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					Equity & Remedies – Outline

Defenses
Unclean Hands & In Pari Delicto In Pari Delicto: in equal fault  at law in suits for damages o П’s recovery may be barred by his own wrongful conduct. o Defense limited to where П bore at least substantially equal responsibility for his injury o Parties’ culpability arose out of the same illegal act. Unclean hands  in Equity o П has participated in some of the same sort of wrongdoing as Δ o Courts will not enforce illegal Ks. o Court will not serve as referee in an accounting b/w co-conspirators.

Examples / Notes
Denying relief may help deter wrongs like П’s o But encourages wrongs like Δ’s.

He who comes into equity must come with clean hands. o If guilty of inequitable conduct, whether illegal or tortious, could not get relief in equity Ex: П barred by unclean hands b/c it has failed to disclose the perjury to the Patent office and b/c it has benefited from the perjury by securing a patent based on the perjured app. Ex: distressed debtor transfers property to a friend or relative to evade her creditors. When the coast is clear, debtor asks for property back and recipient says no. o Not barred by unclean hands b/c fraud not directed at recipient. Ex (Pinter): Pinter agreed to explore for oil on behalf of some Пs. Dahl was one and he invested $310K and induced 11 friends to invest $75K each.When things didn’t go well, Dahl sought rescission on grounds that Pinter did not register the securities. Pinter alleged the defense of In Pari Delicto against Dahl.

o

П’s inequitable conduct must’ve been directed at Δ. o But some cases hold that fraudulent transfer is binding b/w the fraudulent parties, w/o talk of unclean hands.

In Pari delicto defense available when: o As a direct result of his own actions, П bears at least substantially equal responsibility for the violations he seeks redress for. o П must be active, voluntary participant. o Preclusion of suit would not significantly interfere with the effective enforcement of securities laws o o o o In pari delicto defense appropriate when П was more of a promoter of unregistered securities than an investor. Bare min req: П’s improper conduct relates in some significant way to the claim he now asserts. Ask whether Δ is more culpable than П. Gamblers cannot sue to recover illegal losses. o Exception: Δ wins by cheating.

This excludes wholly irrelevant past misconduct.

Courts will not aid a fraudfeasor who invokes the court’s JX to profit from his own fraud by recovering damages. Unconscionability & Equitable K Unconscionability analysis starts by asking whether it was an adhesion K. o Adhesion K = o standardized K o imposed and drafted  by the party of superior bargaining strength o relegates to the other party only the opportunity to adhere to K or reject it. o If adhesion K, then we ask whether unenforceable.
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Equitable defense. Was ground for denying spec perf; but was not a ground for enjoining a suit at law. UCC codified unconscionability as a defense at law and in equity. Ex (Armendariz): Пs sued for sexual harassment and wrongful termination. The ER invoked the employment K arbitration clause. It was a
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Equity & Remedies – Outline

o o

Does not fall w/in the reasonable expectations of the weaker or adhering party Even if it is, is it unduly oppressive or unconscionable?  If unconscionable at time made, court may:  Refuse to enforce K  May enforce remainder w/o clause  May limit applicability of clause to avoid unconscionability.  Lack of mutuality is unconscionable.  Unless need explained in K or factually established.

one way arbitration clause which required Пs to arbitrate its claims but not those brought by ER. Another K clause limited recovery to lost wages.

UCC defenses to Spec Perf (Spec perf is discretionary) o Unconscionability o Inadequate consideration o Unilateral mistake o Ambiguous terms Spec perf could be conditioned on price adjustment. o This is rare and the reason for the price adjustment would still have to be something like unconscionability.

Unconscionability elements – both must be present. o Procedural o Focuses on oppression and surprise due to unequal bargaining power o Substantive o Focuses on overly harsh and one-sided results.  Unilateral obligation to arbitrate.  Choice of forum for stronger party. Unconscionability cases focus on clauses waiving substantive or procedural rights. Not unconscionabile to require customers to release liability for ordinary negligence in an ATV safety course. Labor protections are commonly non-waivable. Estoppel Where a person by his or her statements and conduct leads a party to do something that the party would not have done but for such statements and conduct, that person will not be allowed to deny his or her words or acts to the damage of the other party. Equitable estoppel may be defined as o the effect of the person's conduct o whereby the person is barred from asserting rights o that might otherwise have existed against the other party who,  in good faith,  relied upon such conduct and  has been thereby led to change his or her position  for the worse The party claiming equitable estoppel must demonstrate that: 1. П misrepresented or concealed material facts; o Need not be fraudulent or done with intent to mislead. o May arise from silence. o Where there is a duty to speak; but keeps silent.
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Estoppel is only a defense. o It awards the misled party its expectancy, and not its reliance. Essence of estoppel: detrimental reliance. An act or statement inconsistent with the right later asserted, reliance, injury.

Ex (Geddes): П owned property adjacent to the Club’s golf course. Prior to construction of the course, the club consulted П and others and, at great expense, redesigned the course to accomodaote П’s needs (including an 8-ft fence). П then supported the plans before a county planning committee and the course was built. П later brought suit for trespass and nuisance when golf balls from the fairway began to fall on his property.

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2. 3. 4. 5. 6.

П knew at the time he or she made the rep that they were untrue; Δ did not know that the representations were untrue when they were made and when they were acted upon; the other person intended or reasonably expected that the party claiming estoppel would act upon the representations; Δ reasonably relied upon the representations o in good faith o to his or her detriment; and Δ would be prejudiced by his or her reliance on the representations if the other person is permitted to deny the truth thereof.

Doesn’t matter what the truth was. o If П now saying something different from what they said before, and if Δ relied on what they said before, they are estopped from changing their position. Course of dealing: Evidence is not confined to the words of the written agreement; Δ does not have to worry about contract formalities. Estoppel can arise informally (orally) or through silence.

An injunction will be refused where the П has actively encouraged Δ to undertake the work and then has silently, without protest, permitted Δ to go ahead with the work in disregard of the right of complainant. One who assumes the role of parent can be estopped to deny that he is the parent. All frauds give rise to estoppel. Estoppel at law: o Res judicata  Estoppel by judgment; Collateral estoppel o Judicial estoppel o Does not normally apply to gov. o o Judicial Estoppel: litigant takes a position in court inconsistent with a previous position in the same or a related matter. o Usually said litigant not estopped unless she prevailed on the earlier inconsistent position.

Estoppel by K Estoppel by deed

Traditional Rule: gov cannot be estopped.

If gov is held responsible for its advise, it will never give advice. Waiver Waiver: o an intentional relinquishment of a known right or o Intentional conduct inconsistent with claiming it. a waiver may be effective after expiration of the time for performance of a condition has expired, if the condition which is asserted to have been waived is not a material part of the agreed equivalent of the obligor's promise and its non-performance does not materially affect the value received by the obligor. Waiver is unilateral in character. o Results as a legal consequence form some act or conduct of the party against whom it operates.
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Ex (Fidelity): BIMCO held an insurance policy from Fidelity covering it against property damage from vandals but not against theft. Fidelity said that it was responsible for damage caused by burglars but not responsible for any losses. Fidelity relied on the policy language and Bimco’s failure to timely file proof of damage. o Waiver b/c adjuster called to settle claim after time of filing passed. o So, cannot rely on that defense.

Equity & Remedies – Outline

Waiver need not be founded on a new agreement, nor be supported by a consideration nor based on estoppel. Laches Laches bars relief to those who delay the assertion of their claims for an unreasonable time. o Equity aids the vigilant and not those who slumber on their rights.

Elements of Laches: 1. a substantial delay by a П prior to filing suit; o factors that negate invocation of laches:  ongoing negotiations  conscious fraud or bad faith by Δ o Function of: how much time has passed + reasons for delay 2. a П’s awareness that the disputed trademark was being infringed; and 3. Prejudice to Δ  in reliance interest resulting from the Δ’s continued development of good-will during this period of delay o Mere delay is not enough. o Type of prejudice  Detrimental reliance  Lost evidence is a form of prejudice generally seen only in the laches cases.  The longer the delay the more obvious the loss of evidence.  П tries to claim property after Δ has borne the burden or risk of developing the property, often right after some unusual period of risk has passed.

Ex (NAACP): From 1940-57 the LDF operated as a subsidiary of NAACP and used the NAACP initials. In 1957, it was spun off. In 1965, the association requested that LDF re-incorporate under a name that does not use the initials NAACP. But the assoc did not sue LDF for not doing so. From 1966-1978, the assoc remained silent concerning the LDF’s use of the NAACP initials. o The LDF continued to spend time and millions in soliciting gifts and recruiting legal talent using the NAACP initials. In 1979, the assoc’s board revoked permission to use the NAACP initials; trademarked the initials; and brought this suit enjoining LDF from using them. The req of reliance or harm to Δ makes close link b/w laches and estoppel. o Laches: emphasis in on delay. o Estoppel: emphasis is on misleading.

If П didn’t know and had no reason to know, delay is not unreasonable. o Non Ex: poverty or inability to find a L does not justify delay.

Non Ex: K’ing officer died; but written record was sufficiently documented.

Non Ex: granting spec perf. No laches. Property value increased from $500 to $2,800 over 10 years. But much of the delay was due to Δ’s inability to perform. The more volatile the value of the property, the sooner any claim will be barred. Statute of Limitation  Time begins to run when the cause of action accrues  Suit is barred when the time runs out.

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    

Laches was the equitable substitute of SoL o and the sole time limit on suits in equity. But most equitable claims are not subject to SoL and also laches. o Models SoL explicitly apply to suits in equity If both legal and equitable remedies for the same underlying wrong, then the SoL applies to both remedies. Concurrency doctrine makes SoL applicable to equitable remedies as well as legal remedies. Laches remains the sole bar only in cases where the substantive right is created by equity. Ex: a suit for damages for breach of K and a suit for spec perf are 2 remedies, there is only one substantive wrong: the breach. So, SoL applies to both remedies.

Ex: breach of trust.

Execution, Garnishment, etc
Execution (Minority) A manual interference with chattels is not essential to a valid levy thereon. It is sufficient if o the property is present and subject for the time being to the control of the officer holding the writ, and o that he in express terms asserts his dominion over it by virtue of such writ.

Examples/ Notes.
Ex (Credit Bureau): Credit Bureau obtained a default judgment against Moninger. Moninger then gave the SI to the Bank secured by the truck. No SA was signed. (so, Bank’s was a USP) and Bank’s SI was not noted on the truck’s CT. Sheriff, after finding no encumbrances on the truck proceeded to levy on the truck. Moninger informed the sheriff that the Bank had a SI, nevertheless, the sheriff, after apologizing to Moninger that he had to execute, put his hand on the pick and declared that he was executing on the pickup for the county. (so, he did not take possession nor ask for the key).

(Majority) most states require the sheriff to assert effective control over the property. What constitutes a levy is different from state to state. o Inside bldgs (including homes): need a warrant. o PC that goods are in there. Mechanics of Execution: o court issues a writ o writ is delivered to the sheriff o he levies on the debtor’s property o eventually sells the property Basic Priority Rule: first in time, first in right. Federal tax liens are subject to prior liens. Exemptions: Judgment debtors can keep their exempt property even if the judgment remains unpaid.
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NB: ceremonial procedure. Most states require physical possession if that is possible. o May be somewhat symbolic, but the sheriff must exercise as much actual control as the nature of the goods permit.

Proceeds first to the sheriff to pay the costs of execution, then to pay off other liens.

NB exempts “immediate personal possessions of the debtor and her family; all necessary clothing; $1,500 worth of household goods; $2,400 worth of tools,
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All states exempt some property from execution. Rationale: ensure that debt collection did not leave debtors w/o the means of subsistence. Garnishment Garnishee is liable to the garnishor creditor 1. for all debts which the garnishee owes to Δ debtor at the time the writ of garnishment is filed, and 2. for all such similar debts incurred by the said garnishee b/w service of the said writ and the time the garnishee serves an answer thereto disclosing all such debts owed and properly garnishes all the debtor's funds held by the garnishee “Answer” means complete answer. Garneshee is fully protected from any suit by debtor for funds reported in its answer and garnished where garnishee has a good faith doubt as to whether such funds should be reported and retained. Garnishment is an action against a 3rd party who owes $ to judgment debtor. Garnishee can defend on ground that it doesn’t owe debtor. o Cannot question the underlying judgment Garnishee who fails to answer at all becomes liable for the entire judgment. Bankruptcy terminates the garnishment order. Congressional limits on wage garnishment. o Exception: up to 65% for alimony and child support. Other means of colleting $ judgments o Execution and Garnishment are the basic means of collecting judgments. o Garnishment: reaches simple $ debts o Execution: tangible property. o Post-judgment motion o Judgment creditor can ask about the judgment debtor’s assets by taking his deposition or serving interrogatories. o Discovery from 3rd parties o If discovery reveals assets readily subject to execution or garnishment, the judgment creditor can proceeds with traditional remedies. o If discovery reveals less accessible assets, writ or notice ordering 3rd party to turn over assets.

o o

equipment, books, supplies used in debtor’s trade . . .. Also exmplt interests in a taxqualified pension or profit sharing plan.”

Ex (Dixie Bank): Chase received judgment against Gore for > $48K and filed a writ of garnishment directed to Dixie Bank (where Gore held his accounts). The bank’s filed answer erroneously identified an account of a Jimmy Gore containing $32. It turned out that Gore had another account which between the first filing and an amended and corrected filing had a total deposits of > $13K. At the time of the bank’s amended answer, the bank had $65. Chase brought suit against the Bank.

Typical Garneshees: Banks, ERs. When garnishee disputes his liability to the judgment debtor, garnishment can turn into a full-scale lawsuit.

Ignoring discovery orders subject discoveree to contempt.

Ex: legal process upon securities intermediaries. Creditor is entitled to aid from a court of competent JX.

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o o

Creditor can set aside fraudulent transfers and levy on the goods in the hands of 3rd parties. Injunctions against transferring property. o The judgment does not create a lien o But subjects 3rd party to liability Appointment of receiver o Collects Δ’s assets o It is contempt of court to interfere with the receiver’s possession o Receiver’s expenses are chargeable to the property it is ever found. o Sometimes used in insolvency to liquidate and distribute assets  But largely replaced by BK.

Intent is to freeze the status quo while waiting for sheriff to levy.

o

Uncollectible o Many debtors are uncollectible o Debtors w/o assets are said to be judgment proof. Bankruptcy o Many debtors respond to pressure from creditors by filing BK o BK is Δ’s trump card. o Filing stays all collection efforts o Collected $, not in OCB, within 90 days is returned (preferences) o BK invalidates any judgment lien or execution liens acquired w/in 90 days

o

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