a fraudulent misrepresentation is entitled to recover as damages in an action of deceit against the maker the pecuniary loss to him of which the misrepresentation is a legal cause, including a. the difference between the value of what he has received in the transaction and its purchase price or other value given for it; and b. Pecuniary loss suffered otherwise as a consequence of the recipient's reliance upon the misrepresentation. (2) The recipient of a fraudulent misrepresentation in a business transaction is also o entitled to recover additional damages sufficient to give him the benefit of his contract with the maker, o if these damages are proved with reasonable certainty.

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Consequential Damages
o o General damages for breach of covenant of quiet enjoyment of a lease = K price – rental value for unexpired term. Tenant may recover as special damages (consequential damages) such extra expense and damage, if any, as are the natural and proximate result of the breach. UCC § 1-106: Remedies to be Liberally Administered. o The remedies provided by this Act shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed o but neither consequential or special nor penal damages may be had except as specifically provided in this Act or by other rule of law Consequential damages almost never awarded in eminent domain. Traditional view: may recover as damages o those that would naturally arise from the breach, or o those that might reasonably be supposed to have been contemplated by the parties when the K was made. Ls frequently talk about special damages and general damages. o Ks usually disclaim consequential/special damages. General Damages: those that necessarily result from the violations o Damages the law implies or presumes. o Value of what П lost from the initial impact of Δ’s wrong o Market-measured damages Special Damages: Proximately result. o Foreseeability and natural consequences. o directly related to the injury-causing incident, even though they may not have been intended o Special Damages o must be specially pleaded and proven in each situation o general requirements of certainty and foreseeability o obligation to mitigate damages Actual Damages = out-of-pocket losses o Excludes all liability for emotional distress or loss of reputation. UCC § 2-712(2): buyer may recover o the diff b/w the cost of cover and the K price
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Ex (Buck): trial court held that П could not recover consequential damages for breach of quiet enjoyment of lease. o П’s rent elsewhere may be admitted as the primary evidence of market value, or even as the general measure of damages. Historic Hostility toward Consequentials because they are more speculative, less certain, more remote, and more likely to have been avoidable if the П had been more diligent. Doctrines of: certainty, remoteness, and avoidable consequences.

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General (initial/non-consequential): o Diff b/w K price and market price o Diff b/w the value of the goods delivered and as warranted. o Interest on detained $ o Value of property destroyed or not delivered. o Loss of value b/c property was damaged or defective. Special/Consequential: all others!

Consequentials raise issues of causation, Foreseeability, remoteness, and the likel.

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o any incidental or consequential damages. UCC 2-713(1): buyer may recover o Diff b/w market price and K price + o Any incidental and consequential damages. UCC § 2-715. Buyer's Incidental and Consequential Damages. o (1) Incidental damages resulting from the seller's breach include expenses reasonably incurred in  inspection, receipt, transportation and care and custody of goods rightfully rejected,  any commercially reasonable charges, expenses or commissions in connection with effecting cover  and any other reasonable expense incident to the delay or other breach. o (2) Consequential damages resulting from the seller's breach include  (a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and  which could not reasonably be prevented by cover or otherwise; and  (b) injury to person or property proximately resulting from any breach of warranty. UCC § 2-710: Seller’s Incidental Damages o Any commercially reasonable charges, expenses or commissions incurred  in stopping delivery, in the transportation, care and custody of goods after the buyer’s breach,  in connection with return or resale of goods  or otherwise resulting from the breach. Damage for Late payments: Damages for delay in the payment of money owing upon K are provided for in the allowance of interest, o in the nature of damages for withholding $ that is due. o There is some erosion of this rule where causation is clear and the amount is certain. o Exceptions  (Majority) Allow consequential damages for breach of a K to loan $ when sufficiently foreseeable.  Insusrers refuse to settle in bad faith.  Can recover: Cosequentials, emotional distress, punitive. In a cause involving a tortious interference with an existing contract, П is not

Cover = to buy replacement goods elsewhere.

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Conventional wisdom: sellers cannot recover consequentials o But seller’s incidentals are defined more broadly than buyer’s.

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Ex (Meinrath): П sought consequential damages resulting from late payment of bonuses would caused П’s other, unrelated businesses to fail. No liability even though Δ knew of П’s need for the $ and potentially intentionally withheld payment. Ex: bank withheld $.Court awarded higher interest П would’ve earned by re-investing in an otherwise identical saving certificate.

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П may recover consequentials, emotional distress, and punitive damages.
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limited to the damages recoverable in a K action, but instead is entitled to the damages allowable under the more liberal rules recognized in tort actions. o Law recognizes that П may not be able to prove its damages to a certainty. o This uncertainty is tolerated when difficulty in calculating damages is attributable to Δ’s conduct. Rest 2nd Torts: for interference with a K, Δ is liable for: o Pecuniary loss of the benefit of K o Consequential losses proximately caused. П is entitled to recover for consequences of breach that were within the contemplation of the parties when they made the K.

Ex: insurer denied coverage in bad faith. Car repossessed and sold for < amount owing.

Ex (Pennzoil): Texaco knowingly interfered with the deal with Getty Oil depriving Pennzoil of access to 1.008 bil of barrels of oil at $3.4/barrel when the market price was $10.87 for total damages in the amount of $7.53Bil.

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Ex: Hadley v. Baxendale.

Limits on Basic Principle
The primary tools for restricting recovery of consequential damages: a. Contractual limitations on remedies b. Rules about avoidable consequences, scope of liability, uncertainty. Power to Specify Remedy Under UCC, consequential losses constitute a recoverable item of damages in the event of a breach by the seller. o But the code allows their express limitation or exclusion o Code requires at least minimum adequate remedies be available. o A clause that modifies or limits remedies in an unconscionable manner is subject to deletion. o Where an apparently fair and reasonable clause because of the circumstances fails in its purpose or operates to deprive either party of the substantial value of bargain, it must give way to the general remedy provisions of the article. UCC § 2-714(2): Formula to compute Buyer’s damage for breach of warranty: o Diff b/w value of the goods accepted and the value they would have had if they had been as warranted. UCC § 2-714(3): Buyer’s right to incidental damages. UCC § 2-608: Buyer’s right to revoke acceptance of goods w/in a reasonable time after discovery of a nonconformity that substantially impairs the value of the goods to the buyer.
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Ex (Kearney & Treckre): Master bought a machine from Kearny. The machine was
advertised to require “amazingly low maintenance.” But the machine malfunctioned frequently and was inoperable 25-50% of the time resulting in lost profits. o But there was evidence of deficient maintenance or operation on the part of Master’s EEs. The purchase price was $167K and the K: o Warranted that the machine was free from defects for the shorter of 12 months or 4000 hours of operation. o Excluded all and any incidental or consequential damages o Seller’s max liability was to be limited to repair or replacement or defective parts or return of the machine.

Equity & Remedies – Outline

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When revokes, buyer may also seek damages for breach.

(Majority) The failure of the limited remedy necessarily causes the invalidation of the exclusion of the consequential damages. (Minority) an exclusion of consequential damages is independent of a limited warranty of repair or replacement o If the warranty fails to fulfill its purpose, the validity of the consequential damages exclusion depends upon the specific circumstances and the probable intention of the parties. (CA: In between) Whether the disclaimer of consequentials survives depends on the extent to which the breach is “total and fundamental.” o Repair-and-replace remedy fails its essential purpose when o seller is unable or unwilling to repair or replace o in a reasonable time. UCC implies warranties of merchantability and fitness of purpose o Requires that disclaimer of these be conspicuous. UCC § 2-719(3): unconscionable to exclude liability for personal injury caused by consumer goods.

Cases tend to emphasize parties’ equal bargaining power.

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Liquidated Damages o Liquidated damages provisions are valid so long as the amount agreed to by the parties prior to the breach is reasonable. o Rest 2nd K: Liquidated Damages o Damages for beach may be liquidated o Only at amount that is reasonable  In light of the anticipated or actual loss caused by breach o Unreasonably large liquidated damages are un-enforceable on PP as a penalty. Some allocations of risk in a K are just unacceptable. When a breach causes no damage, the liquidated damage clause is unenforceable. Proof of liability is all that is required to entitle the injured party to liquidated damages. o But does not create the right to seek a greater measure of damages than the amount bargained for.

Even a remedy agreed to be exclusive is not exclusive if o it is unconscionable. o It fails of its essential purpose o It is a liquidated damage that is not a reasonable estimate of damage. Ex (Ashcraft&Gerel): Coady (managing attorney of Ashcraft & Gerel’s Boston office

and the only expert in the field of practice) was fired for deliberate acts of misconduct including attempts to steal clients and sabotage the firm’s DB. The firm sued him for breach of K and asked that he pay the K’s liquidated damages (of $400K) as this was a substantial breach. Non Ex: Lease prohibited tenants from keeping motorcycles – liquidated damage of $50/day. o This bore no relation to he LL’s damage – clause void as a penalty.

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Ex: Buyer breached K to buy house. Seller sold later at + $2500. LD of $6K not
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UCC 2-719(1): Kual Modification or Limitation of Remedy. (1) Subject to the provisions of subsections (2) and (3) of this Section and of the preceding section on liquidation and limitation of damages, (a) the agreement may provide for remedies in addition to or in substitution for those provided in this Article and may limit or alter the measure of damages recoverable under this Article, as by limiting the buyer's remedies to return of the goods and repayment of the price or to repair and replacement of nonconforming goods or parts; and (b) resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy. A liquidated damages clause does not limit a remedy but instead provides an agreed upon measure of damages. A liquidated damages clause which provides an agreed upon formula for calculating the amount of money damages owed in the event of nonperformance is not a limitation on a remedy. o Liquidation or limitation of damages is governed by § 2-718. o Limitations of remedies fall under § 2-719. o Any restrictions on the right to liquidate damages by agreement is contained in § 2-718 and nowhere else. Liquidated damages clause provides the exclusive remedy. o Was the clause intended to deal with the kind of breach that actually occurred? In the over-liquidated damage clause, we ask if the clause is a penalty? In the under-liquidated damage clause, we ask whether it is exclusive? o Fire and burglar alarms liquidated damages: nominal OK. o Some cases: a liquidated damages clause does not bar spec perf.

enforceable.

Ex (NI-Gas): NI-Gas promised to buy 56 mill brl of naphtha from ECI to convert to natural gas. But NI breached the K when it became cheaper to buy natural gas from somewhere else. Instead of liquidated damages, ECI sought actual damages in the amount of $305Mil = the difference b/w the K price and the market price of naphtha + consequential damages. (Liquidated Damages clause provided for 1 cent/gal = $13Mil)

Ex: $50 is a reasonable estimate of the loss if a burglar alarm fails to function.

Avoidable Consequences, Offsetting Benefits, Collateral Source
o UCC § 2-715: a buyer can recover consequential damages he could not reasonably prevent by cover or otherwise.
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UCC § 2-712(1): Cover o after a breach, the buyer may cover by making in good faith and without unreasonable delay any reasonable purchase of or K to purchase goods in substitution for those due from the seller. Attempt to cover is not absolute – it is subject to the circs. o The test of proper cover is o whether at the time and place o the buyer acted in good faith and in a reasonable manner, o It is immaterial that hindsight may later prove that the method of cover used is not the cheapest or most effective. Duty to show that damages could’ve been avoided is on Δ. The person whose wrong forced the choice can not complain that one rather than the other was chosen. There are situations in which continuing with the performance of an unsatisfactory contractor will avoid losses which might be experienced by engaging others to complete the project. Where both a П and a Δ have equal opportunity to reduce the damages by the same act and it is equally reasonable to expect the defendant to minimize damages, the defendant is in no position to contend that the plaintiff failed to mitigate. Avoidable consequences are an affirmative defense – BoP on Δ. Need not take unreasonable steps to cover/avoid consequences: o Employment: does not have work outside field; does not have to take inferior job; does not have to take job 243 miles away (but have to take one 60 miles away) o Personal Injury: П refused surgery with 92% success. o Inability to mitigate: Financial inability to mitigate. o П does not have to avoid loss by submitting to Δ’s illegitimate demands. o П is not required to surrender his claim to Δ. o Refusal to settle is not failure to mitigate. o Harassment cases (pg 100 – note 10) Offsetting benefits rule: o П’s damages are reduced by some offsetting benefit that resulted from the wrong. o Rest 2nd Torts: takes account only of benefits to the interest of the П that was harmed. Remarriage (wrongful death): No state denies recovery to Пs who do not remarry or make reasonable efforts to do so. Ex: П sued for defamation and says he lost wages. Δ can show that П collected lecture fees.
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Need not take steps that are unreasonable. “Δ is not liable for avoidable consequences of his wrongdoing” related to contributory and comparative negligence.

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Ex (Groves): Groves, a subcontractor on a Bridge project, contracted with Warner to provide ready –mixed concrete. Warner, and despite its many assurances that it will improve, frequently failed to make deliveries in compliance with Grove’s instructions causing Groves extensive losses and overtime labor expenses. Groves considered securing other sources as early as 1971 but found no alternatives. Another supplier, Trap Rock, and which Warner had previously used, was not certified until July 12, 1972.

Objectively unreasonable; but subjectively reasonable for П to refuse surgery. Ex: car impounded; П did not have $ to take it out.

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Most Пs conceal fact of remarriage; or jury instructed to ignore

Collateral Source Rule o If an injured party receives some compensation for his injuries from a source wholly independent of the tortfeasor, such payment should not be deducted from the damages which the П would otherwise collect from the tortfeasor. o o Collateral source rule applies to suits against governmental entities. Can be thought of as an exception to offsetting benefits rule.

Non Ex: П claimed emotional distress – Δ cannot show fees from lectures. Non Ex: if a victim of FI alleges only pain and humiliation, Δ can not show П got $ for story. OH: evidence of remarriage admissible – Jury can do with it whatever they want. ILL: remarriage in wrongful death is admissible to offset loss of consortium but not fin support Ex (Helfend): Helfend was injured in a bus-auto collision and was awarded $16,400 against the Δ even though he had collected medical expenses from his insurance. Re “wholly independent” – many states do not follow this rule. o Application of the rule depends less upon source than upon character of the benefits received.

Scope of Liability
o GR: Cannot recover for indirect econ harm. o Minority Exceptions: o Loss of business opportunities due to pollution of steams adjoining П’s property. Purpose of Tort law is to maximize social utility: o where the costs of accidents exceeds the costs of preventing them, the law will impose liability. A П who complained of harm flowing merely from the misfortune visited upon a 3rd person by Δ’s acts stands at too remote a distance to recover. When the number of Пs is almost infinite, it make sense to limit liability even when damages are foreseeable. Δ should pay once and no more for damages inflicted. Recovery may be obtained for damage proximately caused by the Δ’s negeligence. Rest 3rd Torts: Negligence Δs are liable only for those harms whose risks made the actor’s conduct tortious. Econ harm Rule: a negligence П who suffers no physical impact to person/property cannot recover for other losses – so-called economic harm. o Rule prevents П from evading limitation of liability in K o Does not apply to claims of violation of professional duty. Hadley: Consequential damages will not be awarded unless Δ was put on notice of the special circs giving rise to them. Ex: A hands a gun to child. Child shoots B, A liable. Gun falls and hurts B’s foot, A not liable. If П did not suffer physical impact, she cannot recover, no matter how foreseeable the harm or how direct the causation. Ex: П bought truck that was defective. П sued for econ damages. Nope: limited to K damage
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Ex (Pruitt): Allied dumped chemicals in the James river causing economic injuries to different categories of Пs who harvest the River and its Bay. Пs claimed lost profits resulting from decline in demand for seafood from the affected areas. (These damages are indirect damages)

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A Δ who negligently injures a 3rd person entitled to life-care medical services by П is liable to 3rd party but not to П.

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K liability is strict. Breach does not connote wrongdoing. o Could be caused by circs beyond Δ’s control (strike, fire, etc). The costs of untoward consequences of a course of dealings should be borne by that party who was able to avert the consequences at least cost and failed to do so. Affinity between Hadley’s rule and avoidable consequences. Only foreseeable damages are recoverable in breach of K. o General Foreseeability, present in virtually every case, does not justify an award of consequentials. o We need specific Foreseeability. Foreseeable damages of K ≡ limiting Δ’s liability to foreseeable consequences under tort law. The amount of care that a person ought to take is a function of the probability and magnitude of the harm that may occur if he does not take care. A telephone company is not liable for special damages for failure to furnish connection to a patron if it had no notice of the circumstances out of which the damages might arise. Where the damages arise from special circumstances, o and are so large as to be out of proportion to the consideration agreed to be paid for the services to be rendered under the K,  it raises a doubt at once as to whether the party would have assented to such a liability, if it been called to his attention at the making of the K,  unless the consideration to be paid was also raised so as to correspond in some respect to the liability assumed. The facts and circumstances in proof must be such as to make it reasonable for the judge or jury trying the case to believe that the party at the time of the K tacitly consented to be bound to more than ordinary damages in case of default on his part.

Ex (Evra): Boat charter – Bank lost telex directing payment – Bank not liable. o П could’ve averted the loss more cheaply. o General Foreseeability by bank will not do.

o o

o o o

Ex (Norwood): A fire in Norwood’s bathroom spread to the rest of the house and he sued the phone company to recover damages. His monthly subscription was $1.75. Jury awarded $1,500. Reversed and dismissed.

o

o

Certainty Requirement o Where Δ by his own wrong has prevented a more precise computation, the jury may not render a verdict based on speculation or guesswork.
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K cases: Δs cannot be assumed to have accepted a liability they did not know about. o Tacit agreement std is a minority std. o But UCC rejects: sellers are liable for consequential damages they had reason to know of at the time of King. Ex (Bigelow): Пs (theater owners) claimed that Δs (distributors) discriminated against them in the distribution of films and that they were unable to obtain films until 10 weeks after the earlier and more desirable runs in violation of antitrust laws.
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o

But the jury may make a just and reasonable estimate of the damage based on relevant data, and render its verdict accordingly. o In such circumstances "juries are allowed to act upon probable and inferential, as well as direct and positive proof."

o o o o o o

(modern cases) П must prove his damages with as much certainty as is reasonably possible under the circs, and no more. No recovery if no substantial basis left from which jury could make a rational estimate of damages. PP: Wrongdoer bears the risk of the uncertainty. Difficulty of ascertainment is not to be confused with right of recovery. Many courts hold that new bus cannot recover lost profits.

Пs claimed that they were subjected to losses of $120K over a 5 yr period. They presented 2 classes of evidence: o Comparison of earnings with a competitor theater o Competitor’s exceeded П’s receipts by ≈ $116K. o Comparison of earnings pre- and post-discrimination. o The difference was ≈ $126K. Lost Profits types of evidence: o Compare П’s pofits before and after the wrong. o Compare П’s profits to similar businesses unaffected by the wrong o Projections by experts

Jury may make a just and reasonable estimate of damages based on the evidence presented, and its award need not be based on precise mathematical computations. Substantive policy Goals o To recover damages, П must prove more than that Δ violated §7 of antitrust laws. o Since such a proof establishes only that injury may result. o П must prove antitrust injury. o Not only injury causally linked to illegal presence in the market. o Injury that the antitrust laws were meant to protect against. o The injury should reflect the anticompetitive effect either o of the violation or o of anticompetitive acts made possible by the violation. Remedies implement substantive policies. An ER can report violations of the law, but it must do so evenhandedly. o It can not do so in retaliation for union activity. No П can recover damages in fed courts for allegedly unconstitutional conviction or imprisonment. Unclean Hands defense: wrongdoing by П is a defense that bars recovery.

Trend is to abandon any per se rule – treat the risks of new bus as an element of proof.

Ex (Brunswick): Brunswick was the manufacturer of bowling equipment. When it had difficulties collecting from its debtors, Brunswick began acquiring and operating the defaulting bowling renters – it acquired 222 centers in total and either disposed of or completely closed 54 of them. All in all, it controlled 2% of the bowling centers in the US. Pueblo brought this suit claiming that by acquiring and operating the bowling centers which would otherwise have gone bankrupt, Brunswick brought its deep pockets into the industry and decreased Pueblo’s profits in violation of § 7 of Clayton act

o o o o o

Illegal immigration cases: awarding back pay up to the point at which ER discovered the worker’s immigration status. If ER discovers resume fraud such that it would not have hired П in the first place, the EE’s claim for breach of the employment K is entirely barred.

Policy considerations are invoked generically when a tribunal wants to withhold complete relief but can’t explain why. Value cannot be measured by $ o A per diem argument is a tool of persuasion used by counsel to suggest to the jury how it can quantify damages based on the evidence of pain and suffering presented.
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Ex (Debus): Debus suffered 20% permanent disability when she was injured by a falling palette of boxes fell on her at a Grand Union store. During closing argument, she suggested that the jury considers the injury in terms of daily pain and suffering.
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o o o o o o

There is nothing inherently improper or prejudicial about per diem arguments. In cases where claims of pain and suffering are made, juries are forced to equate pain with damages. If a lump sum award may be suggested to a jury, it cannot be impermissible to explain how the lump sum was determined. It is unusual to instruct that pain and suffering verdicts be reduced to present value. (Majority) Counsel may suggest total number for pain and suffering and tell the jury how much is requested in the complaint.

Because pain fluctuated, she suggested an average daily figure that jury could consider if it found helpful. She asked for about $500K. Jury instructions: L’s statements are not evidence and will not be considered by the jury as evidence. The court made it clear that final damage calc should be made on the evidence alone. Roughly equal number of states permit or forbid per diem args. 3rd group allow with a cautionary instruction.

Pain and Suffering Golden Rule: asks jurors how much they would want if they had suffered П’s injuries. Wrongful death  Valuation problems  statutory action  Loss-to-estate type (minority) (maintained by executor) o Loss to estate: amount that deceased woul’ve accumulated during his lifetime but for his wrongful death  Cost of living deducted  Discounted to present value  Loss-to-survivors o Claims of survivors who have suffered provable losses o Econ losses  Loss of support  how good (or poor) an income provider the decedent was  Support of children: loss to maturity unless proven that support would’ve extended beyond  Remarriage irrelevant  Loss of service: Cost of hiring subs  Funeral expenses  Loss of inheritance o Non-Economic Losses  Loss of society, comfort, and protection  Extended to siblings.  Determining loss: evidence as to the nature of the relationship is admissible.  Decedent trauma: pre-impact terror
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Variations in verdicts probably reflect the value of reln bt/w decedent and survivors.  Ex: $0 award for loss of father. Father had virtually never paid child support.  Evidence of reln allowed.

No duty to mitigate damages by re-marrying. What marketplace would pay a stranger with similar qualifications for performing such service Many do not allow b/c too speculative. Care, comfort, protection, parental guidance, nurture, love, affection, companionship Ex: No recovery where decedent’s father was in mental institution
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 o

Damages for death of children

Ex: Non recovery where evidence of marital problem and spouse remarried w/in 3 months. Some cases recognize that children are the source of pride, enjoyment, etc. Costs of rearing are deducted, though. Evidence of child’s moral delinquencies allowed.

 (maj)Grief, anguish, emotional distress not allowed Hedonic damages – generally not recognized.  Loss of enjoyment of life or the value of the deceased’s life to him  Exception: in an action by estate arising out of violation of civil rights statute. o Punitive damages – not allowed Limiting Damages – Tort Reform  Split among state S.Cts over the Constitutionality of damage caps. o Caps have been attacked under state Constitutional clauses guaranteeing open courts or a remedy for every wrong, jury trial, equal protection, due process, no spceial laws. o Caps on P&S are far more likely to be upheld than caps on total recovery. Etheredge – limits on amount of recovery is Constitutional  Without question, the jury's fact-finding function extends to the assessment of damages.  Once the jury has ascertained the facts and assessed the damages, however, the constitutional mandate is satisfied.  Thereafter, it is the duty of the court to apply the law to the facts.  A remedy is a matter of law and not fact.

If we want to do something about excessive verdicts (the big picture), and if we also want to do justice in individual cases, then Js have to be less deferential in reviewing jury verdicts.

Ex (Etheridge): Wilson suffered severe and permanent injuries (brain damage and paralysis) due to medical malpractice. By the time of trial she had expended $300K for care and treatment. The jury awarded $2.75Mil. But the court, applying statutory limits reduced the verdict to $750K – the limit set by statute.

Smith – limits on amount of recovery is un-Constitutional  A statute that limits recovery of damages violated the FL constitution. Ex (Smith):FL statute limited non-econ recovery to $450K.  FL Constitution: The courts shall be open to every person for redress of any injury, and justice shall be administered without sale, denial or delay. Valuing Pain and Suffering  Reasonable compensation; not full compensation.  Posner: infer the value of life (and of serious injury) from the premiums that people charge to incur very small risks of death of serious injury.  Some: no recovery unless П had some level of awareness of the loss.  Hedonic Damages: (few cases have allowed) o Split on whether separate item; or included in P&S. o Juries to make their own assessment of the value of decedent’s life to himself. o Has been allowed where П is in coma. o Pleasures decedent/victim lost by not being alive or suffering an injury.  Would make sense to limit damage liability where any of us could be either П
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Ex: A takes extra $5/hour to take a dangerous job where 1 person is killed every 100,000 person-hours of work. So, the value of A’s life is $500K.

Ex: accomplished violinist can no longer play the violin because of injury to hand.

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or Δ on any given day. Dignitary and constitutional Harm  In reviewing a jury verdict, the court will defer to the jury’s judgment unless the award is “monstrously excessive” or “shocks the judicial conscience.” o One factor is whether the award is out of line compared to other awards in similar cases.    Cities are immune from punitives in federal rights cases. A constitutional claim does not affect the measure of damages. Dignitary torts present valuation problems like P&S. o Assault, FI, malicious prosecution, IIED, libel, slander, invasion of privacy, batteries that do not involve physical harm. o Δ’s motives and nature of their conduct, usually relevant only to punitive damages, becomes relevant to these cases.

Ex (Levka): П claimed constitutional civil rights violation due to strip search. She was awarded $50K for her P&S, trauma, etc. Other cases involving strip searches but also included aggravating circs ranged were awarded> $30K. So, her award is out of line with the other cases – no a aggravating circs here. So, new trial or remittitur to $25K.

Ex: security guard accused a black woman of shoplifting. $56K compensatory + $1.1Mil puni

Remittitur / Additur o A federal П must be allowed to choose remittitur or new trial. o Additur is not applicable in federal courts.  The only remedy for low verdict is a new trial.    Rights, constitutional and otherwise, do not exist in a vacuum. A person should be compensated fairly for injuries caused by the violation of his legal rights. CL courts traditionally have vindicated deprivations of certain absolute rights that are not shown to have caused actual injury through nominal sum of $. Substantial damages should be awarded to compensate actual injury or to deter or punish malicious deprivation of rights. Under civil rights act, Damages are not presumed: damages are compensatory and are awarded only for actual injury. Damages based on the abstract value or importance of Constitution rights are not permissible element of compensatory damages in § 1983 cases. Ex (Carey): PPP’s PDP process was violated by his suspension from school without a hearing. He showed no damages. So, no compensation (except for nominal damages)



Dafamation: CL presumed substantial general damages w/o proof Presumed damages and punitive damages are unconstitutional  except wrt to Δs who publish defamatory material. Right to recover for Emotional Distress  ED was traditionally recoverable in intentional tort, but not negligence. o A П who suffers physical injury can generally recover for emotional distress.  ½ states permit recovery for emotion distress to bystanders who see their loved one injured.  ¼ permit recovery for persons w/i the zone of physical danger created by Δ’s negligence.
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

Where there is quite plausible evidence of emotional harm arising from genuine negligence, allow recovery. o Will allow recovery if diagnosable and medically significant.  Traditionally П testimony was enough.  Now requiring corroborating evidence of physical symptoms, medical or psyco treatment, testimony of others. Emotional distress is gene rally not compensable in K. o But bad faith breach on an insurance K is treated as tort.

Ex: П trapped in elevator and suffers severe anxiety reaction and was hospitalized.  The emotional distress is diagnosable and medically significant.

This is encountering resistance from skeptical Js.



Non Ex: No award for ED in a suit by homeowner against bldr. Bldr’s gross negligence resulted in dream house being saturated with water. This is breach of K and not tort case. The effect is to open the door to emotional distress and punitives. Taxes o Measure of recovery under FILA is “the damages that flow from the deprivation of the pecuniary benefits which the beneficiaries might have reasonably received.” It is after-tax income, rather than gross income before taxes, that provides the only realistic measure of one’s ability to support his family. The amount of any damages received on account of personal injuries or physical sickness is not taxable income. o Emotional distress shall not be treated as a physical injury or sickness.  But the amount paid for medical care attributable to emotional distress is nontaxable. It is error to refuse to admit evidence of the non-taxability of jury awards or to instruct the jury about that. Punitive damages are taxable. If the court adjusts for taxes on future wages, doesn’t it also have to adjust for taxes on the projected income from investing the judgment? o Fact finder could use a tax-exempt interest rate and ignore taxes on investment income o Could use a taxable interest rate and adjust for taxes on investment income. Ex (Norfolk): The jury was not given the Δ’s requested instruction that its “award will not be subject to income tax and that it should not consider such taxes in fixing the amount of the award.” Expert: loss=$302K; jury award=$775. Court: jury probably assumed award is taxable. Should’ve allowed the instruction!

o o

o o o

Court “will approve any reasonably safe arrangement that will provide an after-tax income equivalent to that lost by the П.”

Interest o Traditionally, pre-judgment interest was unvailable when damages were not liquidated or ascertainable. o In practice this means that prejudgment interest was not available
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Some states have abondoned this rule and now allow for prejudgment interest even in personal injury cases.
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o o o

for personal injury and wrongful death actions. Awarded only when damages were liquidated or ascertainable.  Damages for injured or destroyed property.

Post judgment interest: for the period b/w the time of judgment and the time that the judgment debtor pays. Historically, admiralty decrees have included provisions for pre-judgment interest.

Statutes enacted governing the award of post-judgment interest at the legal rate.

GR: prejudgment interest should be awarded in maritime collision cases, o subject to a limited exception for "peculiar" or "exceptional" circumstances. o Allowance is not an absolute right. o Depends on the circs and discretion of the tribunal. o П’s responsibility for undue delay in prosecuting the lawsuit is a reason for not awarding. CL Rule: pre-judgment interest is not awarded on unliquidated claims o (those where the precise amount of damages at issue cannot be computed) o o o Neither a good-faith dispute over liability nor the existence of mutual fault justified the denial of prejudgment interest in an admiralty collision case. S.Ct: monetary award does not fully compensate for an injury unless it includes an interest component. Compound interest is unavailable o Any interest awarded is simple interest.

Ex (Milwaukee): Co’s boat sank due to negligence by the city and the co. Fault was apportioned 2/3 against the co, and 1/3 to the city. The fight here is about prejudgment interest. Co. sought $5.3Mil in pre-judgment interest. The boat sank in 1980 and this is a 1995 case!

Compounding allowed when established by course of dealing included compound interest and certain cases involving fiduciaries. Inflation / Present Value o Pre-judgment and post-judgment interest compensate for harm that already occurred. o Future damages present valuation challenges. o Will have to figure out how much to compensate now for future medical expenses and lost wages.  Uncertain time frame for damages:  When will П stop working?  How will her salary increase/decrease over time?  When will she need extra medical treatment?  What is the time value of $?

Medical expenses or salaries might go up faster/slower than the normal rate of inflation. Пs and Δs might battle over future costs and wage increases. They might disagree over the proper rate of interest so that П can make a safe investment.
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o

o

2 countervailing tendencies: o Inflation: prices will go up over time o Present value discounting: how much to give П now in order for her to have $X in Y years. Different metods: o Total offset: Inflation = Present value Discount rate.  They cancel each other. o Real Rate = 1-3%

Punitive Damages Punitive Damages are awarded against a Δ to punish misconduct and to deter misconduct. o Not intended to compensate П or anyone else for damages caused. Punitives may be imposed to further a State’s legitimate interests in punishing unlawful conduct and deterring its repetition. Jury can consider potential harm to non-parties o But jury may not use a punitive damages verdict to punish a Δ directly in account of harms visited on non-parties. BMW. Punitive Damages awards must reflect (Excessiveness depends upon): 1. The reprehensibility of Δ’s conduct o Relevant factor: conduct that risks harm to may more represehensible than coduct that risks harm to few. 2. Reasonable relationship to the harm the П suffered 3. Presence (or absence) of sanctions (e.g. criminal penalties) that state law provides for comparable conduct. State Farm: 2-4x the size of compensatory damages OK. o Single digit multipliers are likely to comport with DP o Excessive if ratio > single digit The Constitution imposes certain limits to procedures for awarding punitives and the amounts forbidden as grossly excessive. DP forbids a State to use punitive damages to punish a Δ for injury that it inflicts upon non-parties. o DP requires that a Δ be provided the opportunity to present every defense.

Ex (Phillip Morris): Williams died from smoking. The court found that Phillip Morris was
negligent and deceptively made him believe that smoking was safe. Because of this deceit, Williams was awarded $821K is compensatory damages and $79.5 Mil (100x) in punitive damages. The trial court refused to instruct the jury that, while it can look at the harm caused to nonparties in determining the level of reprehensibility, it can not base its punitive damages on the harm to such non-parties. Phillip Morris said that the jury award was based on the harm caused to non-parties and that amounted to a DP violation (taking with the opportunity to present defenses).

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