Equities and Remedies

MC is inspired by notes in the casebook. 15-20 minutes on a note indicates it could be fodder.

1. Moral imperative for the enforcement of the underlying law.
If there are no consequences for the violation of the underlying law then where are we? Think of this course as a moral imperative – the moral force behind all of that substantive law that you’ve been acquiring over the last couple of years of law school. It is time to focus on the violation of that underlying substantive law.

2. Substitutionary Relief vs. Specific Relief
Compensatory damages are a substitutionary remedy. On the other hand, injunctive relief is specific relief. For example, someone wants to build a cement plant and there is a restrictive covenant in your deed that says residential use only. You want to enforce the covenant that prohibits industrial use. If you get an injunction, you are getting a specific remedy – it’s exactly what you asked for. Judge, I want you to prevent them from building a cement plant because they will be an imminent threat of irreparable harm. Property values will go down, there will be pollution, there will be personal injury, etc. I need you to stop them from proceeding. The judge will give you an injunction – a specific remedy.

3. Rightful Position: N2, P16
If you are defining compensatory damages on my exam, I want you to say:
“Compensatory damages are a substitutionary remedy that is designed to restore the plaintiff to his or her rightful position, recognizing that money is an imperfect substitute for the pain and suffering occasioned by tortuous misconduct.”
Money damages cannot restore the plaintiff to his pre-tort condition, and it would uncommon that a prevailing plaintiff would have made an ex ante agreement to sustain an injury or disease in return for an award of money damages.

4. “In a Perfect World”: P9, 17, 729
P 9: Law and economics scholars talk about the efficient level of expenditure on enforcement, and the efficient level of violations, even in the context of criminal law.
P17: In the classical economic view, the function of compensatory damages is to force law violators to take account of the harm they inflict. If the damages they must pay are less than the harm they inflict, potential defendants will violate the law even when it is inefficient to do so. If the damages they must pay exceed the harm they inflict, potential defendants will obey the law even when it is inefficient to do so. Damages should be set exactly equal to harms inflicted, and then, if an illegal act’s expected profit exceeds the expected damages, the actor should go ahead.
P 729: Ford Pinto Chart. Costs of Accidents: $49,530,000. Cost of Prevention: $137,500,000.
In a perfect world, damages or the threat of damages would be calibrated in such a way that actors (corporate actors and individuals) would be forced to at least think twice about engaging in a misdeed before doing it. But on the other hand, damages would not be so potentially crushing that actors would forego in engaging in conduct that might be very socially useful because of the specter (a threat or prospect of something unpleasant) of crushing liability. From the defendant’s side of the tort reform debate, the argument is that the specter of strict liability in tort, and punitive damages act as a deterrent for the conduct of socially productive activities. A company decides to not produce a product or a pharmaceutical for the fear of damages.
The plaintiffs bar would argue that but for the existence of tort law, we’d be in huge trouble because if asbestos companies are willing to put a product out there without a warning, if Merck is willing to put Vioxx out without a warning, if Ford is willing to make an exploding car, etc. – If these actors are willing to do that in the face of punitive damages, query what would they be willing to do without it.

If damages work appropriately, beneficial conduct continues unabated, but if it doesn’t work appropriately and if things are broken, then the argument becomes, we as a society are losing out because a lot of beneficial activities are not going on because of the specter of damages. In a perfect world it would be equilibrium. In a fundamental way that is the crux of the debate.
Injunctive Relief

If you have to prevent the harm from happening, you will attempt to enjoin the defendant from doing what he or she was about to do. You have to meet a very high threshold in order to persuade the court to hear the matter. Term of Art: Imminent Threat of Irreparable harm.

Three Forms of Injunction:

1. Preliminary Injunction. Early stage of litigation, no harm has happened yet. Seek a preliminary injunction to prevent the harm from happening at all.
2. Permanent Injunction. Example: You attempt to close a cement plant that has been operating for years. You want injunctive relief but the harm is already happening. Also referred to as a reparative injunction.
3. Structural Injunction. Example: Decades of segregated schools and a judge is called upon to fix the structure.

Restitution

If I could prove that as a direct and proximate result of using Johnny Carson’s image, their profits went up tenfold. Instead of a tort claim, make it a restitution claim and disgorge them of all of the ill-gotten profits that are attributable to the usage of his name. If that that remedy is higher than compensatory damages and you don’t realize that, it is malpractice.

Ancillary Remedies

If you get an injunction enjoining the parties from using Johnny Carson’s name and 6 months later they are using his name again. You are now going to hold them in contempt and seek to go to the court and say they are violating your order and either fine them or perhaps imprison them until they stop doing it. The primary remedy was the injunction. The injunction is now being violated and so you need an ancillary remedy holding them in contempt to uphold the integrity of the court and its original order.
Attorney’s fees are also an ancillary remedy. If you forced me to bring a contempt action, I am going to ask the court for fees.

Problems in Evaluation: Aggregate litigation – individual or group determination?

United States v. Hatahley (1958)
Fred Small, The Heart of the Appaloosa

There are eight families of Navajo Indians whom the government claims are trespassing. While the trespass case is pending, the government nonetheless comes onto their property and rounds up their horses and burros and promptly takes them to a glue factory.
The plaintiffs bring a cause of action against the US government pursuant to the Federal Tort Claims Act (1946) that enables people to file a lawsuit against the government that would have otherwise been barred because of sovereign immunity. By definition under the FTCA, the plaintiffs are not entitled to a jury trial. In this case the judge was finder of fact, arbiter of law, and ultimately dispenser of remedy.

Three categories of Remedy at issue in this case:

1. Value of the horses taken. The trial judge determines that the most principled way is to simply put a gross per horse figure across the board of $395. The judge does not get into the different ages of the horses. Nor does the court get into the FMV of the replacement cost of the horses. The 10th Circuit is not terribly happy about that.

2. Value of the emotional distress. The court does not engage in any individualistic determinations – how upset are you? Instead, the court concludes that a $3,500 per person figure for the value of emotional distress. There is a danger in any emotional distress-type lawsuit that a plaintiff might be tempted to engage in a bit of hyperbole. If the court takes individual testimony coupled with expert testimony, we may not come to anymore reasonable or rational solution than what this judge did.

3. Consequential damages. The court took the number of livestock they had prior to the roundup, how many do they have now, take their value, multiply, and cut it in half for consequential damages. Proximate cause: The critical weakness in the consequential damages argument is a lack of proximate causation. We will use proximate cause as a limitation in a tort case like this. We will also use it in contract. There is no proven nexus between what the government did and the diminution in value. The case finally settled in the early 1960s for $45,000; $9,000 went to the lawyers for ten years of litigation and the plaintiffs divided the rest in proportion to the number of animals lost. The liability judgment was the first time that Native Americans prevailed against the federal government on a claim of intentional wrongdoing.

Point 1:

P18, N8. Had this been a jury trial and had a jury rendered this verdict, when the case gets to the 10th Circuit they most likely would not reverse it. The court would afford far less scrutiny to a jury verdict than to a judge’s decision. Institutionally, an appellate court is probably going to apply a stricter scrutiny to a judge’s determination of remedy than to jury’s determination.

Point 2:

Where do these numbers come from? The standard for remittitur: did the verdict shock the judicial conscience? One of the things a court will often do is to compare this verdict value to other like cases. The problem is first impression.

Point 3:

It is a slippery slope to get testimony from people on how upset they are. I am a full sponsor of the $3,500 per person for emotional distress. I think that is a principled result and a modern example is what Feinberg did for the 9/11 fund. On consequential damages, get keyed into the proximate cause idea. If you are talking about consequential damages either in a tort case or in a contract case, you want to show a nexus between either the breach of the tort duty or the breach of the contract and the consequential loss you are seeking.

P19, N9: This topic always seems to cause confusion in Torts II. Disclaimer: if I test you on this note, it will be a multiple choice question.

1. Satisfaction. In a tort case, it is the sum total of its overall value. Example: a case with 5 joint tortfeasors and they all settle. The sum total equals the satisfaction of the claim. If plaintiff is entitled to one satisfaction, it may be comprised of multiple settlements.

2. Pro Rata and Pro Tanto. If you have multiple tortfeasors and some of them settle before trial, but some of them don’t and take the case to trial. When a verdict is rendered, what is the impact of those settlements on the party or parties who tried the case?

There are two possibilities:

(a) Pro Rata (majority): The court will instruct the jury to apportion fault against the settling party and the trial party and if appropriate against the plaintiff. The trial defendant only has to pay the percentage share attributed to them – a percentage based credit. The plaintiff may suffer as a result of improperly low settlement.

(b) Pro Tanto: The trial defendant gets a dollar-for-dollar credit from the settling parties. The trial defendant is often called upon to pay for the shortfall of the plaintiff’s settleor. If there is a low settlement from the other tortfeasor before trial, the trial defendant is victimized for the low settlement.

Takings Cases/Public Use

If you are a condemnee, you will be entitled to the FMV of your property and not subjective values like sentimental attachment to the property.

Historically, public use has meant one of two things:

1. Public use has meant what we think it would mean – highways, parks, etc. – things that are inarguably public uses. If you stand in the way of that expansion of the interstate, your property will be condemned.

2. In Berman, the Supreme Court expanded public use for blighted properties. In Kelo, the City of New London was in no way blighted nor was there any stereotypical public use to be executed. The justification was economic redevelopment. The Supreme Court said that economic redevelopment satisfied the public use requirement. But what they really said was, we are not going to second guess what the city planners of New London want to do. If they think that Pfizer’s entry as an employer is a sufficient as a public use, we will let them do it. Importantly, if a city wants to set a higher bar for public use, that’s fine too. Since Kelo, almost every state has responded in some fashion (particularly anti).

The tie in to just compensation is this: Some of the residents of New London had lived there all of their lives. Isn't it odd that they would be entitled to the same FMV as someone who had lived there 6 months – no sentimental or just recovery. A footnote in the Kelo case suggests that just compensation wasn’t before us and we leave that for another day. The only exception perhaps is if you have a piece of property for which we cannot establish a functioning FMV.
Review
· Compensatory Damages
· Problems in Evaluation
- What is a case really worth?
- Aggregate Litigation
- Impact of settlement with joint tortfeasors
· Takings
- Public Use


PROBLEMS IN EVALUATION

Trinity Church v. John Hancock (1987)

Special purpose/unique property case

Typically our benchmark for just compensation is FMV. What do we do in a property damage case when there is no FMV?

The church has been constructed for generations. Up until the John Hancock construction, the settlement of the building had been uniform. But because of the reverberations, there is a non-uniform settlement of the church. On the south side the building was broken into two parts.
The takedown value was $1,742,000. The court comes up with a formula to figure out what percentage of the takedown value was caused by the construction. 65% minus 26% or $672,538.

The Underlying Issues

The parishioners can still go to church every Sunday. Even though the building is compromised, structurally it is still safe. Is there a compensable loss?

John Hancock’s argument:

John Hancock is arguing; yes there may be some structural problems, but you still have a safe, functioning building and we shouldn’t compensate you anything. To give you $672,538 in essence, it would be a windfall

Trinity Church’s argument:

General and Specific Causation (you will need experts in two regards):

(a) General Causation: “More likely than not” is the standard
You will need an expert who will testify generally that PCB’s can cause colon cancer – typically an epidemiologist. Epidemiology is the science of the causative link between various diseases and environmental factors associated with diseases. We talk about statistics that are scientifically significant. In short, you will need an epidemiologist who will testify that generally PCB's are capable of causing colon cancer.

(b) Specific Causation: “Reasonable degree of medical certainty” is the standard
You will also need an expert to testify that your guy’s colon cancer was specifically caused by exposure to PCB’s as opposed to the fact that his father died of colon cancer or the fact that he eats a high fat diet or smokes or has other risks that contribute to colon cancer.
The question becomes: Should you be allowed to recover today for a statistically significant increased risk of future harm?

If the answer is no, let’s assume that you then have some other exposure later on to another toxic substance that can cause colon cancer and in fact you do get colon cancer and you sue the secondary exposure defendant but you choose not to sue the first exposure defendant. If that second defendant is now in the lawsuit, has the first exposure defendant gotten a windfall by not having to compensate you in any way for their part in the ultimate contribution to your disease?
If Hancock goes away and never pays any money, and construction project #2 comes along someday and construction project #2 takes it to the point of total takedown, and now they have to build a new church. At that time is it then fair to make the secondary construction project pay the entire takedown?

We have an excavation that has caused some compromise to this building. The fact of the matter is, the building may stand for another thousand years and never need any work. Or, another project may come along or other factors may come up which will lead to its takedown. If we let Hancock skate free and clear today we, at least, run the potential risk that a secondary actor will overpay for the damage they have occasioned.

In the personal injury context, we face these same issues. In most jurisdictions today, increased risk of future harm is seen to be a compensable tort damage especially if you can produce expert testimony that says that it is more likely than not that you will one day get that cancer, most jurisdictions do allow for compensatory damages for increased risk of future harm.

If you are in a jurisdiction that allows compensation for increased risk of future harm and you start that lawsuit against Amtrak, and Amtrak pays $50,000 for increased risk of future harm. Ten years from now you get colon cancer. How do you suppose the disposition of the increased risk claim will impact your entitlement to a now separate lawsuit for colon cancer? Amtrak would attempt to negotiate a full release for future claims as well. The secondary defendant will seek a set-off or a credit from the first defendant otherwise there would be double recovery. You want a partial release.

Medical monitoring and surveillance fund

In addition to being compensated for increased risk of future harm, the court may create a medical monitoring fund that allows people who are at increased risk of future harm to draw from the fund on an annual basis to get a full-blown physical as a prophylactic measure to cutoff any future disease. Does it sting less if the court directs the funds in a certain way?
If you represent Hancock, you are frustrated for paying this kind of money for this hypothetical future day. The whole problem in this case is that we don’t have a functioning FMV. What is ultimately valuable is that there are times as lawyers you have to suggest creative solutions to problems. There are no easy answers in this case – we can’t just go to a FMV chart and come up with a remedy. My PI analogy might be reasonable. The point I’m trying to make is a good judge without a lot of ego is probably going to ask the lawyers for ideas to fashion a remedy. One of the fundamental things you do as lawyers is to reason by analogy from the familiar to the new.

P31, N3: The church has no market value. Probably no one would buy the church. Cooley was founded in a church.

FLUCTUATING VALUES

Decatur County AG-Services, Inc. v. Young (1981)

What happens when values are changing over time? How do we fix compensatory damages when we have a commodity whose value is fluctuating over time?
Plaintiff has a soybean crop that is being decimated by grasshoppers. Plaintiff hires the defendant to do pesticide control and he does a negligent job. Plaintiff suffers a significant reduction in crop yield.

Plaintiff claims it was his custom to retain the crops until the following growing season at which time they would be sold. The value of the crops at the time of harvest is approximately $7 a bushel. The following growing season their value is somewhere between $8 and $10 a bushel. Where do we fix a loss?

The court says, at least where crops are concerned, time of loss is to be defined as value at time of harvest. The court does not allow P to speculate at the D’s expense despite the fact that this had been the custom of this farmer over time.

1. From the farmer’s standpoint, he wasn’t restored to his rightful position – he was arguably undercompensated
2. Had the crops the following spring been selling for $5 a bushel, he was also assuming the risk of a downside market. It just so happened that they were selling higher the next season.
3. P34: Zealously representing clients. At times, you have to know when to back off a bit. Does one side overreach? Suppose you defended D. You have just persuaded the court to fix damages your way. Pack your bags and go home. The lawyer for the defendant argues that as a proximate result of his client’s crummy work, he saved the P money – he didn’t have to spend as much harvesting; consequential savings. That’s a gutsy argument. Appropriately the court rejects the argument.
4. N3: Securities litigation. There are different approaches to fixing loss in security cases.
Vocabulary of Compensatory Damages
(a) Tort Case
1. General Damages in Tort:
- Subjective, non-economic damages. Designed to compensate for pain and suffering, emotional distress and hedonic (compromised quality of life) damages – e.g. damage to lungs has you tethered to an oxygen tank.

- Tort reform. P170, N2: The area most impacted by tort reform is general compensatory damages – e.g. caps on pain and suffering.
2. Special Damages in Tort
- Objective, economic, more tangible and concrete damages – e.g. hospital bills, lost wages, medical bills, – things for which you can document.

- Tort reform. Special damages in tort have not been subject to tort reform
(b) Contract Case
1. General Damages in Contract:
- Direct loss from breach, loss of the benefit of the bargain, expectancy.

- Neri: General direct damages: $2,579; lost profit on one boat.
2. Special Damages in Contract (more difficult to ascertain than in tort):
- Indirect, reliance, as a consequence of the breach. The most common phrase is consequential damages.

- Neri: $674 Retail Marine had to pay to insure the boat during the interim period.

- Buck: Recoverable if proximately caused by breach

- Meinrath: Problems of remoteness, lack of foreseeability
Neri v. Retail Marine Corp. (1972)
P enters into a contract with D to buy a particular boat. The purchase price is $12,587. He puts a de minimis deposit down originally. He comes to find out that if he puts down a more substantial deposit he can get almost immediate delivery.
He winds up putting 1/3 of the value down - $4,250. Then he takes ill. His illness compromises his financial position and he is no longer able to pay for the boat. He is seeking to rescind the contract and get his money back.
Retail Marine would like to retain the money. The boat in question is later sold to another individual. Retail Marine is a bulk seller and had Neri not breached this agreement, they would have sold two boats instead of one. The lost profit on one boat is $2,579 – the expectancy of the profit (general damages). Because Retail Marine had to continue to insure and store the boat, Retail Marine is also claiming reliance (consequential damages) of $674.

Background Issues: Consequential Damages
Mr. Neri is not an intentional or willful breacher. Should that matter in determining this case?
Henningsen v. Bloomfield Motors case – the ultimate contract of adhesion. Damages limited to replacement cost, waived recovery for any and all consequential loss – i.e. personal injury. “A sense of injustice cries out. This contract withdrew much and gave little.”
Do the Henningsens and the Neris have the knowhow, the wherewithal, in a contract setting to anticipate consequential loss? If this contract were between two merchants, Retail Marine would think about liquidated damages. Let’s put something in this contract that contemplates contingencies.
If you represented the Neris, why not make those arguments? Use your equitable ammunition. It fell on deaf ears here. If we add the two damages up we have $3,253. The original deposit was $4,250. We subtract $3,253 from $4,250 and we have $970 still outstanding. By giving Retail Marine $2,579 and the $674, have we in essence restored them to their rightful position? If Retail Marine were allowed to retain the $997, they would be unjustly enriched. We could characterize the $997 as restitutionary. The $997 goes back to Mr. Neri because if it doesn’t, Retail Marine would be in a better position than before the contract was entered into.
P56
Buck v. Morrow (1893)
Consequential Damage in Contract
The plaintiff is going to be using the property as pasture for his livestock. Two years into the five year contract, D decides to sell the property breaching the five year lease, P commences a lawsuit against D for essential two things:
First, the general or direct contract damages being sought by P is the difference in price between what they were paying in this long-term lease and what they would have to pay for replacement pastures.
The second damage P is seeking is consequential damages. They are making two claims for consequential loss:
1. As a result of D’s breach, P had to hire extra hands to tend to the herd while they were out looking for replacement property.
2. P is seeking the value of the diminution in their herd caused by P’s absence (similar to Hataley).
Consequential Damages in Contract
Historically courts have been hostile and skeptical of awarding consequential damages in K. Why is that? Assuming the parties are on an equal bargaining plain, those parties control their destiny. At the inception of the K, if they are worried about consequential loss they put liquidated damages provisions in the K that will contemplate contingencies – they don’t leave them to chance. You often see courts chastising the parties; why didn’t you put something in the agreement? Why are you asking me to award damages that you could have tailored in your agreement?
P57
Proximate cause language
The tenant may also recover as special damages such extra expense and damage, if any, as are the natural and proximate result of the breach. Whatever special damage naturally and proximately resulted to the appellant from the termination of the lease he should recover. If you get beyond the skepticism and the hostility, then the question becomes, are these consequential losses a natural and proximate result of the breach or, are they too remote, too speculative, or unforeseeable? It’s that classic tort language transposed into the contract setting. It was foreseeable that you would have to hire extra people, and it was foreseeable that you might lose some of your herd. The court was open minded to recovery of consequential loss.
P59, N5: Consequential damages are not awarded in eminent domain cases – FMV, nothing more, nothing less.
N6: !?, P63, N7:
There are a number of courts that when presented with consequential damage cases in contract are fundamentally irritated. Unless you can persuade the court that those damages were foreseeable and that the damages are not too remote, the court is not going to substitute its judgment for the agreement that you could have made.
Tort is about unanticipated harm. You don’t plan for the happening of a tort. The law is much more forgiving and open for compensation for harm that is unanticipated than it is for consequential loss in a contract setting whereby the parties control their destiny.
Spring Motors v. Ford (1985) NJ, J. Stewart Pollock
Ford ↘
Turnpike Ford↘
Spring Motors ↘
Economic
Spring Motors is contracting with Ford to make these customized trucks. Among the specifications are these Clark Transmissions. Dates are very important in this case. The trucks are delivered to Spring Motors in November, 1976. By as early as February, 1977 the problems begin to manifest themselves with the transmissions. Throughout the course of 1977 and 1978 there is a constant back and forth between Spring Motors, Ford and Clark about these transmissions. In the meantime, Spring Motors is incurring all kinds of expenses – loss of profits, towing, repairs, etc. Ultimately it gets to the point where Spring Motors, who had earlier leased the trucks to Economic, basically says to hell with it and they sell the trucks to the lessee for a highly discounted price.
They decide to approach their attorneys about this matter in December of 1980. A few weeks ago we talked about how important it is to know how to characterize a lawsuit for purposes of statutes of limitations. This lawyer does a little research about this freak hybrid, born of this illicit intercourse between tort and contract. There’s an ambiguity in the law as to whether this case should sound in contract or tort.
We are going to get the court to articulate when a case is particularly held under the UCC or in tort. If we can characterize the harm in this case as tort based, under the NJ statutes, the SOL for property damage in tort is six years. We would be well within time if that’s the genesis of this claim.
Know these points:
1. Know your jurisdiction’s applicable SOL’s so that when a client approaches you, you are equally conversant with potentially multiple theories on which to rest your case. If a suit has been time- barred under one theory, it may be viable under another.
2. Nature of the Loss. This is a case that we would characterize as a products liability lawsuit involving direct economic loss. There really isn’t any property damage. This is our first non personal injury products case that we have read. It’s a case of direct economic loss meaning simply that you paid full value for a product that in its defective condition is not worth as much. In a case of direct economic loss that is litigated between two commercial entities, Justice Pollock concludes that the appropriate remedy is under the UCC and therefore time barred. What if a consumer suffers direct economic loss at the hands of a commercial entity? The majority of jurisdictions label that as a UCC claim. A small minority of jurisdictions allow that consumer to sue in tort. If you are doing a products liability case in which two commercial entities of relatively equal bargaining power are litigating over economic loss, you’re going to bring that case as either a 2-314 or a 2-313.
3. Limitation on Damages. Why do we care whether this is a UCC remedy or a tort remedy? In a tort world, you don’t have to worry about all this UCC stuff. All you have to do is prove causation. P9, HN4: From the perspective of an injured party, strict liability generally provides a more congenial environment than contract principals which may prevent recovery because of things like privity. UCC Disclaimers: 2-316, 2-719(3), 2-725, 2-607. Under 2-316, if a disclaimer is conspicuous and unambiguous, it is generally enforced. 2-719 talks about limitations under consequential damages. This is what the Henningsens ran into. There is language in paragraph (3) that says limitations on consequential damages in the case of consumer goods is said to be prima facie unconscionable. That’s good news. Today, the Henningsens could quite confidently point to (3). 2-725, that’s the four-year SOL. This is a limitation because the equitable discovery rule does not apply to the UCC. Under 2-607, the injured person must give the manufacturer reasonable notice of breach (Greenman v. Yuba Power).
4. If the claims by Spring Motors had not been time barred, what would the remedy have looked like? The court in this case ultimately concludes that there is no claim. But Justice Pollock in dicta goes on to discuss what if they had not been time-barred. “Presumably the price that Spring Motors paid for the trucks reflected the fact that Ford was only liable for repair or replacement of parts. By seeking to impose the risk of loss on Ford they are seeking to get a better bargain then the one they made. As between commercial parties, the allocation of risks in accordance with their agreement better serves the public interest than an allocation achieved as a matter of policy.” In other words, had they been able to recover, we would have held them to the terms of this agreement. We would not have allowed them to recover consequential loss. We would have enforced the disclaimers and the limitations. We would have taken 2-316 and 2- 719 seriously. We would not have allowed Spring Motors ex post facto to try and hammer out a better agreement than the one they made initially.
5. Had the claim not been time barred, would Spring Motors have had a remedy against Clark with whom they were not in privity? There is no privity between Spring Motors and Clark. Justice Pollock talks about Winterbottom – the stagecoach case. In a case of personal injury, privity is not a bar. What about economic loss. Justice Pollock says it would not have been problematic. The lack of privity would not have frustrated a remedy against Clark and they been timely. That is the majority position.
6. Page 15 of decision: The demarcation of duties arising in tort and those arising in contract is often indistinct, but one difference appears in the interest protected under each set of principles. The purpose of a tort duty of care is to protect society's interest in freedom from harm, i.e., the duty arises from policy considerations formed without reference to any agreement between the parties. A contractual duty, by comparison, arises from society's interest in the performance of promises. Generally speaking, tort principles, such as negligence, are better suited for resolving claims involving unanticipated physical injury, particularly those arising out of an accident. Contract principles, on the other hand, are generally more appropriate for determining claims for consequential damage that the parties have, or could have, addressed in their agreement. Spring Motors and Ford should not have left their damages to chance. They should have sat down and hammered out a liquidated damage clause. If I fail to do that, how dare I ask the court to rewrite my contract for me and give me a better deal?
General Damages in Tort: subjective, noneconomic loss – i.e. pain and suffering, emotional distress, hedonic or quality of life damages. General damages are the most fertile source of the tort reform movement. Caps on general damages are the most prolific source of tort reform.

Specific Damages in Tort: objective, economic loss – i.e. hospital bills, medical bills, lost wages – things that are tangible, concrete. A P can come forward with documented proof and are immune from tort reform.

General damages in K: the direct result of the breach of the K. We often call general damages in K expectancy loss or benefit of the bargain loss. The $2,700 representing the profit from the sale of a boat in Neri was expectancy damages.

Special Damages in K: more difficult and commonly referred to as consequential damages. They are a consequence of breach. They don’t arise directly from the breach, but rather as a more distant consequence of the breach of K.

Some courts, as in the cases for today, look to see whether the consequential loss was foreseeable. Was it too remote or speculative? We take tort language and transpose it into the K setting. As long as that consequential loss is not too remote, as long as it’s foreseeable, we see courts allowing consequential damages despite the fact the parties did not include any liquidated damage provision.

Interplay Between K and Tort-based Remedies
When should I sue out a case in tort and seek a tort-based remedy and when should I sue out a case and seek a K-based remedy? (Spring Motors)

If you represent someone for a claim of economic loss (a defective product but no injury to person or property), it will be pursued under the UCC. You can avoid the “booby-traps” of a UCC claim if you sue in tort but if it’s purely economic harm, you will be confined to the UCC world.

Potential Range of Damages

The potential range of consequential loss in a K case tends to be more truncated or limited than it is in a tort-based case. A tort and the injuries that arise from it involve unanticipated harm. An actor breaches a duty that he owes to society and you are the hapless victim, your injury is unanticipated. Fundamentally we are more inclined to allow a broader array of consequential loss in a tort based setting as opposed to a K based setting where the duty of the legal system is to enforce promises freely made between consenting parties. K based system enforces promises freely made between consenting parties. Punitive damages in a K-based case are unlikely.

Limitations on Damages – Liquidated Damages

P63

Meinrath v. Singer Co. (1980)

P, who admittedly was entitled to bonus compensation. The bonus compensation was wrongly withheld. P is claiming that he needed the money to fund enterprises in which he was engaged. Since he didn’t receive the money, the enterprises flopped. The question becomes, what is he entitled to? Is he entitled to the value of the bonus money that was withheld plus whatever interest would have accrued thereon, or should D be responsible for the consequential losses that he has suffered now because his business enterprises have run into trouble? The court says P is not entitled to consequential damages:
“[W]e hold that as a matter of law plaintiff’s consequential loss is too remote from the main injury to be compensable and too speculative to be ascertainable; plaintiff is barred from recovering such damages.”





We saw that language in the Hataley case. The court chastised the P for failing to plan for contingencies. He should have put a liquidated damages clause in there. We saw that language in the Spring Motors case – if you were so concerned about losses, you had ability to control it. P seems to be a sophisticated individual. This does not appear to be a Henningsen type of situation of a contract of adhesion.

Bank loan hypo: Your lender negligently failed to complete the transfer of funds in order to close on your new house. You’re not able to close and your sale contract falls apart. A week later you enter into a new contract but the interest rate rose .5%. If the bank had actual knowledge of your reliance interest, then that will often tip the balance in your favor for consequential damages.

P59, N6: The author suggests that some of the hostility towards consequential damages is waning. EXAM: If analyzing consequential damages, you should inform me of the historical hostility, but the hostility can be overcome so long as the consequential loss is not too remote or too speculative.

P67, N8: Campbell v. State Farm. Another exception to the rule of no consequential loss flourishes against insurers for bad faith refusal to settle. If the insurer refuses or delays in bad faith knowing it is liable, P can sue not only for interest but for consequentials, emotional distress, and punitives. The big recoveries are for emotional distress and punitive damages.

(a) Liquidated Damages – Enforceable or Penalty?

The fundamental question in litigation concerning liquidated damages clauses is: is the clause enforceable or is it an unenforceable penalty? Is the liquidated damages clause good, fair, or enforceable or in fact, a penalty provision that the court should either strike or reform?

In answering that question, the court looks at the relationship with actual damages. P86, N5: Farmers Export v. M/V Georgis Prois (1986) is case good example of liquidated damages being enforceable or a penalty. One thing court might do is compare the value of what the actual damages were with the numbers that were included in liquidated damages provision.

In Farmers Export, a ship gets tied up in a grain elevator beyond its assigned time so all the other ships are now backed up and can’t get in. There is a charge of $5,000 per hour for this type of circumstance. As it turned out, the actual loss was $5,184 per hour. The liquidated damages clause was almost a perfect prediction of what the actual loss would be.


(b) Liquidated Damages – The Relationship with Actual Damages

A very important potential argument in favor of enforcing a liquidated damages clause is to demonstrate to the court that the figures that you contemplated turned out to be very accurate of what actual damages were.

(c) Liquidated Damages – One Size Fits All or Variable for Different Contingencies

Ashcraft & Gerel v. Coady (2001)

Attorney Coady was the managing attorney at the firm’s Boston office. When he was fired he attempted to steal and sabotage the firm’s computer database.
Coady contends that where parties provide that one fixed sum be awarded as damages for any material breach, courts should “look askance (suspiciously) at the liquidated damages provision.”

Coady is arguing that the liquidated damages clause is one size fits all (and that is often suspect). But the court goes on to say that the liquidated damages amount was not unreasonable.

You have a better chance of enforcing a liquidated damages clause if the parties have calibrated the amount of liquidated damages for various contingencies as opposed to just saying, “Whatever happens – $100,000.” Look to see if there are different figures for different contingencies.

But, P fails here because the graduated amounts in the clause took into account his importance over time. By the time he does this he has become a significant person in the firm and he’s now on the hook for $400,000.

(d) Liquidated Damages – Unconscionability Doctrine

P87, N10: If you and I enter into a K and we have the foresight to put a liquidated damages clause in it, the primary reason we did that is to avoid litigation.

A liquidated damages clause is designed to prevent a lawsuit. Maybe courts should defer to intent of the parties. Is this a Henningsen case (K of adhesion) or a Spring Motors case (equal sophistication). If the answer is you are both sophisticated, maybe the court should say that it is not getting involved. Instead of court second guessing what the parties did, have a threshold plenary hearing on unconscionability. And if the court is satisfied that there was no oppression when the K was entered into, the court should wash its hands of the whole thing and enforce the liquidated damages provision.

EXAM:

1. Go through the four liquidated damages steps above.

2. Suggest that there is academic commentary and a fair argument to be made that courts should not second guess the intent of the parties and so long as it is satisfied that there is no suggestion of unconscionability, the court should generally defer to the wishes of the parties and not insert itself into the merits of the value of liquidated damages established by the parties.

P87, N10: Psychology of liquidated damages. Some parties may tend to be optimistic and greatly underestimate the risk of breach and therefore may not think enough about a liquidated damages clause. Why don’t parties always include liquidated damages? I think this note speaks to that. Human nature can be too optimistic. It can also be a long-standing history of gentleman’s agreements. That thing may never happen, one might think. Especially if people know each other and have had this happen before.






FURTHER LIMITATIONS ON DAMAGES

Avoidable Consequences/Duty to Mitigate
Classic Cases:

1. Employment discharge
2. Personal injury
3. Landlord-tenant (P100, N9)

Employment Discharge

Law Firm Hypo: Prestigious law firm offers you a job with a starting salary of $100,000. The firm reneges on the offer and you sue for breach of contract. You know you have some duty to find replacement work. You don’t have to get a job in something unrelated to what you are aspiring to. You don’t have to take per diem work at the courthouse either. However, if a sole practitioner is hiring his first associate and wants to pay you $40,000, when the replacement work gets closer, you have a duty to take the job.

P98, Ford v. Nicks (1989) Assistant professor fired from state college. The court said she doesn’t need to go back to high school teaching, nor go back to selling real estate but the court did find it unreasonable to turn down a comparable college job 70 miles away because she and her husband could relocate and split the difference in their commutes.

Personal Injury

Lansing Sidewalk Lawsuit: A girl is killed when forced to walk on the street because snow is covering sidewalk. The Michigan Supreme Court held the city breached no duty to maintain sidewalk. If you fall into a pothole and start a lawsuit for past pain and suffering as well as future pain and suffering, D will argue that you could go through an arthroscopic procedure that would restore most of your mobility and therefore eliminate all future pain and suffering and medical bills. In this context, you don’t have a duty to do anything – no one will force you to do it – but if a reasonable person in your shoes would have and you chose not to means you may get a fraction of what you are seeking.

If you can avoid some consequences of D’ wrongdoing, then your claim is not what you think it is worth. The burden of proof is on D to prove what the reasonable person would have done. Avoidable consequences in most jurisdictions are treated as an affirmative defense that must be pleaded in the answer. We take into account the risks of the surgery, side effects, costs, etc. As in Small v. Combustion Engineering (1984) some courts are willing to take into account a subjective standard whether it is a religious issue or a mental disorder.

P96, N1: Comparing notions of comparative fault with avoidable consequences and duty to mitigate. When you are talking about avoidable consequences you are talking about conduct on the part of the plaintiff after the accident. Comparative fault is P contributing prior to the happening of the accident and we compare P’s fault with the fault of the tortfeasor. Admittedly, both principals are limitations on damages. If the P is found to be comparatively negligent, his reward will be reduced by the percentage of whatever the comparative fault is. Similarly, with avoidable consequences, if P chooses not to take some measure and a reasonable person in his position would have, then his award will be limited as well, but P has no duty to do anything.
Landlord-tenant

P100, N9: You are in one year lease that was premised upon your expectation that you were going to graduate at a certain time, but then you accelerate your course of study and you graduate earlier. You contact landlord and tell him about your situation and that you want to leave. L says go ahead and leave but you will be on the hook for the rent. Common law treated a lease as a sale for a term of years and rent was still due. A number of jurisdictions no longer follow that rule especially in residential leases. In 2008, a strong majority of jurisdictions require a landlord to at the very least to mitigate in a residential setting.

S. J. Groves v. Warner Co. (1978)

P has been awarded a subcontract for concrete work on a bridge construction project. P uses D for supply of concrete material. D is not reliable. P continues to work with D but fall behind due to D’s bad business habits. D’s primary defense is duty to mitigate. One of the arguments D makes is that P should’ve taken advantage of this alternate supplier by the name of Trap Rock. Problems with that:

First, for most of the construction period, Trap Rock could not work because of licensing certification issues. Second, Trap Rock was equally available to D – if they are so great, why weren’t you using them?

P95

“Where a choice has been required between two reasonable courses, the person whose wrong forced the choice cannot complain that one rather than the other was chosen. This rule may not be invoked by one who breaks a contract as a basis for ‘hypercritical’ examination of the conduct of the injured party.

In other words, hindsight is always 20/20. One who breaches a K or one who injures you through tortuous conduct cannot focus on decisions you made in some hypercritical way. We cannot use the doctrine of avoidable consequences or duty to mitigate for a hypercritical examination of what P did or did not do.

This is an important response by a P in one of these cases who is being accused of not taking appropriate measures.

“Judge, it’s easy now for D, ex post facto, to make a hypercritical examination of what my client did in this case. That is not the standard for you to judge whether or not my client had a duty to mitigate. The D, a wrongdoer, cannot use this doctrine as a hypercritical examination of my client’s conduct.”

Offsetting Benefits

Returning to sole practitioner hypo: The money I get paid would be an offsetting benefit in my lawsuit against the original firm. Offsetting benefits are limitations on compensatory damages.

Defamation: as a result of being defamed you have lost income. If you have become a voluntary or involuntary public figure and you derive lucrative lecture fees, the D could argue that the lecture fees are an offsetting benefit.

Negligent sterilization operation: you end up having a child. Is the child an offsetting benefit?
Murder a fellow prisoner: in the wrongful death claim, D says he’s saving the state money by not having to feed him anymore.

Exception to Offsetting Benefits – The Collateral Source Rule

Collateral Source Rule: If the Collateral Source Rule is in effect, then a tortfeasor in a lawsuit will not be entitled to any credit whether it be dollar for dollar or percentage setoff, there is no limitation on damages.

It prohibits a tortfeasor from receiving any credit for collateral sources that have been paid to the P during the pendency of the litigation.

Slip and fall in store example. The plaintiff gets discounted services but is seeking the full value of her medical expenses. The defendant wants credit for discount. A classic Collateral Source Rule is with private health insurance. If the Collateral Source Rule is in effect, the defendant does not get any credit or reduction. The plaintiff gets totality for loss.

The Collateral Source Rule has been abolished in New York. (9/11 example – get smaller awards because they had life insurance – a collateral source).

Subrogation: Must pay back for specials out of a tort. A good P’s lawyer can get the insurance company to compromise.

Over half of the states have modified the common law collateral source rule by statute. The Collateral Source Rule is under attack.

Helfend v. So. Cal. Rapid Transit (1970): Rationales supporting the collateral source rule

P104

If you have the foresight and the wherewithal to buy insurance, you are penalized for your providence. In other words, if you are paying premiums for private insurance and someone else is not and both are victims of a tort, the prudent person is penalized for having to pay that money back.

P105

Point #1: The first justification for the collateral source rule is: “if we were to permit a tortfeasor to mitigate damages with payments from P’s insurance, P would be in a position inferior to that of having bought no insurance, because his payment of premiums would have earned not benefit.”

Point #2: Double recovery argument. In most circumstances, if Blue Cross pays your medical bills during litigation, and if you settle or win that case, Blue Cross has rights of subrogation over and against your tort award. Subrogation is the direct response to the double recovery argument. This is not always the case. In certain circumstances P may, through a gift or charity, recover more.

Wal-mart subrogation example: P was hit by a truck and Wal-mart’s health plan paid the medical bills. After fees and costs the victim had $400,000. Wal-mart’s lien would have wiped out her remaining settlement.
Point #3: Jury was unaware that the attorney takes a contingency fee. The court is saying that juries award verdicts and they don’t know that right off the top lawyer’s take a 1/3. If we do away with the collateral source rule, there goes another chunk. The point here is that the jury’s verdict is intended to put P in his or her rightful position and that verdict does not take into consideration all the hands that start to take that money away. A number of states have re-created collateral source rule.

P109, N9: Most of these cases are insurance but not always. NY doesn’t have collateral source rule. Fire that destroys synagogue case – insurance was inadequate but received $20M in charitable contributions. D says the charitable contributions should be considered as collateral sources.

EXAM: inform me that this is the subject of very active tort reform.

Economic Harm Rule
Pruitt v. Allied Chemical (1981): The Economic Harm Rule
As a result of the pollution, much of the harvestable species in the bay have been destroyed. Various categories of plaintiffs sue.
Economic Harm Rule: A party suffering purely economic losses occasioned by D’s negligent conduct, cannot maintain a tort action for such losses unless the party also sustained physical harm to person or property, or damage to a proprietary interest, or is otherwise entitled to recover on the basis of a separate tort, i.e. fraud.
To justify why fisherman recover and others don’t the court said, “The entitlement given these fisherman presumably arises from a constructive property interest in the bay’s harvestable species. Any P whose interest was in the water, i.e. commercial fisherman, and owners of boats, tackle and bait shops, and marinas. Those P’s can circumvent the economic harm rule and recover their lost profits because they have met the threshold of property damage. In other words, the court is saying if you’re a fisherman or the owner of a bait and tackle shop, when those fish are killed, you in essence suffer a property loss. It’s a legal fiction – nobody owns the fish. Once we give them a property interest, we get around the economic harm rule. They can recover because they have suffered property damage.
This is a negligence theory. The court also says that if we analyzed this case on proximate cause; the bay is polluted, who is going to suffer loss? It’s totally foreseeable that people other than fisherman will lose business. But the court says we feel this need to cut off liability and draws a line in the sand. How do we do that? With the economic harm rule. Either you have property damage or personal injury or you don’t. The case was ultimately dismissed on governmental immunity grounds.
9 times out of 10, the application of the economic harm rule will create limits of liability that are much more truncated than would they would be under a proximate cause analysis.



The avoidable consequences/duty to mitigate doctrine is an important limitation on damages especially in the context of employment breach lawsuits. The second classic fact pattern is in personal injury cases – i.e. if the reasonable person in your position would choose to avoid some of the consequences of D’s wrongdoing and you chose not to, your lawsuit will not be as worth as much. This is usually treated as an affirmative defense that must be plead in D’s answer.
The offsetting benefits doctrine in an employment setting, your income from the replacement job will be treated as an offsetting benefit in your employment breach lawsuit. This is seen in defamation lawsuits. You simultaneously have become a hot commodity on the lecture circuit and the fees you are making may be considered as an offsetting benefit. The exception to the offsetting benefits doctrine is the collateral source rule. if the CSR is still in effect in your state, a tortfeasor will not be entitled to receive any kind of setoff for monies that you have received from collateral sources (usually your insurance company) during the pendency of the litigation. No credit if the rule is in effect. Most states have abolished CSR.
The economic harm rule is a black and white line-drawing limitation on damages. If you are involved in a tort-based lawsuit, and you are seeking economic loss, in order to recover economic loss you must show that you personally have suffered either property damage or personal injury. If you can’t show it, you cannot recover lost profits. Pruitt case.
LIMITATION ON DAMAGES – SCOPE OF LIABILITY AND RIII
P115, N3; RIII Test: Negligent D’s are liable only for those harms whose risks made the actor’s conduct tortuous. In other words, let’s match the harm up with the foul – e.g. negligently hand a gun to a child and the child shoots herself; liability. That’s the type of harm that flows naturally from your act. On the other hand, if the child drops the gun on her foot and breaks her toe; maybe there is no liability. Instead, let’s analyze the type of harm that would have ensued and see whether that harm matches up with the foul. If it does – negligence liability. If it’s too wacky – no.
Caputzal v. Lindsay Co. (Supreme Court of NJ, 1966)
After a water softener is installed, plaintiff drinks coffee with discolored water and upon recognition of that fact has a heart attack.
The court rejects the plaintiff’s case and says there are two ways we can reject this claim: The Front Door (duty) or The Back Door (causation). In Palsgraf, Cardozo rejects Mrs. Palsgraf’s claim at the front door. Andrews said not only did they have a duty but once they set that stream of events in motion, we go all the way to causation.
Here, the court says the first way is through duty: “The question is whether liability therefore should be imposed on a manufacturer, seller or installer…with respect to other types of distant consequences.”
“Whether a duty exists is ultimately a question of fairness. The inquiry involves a weighing of the relationship of the parties, the nature of the risk, and the public interest in the proposed solution.”
Henke: Yes we talk about foreseeability but in real practical terms, this is what duty is all about.
In the instant case it is much too fanciful to say, from the point of view of fairness, that a reasonable manufacturer, seller, or installer of water softeners should be held to recognize that he would create this kind of injury – no duty to foresee these extraordinary circumstances.
Even if we got to proximate cause, the determination of proximate cause is to be based upon logic, common sense, justice, and precedent.
We would expect some type of gastric harm but not a heart attack. Looking back from the harm to the actor’s negligent conduct, it appears to the court highly extraordinary that it should have brought about the harm.
Misuse
The Larue case would not pass the RIII test.
Using plaintiff’s conduct on misuse is another very important way to trip up the plaintiff.
Typically, you are talking about one of two fact patterns:
1. Either the person is using the product in its intended way but they are pushing the envelope. Tractor lawnmower example.
2. Total misuse. Larue case.
The underlying theme of misuse cases is foreseeability. Most misuse cases are fact questions for the jury – the issue of whether or not a particular misuse was foreseeable – 9 times out of 10, it goes to a jury. Even Larue was found to be an issue of foreseeability before a jury. As a defense lawyer, how do you introduce misuse? It could be jurisdictional.
1. Introduce misuse to defeat duty. Hoover does not have a duty to manufacturer its product in anticipation of this kind of bizarre misuse. You should dismiss the plaintiff’s claim for failure to show that we even had a duty to anticipate this.
2. An affirmative defense in your answer. A lot of jurisdictions treat misuse as a separate affirmative defense to be plead in the answer.
3. Some jurisdictions have merged misuse into comparative fault. The defendant argues misuse in an attempt to elevate the plaintiff’s level of comparative fault.
4. Use misuse as an intervening and superseding cause of the accident (causation).
RII §§ 519, 520: Strict Liability for Abnormally Dangerous Activities.
519(2): Strict liability is limited to that type of harm the possibility of which makes the activity abnormally dangerous. Preston v. Foster (mother mink case): Strict liability is not the type of harm, the possibility of which makes blasting abnormally dangerous – it doesn’t match up. If the barn collapsed, then that would be a strict liability case.
P125, N4: Distinguish between general and specific foreseeability. Larue: does the manufacture have a duty to foresee: (1) that kind of misuse of their product; and (2) the ensuing injury? If you use a specific foreseeability test there is no chance that they would have such a duty. If you use a general foreseeability test maybe they have a duty. Everything is generally foreseeable. The Restatement is trying to move away from foreseeability to the extent that foreseeability is still a part of the RIII test but it is a more specific foreseeability.
P116, N2: Another nice statement of the economic harm rule. It is not just a factor to be considered. The usual application of the EHR is much more mechanical. If P did not suffer physical impact, P cannot recover no matter how foreseeable the harm or how direct the causation.
LIMITATION ON DAMAGES – PROXIMATE CAUSE
Public interest and public policy is the determinative factor in a proximate cause analysis and beyond which we will not extend liability.
Evra Corp. v. Swiss Bank Corp. (Posner 1982)
1. It doesn’t matter that the underlying theory is tort based instead of K;
2. Evra is the cheapest accident avoider;
3. Not only were they in the best position to avoid the accident, but also to avoid some of the consequences; and
4. Could have approached the bank about a damages clause.
Something at the Swiss Bank goes awry when Evra Corp. tries to make a payment to the owner of the Pandora. Evra Corp is aware of the snafu and they continue to work with the Swiss bank; however payment was made a week late.
The owner of the Pandora wants out of the contract and an arbitration panel agrees. As a result of the late payment, Evra Corp. is going to lose $2.1M from their sub-charter arrangement with this third party.
The question becomes, should Evra Corp. be entitled to recover this consequential loss? Posner ultimately says no.
This is a tort case. The Swiss bank was negligent. Posner focuses on Hadley v. Baxendale (failure to deliver a shaft in a timely fashion). Posner also talks about a Western Union case where P wants to put money on a horse and WU doesn’t deliver the money on time and the horse won. Both cases are K cases.
Consequential damages in K are more difficult to acquire because of liquidated damages clauses. A tort is an unanticipated harm. There is no K between Evra and the Swiss bank. Prudence required Hadley to have a spare shaft anyway since a replacement could not be obtained at once. If Evra Corp. is so concerned about money getting there on time, they could’ve approached Swiss bank about an agreement.
What else makes Posner not terribly sympathetic to Evra? Evra could’ve avoided all this. The cheapest accident avoider is of course Evra – send your money in earlier. They got away with it once. The P is in the best position to avoid a problem. If you put yourself in that position and something bad happens, don’t try and pin that on the other party. They didn’t really need a liquidated damage provision, had they been more prudent and transferred the money earlier; they would not have been in this pickle.
Why are we so less forgiving of Evra than the P in Groves? The amount of care that they take should be a direct function of both the probability of loss and the magnitude of that loss. If the Swiss bank had actual knowledge of the purpose for which Evra so desperately needs this transfer, the bank could adjust their level of care (B) if they knew about the P’s PL.
Tort allows for a wider array of loss. The point is that even though the tort did not justify a remedy, I would suggest to you that in many cases it would.
The banks negligence ultimately goes un-remedied.
Per Diem – General Tort Damages (this goes in week 2 outline)
Where a number of jurisdictions allow the lawyer to make a so-called per diem argument in an attempt to more principally quantify a person’s pain and suffering. What is a day in my client’s life worth in terms of pain and suffering?
Debus v. Grand Union Stores (1993)
A pallet of canned pet food fell over onto P and she suffered injuries resulting in 20% disability.
P is seeking special damages for medical care and general damages for pain and suffering. Her lawyer wants to give the jury a per diem breakdown of what her pain and suffering is worth on a daily basis. The court accepts the per diem argument.
1. The majority of jurisdictions allow the per diem argument to quantify pain and suffering.
2. However, most jurisdictions require that the trial judge give the jury some kind of limiting instruction explaining to the members of the jury that per diem information is not to be considered as evidence in the case. It doesn’t rise to that level of significance in the case.
3. If you are a defense lawyer in a jurisdiction that allows the per diem argument, how concerned should you be about P’s lawyer making these kinds of suggestions to the jury? Limitations on Damages – The psyche of the Juror:
· Tort reform works on a legislative level.
· If a P’s lawyer plays fast and loose with numbers, suggesting to a jury that the amount should be $10M – it will blow up in your face. The jury is already predisposed to not giving you a remedy. To piss them off even more, make a per diem argument that overstates the case and makes you look like a pig. Use it in a reasonable way.
4. Not all jurisdictions allow the use of per diem arguments.



WRONGFUL DEATH
P153
Wrongful death is the ultimate problem in evaluating a case – what is life worth?
A wrongful death claim is statutorily based cause of action brought by someone who qualifies as a beneficiary under the statute and compensates that person for the pecuniary loss that they have suffered as a direct and proximate result of the death of their loved one. Pecuniary is elastic in this sense. It is a derivative claim. The beneficiaries claim derives from the wrongful death of their loved one.
Wrongful Death of a Child
A small majority permit dependents to recover for loss of “society,” which may include love, affection, care, attention, companionship, comfort, and protection – those intangible things that you can recover for the loss of a child. In the appropriate case, it can be a huge issue.
P160, N9: The relationship between parent and child may or may not be irrelevant. Some cases will fall apart like a cheap rug. The bottom line: when determining the value of the wrongful death of a child, evidence of the quality of the relationship between parents and child may or may not be admissible. Try to argue it both ways.
To what extent can you try and introduce evidence of the exceptional or prodigal abilities of your child? In most circumstances no – it’s too speculative. You should strongly assume that is not admissible.
Adults without Dependents
P153, N2: Unless the parents can show financial dependence on their deceased adult child, their case is worthless in the eyes of the law. As a matter of course, wrongful death statutes typically allow for the recovery of burial and funeral expenses. We now have tort reform statutes that say whatever advice, counsel, or advice that an adult child has with their parent(s) has no value.
Quality of relationships between husband and wife
P160. $0 verdict for the wrongful death of a wife and stillborn child where there was some evidence that the marriage had “difficulties,” and the husband remarried only three months later. I would treat this the same as the quality of life between parents and children; however, you probably have a better chance at getting in the relationship between husband and wife.
Remarriage
P102, N3. Your husband or wife is killed and you get remarried. What in the world do we do with that fact? In most jurisdictions evidence of remarriage is not admissible. Loss of consortium and inferiority can become wacky testimony.
P161, N12: 21 kids drowned in a school bus accident and their families bought expensive things with the money. “The money doesn’t help any of us. The money can’t give us back what we lost.”


Damages
Certainly monies for the maintenance of the family in the traditional sense. What percentage of the decedent’s income was going to maintain the family? Clothing, shelter, food, sustenance – that certainly comes under wrongful death.
Damages Outside the Scope of Wrongful Death
Not included under the wrongful death heading is emotional distress. The sorrow and grief of beneficiaries – that is not to be included under the general umbrella of wrongful death. A claim for emotional distress is separate and apart from any wrongful death action in the majority of jurisdictions. There is a good handful that does because courts have come to believe that no matter how much the judge instructs the jury not to include it, they do anyway.
Proximate Cause
In order to recover for wrongful death, the tort must be the proximate cause of the death. You must link the tort to the death or there’s no cause of action. This is not true for a survivorship claim.
SURVIVORSHIP
In a survivorship action, the person who is representing the interest of the decedent’s estate is an executor or executrix. The executor is the person who is bringing the survivorship claim. Because a survivorship claim is all about the continuation of the decedent’s lifetime claim. This is what about the decedent lost. What damages fall under the survivorship column? Whatever conscious pain and suffering the decedent suffered before he died clearly falls under the survivorship column. You do not need proximate cause.
1. If someone dies instantaneously, there is no survivorship claim. The threshold prerequisite to a survivorship claim is to show that in fact the person had some conscious pain and suffering before they died. Expert testimony is needed to prove that they did suffer and what is its value e.g. airline crashes.
2. Personal Effects – Clothing falls under this category.
3. The percentage of the decedent’s lost income that he would have used for his own maintenance. You take the total lost income over normal life expectancy, let the economists reduce that to its present value and then take whatever percentage of that that would have gone to the maintenance of the family, put that in the wrongful death column and whatever percentage of this person’s income that they would have used for themselves, that goes in the survivorship column.
This is where wrongful death and survivorship claims can become very unseemly. Often times we have very disparate interests here. Folks that qualify as beneficiaries for wrongful death they may be different people than who is in charge of the decedent’s estate. All of a sudden, somebody finds out they qualify as a beneficiary under a wrongful death statute and they realize they may come into some money. This makes for very interesting deposition testimony.
Example: A victim of med mal dies of an unrelated heart attack. Decedent cannot bring a wrongful death claim but can bring a survivorship claim. You can have one claim without the other. If death is instantaneous you still could have a wrongful death claim but not survivorship claim.
LIMITATIONS ON DAMAGES – TORT REFORM
“Blind men and an elephant”
In various versions of the tale, a group of blind men (or men in the dark) touch an elephant to learn what it is like. Each one touches a different part, but only one part, such as the side or the tusk. They then compare notes on what they felt, and learn they are in complete disagreement. The story is used to indicate that reality may be viewed differently depending upon one's perspective, suggesting that what seems an absolute truth may be relative due to the deceptive nature of half-truths.
Tort Reform
(a) Legislative enactments
(b) Psyche of the juror: A P’s lawyer has to be very astute during voir dire to make sure that he is picking a jury that will give them a fair shake.
(c) Hot button topics: P170, N2:
· Caps on damages
· Abolishing the collateral source rule
· Limiting or abolishing punitive damages
· Judgments paid over the life of the victim paying less for victims who die sooner but not paying more
· Abolishing joint and several liability
§ There are circumstances in which joint and several liability is terribly unfair, e.g. asbestos claims.
§ Some jurisdictions have abolished joint and several. Each D is responsible for the actual percentage share attributed to them by the jury. In those jurisdictions, where a D is absent or in Chapter 11, P does not recover the entire reward.
§ The threshold of liability approach (a reasonable approach). A number of jurisdictions require that a D must be assigned a minimum threshold of responsibility before they can be jointly and severally liable. Example: If D is 50% or more at fault, the P can collect 100% from them. The usual thresholds are 40-50-60%. Some jurisdictions only require the threshold for general damages and they retain full joint and several for special damages. At least that way P is assured of recovery for all hospital, medical, etc. but a stiffer standard to recover for full pain and suffering.
July 11: Additional hour of class for exam problems
July 25: Additional hour of class – two more essays and model answers
August 1 (week 13): Additional hour of class beginning review
TORT REFORM CONTINUED
P170, N2(e)
Different Approaches to Joint and Several Liability
1. Actual Percentage
In the jurisdictions that have done away with joint and several liability altogether, when a P gets a verdict in a tort suit, P can only collect the actual percentage share attributed to any one D. That’s not a big deal if you are able to sue all the D’s and they all have money. This becomes a big deal when a D is bankrupt, absent from the case because they are beyond the court’s jurisdiction, or perhaps is immune from liability, e.g. employer sabotages work equipment, P sues for design defect, the jury assigns fault but the employer is immune because of exclusive remedy.
2. Threshold Approach
A number of jurisdictions require P to achieve a certain threshold of liability against D before D can be held jointly and severally liable, e.g. 50% responsible. Note: These jurisdictions only require it for general damages.
3. Abolishing Negligence Type Cases
Some jurisdictions have abolished joint and several liability for certain types of tort cases and have explicitly preserved it for others, e.g. preserved for products liability, environmental tort, and other complex types of cases and abolished in routine negligence type cases.
(f) Frivolous Lawsuits
Remedy: Rule 11 sanctions.
(g) Limiting Contingency Fees
Flipside: Fewer attorneys would take cases; therefore not having their day in court. A number of states have sliding scales. As a P’s lawyer you do risk assessment. You predict what the likelihood of success is and there is a lot of risk involved.
(h) Shorten SOL or Eliminate the Equitable Discovery Rule


(i) Junk science debate
Daubert v. Merrill Dow. A Daubert hearing is held to determine the admissibility of an expert’s report. The Standard: In order for novel scientific evidence to be admissible, the expert’s report must be based upon underlying scientific methodology that is the kind that is reasonably relied upon and utilized by experts in the field. This is not just a federal court issue, many state courts follow it as well.
Rehnquist’s dissent: we are not “ologists”
Daubert v. Merrell Dow Pharmaceuticals (Supreme Court, 1993, Blackmun)
The junk science debate
Bad cases make bad law. Daubert was a bad case. For the Supreme Court to finally take a case on the junk science debate, they took the Bendectin litigation. The allegation in the Bendectin litigation was that Bendectin, which pregnant women took for morning sickness, led to certain types of birth defects, particularly malformed digits or limbs.
Even I would concede that the science supporting a causal relationship between Bendectin and birth defects was dubious. From a plaintiff’s standpoint, you could hardly have picked a less favorable backdrop for the US Supreme Court to make a statement about the admissibility of this kind of science.
The standard in these cases was always the Frye standard. Under Frye (1923), scientific opinions were not admissible unless they had gained general acceptance in the scientific community – the general acceptance standard.
In the intervening years, the Federal Rules of Evidence were drafted, including Sections 702 and 703.
The Frye standard was really a bean counting approach. How many studies had been done and what percentage of those studies support the plaintiff’s position? If it is only a minority of those studies, it is not generally accepted, and it’s not admissible.
With Daubert, the Court begins a shift away from simple bean counting and suggests to a trial court judge, who is faced with this determination of admissibility, to look instead at how the scientist/expert arrived at his or her determination. What was his or her methodology? Are their conclusions based upon reliable underlying data? Is this the type of methodology that most scientists would use and would find to be valid?
“Thus when a party proffers expert scientific testimony, the trial court has a vital ‘gatekeeping function’ – a threshold obligation to render a preliminary determination of both the (1) reliability (validity – is it a good methodology?) and (2) relevance (fit) of the expert’s reasoning or methodology underlying the testimony proposed.”

Henke: In the aftermath of Daubert, a lot of trial judges have taken very seriously the gatekeeping role that Justice Blackmun set forth.
Daubert Factors:
1. Testability. Has it been tested, or is it just theoretical?
2. Error rate. An acceptable known or potential rate of error.
3. Control Standards. The scientific techniques application was subjected to appropriate standards of control.
4. Peer Review. Whether subjected to peer review and publication.
5. General Acceptance. No longer the sole determinate, but this still matters.
Bendectin is a classic example of litigation driven science. When all you have is poking holes in the existing science, as opposed to doing new work that supports your claim, you are on very thin ice. The plaintiff’s experts could not show a causal connection between Bendectin and birth defects. They could only testify that Bendectin was capable of causing birth defects, not that the drug in fact (or more likely than not) caused the plaintiff’s birth defects.
The Federal Rule of Evidence 702: The Daubert Amendment
1. Whether experts are “proposing to testify about matters growing naturally and directly out of research they have concluded independent of the litigation, or whether they have developed their opinions expressly for purposes of testifying.” Is the opinion based upon preexisting research of the expert or did this expert have any opinion about this until the litigation began and he was asked to be an expert and put together a theory? Is it preexisting or litigation driven science?
2. Whether the expert has unjustifiably extrapolated from an accepted premise to an unfounded conclusion.
3. Whether the expert has adequately accounted for obvious alternative explanations. Negating other causes/possibilities.
4. Whether the expert “is being as careful as he would be in his regular professional work outside his paid litigation consulting.” Forensic work as opposed to their regular work: Is there some suggestion that this expert might have a different standard for his or her forensic work than he or she would have with their patients or with other non-litigation clients? A cynical but realistic factor.
5. Whether the field of expertise claimed by the expert is known to reach reliable results for the type of opinion the expert would give. For example, an expert is doing animal studies – are animal studies a reasonable underlying methodology by which to arrive at the conclusion that is being offered?
If you are going to be products liability lawyers or toxic tort lawyers, this is your bread and butter. It is going to be hugely important.
“Abuse of Discretion” standard of review. If a district court judge throws out your expert, and you take that up on appeal, the Joiner case (a Daubert progeny case) does not give you much confidence that the appellate judge is going to reinstate your expert.
Rehnquist’s dissent in Daubert: With all due respect, we are not epidemiologists, toxicologists, or pharmacologists – pick your ologist – we’re not any of them. Rehnquist questions trial court judges having this active gatekeeping function. What about the Seventh Amendment? A right to a jury trial? Access to the court system? To what extent should a trial judge usurp the role of a jury by making this pretrial determination that an expert report is inadmissible as opposed to allowing a jury to asses that expert’s credibility?
Assuming that a trial judge is capable of making a very fact-sensitive determination, I can see the Joiner rationale. Why should an appellate court, who didn’t see the expert testify, be probing of what really happened?
In Kumho Tire v. Carmichael, the Court ruled that Rule 702 should apply to all expert testimony including engineering testimony of the type ordinarily relied upon in products liability cases involving durable products.
Rule 104 Hearing (Daubert Hearings)
How this works: You file a lawsuit and file an expert’s report. The defendant receives a copy of the report, says this is junk science and they move to dismiss the report pursuant to Rule 104 or a Daubert Hearing.
The Daubert Hearing and ruling have effectively become virtually as case outcome determinative as a class certification hearing and ruling: once decided, a case either shrivels up and goes away, or becomes more dangerous to try. Practically speaking, they are every bit as case dispositive as a summary judgment hearing.
You are not going to get in front of a jury without an expert and if the judge bounces your report in a Daubert Hearing, it’s all over. If you survive a Daubert Hearing, and your expert report is admissible, the value of your case may have just doubled. Daubert Hearings are a trial within a trial.
(j) Supreme Court Jurisprudence: Punitive damages and Federal preemption
Federal Preemption is the hottest topic today in products liability. We know that federal law is the supreme law of the land. If federal law and state law conflict without reconciliation, then federal law will preempt the inconsistent state law.
Riegel v. Medtronic (2008 Supreme Court)
In its first significant preemption ruling of 2008, the United States Supreme Court in Riegel v. Medtronic voted 8-1 in favor of upholding federal preemption. The Supreme Court’s ruling resolved a question that has divided the lower courts for more than a decade:
Does the preemption clause in the Medical Device Amendments of 1976 (MDA) bar state common-law tort claims that challenge the safety and effectiveness of a medical device that received premarket approval from the U.S. Food and Drug Administration (FDA)?
Answering in the affirmative, the Supreme Court held that “[s]tate tort law that requires a manufacturer's [device] to be safer, but hence less effective, than the model the FDA has approved disrupts the federal scheme no less than state regulatory law to the same effect.” In tracing the path of federal regulation over medical devices, the Supreme Court noted that the premarket approval process adopted in 1976 under the MDA “imposed a regime of detailed federal oversight” that is “specific to individual devices” and “is in no sense an exemption from federal safety review—it is federal safety review.”
The Court pointed out that “the FDA may grant premarket approval only after it determines a device offers a reasonable assurance of safety and effectiveness.” Allowing Riegel to proceed with his state common-law tort claims would impose on Medtronic “different” or “additional” requirements from those imposed by the FDA premarket approval process and would disrupt the federal regulatory scheme. Thus, the Supreme Court held that Riegel’s claims were properly barred by the federal preemption provision in § 360k(a) of the MDA.
Warning Defects and Federal Preemption
When the FDA approves a warning for a pharmaceutical product, the evidentiary value of that warning is either:
1. FDA approval of a warning is some indication of reasonable care; or
2. FDA approval of a warning creates a rebuttable presumption that the warning was adequate but P can still attack the warning. P has to overcome the presumption.
3. In MI – must show company defrauded the FDA
For Exam: If discussing one of the topics on this list, i.e. collateral source issue, cap on damages, etc. Just let me know that this is a tort reform area. “The D in this case will argue that the CSR will lead to double recovery, it is a frequent target of tort reform and if the CSR is abolished in this case the D will get a set off for monies that P has received.”


Constitutional Debate Surrounding Tort Reform
P163
Etheridge v. Medical Center Hospitals (1989)
Wilson underwent surgery at the hospital to restore a deteriorating jaw bone. The hospital was negligent and caused severe brain damage with limited memory and intelligence. She is paralyzed on her left side, confined to a wheelchair, and unable to care for herself or her children.
Her medical specials are $1.9M. The jury returned a verdict for $2.75M. Given what this woman will have to endure for the rest of her life that is a reasonable verdict. One problem however: tort reform in the state of Virginia has capped damages at $750,000.
Does the $2.7M verdict shock the judicial conscience? How would you feel as a juror if that the verdict that you rendered was meaningless? In a sense, it’s like an advisory opinion.
Typical Argument Against Tort Reform: The Seventh Amendment
What kind of access to the court system do I get when my ultimate remedy is capped? Does that violate my right to a jury trial and full access to the court system when the remedy is fixed? The court rejects the Seventh Amendment argument: The Seventh Amendment gives you a right to a jury trial but it doesn’t give you a right to an unfettered remedy. The issue of remedy can still be decided by the state legislature. Henke: I don’t happen to agree with that but that’s the argument.
Procedural Due Process Argument (more favorable to Henke)
The Rebuttable Presumption line of Due Process: A cap on damages creates an irrebutable presumption that your claim can never be worth a certain amount. In other words, the result is preordained. What kind of procedural due process are your receiving when the results of that process are predetermined?
Separation of Powers Argument
The legislature interferes with the powers of the judiciary.
Justice Russell’s Dissent: Tort reform like this creates a special law in favor of one class of D’s. Health care providers under this system are a favored class and all other categories of tortfeasors, e.g. bandits, dog owners, golfers, inebriates, jailors, kidnappers, lawyers, etc. – all of those folks who don’t enjoy the cap are a disfavored class.
Smith v. Department of Insurance (1987)
Many sections of the Florida Tort Reform Act were unconstitutional.
Florida constitution: “The courts shall be open to every person for redress of any injury, and justice shall be administered without sale, denial, or delay.”
P174, N9 + P189
LIMITATIONS ON DAMAGES – REMITTITUR
If a verdict comes down that is so excessive that it “shocks the judicial conscience”, the defendant can make a motion for a remittitur asking the judge to reduce the number to something more appropriate.
Techniques
1. Compare and Contrast. Using precedential cases as a framework for whether or not a verdict shocks the judicial conscience.
2. Maximum Recovery Rule. In order to determine if Remittitur was proper. Under the Maximum Recovery Rule, the trial judge takes each measure of damages, i.e. past and future pain and suffering, past and future medical bills, permanent disfigurement and disability, and tallies them up. If the jury’s verdict is at or below what the court feels is a maximum recovery, then the motion for remittitur will be denied. On the other hand, if the verdict goes above what the court feels is a reasonable maximum; the court will remit it appropriately.
What happens if the judge grants remittitur?
1. If the original number is knocked down, take the lower number and call it a day (this is normally what you do).
2. Roll the dice and try the case again.
a) The new trial judge will not require you to re-try the liability portion – retrial will be limited to damages; or

b) The judge may make you re-try the whole case again – liability and damages
There is no tort crisis. Some verdicts are just wacky.
Instead of legislatures categorically deciding caps, let trial judges in individual cases say this one needs to be remitted. Trial judges are the institutional actors in the legal system who know what cases are worth – especially the experienced ones. State legislatures do not know what cases are worth. I am much more comfortable with the use of remittitur on an ad hoc basis to knock down those verdicts that are wacky as opposed to state legislatures that are beholden to all kinds of special interests saying categorically that no lawsuit is worth such and such.




Levka v. City of Chicago (1984)
As a result of a misdemeanor strip search, P is claiming a dignitary tort claim and that she has continuous and deep emotional trauma.
P187, N2: a list of dignitary torts
The jury returned a verdict of $50,000 which was reduced on remittitur to $25,000. Prior to P’s case, there had been 9 other cases of this nature. The verdict values ranged from $3,300 to $112,000. The court looks at P’s experience and compares and contrasts those to the other nine cases to see where her case stands on the spectrum of offensiveness.
If you were defending against the motion for remittitur, how do you argue all the cases that didn’t get filed? Wouldn’t we need a higher number to deter the police force from doing this again? The court was left with the impression from all the evidence that the jury was in fact assessing punitive rather than compensatory damages.
P could have chosen better fact witnesses to prove her claim. Her single isolated visit to a psychiatrist is inconsistent with her contention of severe trauma. The flipside argument: P is a strong individual and it only took one visit to overcome this problem. It strikes me as odd that she is being penalized for her fortitude. There may be other ways to deal with this, e.g. spiritually.
An alternative would be to have an omnibus trial on punitive damages alone and distribute it among the 9 women and punish and deter the police in one setting.
P189, N3
Even if you don’t have a punitive damage claim in these dignitary cases, make no mistake, the jury is often burying a punitive damage component into the damage award because of the offensive nature of D’s conduct.
Emotional Distress
1. Direct Claim; or
2. Bystander Claim
Direct Claim: In most jurisdictions you must show a physical manifestation of your emotional distress as a prerequisite to recovery especially if it is a negligent infliction of emotional distress. If you can show intentional infliction of emotional distress there is a good chance you may not have to show a physical manifestation because the D’s conduct is more egregious.
Bystander Claim: The Thing test. Requirements:
1. The P be physically and contemporaneously present at the source of the accident.
2. A realization that the tortuous misconduct is causing the harm. Example: A Civil Action. Among the claims brought by P’s were that the pollutants caused childhood leukemia. The parents brought NIED bystander claims which were rejected by the court under the second prong of the Thing Test reasoning that when the kids first became ill, the parents had no suspicion or appreciation of the fact that these illnesses were of tortuous origin. That kind of slow, developing disease lacked the emotional impact (as opposed to being hit by a car).
3. Close Familial Tie: Attempts to enlarge this prong have been unsuccessful.
P192, N3: How to characterize a lawsuit and Malpractice Trap. D videotapes himself and P having sex and distributed the tape. P sued only on NIED because IIED was excluded from coverage on D’s homeowner’s policy. Your failure to include a negligence claim in that complaint in contemplation of the insurance policy’s exclusion is a breach of professional care and duty. Breast Implant litigation: malpractice insurance does not cover products for strict liability claims. If you succeed in characterizing physicians as sellers and subject them to SL, the policy does not apply to the risk. You have got to be mindful of the practical ramifications of the theories you pursue.
P193, N5: Generally cannot get emotional distress in a contract case but most courts treat bad faith breach of an insurance contract as a tort opening the door to emotional distress and punitive damages.
Carey v. Piphus (1979) (Justice Powell)
A constitutionally based tort
A 9th grade kid who may or may not be smoking a joint. He is summarily expelled from school without a hearing.
Multiple Remedies
P wanted a declaratory judgment that his rights had been violated; injunctive relief to clean his record; and compensatory damages for past harm.
P argues that the violation of his constitutional rights is so offensive that compensatory damages should be presumed. P reasoned by analogy that what happened to him is analogous to what happens to a defamation victim – at common law compensatory damages were presumed – and should not have to show actual harm as a prerequisite to recovery.
His procedural due process rights were violated but could not show actual harm. He is awarded $1 in nominal damages. Unless he could show actual harm he was entitled to nominal damages.
P196
“As we have observed in another context, the doctrine of presumed damages in the common law of defamation per se is an oddity of tort law, for it allows recovery of purportedly compensatory damages without evidence of actual loss.” Gertz v. Robert Welch.
P201: Defamation and the Bar. The relationship between money that a defamation victim receives and the actual harm to them is often totally illusory.
Constitutionally keep in mind three things:
1. Public figure or public official involved in a matter of public concern. You have to identify the P and the type of concern. The P must show actual malice defined as a knowing falsity for a reckless disregard for the truth by clear and convincing evidence. If P can prove that, compensatory damages are presumed. If that person seeks punitive damages they must make the additional showing of common law malice. The difference between actual malice and common law malice example: I get an anonymous tip from someone and I report that to the newspaper without any further inquiry is actual malice. Add to that, that I have been attempting for the last six months to destroy you. Throw that in with the knowingly false statement and you have common law malice.
2. Private person in a matter of public concern. A state has two choices:
a) Actual malice
b) Require that person to show mere negligence and falsity
This person must show actual harm as a prerequisite to compensatory damages. For punitive damages P must make out common law malice as well.
3. Private person in a private matter need not show actual malice but the court has not said what he needs to show. At most a person would have to make out the Gertz standard – negligence and falsity of the statement but I think you could argue that there are no First Amendment concerns in the private affairs of private people and therefore I would argue that if a private person in a private matter makes out the prima facie elements of a defamation claim, there should be strict liability and presumed damages. If you can make out a defamatory statement that was communicated to a third party – you are good to go.
PUNITIVE DAMAGES
“The Joker in the Deck”
P729 Pinto Chart – Cost of Accidents: $49,530,000. Cost of Prevention: $137,500,000. Punitive Damages in Grimshaw: $125M.
You never know what is going to happen when a jury listens to this kind of outrageous conduct. What might be the impact on corporate behavior if we remove the joker from the deck?
Always ask yourself: If a company like Ford or Merck is willing to do outrageous things knowing that punitive damages are a possibility, what might they be willing to do in the absence of punitive damages?
Also keep in mind that statistically speaking that 1) punitive damages are awarded in a very small number of cases; and 2) to the extent that you get a punitive damages award, it is remitted in most cases. The specter of punitive damages remains a policing mechanism for potential misconduct. “The threat is stronger than the execution.” The threat is more important than the collection of punitive damages.
Grimshaw v. Ford Motor Co. (1981)
A 1972 Ford Pinto hatchback erupted into flames when it was rear ended. Thirteen-year-old Grimshaw suffered severe and permanently disfiguring burns on his face and entire body. Following a six-month jury trial, verdict for P: $2,516,000 in compensatory damages and $125M in punitive damages, $3.5M on remittitur.
Crashworthiness Doctrine
When you are talking about automotive litigation you will have 1 of 2 possibilities:
1. A design defect in the automobile causes the accident to happen, e.g. defective accelerator gets stuck and causes an accident; and
2. The design defect didn’t cause the accident but instead “enhanced” the injury. The car’s lack of crashworthiness enhanced the injury. Instead of suffering a normal injury, you have a catastrophic one or even death. Also referred to as second-collision cases meaning, the first collision is when you hit a tree. The second collision is your body colliding with the interior of the car.
Point 1: The Crashworthiness doctrine stems from the recognition that an automobile accident is a foreseeable misuse of a car. Accidents happen all the time. An accident is not an intended use of your car but it is a foreseeable misuse. The duty to design a crashworthy car stems from the fact that accidents are foreseeable misuses. That’s where the basic duty comes from.
Point 2: Burden of Proof. If you’re arguing in a crashworthiness case that you are paralyzed and you only should have had whiplash, is it the plaintiff’s burden to prove that but for the defect I’m only minimally injured and instead I’m paralyzed or does the defendant bear the burden that the alternative design you suggest, it wouldn’t have helped and you’d still be in the same condition given the dynamics of this accident. Who has that burden of either proving or disproving the enhancement? Third Restatement § 16 puts the burden on the defendant. If the defendant is unable to prove that enhancement – if they are unable to divide up the harm, they are on the hook for the severe injury. A majority of jurisdictions follow the Third Restatement on this.
Point 3: Should the plaintiff’s conduct in causing the accident count against him in crashworthiness case? If you were drunk and you drive into a tree. Your door is not sufficiently reinforced. Should the fact that you were drunk be something the defendant could use against you? I would argue no, because accidents are foreseeable drunk or not. Accidents happen, let’s see how the car reacts. Under the Third Restatement and the majority of jurisdictions, plaintiff’s conduct is fair game for the defendant to raise in crash-worthiness.
Point 4: These cases often involve that issue where reasonable alternative design made defeat the very nature of the vehicle. It comes up a lot in crashworthiness cases.
COMMON LAW CONSIDERATIONS OF PUNITIVE DAMAGES
a) Punishment and Deterrence. Exam: The first thing you state is “The primary goals of punitive damages are punishment for past outrageous misconduct and the deterrence of such conduct in the future.” Two types of deterrence:
i. Specific Deterrence
ii. General Deterrence
If Ford is whacked for punitive damages, are they meant only to deter Ford specifically or are they meant to generally deter automobile manufacturers from making similar decisions?
b) Standards for imposition: outrageous misconduct. The prerequisite for punitive damages is a standard of conduct that is far removed from simple or gross negligence – in a punitive damages case you have to show some really bad stuff. Statistically, this is why we don’t see a lot of punitive damages cases because the standard is quite high.
c) Vicarious Liability. Grimshaw and RII § 909 As in Grimshaw, if an agent of a corporation is engaging in outrageous misconduct, we have to answer the threshold question of whether the company is liable for the shenanigans of its agent.
Test for vicarious liability in punitive damages: R II § 909
a) The principal authorized the doing and the manner of the act; or
b) the agent was unfit and the principal was reckless in employing him; or
c) the agent was employed in a managerial capacity and was acting in the scope of the employment; (most stereotypical) or
d) the principal or managerial agent of the principal ratified or approved the act.
When a court considers the issue of vicarious liability for punitive damages § 909 tends to get a liberal construction and will able to fit in to one of those categories.
d) Isolated or repetitive Grimshaw P727 and P730, N8: Ford is facing an avalanche of litigation involving the Pinto. The court is saying that if we let $125M stand, what is that going to mean to victim #2000 when he gets to court? He might not even get a compensatory award. If this is a mass-tort setting, we have to be sensitive to the future victim, e.g. asbestos litigation.
e) Wealth of the Defendant. Most jurisdictions allow and some require that the jury be informed of the relative wealth of the D.
f) Use of Class Actions. P731, N9-10: 23(b)(3) Class Action: common questions of law and fact predominate over the idiosyncratic facts, i.e. different factual nuances in one case to make it more efficient. Here’s how it might work: When damning documents were discovered against OCF 20 years ago, we could have done a 23(b)(3) class action – one punitive damages trial against OCF. In a bifurcated trial, i.e. one phase for liability. Should OCF be subject to punitive damages for this outrageous conduct, if yes, phase two: what would be an appropriate amount of money to compensate the class? Multiplier: take the compensatory pot of money, divide it up and give a 10% multiplier for punitive damages. That takes away the lottery-like feel. 23(b)(1)(B) Limited Fund Class Action: “A gentleman’s bankruptcy.” Instead of all the first victims in line taking all the money, have yourself declared a limited fund at which point the court regulates the distribution of the remaining funds.
g) State Funds. A good number of states have created funds to which some percentage of a P’s punitive damages award goes to various state funds. Where do you take your contingency fee? Referred to split recovery statutes
h) Tort Reform. P734, N9: Exam: If you are talking about punitive damages, indicate to me that most jurisdictions have adopted the elevated level of proof – clear and convincing evidence. Ratio Caps: Can punitive damages become a planned-for event?
i) Need for compensatory damages. In most jurisdictions, courts require that there be some compensatory damages as a prerequisite for the receipt of punitive damages. In certain circumstances nominal damages might be enough.
CONSTITUTIONAL CONSIDERATIONS OF PUNITIVE DAMAGES
The constitutionalization of defamation makes sense to me. The constitutionalizaiton of punitive damages does not.
a) Browning-Ferris Industries v. Kelco (1989): punitive damages not limited by excessive fines clause of the Eighth Amendment.
b) Pacific Mutual v. Haslip (1991): Broker pocketing premiums. The Supreme Court said there is no bright mathematical line between what is constitutionally acceptable and what is constitutionally infirm. The court refused to make a formula or ratio. Also a vicarious liability case.
1. Procedural Due Process Analysis for Exam (see below)
I. Exacting Jury Instructions.
II. De novo review by Trial Court (Cooper).
III. De novo review by Appellate Court
2. Substantive Due Process
The US Supreme Court has setup a series of Procedural Due Process protections that a defendant is entitled to in a punitive damages case. It really breaks down into three steps:
1. The judge has to give a good jury instruction. We don’t want the jury to go into the jury room without guidance, if not it is grounds for an appeal. Leave nothing to the imagination of the jurors.
2. If a verdict is rendered, the Supreme Court in Pacific Mutual and more recently in Cooper, the trial judge is to do a de novo review (a fresh look) of the jury’s result. The Supreme Court has made a suggestion that the trial judge make a “probing review” to make sure that the jury listened to their instructions.
3. The appellate court also does a de novo review. In terms of process, the defendant gets two de novo bites at the apple – one from the trial judge and one from the appellate court. . I can’t think of another area of law where a D gets two de novo reviews.
TXO Production Corp v. Alliance Resources (1993): The ratio of compensatory to punitive damages was 526 to 1. It was really bad misconduct. The outrageous misconduct was exceedingly profitable and it allowed the Court to live with the ratio. However, you could feel the court squirming in their seats. No bright mathematical line.
Honda v. Oberg (1994): This case was sent back because the trial judge and the appellate court did not comply with the procedural due process requirements of Pacific Mutual – not for the amount. The case was remanded for lack of procedural due process. It was however a little step closer.
BMW v. Gore: The contract promised you a new car and you got a touched-up car. Arguably the Gore lawsuit is about a $5,000 economic loss. But some very clever lawyer in Alabama said wait a second, this isn’t a simple breach of contract, this is an active concealment, an actionable misrepresentation and I’m going to use this as a springboard to a punitive damage claim. If Gore is litigated as a simple contract case, it’s a $5,000 case. The lawyer that turned it into $4M punitive damage case. The jury heard testimony that BMW was doing this everywhere and used the out of state conduct as a multiplier for punitive damages. It was remitted at the State Supreme Court down to $2M.

The US Supreme Court creates three constitutional guideposts: BMW did not have fair notice of the severity of its punishment. Ultimately Gore got $56,000. There were 14 touch-ups in Alabama. 14 X $4,000 = $56,000.
Gore gives us three guideposts that ensure that the D receives substantive due process:

1. (The most important) The degree of reprehensibility of the D’s conduct (in this case, nondisclosure);
2. (The second most important) The disparity between the harm or potential harm, suffered by Gore (P) and the award (ratio of compensatories); and
3. The difference between this remedy and the civil penalties authorized or imposed in similar cases (least important). The extent to which the state legislature has passed either civil or criminal fines that are relevant to the outrageous misconduct.
Reprehensibility
Does the conduct result in economic harm or injury or death? In Gore it was not all that reprehensible because the harm was economic, not personal injury.
a) Profitability. How profitable is misconduct? Ford is profiting from making a car that was less safe than it should be. Was BMW profiting here? Yes, but not wildly.
b) Isolated or are thousands impacted?
c) Out of State Conduct. To what degree are other states admissible? To what extent can Dr. Gore introduce the fact that BMW is doing this all over the country? That was critical in the Gore case. Out of state conduct/information cannot be used as a multiplier. You can get it in generally for purposes of reprehensibility, but the jury cannot take that and use it as a multiplier for punitive damages
Ratio See State Farm, Exxon
State Legislature
What does the state legislature think an appropriate penalty is, i.e. for fraud? Look to the state legislature for guidance. Fact pattern in an exam (from Torts II): In a punitive damages case, if I give you a statute that says: Under the Consumer Fraud Act, a misrepresentation resulted in a $10,000 penalty. You might discuss that in terms of your overall punitive damages analysis. Is this an appropriate number when a state legislature says that this should be a $10,000 issue?
State Farm v. Campbell (Supreme Court, 2003)
The Gore Guideposts on steroids
Remarkable fact #1: The Campbells have per occurrence limits of $25,000. The lawyers for Ospital and Slusher say, we’ll take the policy limits ($25,000 each) and go home. Presumably because the Campbells have no assets.
Remarkable fact #2: State Farm says we’d rather litigate these cases. State Farm can buy these cases for $50,000. They are ultimately hit for $45M.
Remarkable fact #3: The relatively modest verdicts that are rendered. The combined verdict on these cases is only $185,849 for a wrongful death and catastrophic injury case. The numbers are not that great.
Remarkable fact #4: State Farm who first told the Campbells they have nothing to worry about says “you better think about selling your house.” Like a good neighbor, State Farm is there.
The nature of this case changes. It began as a simple personal injury case. Now Campbell is approached by the lawyers for Ospital and Slusher who start a bad faith claim against State Farm. If we get a verdict, we’ll take 90% and give it to the estates of the Ospitals and Slushers and you can take 10%
Ultimately $1M in compensatory and $9M in punitive damages. This is a case that could have gone away for $50,000.
The case goes up to the Utah Appellate Court who grants remittitur and knocks the compensatory number to $1M and knocks the punitive damages to $25M.
The case goes to the Utah Supreme Court and keeps the compensatory damages at $1M and goes back to $145M in punitive damages.
The case arrives at the US Supreme Court. Justice Kennedy takes us thru the Gore guideposts.
Guidepost 1: Reprehensibility. Where the Court really sees this case differently is on reprehensibility. Justice Kennedy acknowledges what State Farm is up to. State Farm’s conduct is not something that leads to catastrophic injury or death – it’s economic in nature. In order for out of state conduct to be admissible it must be “substantially similar” to what happened within the state. Henke: this is a severe limitation. It will be harder for plaintiff lawyers to get stuff in after Campbell.
Guidepost 2: Ratio. Decline a bright line ratio but let’s do it anyway. Single digit multipliers are more likely to comport with due process, while still achieving the State’s goals of deterrence and retribution, than awards with ratios in range of 500:1 or in this case 145:1.
Three lines are drawn:
1. If compensatory damages are “reasonable” apparently the highest ratio you could have is 9:1.
2. The conduct is outrageous but fortunately it led to very little harm. Example: Bed bug case. 20:1 ratio. This is an example of what J. Kennedy was talking about.
3. The outermost limits may be 1:1.
Guidepost 3: Other civil or criminal fines. Nothing to really add to State Farm.
J. Ginsberg’s Dissent: State Farm’s treatment of the Campbells typified its Performance, Planning and Review Program (P.P. & R.): “To prey upon the weakest of the herd”
The claims adjustment process was a profit center.
It was an unlawful scheme to deny benefits owed consumers by paying out less than fair value in order to enhance profit targets.
Falsify or withhold evidence on claim files.
Unjustly attack the character, reputation and credibility of a claimant and make notations in the claim file if it ever came before a jury.
Made up stories about Todd Ospital that he was speeding to see his pregnant girlfriend. (There was no pregnant girlfriend)
Deliberately crafted to prey on consumers unlikely to defend themselves.
Destroyed damaging bad faith material under orders from an attorney.

When remanded to the Utah Supreme Court they awarded punitive damages yielding $9,018,780.75. Utah was annoyed.
Supplement P114
Philip Morris v. Williams (2007)
Issue: To what extent can the jury take into account what Philip Morris did to other citizens of Oregon, i.e. “strangers to the litigation”?
When the jury is contemplating reprehensibility, to what extent can the jury consider out-of-state conduct? The jury tried to adhere to the State Farm ruling as much as possible. In State Farm, the company was treating people badly all over the United States, not just in Utah. Justice Kennedy in State Farm said the out-of-state conduct could only come in if it was substantially similar to what happened in the state and it could not come in as a multiplier as damages.
The amount of punitive damages in this case was $79.5 million. The trial court had reduced the number. When the case went up the court of appeals it was reinstated. The US Supreme Court was asked to address two things:
1. Whether or not the numbers were excessive based upon the ratio analysis from State Farm.
2. A jury instruction. Philip Morris had asked the court to instruct the jury as follows: You may consider the extent of harm suffered by others in determining what the relationship is between a punitive harm and the harm caused to Mr. Williams, but you are not to punish the defendant for the impact of its alleged misconduct of other persons who may bring their own lawsuits and have their own jury awards. Henke: Listen to how bad we are, take that into account but then do not punish us for it because we are probably going to get clobbered in other cases. The court rejected that proposed jury charge. This case is about the jury charge that led to the punitive damages award – not the number.
Justice Breyer draws the opinion and says, we are not going to speak to the excessiveness issue. All the Court basically talks about in this opinion is whether or not it was appropriate to exclude that proposed jury charge language. Breyer says it was inappropriate.
Here’s what the Court says the jury can do with testimony about other people: Harm to others shows more reprehensible conduct. Philip Morris does not deny that a plaintiff may show harm to others in order to demonstrate reprehensibility, nor do we. Evidence of harm to non-parties can help to show that the conduct that harmed the plaintiff also posed a risk to the general public. Yet for the reasons given above, a jury may not go further than this and use a punitive damages verdict to punish a defendant directly on account of harms that it is alleged to have visited on non-parties.
Justice Stevens says: This nuance eludes me. Henke: I agree. How does a trial judge instruct a jury, that Philip Morris not only killed Williams but also is killing a lot of other folks in Oregon? Listen to that under the “reprehensibility guidepost” but then do not punish Philip Morris based upon what they are doing other people.
I think the Williams case is very confusing. Once again we have dissents by Thomas and Scalia, both of whom continue to say in every punitive damages case, that punitive damages are none of our business. There is no constitutional issue here; all of this due process stuff we have created around punitive damages is crazy. The Court is much splintered on this. The court did not speak to the ratio issue in this case. This was all about a defective jury instruction and the case was remanded for retrial.
But for Cipollone, we never get to Williams. But for the Court’s preemption of the warning based claims and its preservation of the fraud claims, we probably never get a $79.5 million punitive damages hit because plaintiff’s lawyers never would have gotten into the mud and unearthed all these dirty documents.
INJUNCTIVE RELIEF
Up until now we have been talking about remedies at law. We shift gears to talk about equitable remedies.
A P who seeks an equitable remedy must demonstrate to the court why P deserves to be in equity. You cannot get to equity as a matter of right or a matter of course. In other words, you have to prove why a legal remedy would be inadequate. Why is money an inadequate remedy? Why do you need a court to exercise its equitable powers to enjoin an activity from happening? Prove to me why you need this.
Three Basic Categories of Injunction:
1. Preliminary Injunction
2. Reparative or Permanent Injunction
3. Structural Injunction
Preliminary Injunction
By definition you are asking the court to do something dramatic when there is very little information.
Humble Oil v. Harang (1966)
P seeks a preliminary injunction to prevent D from destroying records.
When the party who seeks an injunction shows potential irreparable injury, he has established merely one essential condition for relief. He must demonstrate in addition that there is real danger that the acts to be enjoined will occur, that there is no other remedy available, and that, under these circumstances, the court should exercise its discretion to afford the unusual relief provided by its injunction.
Contempt
1. Compensatory Civil Contempt – classic example: patent infringement.
2. Criminal Contempt: In a criminal proceeding, you get a jury, proof beyond a reasonable doubt, jail.
3. Coercive Civil Contempt: The judge grants an injunction, D violates injunction, then the judge creates a cat and mouse game. You’ll be fined $1,000 first week, $2,000 second week, etc. Or you’ll go to jail. The difference between criminal contempt and coercive civil contempt: In criminal contempt the D is punished for past misconduct with a jail sentence. Even if D agrees to comply, it’s too late. With coercive “the D holds the keys to the jailhouse.” D might go to jail, but as soon as he complies with the order D will get out. (Reporter example)
The threshold is to prove Ripeness
Ripeness:
1. Imminent threat of irreparable harm or injury; and
2. Why a legal remedy would be Inadequate.
Fear that D will destroy documents is not enough. To get over that hump and persuade the court to grant preliminary relief, you have to show a real propensity, i.e. that D has done it before. If they’ve done it before, they’ll do it again.
N9, P239: In Humble Oil, P’s attorney should have shown D had a demonstrated record of spoliation (spoil/destroy) of records: It takes one violation of a serious threat to get an injunction, and a second to get any serious efforts at enforcement. Of course, if that first violation does any harm, P will usually have an ordinary action for damages. Destruction of documents is an atypical context; human Ds do not generally get the free bite accorded the common law dog. Even in the discovery context, some courts have ordered all parties not to destroy documents. Henke: one of the reasons why P seeks an injunction is so that D thinks long and hard about turning on the shredder. Example: Under injunction and turns on shredder – held in contempt; no injunction – maybe there is spoliation, maybe there is not.
P252
Nicholson v. Connecticut Half-way House, Inc. (1966)
D wants to construct a half-way house which will house interesting folks. The folks in the community seek a preliminary injunction to prevent the construction.
Ask: Are they able to persuade the court that there is an imminent threat of irreparable harm and that a legal remedy would be inadequate. Here the answer is no.
If you are attempting to prove an actionable nuisance, as courts say, mere diminution in property value, standing alone is not enough to constitute actionable nuisances.
Exam: if you think the fact pattern doesn’t quite satisfy the standards for preliminary relief, it is preferred that you might say something like, although the court may be hesitant to grant this dramatic relief today, this does not mean that the court in any way prejudges the opportunity to come back at a future time for injunctive relief.
Nuisance Law and This Class
This is fertile territory for all sorts of remedies (and final exams!)
Nuisance: A substantial and unreasonable interference with one’s use and enjoyment of property that results in substantial harm.
Whether something is unreasonable will typically involve a balancing of the relative hardships to determine if the enterprise is unreasonable; thus, be subjected to injunctive relief.
Distinction between trespass and nuisance – trespass damages are presumed. In the context of nuisance, there are four remedial possibilities:
The standards for the imposition of injunctive relief
1. Injunctive Relief. Hold that the P is to be relieved from the harm by an injunction. Henke: despite whatever merits this enterprise might have, it’s too dangerous, too offensive, and we’re going to shut it down.
2. Permanent Damages. Hold that there is a nuisance for purposes of a damage action, but refusing the injunction – that is, the P must bear the harm but will receive compensation. Henke: Boomer case – damages arrived at after a balancing test. Yes it’s a nuisance but it employs half the town; there were significant capital investments to build the plant; and as long as the plant pays its way, we will allow it to operate.
3. No Remedy. Hold that there is no actionable nuisance and that the P must simply bear the harm as a consequence of living in an industrial society. Henke: in other words, if you want to build your house next to a landfill or a chemical plant, knock yourself out. But don’t try and get an injunction to shut them down especially if they are in an area that is zoned for heavy industrial use.
4. Grant Injunctive Relief, But Make P Pay (Spur case). There is a perfectly appropriate feedlot and a developer comes along and puts in retirement communities that grow closer and closer to the feedlot. The developer says I want an injunction. The feedlot says I was here first and my activities are appropriate. Both are fair arguments. The court fashions the remedy of I’m going to shut you down, but I’m going to make the developer move you. Grant injunctive relief but shift burden to P to move what has become an inappropriately placed enterprise.


Ripeness
N14, 240 – Ripeness is partly a matter of timing; unripe cases may ripen. It is sometimes said that the threatened harm must be imminent or even immediate. That the true only in the sense that ripe threats are usually imminent threats; a threat of long-delayed harm is likely to be contingent and speculative. But when it is possible to say with substantial certainty that a harm will occur eventually, and the facts are sufficiently developed for reliable decision, a suit to enjoin that harm is ripe (EX: Asbestos plant in neighborhood – harm will occur eventually.)
Marshall v. Goodyear Tire (1977)
P is seeking a national injunction for age discrimination case at one facility.
Rule: When you are seeking a preliminary injunction it must be as narrowly tailored as possible to only address the actual harm that is occurring. You cannot get some blunderbuss injunction that goes way beyond the scope of the harm. Because a preliminary injunction is such a dramatic remedy to begin with, if it is granted, you only get as much injunction as you absolutely need
Mootness
It is P’s burden to prove ripeness. It is D’s burden to prove that the need for preliminary relief is now moot for some reason.
United States v. W.T. Grant (1953)
The Clayton Act prohibits someone sitting on too many boards of directors. D sits on six boards and does so for a period of time in violation of the Clayton Act. Finally injunctive relief is sought.
As the hammer is coming down, “my bad, I’ll give up the directorships.”
Issue: If the wrongdoer voluntarily ceases in engaging in the wrong, does the voluntary cessation of the wrongdoing render the need for injunction moot?
No, not standing alone. Ceasing to do the wrong under the threat of an injunction, standing alone, does not render the need for injunction moot. The D must persuade the court that not only is he ceasing but he has no propensity to ever do it again.
The Supreme Court approach is correct (deferential to the trial judge’s feel of the case).
P248
The necessary determination is that there exists some cognizable danger of recurrent violation, something more than the mere possibility which serves to keep the case alive. The court bases its decision on all of the circumstances. The Appellate Court is very deferential to Trial Judge’s discretion – and unless there is a clear showing of abuse of discretion, the court should be hesitant. Even though the court wouldn’t have ruled the way the trial court did, they did not see any abuse of discretion. Although the actions were not moot, there was no abuse of discretion – dismissal is not bar to bringing another action if the situation warrants.
P250, N2: P’s win more voluntary cessation cases than they do ripeness cases because the past conduct hurts D’s credibility. Henke: if D has already done it, you’ve got propensity.
N3: Don’t lose sight of the fact that proving mootness is difficult because propensity has already been proven. P has the burden of proving propensity at the beginning of a case, but the D has the burden of proving mootness, and voluntary cessation of illegal conduct is generally not enough.
Exam: In a preliminary injunction, you must talk about ripeness. Also indicate the preliminary injunction should be narrowly tailored (scope). Don’t talk about mootness if it’s not there.
P257-260: Coercive Relief at Law – specialized writs that look a lot like injunctions, e.g. writ of mandamus – an order to a public or corporate official, directing him to perform a ministerial duty. A writ of mandamus has 2 limitations: (1) not available against a private individual; and (2) the duty must be clear and nondiscretionary – it is an equitable remedy meaning it must be inadequate remedy at law. Writ of habeas corpus – an order to a person holding another in custody, directing him to bring the prisoner to court and justify the prisoner’s further detention, etc.
Reparative/Permanent Injunctions – Timing
The critical difference between a permanent and a preliminary injunction is timing. The harm has yet to happen. You are trying to prevent the harm from ever happening. When you are at the stage of a permanent injunction the harm is happening and you are attempting to prevent additional harm.
Coexisting Remedies: If you are at the stage of permanent injunction, you may very well need compensatory damages as well because if the harm is accruing, getting an injunction alone may not be enough. We need to compensate for the harm that has already accrued.
Permanent Injunction
Bell v. Southwell (1967)
During an election between a black woman and a white woman, racially discriminatory things happen on election day. P loses and moves to overturn election with injunctive relief.
The district court judge does not have the temerity to overturn the election. The 5th Circuit issues a permanent injunction to overturn the election and have another.
P262-263
D’s main argument was a timing argument. D argues that P should have anticipated the outrageousness that was about to happen and should have taken legal action in advance of election day.

Laches
Henke: A SOL governs actions in a matter at law. Laches is what governs the appropriate timeframe within which to bring an equitable action. D is arguing that P waited too long. Unlike a SOL which is a concrete timeframe, laches is more elastic. We are talking about two things:
1. One party’s failure to act combined with;
2. The other party’s detrimental reliance upon that failure to act.
A case in equity will be time barred by the application of the equitable doctrine of laches.
The injunction in this case doesn’t address all the harm that occurred. It helps Ms. Bell get a reelection, but doesn’t address the folks who were discriminated against at the polls.
Forster v. Boss (1996) C.J. Richard S. Arnold
The Nine
P is purchasing waterfront property with a boat dock and a swimming dock. P wants the boat dock, doesn’t want the swimming dock. The seller represents to the buyer that P will have a licensed access to the boat dock and the swimming dock will be removed. At time of closing, neither promise had been fulfilled and come to find out there is only one license which the bosses own.
The Remedy
Through an injunction P gets the boat dock as well as compensatory damages ($12K) representing the diminution in property value for no water access and $10K in punitive damages for fraud.
The D’s argue that this is a double recovery.
How do you suppose that we got to this seemingly duplicative remedy?
P266
It does seem like double recovery – they got the dock and they got the money. However, the lapse of time was greater than one day here – about three years in fact. It is entirely possible that P’s sustained some sort of damages because they had to wait for the complete fulfillment of the terms of the sale.
The $12K ultimately would have been appropriate – not for the value of the dock but for consequential loss for a lack of water access. P’s lawyer didn’t argue it that way however.
If the remedy is to get an injunction, how do we satisfy the punitive damages prerequisite of compensatory damages when we no longer have a compensatory damages award?


P267
If it is necessary under MO law for some compensatory damages to be awarded in order to support any award of punitive damages, the District Court is instructed to award P’s compensatory damages of $1 on their fraud claim, plus punitive damages of $10K.
P269-270
Structural Injunction
These are cases in which a system or an institution is broken down and there is a long standing course of abuse, dysfunction, or maltreatment and a federal district court judge is called upon to fix that structure. A structural injunction can overlap with a permanent or preliminary injunction.
Irreplaceable Losses/Doctrine of Uniqueness
P363
Ways in which you can fulfill the inadequacy of legal remedy requirement. What are the justifications of why a legal remedy might be inadequate thus requiring an equitable solution. One of your arguments for equity is that basically the property that is being considered in the case is unique. You need an injunction because Blackacre is Blackacre.
Pardee v. Camden Lumber Co. (1911) – still good law today.
If your neighbor trespassing and is cutting your trees down, he shouldn’t be able to do that. You should be able to get an injunction to prevent him from doing that because if you want Blackacre with the trees on it, you are entitled to it.
This applies to both real property and in certain circumstances to personal property, e.g. someone about to destroy heirlooms (irreplaceable items), the legal remedy is not adequate and a court of equity will protect possession and title of the owner by exercising its powers.
P365 – Henke loves this statement. Use in a brief in a court of equity on why the court might want to exercise its equitable powers.
“An equity follows the law, and, as far as possible, supplies omissions therein, so far as may be necessary to the effectuation of substantial justice, it vindicates the right of an owner to enjoy his property…”
Henke: “Your honor, as both and as an arbiter of law and a chancellor of equity, your equitable powers follows your powers at law and as we know, equity often supplies and fills the omissions that law often cannot address. I would respectfully request an equitable remedy in this case your honor.”
Courts of equity fill in the gaps that courts of law cannot always address.

INJUNCTIVE RELIEF CONTINUED
Exam: Preliminary Injunction Analysis:
1. Ripeness: Equity will not act if there is an adequate remedy at law; equity will act only to prevent injury that is irreparable, i.e. irreparable at law.
2. Imminent Threat of Irreparable Harm; Why might a legal remedy be inadequate?
3. Narrowly Tailored (because it is such a dramatic request; You only get as much preliminary relief that you absolutely need – nothing more
4. Mootness (you may or may not have to talk about mootness) If D has ceases his unlawful activity, that will be a trigger for whether or not the application has been rendered moot. If the activity is ongoing there is no need to speculate about mootness. Keep in mind that just because the wrongdoer ceases their misconduct that alone does not render the action moot – you need more. The D will have to persuade the court that he is unlikely to engage in this type of conduct again.
Permanent Injunction
Much the same as preliminary relief, but if you are at the stage of permanent injunction, it will be quite likely that you will have compensatory damages remedy as well because the harm (or some harm) has already occurred. When you seek a permanent injunction, you are attempting to stop the additional harm from occurring. Be on the lookout for the supplemental remedy of compensatory damages to truly restore the P to their rightful position. See below for balancing test.
P363
Pardee v. Camden Lumber (1911)
We are creating a list of reasons why monetary damages might be an inadequate remedy; thus, justifying equitable relief.
WHY MIGHT A LEGAL REMEDY BE INADEQUATE?
Explanation #1: The matter at hand is unique. Real property is said to be unique. If you want specific performance of a real estate contract, you usually get it. As in the Pardee case, if you want your trees in Blackacre, you are entitled to those trees. Your neighbor cannot come onto your property and cut them down and then give you compensatory damages for the value of the wood.
The Bottom Line: When it comes to real estate, if you want Blackacre, you are entitled to Blackacre.
P365
Equity fills in the gaps that the law does not always cover. Do not confine the holding of this case just to real estate.
P370
N1: Equity will not hold unless there is an inadequate legal remedy – and equity will act only for injury that is irreparable that can happen at once
N3: Henke spent a “bit of time” on this note.
(a) IMPORTANT Pros and cons. Jenkins and Swann (a desegregation case that has taken 33 years to effectuate). Injunction has to be enforced over time vs. a damage judgment which is done once at a time. Injunctive relief is often non self executing. An injunction can take decades to implement as opposed to a damage remedy. An Injunction can be more taxing to the court system.
(b): Injunction is a greater intrusion upon D’s freedom vs. a damages case where assets are seized, wages garnished, BK, etc. If an injunction is ordered against you and you violate it, you may be subject to contempt and thrown in jail. You don’t go to jail for refusing to pay a tort award.
(c): Timing Issue. To prevent harm, the court must resolve liability before the harm has happened (Michelson case) – potential for hasty decisions (vs. damages which runs a leisurely course) If the harm has already happened, we know everything. If you are seeking damages for that harm, we know what happened and the lawsuit is an informed process. For an injunction, we don’t know anything yet, it’s all speculation. See also N3, 448: Backlog of cases, judge shortage = irreparable harm. You can get preliminary relief in equity. In a case for damages, there is virtually nothing you can do. A PI plaintiff who has no funds for medical care may suffer irreparable harm before trial but you can’t get any preliminary payment. Henke: (1) File a motion. A lot of courts will entertain an acceleration of the trial date based on exigent circumstances, i.e. client will be on the street, has no food, etc. (2) If you have multiple tortfeasors. For those marginal players (not the big D’s), approach their lawyers, I’ll take $15K today instead of $25,000 years down the road. By settling early is it a discount to D? Yes, but at least in part you stop the bleeding of your client. Insurance companies today are reluctant to pay you anything until you have a firm trial date.
(d): A granted injunction is by definition taking the D’s right to a jury trial which would normally be available in a damages case. Trial at law = jury trial; Trial in equity = bench trial. But how many D’s want a jury trial, or P a bench trial? Not very often.
(e): Economic View: Pardee case: how opposed to the cutting are you? If P doesn’t want an injunction but damages, he should probably go for injunction and have D buyout the injunction. Jury would give market value of timber taken in a damages case, but the timber may be worth more to owner. An injunction and its subsequent buyout may be a better assessment of the value than what a jury would award for the lumber. An injunction will lead to what the true value of the wood is to the D
Injunctive relief and its ultimate buyout is a better indicator of the value of the resource to the parties than a jury trial for damages for FMV. One fly in the ointment: transaction costs. If it’s going to cost a lot of money to negotiate the buyout, it defeats the very purpose of what they are trying to achieve.
Sanborn case example: D’s deed did not contain the restrictive condition to not build a gas station. Enjoin neighbor from building a gas station and then sell it to him.
P373
If the jury underestimates the market value, the landowner will be undercompensated. If the jury overestimates its value, the lumber company will pay too much.
Continental Airlines v. Intra Brokers, Inc. (1994)
WHY MIGHT A LEGAL REMEDY BE INADEQUATE?
Explanation #2: The inability to calculate damages (the most common).
“Where the threat of injury is imminent and the measure of that injury defies calculation, damages will not provide a remedy at law.” Damages are inadequate if there is no way to calculate them; therefore, if you cannot calculate damages, you need an injunction.
Continental published discount coupons which were resold to D. Continental later decided not to sell to D and D did not comply. P sought an injunction.
Henke: What’s interesting about this case is that it’s totally unclear what financial impact these discount coupons might be having on Continental’s overall revenue. More seats are filled; the last-minute flyer doesn’t get gouged.
P382: Professor Laycock: With respect to the irreparable injury rule, lawyers need to know it live, and they need to know it dead. Henke: 9 times out of 10 an injunction opinion will talk about the irreparable injury rule – even if, in fact, they were talking about something very different. If you practice in equity doing injunctive relief cases, you need to argue within the terminology. Boomer case. What motivates judges to sometimes say a legal remedy is adequate despite serious problems? Balancing. It is the balancing of the equities that is often the critical aspect of the court’s ultimate decision as to whether to grant equitable relief – not the buzzwords of irreparable harm but in fact this balancing as in the Oakland Raiders case.
Campbell Soup Co. v. Wentz (1948)
WHY MIGHT A LEGAL REMEDY BE INADEQUATE?
Explanation #3: Scarcity.
If a resource is scarce, no amount of money is going to replace Chantanay carrots. If they are so important to P’s product, they do not want money, they want their carrots. Could also argue uniqueness and the inability to calculate damages.
P and D have a long-term contract for $30 per ton of carrots. The price spikes to $90 per ton. D starts to sell contracted carrots to his friend. P then realizes that they are buying contract carrots from D’s friend at the spiked price.
P seeks specific performance against D; however, many of the carrots are irretrievably gone, and they seek compensatory damages as well.
D is a willful efficient breacher. The $30 per ton no longer reflected the true commodity price. Apparently D must have thought that he could breach this K, get sued for damages, absorb the blow, and still come out OK.
The court is suggesting that P is about to get specific performance, but P had a liquidated damages clause.
P385
P was very heavy handed with D and the K is unconscionable. On the other hand D was a willful breacher. If P is so unconscionable, we don’t want to give him anything. D is a willful breacher and maybe should pay damages of $60 per ton representing the spike in the market.
N2: P’s liquidated damages provision was $50 per ton. Did P outsmart itself?
General K damages vs. Consequential damages. If P could show a dip in sales (proximate cause) without Chantanay carrots, P may be entitled to consequential damages. An actor like D may not be entirely mindful of that.
P388, N1: Auctioneer Note: If the remedy is damages, D becomes the auctioneer. Wentz can decide how much he can sell the carrots for. An injunction puts P in the position of the auctioneer where they can choose whether to sell or keep the resource.
P393, N2: If you ask for specific performance from a party that has already screwed you over, doesn’t your very request bespeak the necessity for that remedy? Why would you ever seek SP from someone with whom you have a difficult relationship? Isn’t the request itself prima facie evidence of its necessity? If you are asking to be stuck in that relationship, it suggests that you need it. Making a party specifically perform their contract is the ultimate injunctive relief.
Specific Performance as a form of injunctive relief
Van Wagner Advertising Corp v. S & M Enterprises (1986)
The original owner of the building enters into a lease with P to use the building as billboard space. The original owner sells it to D who decides to knock the building down in conjunction with city redevelopment in Manhattan. The P has subleased the building using the billboard. P files an injunction.


P395
P argues specific performance. The response by the court regarding the uniqueness argument is that the word uniqueness is not a magic door to specific performance. Henke: you could’ve fooled me because it usually is a magic door.
P398, N3: The traditional rule is that damages are never an adequate remedy for the loss of real estate or damage to real estate. This rule is routinely applied to leases as well as to sales, and to all sorts of other claims about real estate.
This case is all about balancing the relative hardships. Specific performance is denied on the ground that such relief would be inequitable. Its effect would be disproportionate in its harm to the D and its assistance to the P. the NY Court of Appeals is not going to allow a billboard to stand in the way of the redevelopment of downtown Manhattan.
P440
LA Memorial Coliseum v. NFL (1980)
Balancing Test for Preliminary Injunctive Relief
1. Strong likelihood of success on the merits (the crystal ball element); Prove/persuade to the court that, if we knew everything, I would be successful on the merits.
2. Harm to P if injunction denied;
3. Harm to D if injunction granted; and
4. The Public’s interest in proposed injunction What impact might this injunction have on parties that are not part of the litigation? It may have no impact but we look beyond the litigants.
FULL ANALYSIS
1. Ripeness inquiry
- Imminent threat of irreparable harm
- Narrow scope
2. Mootness
3. Balancing Test
- Success on the merits
- Harm to P
- Harm to D
- Public’s interest
P443, FN6: Affirmative Defense of Waiver. Waiver applies when a party either intentionally or inadvertently has failed to raise an argument, has failed to include something in a pleading, and the failure to raise an issue at a particular point in time leads a court conclude that the raising of that issue has been waived presumably because your failure to raise it was detrimentally relied upon by your adversary.
P444, N2: If the loss would be irreparable after trial, why isn’t it reparable after trial? Courts at the preliminary relief stage routinely find no irreparable injury in injuries they would consider irreparable after a full trial. No prelim injunction today, but come back to us if the problem is ongoing. You haven’t proved irreparable injury today, but we remain open minded to you proving it in the future. Exam: If doing a prelim injunction analysis, talk about irreparable injury. If you do a permanent injunction analysis, you are also going to start to talk about irreparable injury; however, at the permanent stage your discussion is shorter because you are not speculating anymore – we know what happened. At a prelim injunction, ripeness is huge. Permanent injunction, the discussion is shorter.
N3: At the stage of permanent injunctive relief, I want you to talk about three things in balancing; Elements 2, 3, and 4 from the Oakland Raiders Test. There is no need to talk about the merits – you’re there. What’s the hardship to P if denied, hardship to D if granted, and if appropriate, the public’s interest. If the half-way house has been constructed, and we’re five years down the road, and people have been assaulted, harassed, etc., the seesaw is lopsided. We are using the same model absent element 1. At preliminary stage it’s an even seesaw, at permanent stage it’s lopsided and difficult for D to bring it back into balance.
Week 8 Outline – Balancing Test for Injunctive Relief
Email Exchange with Professor Laycock regarding the eBay case.
PERMANENT INJUNCTION
eBay inc., v. Mercexchange, LLC (2006) (Supreme Court)
I suppose that if you were a patent lawyer, representing a P whose patent was infringed upon, and you are seeking an injunction, it will behoove you to argue within the framework of eBay. BUT practically speaking, seeking an injunction outside of patent law, courts will always focus on the balance of the hardships.
J. Kennedy’s Concurrence – Henke: the most practical point
P51
Mercexchange is sitting on this patent with no intention of using. Somebody with the wherewithal comes by and Mercexchange holds them hostage with the idea. The buyout of the injunction becomes extortion. Henke: in these days of intellectual property, the notion that we ought to be able to negotiate a buyout may or may not be advantageous to the public at large in this context because all of us may suffer and pay higher costs if the patent squatters are holding companies hostage for their ideas.
FULL ANALYSIS FOR PERMANENT INJUNCTION:
Begin with a ripeness discussion:
1. Imminent threat of irreparable harm
2. The inadequacy of the legal remedy
3. Easier at the permanent stage then at the preliminary stage
Then go into balancing discussion of the three-part test:
1. Hardship to the P if denied;
2. Hardship to the D if granted; and
3. If appropriate, the public’s interest in the injunction.
Week 9 Outline – Choosing a Remedy
Lakeshore Hills v. Adcox (1980)
There was nothing in the bylaws and C.C. & R’s regarding having a bear. The board made an amendment after he moved in. A court will give great deference to covenants already in place; however, a stricter level of scrutiny is given (because they are frowned upon) to after adopted covenants which transparently address something against you.
The Bonding Requirement
Coyne-Delany Co. v. Capital Development Board (1983) (J. Posner)
(Govt’ excluded sub from contractor’s bid)
(a) Required at TRO or preliminary injunction
· A P who seeks either a Temporary Restraining Order or a preliminary injunction is required to post a bond

· A TRO is only issued in the most extreme exigent circumstances

· If a TRO is extended, it turns into a preliminary injunction. The TRO is carried over and transformed into a preliminary injunction or it is dissolved
P seeks a TRO to force the development board to include them in the bidding of the project. The development board requested a bond of $50,000; the emergency judge said a $5,000 bond was appropriate.
To the extent that you are unsatisfied with the amount of the bond, the Capital Board should have taken up an interlocutory appeal.
The litigation costs the Development Board $56,000 (close to the amount of the original bond) to let out the P.
(b) Forces P to take application seriously
The bonding requirement of Rule 65 is designed to make what the applicant is asking for very seriously – you should not be asking for preliminary injunction lightly. The bonding requirement exists to compensate the D or damages that they may suffer as a result of an erroneous grant of preliminary relief. If a D is dissatisfied with the amount of the bond, he can on appeal, ask the court of appeals to increase the bond. This applies to temporary restraining orders and preliminary injunctions
The bonding requirement recognizes that a trial judge, based on the limited record at the preliminary stage, may make a call that was wrong. At the permanent stage when the judge has more information, he reverses himself – it happens all the time.
(c) If the judge changes his mind or the case law changes, the original P is generally liable up to the amount of the bond
In this case, P is required to pay the $5,000 on the bond.
If there is a change in the applicable law after the preliminary injunction, is not always a good ground to deny cost and injunction damages but it is a legitimate consideration. The Bottom Line: most of the cases at a full-blown hearing if the judge made a mistake, you are still going to pay. It’s not a matter of good faith – the bond will be imposed and paid regardless of good faith (not an excuse to not pay the bond). Change in case law while case is in progress, then it is a legitimate consideration – the point is to argue this, regardless of whether it wins or not. Bad faith (fraud, malicious prosecution, etc.) – may need to pay more than the bond amount.
(d) The judge has discretion to waive the bond
N2, P455: Bonding companies will only bond those Ps who can pay – so poorer Ps may not be bonded. A mandatory bonding rule would make preliminary relief unavailable in civil rights and environmental consumer cases. Courts may exercise its discretion in these cases.
(e) Can liability exceed the bond?
N6, 458: Exceeding the amount of the Bond. Cap = amount of the bond. P liable if there is some independent ground of liability, i.e. malicious prosecution, fraud, abuse of process, etc. Absent those kinds of things, the amount of the bond represents the ceiling of liability. The classic fact pattern is where the court realizes that it got it wrong, and then the bond will need to be paid.
NOTE: A judge can control prelim injunction by not granting it today, but come back later, or he can require bond.
STRUCTURAL INJUNCTIONS
Definition: a remedy that addresses the breakdown of some system or some institution (Systemic Breakdown), and has been broken for a period of time or has become dysfunctional; a federal district court judge is called upon to fix it.
Examples: segregation, prison reform, discriminatory housing, labor disputes between union and employer, etc.
1. Broadest of equitable powers
Structural Injunction: This is where the equitable powers of a judge are most broad. Analytically, prelim and permanent injunctions are where it’s at.
N2, 290: School Desegregation – The Swann case. The nature of the violation determines the scope of the remedy. A district court has broad power to fashion a remedy that will assure a unitary school system. Requires continuing supervision, Swann = 35 years supervision. Remedy is so complex that it takes decades to interpret, enforce and implement. NOT narrowly tailored; in fact, it is the polar opposite), Mount Laurel, Labor disputes, Yonkers (later pg 790), Bagwell (Labor relations dispute in Contempt section later)
N6, 292: Milliken Detroit desegregation case. Compensatory Damages = training for teachers and administrators on how to perform in an integrated system. Be mindful of compensatory damages in both permanent injunctions and structural injunctions in addition to injunctive relief.
2. Federalism Issues and Separation of Powers
Ask: Is a federal district court judge in the best position for this remedy? Are the courts equipped to do this? Is this the most appropriate entity to oversee this remedy?
Missouri v. Jenkins (1995)
Through the years the FDCJ has ordered the state to pay massive expenditures (he had an agenda). See P296. J. Rehnquist said that it was not appropriate.
J. Thomas Concurring:
In his concurrence we sense this skepticism for the broad usage of equitable powers by the FDCJ in these circumstances. P300 “There is no general equitable remedial power expressly granted by the Constitution or by statute. We ought to be reluctant to approve its aggressive or extravagant use.” Henke: a far cry from Swann. “The Framers did not intend federal equitable remedies to reach as broadly as we have permitted. There are two clear constraints in the use of the equity power – federalism and the separation of powers – derive from the very form of our government.”
P305, N4: The amount of the remedy is discretionary depending on which judge draws the case. Notions of federalism and separation of powers should be in the back of our minds when a FDCJ rolls up his sleeves and starts ordering vivariums.
P307: After all this test scores did not improve, Kansas City cannot comply with the order, and the district was in shambles.
THE RIGHT TO A JURY TRIAL
P1102
P370: Right to a Jury Trial. Equity and Law has been merged in Federal courts. There is no right to a jury trial if the remedy is equity.
Chauffeurs Local 391 v. Terry (1990)
A group of truckers are relocated to another facility. The company has financial problems and the relocated truckers are laid off. They start a lawsuit against their employer for breach of the collective bargaining agreement and against the union for breaching its duty of fair representation by taking the side of the original workers.
The company folded and the reinstatement argument is moot. The only remedy being sought now is money.
The aggrieved workers want a jury trial and the union opposes it. The Court must take into account two things:
1. The Historical Analog. The moving party must go back in time and look into the pre-merger historical analog and look to see what does the cause of action most resemble – an action in equity or in law? P argues that the union is like our lawyer; therefore, a malpractice case – an action at law with entitlement to a jury trial. D argues that they are like a trustee-beneficiary; therefore, an action in equity. Justice Marshall agrees with the union - EQUITABLE Remedy
2. The Nature of the Remedy Being Sought. Terry: seeking back pay, because reinstatement is no longer a possibility (takes us out of equipoise) – LEGAL Remedy. The nature of the remedy tips the scales and this part of the test (nature of the remedy) is more important than the historical analog. Henke: when you seek a restitutionary remedy, you are disgorging the D’s ill-gotten gain. A focus on restitution is on D’s gain, not the P’s loss.
P1106
EXAM TIP: When writing exam, do not discuss historical analogy – Terry will be tested in MC
Test to determine if the remedy is in equity or in law:
N3, 1117: Title VII: “Equitable” Relief. The union’s argument –– see argument on 1106 and Marshall’s handling of it. The very purpose of Title VII would have been frustrated by racist juries so Congress deliberately characterized a remedy as equitable to circumvent jury trials. Henke: I have to applaud the lawyers for the union in making that argument. The SC said that back pay under Title VII was deliberately characterized as equitable for that reason and we limit that notion to Title VII. Here, back pay is a legal remedy as money damages usually are.
P1107: J. Stevens. “The common sense understanding of the jury is appropriately invoked when disputes in the factor, the warehouse, and the garage must be resolved.” We ought to allow these workers’ peers decide if they are entitled to a remedy.
Dissent – J. Kennedy
The essence of this lawsuit is equitable. J. Marshall got it right when he said this most resembles a trustee-beneficiary relationship. Because this is an action in equity the money they are seeking, the majority is attempting to parse legal elements out of a claim that is equitable. He is suggesting that the remedy of back pay is almost like a tag on to what is an equitable cause of action for which there should not be a jury.
P1112, N1: Merger has changed the Seventh Amendment. Beacon said that any suit that could be filed at law must be. If legal and equitable issues are in the same case, you have to try the legal issues first to a jury. Equity courts have asserted “cleanup jurisdictions” to decide all issues in a case including damages. Example: Assume you had a case for permanent injunctive relief and you needed consequential/compensatory damages as well. In an equity cleanup jurisdiction the court would decide both the injunction as well as compensatory damages. This is no longer the case after Beacon which applies in Federal Court.
N3, 1112: In most state courts, Beacon is not followed.
N8, 1113 – decision of the judge or jury, whichever goes first will bind the other decision-makers
N7, 1113: Fact issues = jury; law issues = judge
N12, 1114: Are juries really that cumbersome? Sometimes a P will prefer a jury trial because they believe that juries are more likely to be influenced by sympathy for Vs and more likely to measure damages generously. Sometimes, D will prefer a jury trial in situations such as a D being sued by a large institution or police officers sued by suspected criminal.
Tort Reform: Faith and lack of faith in the jury system. When a person’s life is at stake, the jury is always right. When Exxon’s pocket is at stake, they always screw up.
Declaratory Judgment: Defined: to settle and to afford relief from uncertainty and insecurity with respect to rights, status and other legal relations
P511

DECLARATORY JUDGMENT
A declaratory judgment is an equitable remedy that is sought when a person is about to take an action and there is some underlying legal ambiguity or some legal uncertainty, and the person is thus fearful that their action may run afoul of the law.
(a) Equitable remedy
Nashville, Chattanooga Railway v. Wallace (1933)
Appellant argues that a tax on the storage of gasoline does not apply to him. He is seeking a declaration as to whether or not the tax applies to him, i.e. a declaratory judgment from the court.
1. Ripeness
The definition of ripeness here is different than for injunctions. Here, all that is needed is an existing case or controversy; NO need for discussion on irreparable harm or inadequacy of legal remedy.
2. Important in the context of insurance disputes
Example: my community has been subjected to a polluter contaminating the soil which occurred over 20 years. Now folks are getting sick and they get together to file a class action. Dow gets the complaints and its insurer points to something in their comprehensive general liability policy called a Pollution Exclusion Exception; therefore, no duty to defend or indemnify. Dow will now start a declaratory judgment action against its carriers over the different years the folks were exposed. If the court finds that there is coverage and millions is freed up in coverage, or conversely, the court says the exclusion is valid – it will be resolved in a declaratory judgment action.
N3, 515: The line drawn for whether a DJ will be granted or not has never been consistent, especially when ripeness turns on the likelihood that D will assert the rights P is challenging, or on the political consideration that underlie the case or controversy requirement, the ripeness doctrine is amorphous and unpredictable in declaratory cases as in any other context.
3. The importance of pleadings
You must convey to the court what the circumstances are in order for it to determine that the matter is ripe.
(b) Possible precursor to injunctive relief
If you get a DJ and the party is told to pay the tax and he doesn’t pay it? The further relief to come is an injunction. A violation of a declaratory judgment is prima facie evidence of an imminent threat of irreparable harm to show ripeness for injunctive relief.


RESTITUTION
1. Focus is on D’s ill gotten gain as opposed to the P’s loss.
Restitution:
• Important remedy that is often overlooked
• Restitution – unjust enrichment, disgorgement, ill-gotten gains
• Perspective is not from P’s loss; rather, it is from the D’s ill-gotten gains
• Fundamental shift of focus – what the D has gotten at the P’s expense, i.e. unjust enrichment that the D now enjoys.
• Thematic Qs in all cases: How much of that ill-gotten gain shall be disgorged? The Classic Restitution Case Olwell,: When D’s gain exceeds P’s loss. General Rule: The more conscience the wrongdoing and more culpable D, then more percentage of ill-gotten gain
• More difficult because of terminology – there are 10-12 restitution devices (ways to disgorge ill gotten profits), i.e. rescission, constructive trust, etc. – and it is further complicated because some are equitable and some are legal (discuss on exam if legal or equitable)
• If a lawyer fails to recognize that there is restitution, i.e. conversion and quasi contract = malpractice trap
• NOTE: The RIII of Restitution attempts to unify the vocabulary
• How much do we disgorge? All, a fraction, most? CULPABILITY: Be mindful of the level of wrongdoing of the D. Did they intentionally steal a patent, or were they merely negligent? How profitable was their wrongdoing? Culpability distinctions are essential to the court’s ultimate determination of what the appropriate amount of disgorgement is.
• Analysis: Ask, how bad is this actor? Was it inadvertent? An innocent mistake?
• Restitution by its very nature has a punitive feel to it. Maier case – 100% disgorgement when we don’t really know how much of they sold played a role in that. Restitution + punitive damages would be “piling on.”
• FOCUS: The more culpable the wrongdoer is, the more disgorged
N4, P566 – Fact patterns that lend themselves to restitution: Mistakes, Quantum Meruit, Judgments, Joint Obligations (Contribution and Indemnity – if someone is jointly and severally liable, then there’s unjust enrichment because the guy who underpaid is unjustly enriched and there should be restitution), Wrongful Acts (Fraud and Misrep are perhaps the most classic example of restitution)
N6, 568 – The law of restitution and unjust enrichment was developed through a number of more specific remedies and causes of action: quasi-K, constructive trust, accounting for profits, rescission, equitable lien, indemnity, contribution, replevin, ejectment, and more. Each had its separate origin and its own set of historical limitations. Some originated in equity and some originated in law. Some are labels for fictional explanations that enabled courts to reach just results without fully confronting some doctrine that stood in the way. The Restatement of Restitution in 1937 identified a general principle uniting these separate remedies.
Restitutionary Devices – Quasi Contract
Olwell v. Nye & Nissen Co. (1946)
P sold and transferred to D his one-half interest in an egg packing plant, but was to retain the egg washing machine. D steals it and uses it for his own benefit.
Bad faith negotiation blows up.
The underlying claim here was the tort of conversion, which would have ended up as FMV rental. Instead the lawyer went beyond and took it into the realm of restitution of Quasi-K. There was a property right – and even though there was no harm, P had a right to exclusive use. Good straight up Restitution Case)
1. Implied Contract at law, legal fiction See N3, P578 – Quasi-K is not a K and has nothing to do with enforcing agreements – it’s a legal fiction. The court implies a contract at law as a restitutionary device by which the D holds the benefit for the P.
2. Implied Contract in Fact. You distinguish a quasi contract with an implied contract at law from an implied contract in fact (situations where two people have an agreement in fact, but they are not sure what its terms were and the court tells them to figure out what they were).
3. But for the tort, no unjust enrichment. State: “The P elected to enforce (or collect on) the underlying tort of conversion through the restitutionary device of quasi contract.” IMPORTANT: Avoid talk of “waiving” the tort of conversion – See N3, pg 578 – because if the tort is waived then there is nothing to sue for; rather, you’re using quasi-K for the restitutionary remedy in tort. Instead of suing for P’s losses from the conversion or fraud, P sues for D’s gains from the conversion or fraud. N4, pg 578 – Must have 2 separate counts: 1 in tort/conversion and 1 in unjust enrichment (can’t go wrong in doing both). You might be wrong only pleading out the tort of conversion.
D never promised to pay – if he had, the suit would be on the actual K. Ds rarely intended to pay, and it does not matter if he explicitly intended not to. Money was more for unjust enrichment than conversion.
P571
D argues that P wasn’t using the machine and that he had put it to good use. The court responds: “The very essence of the nature of property is the right to its exclusive use. Without it, no beneficial right remains.”
There was a level of culpability here: “If the D was tortuous in his acquisition of the benefit he is required to pay for what the other has lost although that is more than the recipient benefited. If he was consciously tortuous in acquiring the benefit, he is also deprived of any profit derived from his subsequent dealing with it. If he was no more at fault than the claimant, he is not required to pay for losses in excess of benefit received by him and hi is permitted to retain gains which result from his dealing with the property.”
Malpractice Trap
Sue in restitution and not just in conversion.
How much to disgorge?
Your guiding light is culpability. How bad was this actor? If you have a conscious or intentional wrongdoer then you have a good argument for full disgorgement. If merely negligent or did something inadvertently wrong with no intention whatsoever will weaken your argument.
RESTITUTIONARY DEVICES
1. QUASI CONTRACT – Legal Form of Restitution: Olwell
Definition: An implied contract in law. It is a legal fiction. The court creates a quasi contract in which we say that the parties had an agreement and one party is holding their ill-gotten benefit on behalf of the other. The quasi contract is a legal form of restitution
If you don’t have the tort (conversion), you never get to restitution.
N2, pg 572 – always keep in mind that many wrongful acts don’t benefit the wrongdoer – the focus is shifted from what P lost
P573, N6: Restitution has a punitive flavor to it – disgorging all of D’s ill-gotten gain. In a case like Olwell, instead of stealing the machine, approach him and come up with an agreement to buy the machine. The punitive threat that all of your gain might be taken away from you demonstrates that restitution is designed to encourage an agreement between parties as opposed to thievery. Classic example: patents and copyrights.
P575, N10: Consequential Gains (Henke likes this one)
When we talk about a D’s ill-gotten gain, might it be useful to call that ill-gotten money a Consequential Gain? Since we are focusing on what D has gained at the P’s behalf, instead of talking about consequential damages for P, why not use the vocabulary of consequential gain?
N11: Full profits vs. market value – the ongoing choice. Should unjust enrichment be measured by the full profit that D has earned or by some measure of market value? Answer: D’s culpability – a conscious wrongdoer will be liable for all of his profits.
The theme in the cases is that the measure of restitution depends on D’s culpability. A conscious wrongdoer is liable for all his profits, including those that result from putting P’s property to D’s more profitable use. A D who has acted negligently, or illegally in good faith, is liable only for the FMV of the thing taken.
N15, 576, Emergency situation – Ship tied during a storm – $500 damage to dock. Restitution case (but Henke sees it as a damages case)? D’s profit is the value of the ship.
2. ACCOUNTING FOR PROFITS – Equitable form of Restitution: Maier, Sheldon
P579
Maier Brewing Co. v. Fleischmann Distilling Corp. (1968)
100% disgorgement
P’s distilled and distributed Black and White Scotch whisky. The Black and White trademark was registered and well established with consumers. D began brewing a cheap beer under the Black and White label. Maier distributed the beer exclusively through Ralph’s Grocery Stores.
P now seeks an accounting of all profits that both the manufacturer of the beer and the exclusive distributor has made with the infringed label.
The court ordered total disgorgement of both even though there was no direct competition. There would be no deterrent effect to the distributor (it looks like double recovery because of the disgorgement of the Ralph’s).


P603
Sheldon v. Metro-Goldwyn Pictures (1940)
Producers approach a playwright to cut a deal. Negotiations break down and they make the movie anyway. The movie grossed over $500,000.
The court here ordered 20% disgorgement of profits.
Why 100% in Maier and 20% in Sheldon?
1. The story is about a crime that was already in the public domain; and
2. The inability to calculate profits (partially due to the “stars” in the movie – i.e., how much did the movie stars contribute to the revenue of the film?)
Accounting for Profits Definition: A restitutionary device in equity, through which the P demands that the wrongdoer be asked to account for some or all of his ill-gotten profits.
Why might a legal remedy be inadequate? Because of the inability to accurately determine damages.
The Central Oddity of Restitution (use in exam)
How damages and restitution differ: “The dollar amount of the recovery in an accounting for profits under the unjust enrichment rationale has no relation to the damages, if any, sustained by the P in the action.” There is no relationship whatsoever between the concept of compensatory damages and restitution.
Henke: The justification for an equitable form of restitution will be the inability to calculate damages, and because we cannot calculate damages, we need an accounting for profits or a constructive trust.
Sheldon had no expert. If he had rebutted D’s experts, the court may have been willing to give a higher percentage.
Cookies before dinner: Isn't the breakdown of negotiations and the stealing of an idea anyway more culpable?
P582
Coexisting Remedies
In a restitution case:
Step 1: Permanent injunction prohibiting Maier Beer from further piracy of the Black and White label.
Step 2: Restitution to disgorge. The court in Maier said that because Maier is a willful infringer, injunctive relief is not enough. You’ll stop using this guy’s label (idea) and start using someone else’s. We need full disgorgement as a deterrence of further piracy.
Also, include the Earthinfo case here – discussed later – though in a different context because it is a K case.
N3, 597: When P seeks restitution from a solvent D, quasi contract will often yield the same recovery as constructive trust or accounting for profits, and when there are no profits other than the value of the thing taken, damages will work just as well.
How do you know which device when? If seeking restitution from a solvent D, then quasi-K may be a better option. But if there is some concern that there will be BK, then ask for CT. And when there are no profits, an Accounting for Profits will not allow the tracing.
3. CONSTRUCTIVE TRUST – Equitable Form of Restitution
Snepp v. US (1980)
P585
Snepp worked for the CIA during the Vietnam era. He signed an agreement that stated any writing he would do would be vetted by the government to ensure he wasn’t divulging confidential information. He subsequently wrote a book without government clearance.
The first book did not divulge confidential material. He violated the letter of the agreement, but not the spirit of the agreement.
The government asked the court to impose a constructive trust on all proceeds that Snepp derives from the book. In other words, a full disgorgement through the equitable restitutionary device of constructive trust.
The Coexistence of Remedies:
The government is seeking three remedies:
1. A declaratory judgment that Snepp violated his contract;
2. An injunction requiring Snepp to submit future writing for review; and
3. The constructive trust to disgorge him.
Dissent
The Dissenters say the remedy should have been nominal damages plus a trial for potential punitive damages.
P594, N5: A huge legal fiction. The wrongdoer is a trustee who holds his or her ill-gotten gain for the equitable benefit of the beneficiaries.
Snepp becomes a constructive trustee who holds this money for the equitable benefit of the US government and he is fully disgorged.
J. Stevens (Dissent): There is no showing in this case of why the legal remedy is inadequate. Nominal damages plus punitive damages would be adequate. In addition, the remedy in this case violates the First Amendment – this is a prior restraint on speech. (To me it does seem compelling enough for national security reasons)
P587
What was the irreparable harm that justified the constructive trust? Apparently, if a guy like Snepp could be potentially be loose lipped, he might endanger other folks who are contemplating giving us information. They would otherwise be muted by a guy like Snepp giving them up.
N7, 594 & 595: Advantages of the constructive trust – Tracing and BK.
1. Constructive trust is a legal fiction
2. The Constructive Trust can be used to trace proceeds through a series of exchanges
3. Preference of Constructive Trust in BK – i.e. P can reach assets in the hands of 3rd parties.
N8, 595: Courts will sometimes order an accounting for profits without going through a constructive trust on the property (Maier). Why wouldn’t you ask a court to impose a constructive trust and the accounting for profits? Cover yourself for all contingencies. The reason why you want a CT is for the possible contingency that by the time you get to trial, D has no money and the CT will give you that preference in the BK proceeding.
Exam: if you think that an accounting for profits is appropriate, you should also talk about a CT. You will ask the court to impose a CT first and then make the D account for profits – keep them together. And, if you think the CT and the AFP is appropriate, you should talk a little about the irreparable harm rule and the inadequacy of the legal remedy.
The Bottom Line in Practice: you may get a judge who knows his or her remedies well, and asks you to do the irreparable harm dance. You may get another judge who doesn’t care. You have to be ready for either contingency.
State on Exam: “The court may very well require us to show irreparable harm and inadequacy of a legal remedy as a prerequisite for the imposition of an equitable form of restitution. Based upon our facts (insert facts from exam), we will argue that a legal remedy is inadequate because we cannot calculate damages (or whatever the case might be).”
P601, N3: The Interplay between the doctrine of CT and the doctrine of Specific Performance. Example: Buyer and Seller have an agreement to sell Blackacre for $10K. Another buyer offers $15K and Seller decides to sell to him instead. It’s too late for the first buyer to get SP. One remedy would be damages – i.e. reliance damages. If we want to discourage that kind of opportunistic behavior, let’s put a CT on the $5K of profit that seller made by the second deal. If specific performance is unavailable, in its place use a CT giving first buyer restitution as opposed to my damages.
The Doctrine of Equitable Conversion (Always on MBE)
Bar Exam Question: Buyer and Seller set a closing date of Sep. 2. In the fact pattern there will be no mention of fire insurance. On Aug. 1 a fire erupts and the property is partially destroyed and the property is worth 1/2. The buyer will seek to rescind the K or reform the K to acknowledge the diminution in property value. The Seller will move to enforce the K. What happens? Answer: The contract will be enforced under its original price because under the doctrine of EC, the buyer becomes the equitable owner of the land from the moment the contract was signed. The risk of loss has shifted to the buyer.
Once a court said that the seller held the land in trust for the buyer, it followed easily that the trust attached to the proceeds of the sale. In the absence of any specific statement about loss, the risk of loss has shifted to the buyer.
P598-600: The future of punitive damages?
Why don’t we substitute restitution for punitive damages in a product liability setting? Let’s disgorge instead. Wasn’t Ford unjustly enriched when it made its cost-cutting decision to pay damages instead of fixing the Pinto? Why is that? N7: It would pose problems of standing and of allocating the award.
4. RESCISSION
P621
Rescission is a form of restitution and yet it is quite common to see the phrase, rescission and restitution. We rescind the contract and then we restore to each party what they had before the deal. It’s the restoration of the parties to their pre-K status.
The most common underlying reason for rescission is misrepresentation. This can be a dramatic remedy when values change.
Elements:

1. A misrepresentation very element driven, can be broken down into four species:
a) Silence (a failure to speak being a misrepresentation)
b) Negligent speech (careless speech by an accountant, financial advisor, etc)
c) Deceit (synonymous with intentional misrepresentation and fraud)
d) Innocent misrepresentation (a good faith statement that turns out not be true)
2. of a material fact, something of no consequence – no harm, no foul
3. made with an intent to induce reliance, a statement is made or not made to reel the person in
4. actual reliance, you got me
5. reasonable reliance, to what extent do you have to be savvy or a dupe?
6. and damages.
Fraudulent misrepresentation: a knowingly false statement or a statement made with reckless disregard as to its truth.
The elements of misrepresentation really play out in this case
Mutual Life Insurance v. JMR Electronics Corp. (1988)
Decedent’s former employer is attempting to enforce a key man life insurance policy. Decedent lies about his smoking on the application. What’s at stake here is whether the insurer has to pay $250,000 or return a few premiums.
Rescission is one of the most dramatic forms of restitution when values change from the inception of the contract to the time of breach.
P seeks rescission. D says; give us the amount of coverage that the premiums we paid would have bought us had we disclosed his smoking.
The employer asks the court to engage in speculation in what might have been. Appropriately the court is having none of it. We are not going to speculate as to what might have been. Why should we sanction your lying? Instead, recession is the most appropriate remedy and all the carrier has to do is return the premiums.
P623, N4: Nondisclosure of termites. Damages – cost of extermination: $1,500 plus reduction in value due to termite damage. Rescission – P’s got all their money back and D’s got the house back.
P624, N6: Initially It is P who gets to choose whether to rescind or sue for damages.
P628, N13: Limits to N6. SOL is the only clear time limit on rescission. The more time goes by, the more difficult to implement and the more resistant courts might become. P cannot speculate indefinitely on the potential change in value. P cannot knowingly speculate at D’s expense. If the court gets a bad whiff of opportunistic behavior, it may deny the rescission remedy.
Rescission has been treated both as an equitable remedy and as a legal remedy. While a court may ask you, I would be shocked if any trial judge in a case for rescission asked you to go through an irreparable discussion. The bottom line: if talking about rescission for me, no need for irreparable harm discussion as an equitable remedy.


Farash v. Sykes Datatronics (1983) (this is the last time Henke teaches this case – disregard it)
P claims that he had an agreement with D to improve a space in a building. D claims there was no agreement but has to pay anyway.
P633, N3: Oral Contract that violates the statute of frauds or an Invalid Contract – How do you enforce a deal with a defective contract? Two ways:
3(a) Doctrine of Part Performance – an equitable doctrine
1. Evidentiary element. The person seeking to enforce the agreement must demonstrate that he has taken actions and engaged in conduct that can only be explained visa vie a contract
2. Detrimental reliance. If D is allowed to walk away from the agreement, I have suffered detrimental reliance (usu. monetary)
The doctrine of part performance takes an otherwise invalid K and enforces it through specific performance. If you still want Blackacre, you want part performance.
3(b) Promissory Estoppel
You don’t want Blacacre but you want damages instead of SP, use PE. The elements are the same but the remedy is different. Part performance = specific performance. Promissory estoppel = compensatory damages.
3(c) Concede there was no agreement, but sue in restitution for the benefit. Sue in quasi K and have the court imply a K in law.
P652
EarthInfo, Inc. v. Hydrosphere Resource Consult. (1995)
P develops software, D markets and distributes it. P then pays royalties to the programmer. EarthInfo decides they no longer have to pay royalties. D seeks the back royalties as well as the recession of the original agreement.
This court feels that rescission is an equitable remedy.
“The more culpable D’s behavior, and the more direct the connection between the profits and the wrongdoing, the more likely that P can recover all D’s profits.”
“EarthInfo is required to disgorge all the profits it accrued as a result of its breach since its breach was conscious and substantial.”
P656: Apportionment of Profits
Just like in Sheldon with the actors, the D here should get a set off for its marketing, packaging, and enhancement of the products.
Exam: 40 point essay w/ four COQ’s:
1. 9 pts
2. 11 pts
3. 7 pts
4. 13 pts
RESTITUTION CONTINUED
Earthinfo case is a nice case to review. It makes the careful distinction between a damages remedy and a restitution remedy, and the culpability of the wrongdoer in disgorgement. The difference between Sheldon and Maier and this case is the fact that these folks had a contract as opposed to Maier beer where they stole the label, or Sheldon where they stole the underlying play. Is it different when we have an agreement? Is our whole culpability analysis different because EarthInfo had an agreement? Maybe it is and that’s why the court made the burden shift to establish facts.
5. EQUITABLE LIEN
P690
Robinson v. Robinson (1981)
This is a troubling case because three of the four players are lying through their teeth. There is a tract of land owned by Earl and Alice Robinson. Their son, Wylie, is married to Ann. At some point in time Wylie and Ann construct a house on his parents’ property. The value of the improvements in the home is $71,000 but the couple has a $15,000 construction loan; therefore, $56,000 in equity. Ann and Wylie get a divorce.
Ann would like to realize the benefit that she has conferred upon Alice by building the house. The parents say that we didn’t ask you to build the house – this is just a gratuitous benefit that you have conferred upon us – we don’t owe you anything.
Everybody knew the intent of the parents was to give the property to the couple.
Fundamental Question
The fundamental question is, is Ann as a matter of equity entitled to her percentage share of this benefit that she has conferred upon Earl and Alice?
The Second Question
If the answer to the first question is yes, then the second question becomes, which restitutionary device should be imposed in order to recognize that benefit? The choice is whether to put this equitable lien on the property or whether give her a constructive trust.
Ultimately she gets an equitable lien. For a constructive trust, the court would have had to find that she had an actual property interest. In other words, the court would have to find that in some point in time Earl and Alice had in essence deeded or conveyed this property to Wylie and Ann. If we don’t get to that conclusion, she cannot have a constructive trust.
Whose property was this?
Constructive Trust
P691
The parents paid the property taxes. The court determines that Earl and Alice remain the owners of the property. Isn’t that typical? The conveyance of property and the delivery of a deed is a specific term of art. If there has been no formal conveyance, even if constructive, the elder couple still owns the property. Ann is not going to get a constructive trust.
Equitable Lien
P693
Equitable Lien: In the absence of an express contract, a lien based upon the fundamental maxims of equity may be implied and declared by the court. An equitable lien is the right to have property subjected in a court of equity to payment of a claim
It’s a court-created device – i.e. a legal fiction to recognize in this case, the benefit that Ann and Wylie have conferred upon the parents. There was no actual lien (or lien in fact) here. However, once an equitable lien is created, it’s very important because it now fixes Ann’s interest in the property.
One of two things is going to happen:
1. Either the parents will voluntarily give Ann the $25,000 that they owe her; or
2. If not, she can force the foreclosure of the property, have it sold, and satisfy her lien.
The Critical Difference between the Equitable Lien and the Constructive Trust
If Ann has a constructive trust and the value of the property appreciates, her CT allows her to realize that appreciation because under the CT we would now be granting her an actual property interest. The converse is also true; if the property value depreciates is also going to suffer the depreciation.
The EL fixes her value once and for all – $28,000. In a flat market or depreciating market, the EL is the preferred remedy.
P697, N10: The strongest remedy that a court could give to a P is a choice between the remedies. If the traceable property is worth less than she lost, she will seek a money judgment for the full amount of the loss and an equitable lien on the property to secure the judgment. The choice is generally available to the victims of a conscious wrongdoer – i.e. the level of culpability.
P694
Frustrating Part of the Case: Ann asks the court to place a lien to secure arrearage child support. An equitable lien is a remedy, not a property right. You cannot put a lien on top of a lien. Ann has really nothing to secure all the ongoing obligations Wylie has to her.
Bar Exam Point: The Notion of Delivery of Deed. On the MBE, there is always one if not two questions of when a deed is delivered. In the context of both a deed and a gift, if the grantor has not irrevocably transferred that property, you are to conclude that it was not delivered. (Deed in the envelope case – “To Harold or Jay” – never effectively conveyed to Jay.) Everything in the fact pattern will make it look like the property was successfully conveyed, however it was still revocable.
6. SUBROGATION
If the Collateral Source Rule is still in effect, and you get $20,000 from insurance company, and the court tortfeasor has to pay the whole verdict amount of $100,000, If you are getting $120,000 on a case that was worth $100,000 you are being unjustly enriched. Most insurance policies require the victim to pay back the carrier out of the tort judgment. The insurance carrier has rights of subrogation over and against your tort award and will be able to recover either all or some percentage of the $20,000 that they paid you.
Subrogation addresses the unjust enrichment by subrogating the rights of the carrier over and against your award.
An insurance carrier will often be willing to work with you to compromise the lien. If you walk away with very little, don’t just assume as a matter of course that the entirety of the lien will have to be paid off.
P707, N7: For every dollar that a state paid in costs associated with tobacco related health issues, the tobacco industry was unjustly enriched and had to pay back in the subrogation case against them.
The only three Restitution Devices in equity are:
1. Accounting for profits;
2. Constructive Trust; and
3. Equitable lien.


7. CONTRIBUTION
Interplay between joint and several liability
If joint and several liability has been abolished in your jurisdiction, almost by definition you will not have to deal with contribution – it’s rendered moot. Under joint and several, each tortfeasor is liable for its percentage fault and jointly liable for the whole. The P can choose to collect the entirety of their award against any tortfeasor to whom the jury has apportioned a percentage of fault.
If one D has overpaid, another has underpaid and that’s what makes contribution restitutionary. The one who underpaid is unjustly enriched. Contribution addresses that fact and makes the other joint tortfeasors contribute that access back to the tortfeasor with whom the P collected. With contribution, a tortfeasor is not claiming that they are without fault. They recognize that they are at fault, but they paid more than their percentage share. Contribution gives them back what they overpaid. Each tortfeasor only pays their original share.
Lack of Contribution from Immune Parties – Workers Compensation
Unless a P can show an intentional wrong, and absent subjective intent (punching in the face), the sabotage of a machine does not rise to the level of the intentional wrong standard. P cannot sue on the front end, and the machine company cannot sue on the back end for contribution. If you represent the manufacturer, you are going to put an affirmative defense in your answer for substantial alteration. The machine was safe, the employer sabotaged it. The standard for substantial alteration: substantial and unforeseeable alteration. Product liability law recognizes that employers routinely sabotage their equipment.
Such employees are generally left to the inadequate remedies of workers compensation virtually sacrificed on the altar of production quotas with no downside risk whatsoever to the employer.
8. INDEMNITY
Indemnification: A tortfeasor pays something, and claims they are without fault and should not have pay anything.
Two Examples:
1. Products liability. Glass in your soup, injured. You sue Campbell’s and Kroger’s. Everyone in the chain of distribution is liable. Kroger’s will get hit for 5 to 10%. Kroger didn’t do anything wrong; therefore, they have a strong claim for indemnification against the upstream entity to get back the percentage they had to pay.
2. Vicarious liability. Maloney v. Rath: Faulty brake job, vicarious liable for the negligence of her contractor. Her duty to keep her car in working order is a non-delegable duty. That doesn’t mean that she cannot start a claim against her mechanic for full indemnification.

9. REPLEVIN
Replevin: A restitutionary device to restore wrongfully taken personal property.
O’Keefe v. Snyder – an action of replivin for the return of the paintings. Issue: whether or not the discovery rule would apply to the six-year SOL for Replevin
P713
Welch v. Kosasky (1987)
In 1974 a thief broke into the Welches’ home and stole 12 lots of valuable antique silver. A month later, D purchased the lots from a dealer for $2,750. The Welches’ paid over $40,000 for the lots. The trial judge concluded that D knew or should have known that the silver was stolen.
In 1981 D sold the silver to another dealer and Mrs. Welch saw two of the stolen items in the store. In the next year or two, Mrs. Welch succeeded in recovering all of the stolen items. The Welches then brought an action for conversion.
The court said that in addition to her getting the silver back (the replevin), she should also be entitled to damages representing depreciation and dispossession.
Keep restitution and damages separate exception:
If personal property is relpelvied to you, but its value is now depreciated, recovery alone does not restore you to your rightful position. This is the one restitutionary context in which we may need a companion remedy of damages representing diminution in value of the item as well as a value for the time you’ve been dispossessed.
10. TROVER
The chimney sweep/jewel case: Armory. In the absence of the ability to return the property, there is trover – restoring the value of this personal property to the rightful owner.
Restitution so often has a punitive flavor. The court says we are going to award trover to the chimney sweep representing the value of the jewel of the finest water (the combination of color and transparency). The court is doing this to punish and deter the silversmith.
In the modern context, you are not likely to see trover. Causes of action that once sounded in trover have been subsumed into the tort of conversion.
11. EJECTMENT
Ejectment: the restoration of real property. Modern disputes: an action to quiet title.


ANCILLARY REMEDIES
An Ancillary Remedy is used to enforce another remedy. If a court has ordered a party to do something, and that party is recalcitrant (resisting authority), now we need the ancillary remedy of contempt.
1. ATTORNEYS FEES
(a) American Rule: In most cases, each side pays their own attorneys fees. AF become an ancillary remedy when a court decides to shift them.
(b) Context of shifting AF:
P913: Laundry List of Shifting Attorneys Fees – e.g. statutory fee shifting, contempt of court, and family law.
Fee Shifting as a matter of Statute: Rivera
City of Riverside v. Rivera (1986)
Issue: Whether an award of attorney’s fees is unreasonable if it exceeds the amount of damages recovered in the underlying civil rights action.
Eight P’s start a civil lawsuit against the city of Riverside and its police force after a large number of police officers, acting without a warrant, broke up a party using tear gas and physical force.
The lawyers who take on the case file a blunderbuss complaint and they submit their bill to the government for $245,000.
(c) Lodestar: A reasonable number of hours expended multiplied by a reasonable hourly rate = the lodestar of attorneys fees.
P906, FN3: The preclusion of employment by the attorney due to acceptance of the case.
1) time and labor required; 2) novelty and difficulty of the Qs; 3) skill requisite to perform the legal services properly; 4) the preclusion of employment by the attorney due to accepting the case; 5) the customary fee; 6) whether the fee is fixed or contingent; 7) time limitations imposed y the client or the circumstances; 8) amount involved and the results obtained; 9) experience, reputation, and abilities of the attorney; 10) the “undesirability” of the case; 11) nature and length of the professional relationship; and 12) awards in similar cases.)
N4: A trial is counterproductive financially. The value of you trying a case is ultimately about legitimacy. The undeniable truth: The guy who is afraid to try the case: $750K, the guy who’s not afraid to try it: $1M to $1.2M. That’s ultimate value – the fact that the defense bar knows you are willing to go to court enhances the value of your cases.

(d) Relationship between Results and Fees!?
Point 1: Must there be a relationship between result attained and the legal fee? J. Brennan: Although that’s a consideration, it is by no means dispositive. In this case, these two lawyers were not only vindicating the rights of the litigants, but perhaps sending a message to the community at large – i.e., we are not willing to tolerate this kind of behavior. The Court says that it’s too myopic (lack of foresight) to look simply at the result in this case, we must expand our vision and think about how this lawsuit may vindicate the rights of others.
Point 2: If this case is broken down into a contingency fee arrangement or break down into an hourly rate, they get minimum wage. If we do a percentage fee, these two guys only get $10,000. We have to allow a generous fee here or no one will take this work vindicating these important rights.
Point 3: (the most significant) A civil rights D is not liable for attorneys fees incurred after a pretrial settlement offer where the judgment winds up being less than the offer. Brennan says, look government, you can’t have it both ways. You can either start this case, do a little bit of discovery and offer them something to make it go away. You didn’t select that choice and decided to fight this case tenaciously. Once the dice was cast, what did you expect? Did you not expect the P’s to expend the amount of time they did? If you are going to fight this case tooth and nail, what do you thing they are going to do? If you want to avoid $250,000 in attorney’s fees, do some discovery and make them an offer.
P920, N5: 3 to 1 ratio for D’s hours vs. P’s hours – D has incentive to make case last as long as possible (or to defend an important issue that will have repercussions going forward)
Ron Motley, conspiracy case against MetLife. Status Conference – five lawyers billing for just writing something down on a pad.
P913, N1: Statutory Exceptions to Attorneys’ fees: many federal and state statutes authorize awards for attorneys’ fees.
P914, N3: Contempt-of-court exception: If the D violates the court’s injunctive order, you are going to seek to hold them in contempt. If you have start a contempt proceeding, why shouldn’t you have your fees paid for bringing that proceeding?
N5: Family law: it is common to see fee shifting in family law and in post-motion judgment practice. A great way for a judge to cut that off is to shift fees for dubious motion practice after divorce.
(e) Why Does Fee Shifting Favor Plaintiffs?
P916
Fee Shifting is almost always in favor of P’s and against D’s. The underlying dynamic is the notion of a one-time player vs. a repeat player – e.g. John Deere, Hobart, etc. They are repeat players in the tort system.
Point 1: Litigation costs for repeat players are a cost of doing business. Some percentage of the purchase price reflects litigation costs.
Point 2: Repeat players have an advantage in the legal system – they know how to try their cases and defend their products. They start out with a presumptive edge and more likely to be victorious than a one-time player.
A one-time player doesn’t have a bank of legal costs set aside and if they lose the case and have to pay the other sides’ fees, it’s all over. It’s not a big deal for a repeat player to absorb some fees.
P920, N4: Toward the Class Action. One crummy printer vs. 20,000 crummy printers. Standing alone, small cases fall through the cracks.
In Re Synthroid Marketing Litigation (2001)
The sliding scale of fees in “megafund cases”
The court will probably impose a sliding scale of fees. Often P’s counsel will get 33.3% of the first $1M, then 25% of the next, then 20%, etc.
The District judge concluded that in the settlement of a large case ($75-200 million and more), the appropriate fee is 10%.
P928
The market rate for legal fees depends in part on the risk of nonpayment a firm agrees to bear. Never lose sight that there is a risk of non-payment plus out of pocket costs. The firm takes this on and should be considered when looking for big fees.
Contingency Enhancements and Risk Management
P932, N1: Dague case. A P’s lawyer cannot seek a contingency fee enhancement in federal court. Once you have a contingency fee agreement, you are locked in even if it turned out to be more work than you thought. The Court held that contingency enhancements are a disguised way of paying the lawyer for the cases he lost.
P933, N3: Risk Management. Most P lawyers reject cases that are too weak. As a P lawyer, you have to be a risk manager. You’ve got to assess the risk of a case.
2. CONTEMPT
Three categories:
1. Compensatory Civil;
2. Criminal; and
3. Coercive Civil
Compensatory Civil
The most straight forward contempt is the compensatory civil contempt, prosecuted by the P to vindicate his or her rights. Example: You get an injunction and for a while the offending party doesn’t use your trademark. But then they start using it again. You are going to hold them in contempt and disgorge the further profits they have made. The P controls the litigation to vindicate her rights; there is no governmental piece to it. The result will be either further damages or further restitution depending upon the fact pattern.
Criminal Contempt – fixed fine or period of jail time
P776
International Union v. Bagwell (1994)
For the contumacious, if they violate the order in a violent way they are fined $100,000. We wind up having seven contempt hearings and $64M in fines for contempt.
The union and the employer settle their dispute. The Commonwealth of VA still has a claim against the Union for $52M.
Important Points about Criminal Contempt:
Point 1: Look to see who’s prosecuting it. Criminal contempt is prosecuted by some representative by the state. Here, Commissioner Bagwell is appointed by the State of VA to now prosecute and collect the fines. That is one of the critical distinctions between criminal and civil contempt – who’s prosecuting the claim – a prosecutorial arm of the government.
Point 2: Look to see if it’s a fixed fine/jail sentence. If a contempt penalty is criminal in nature, we usually have a fixed fine or fixed jail term for past misconduct. Example: go to jail for 30 days. With criminal contempt, the fine or jail sentence cannot be alleviated. Once imposed, it must be paid or served. The critical distinction between criminal contempt and coercive civil contempt is with coercive civil contempt the D still controls his destiny – e.g. if you don’t produce documents, you are going to go to jail. Documents are not produced, you go to jail. But if the court’s citation is coercive civil, you can get out of jail by producing documents. As long as he comes into compliance with the court’s order, the fines will stop. Even if the court has imposed fines already, they may be purged from the record.
Coercive Civil – once you come into compliance, you are okay
There is a sense that the Union is being penalized for what they have already done. Do the fines in this case look criminal or look coerce civil? Here, plausible arguments can be made either way.
If you are being held in criminal contempt, it’s a criminal proceeding with all the trappings of criminal law – i.e. you are entitled to a jury trial, proof beyond a reasonable doubt, whereas if it is a coercive civil matter you are not entitled to a jury trial, and the burden of proof is the elevated standard of clear and convincing evidence.
What leads the court to conclude criminal contempt is summed up by J. Scalia’s concurrence:
“One and the same person should be able to make the rule, to adjudicate its violation, and to assess its penalty is out of accord with our usual notions of fairness and separation of powers.”
He reminds us just how odd the contempt power is. Judges can basically do whatever they want. They have unfettered discretion to impose whatever kind of penalties comes into their heads.
Point 3: Look to see how complicated/complex the underlying order is. The modern structural injunction is often very complicated.
Even equitable decrees in earlier times were much more sweeping than their modern counterparts. Contemporary courts have abandoned these earlier limitations upon the scope of their mandatory and injunctive decrees. They routinely issue complex decrees which involve them in extended disputes and place them in continuing supervisory roles over parties and institutions. (See bottom P782 and top P783)
J. Scalia’s Points:
(a) If the order is that complicated, if the D violates that complicated order, shouldn’t we err on the side of a jury trial before we throw him in jail or before some outrageous fine to pay?
(b) Because these orders are so complex to begin with, let’s let a jury – a neutral fact finder – determine whether the order has been violated and if so, whether this party should be thrown in jail.
Point 4: Is the contumacious behavior happening outside the courthouse or are the parties thumbing their noses in the courtroom? (Henke’s Point): Another distinction between criminal and coercive; keep in mind where is the conduct taking place? Example: judge holds trial, drafts case management order, you show up and your expert is supposed to testify and he doesn’t, the judge could hold you in contempt. If you violate the court’s order in his courtroom, you are not going to get a jury trial. If he wants to fine you the point is this: when the contumacious conduct happens under his nose, you will label that a coercive civil contempt. On the other hand, in a case like Bagwell where the conduct is happening outside the courtroom in the real world – i.e. the workplace, in a complicated setting –maybe out of court violations of an underlying complex order should be afforded jury trial status.
P780
Keep in mind that contempt is a very drastic ancillary remedy. The court has other options short of contempt. Courts traditionally have broad authority through means other than contempt such as:
· Striking pleadings;
· Assessing costs or attorney’s fees;
· Excluding evidence; and
· Entering default judgment – to penalize a party’s failure to comply with the rules of conduct governing the litigation process.
Coercive Civil Contempt
Four Steps
N3, 787 re: The process: When conditional fines are used for coercive contempt, the process breaks into 3 distinct phases.
Step 1: The court issues the injunction.
Step 2: Futuristic Threats. We are back in court and the judge adjudicates the fact that his order has been violated. The judge threatens you with fines or jail time for a further violation. It adjudicates the first violations and threatens specific fines for further violations.
Step 3: You violate it again and now the court is going to make good on those threats. The third step is not easily pigeonholed. When the court threatened to fine the union $100K for each violent violation, the threat was remedial and prospective. After the threats failed, enforcing the fines looks punitive and retrospective. The fines had lost their coercive effect; they were no longer conditional, because the condition had been fulfilled. But the law must keep its promises, or coercive contempt will no longer coerce. Coercive fines must be collected, but they need not be collected with civil procedure.
Step 4: The Cat and Mouse Game and Psychology of Coercive Contempt. Perhaps the judge says maybe my last order wasn’t clear; let me clarify it for you. If you don’t do X in the next five days, then you’re going to jail or start collecting $500 a day. If you comply, you are let out of jail or estopped from paying more fines and in some cases the fines that you did pay may be purged.
N9, 789: Gamesmanship: There is psychology and gamesmanship in coercive contempt; moderate threats may be more effective than harsher threats. A threat should not be so great that the contemnor doubts the court will carry it out, or so great that there is no room for further escalation. Such tactical considerations help explain the three steps of coercive fines. Some judges have stretched the contempt process out into an indefinite number of steps, especially in structural injunctions against the government’s D’s. See also pg 794: In considering what sanctions to use, a judge faces the classic strategic dilemma in bargaining games: whether and how to use a threat of mutually disadvantageous action as an inducement to action. A madman’s threat is convincing precisely because his opponent cannot be sure that he will not pursue a mutually damaging course of action. But we expect, instinctively, that judges will not act like madmen. The historical failure of judges to impose harsh sanctions even in the face of protracted noncompliance stands as convincing evidence that they will not do so in the future.
Simplest form is to throw D in jail until he complies w/order. There are only 2 steps:
1) The injunction is issued, and;
2) The D is found in contempt and sent to jail. Conditional penalties do not accumulate to be collected later, because imprisonment is continuous. Every instant that D refuses to comply, and every instant D remains in jail for that refusal.
P790
US v. Yonkers (1987)
“Ruthless or Toothless”
Once you go down that contempt road, fasten your seatbelt because you don’t know where it will end up.
N6, P793 – Bagwell and Yonkers test the limits of coercive contempt. Most Ds are less defiant, and most judges are more tempered. Yonkers soon reverted to the more traditional method of dragging its feet instead of openly defying the court.
P794
Perpetual Coercive Civil
Anyanwu v. Anyanwu (2001)
The bottom line: At what point does continuous civil contempt lose its “sting” and just become gratuitous, ineffective punishment? It’s the ultimate cat and mouse game. At what point does the court throw up its hands and let the guy out of jail recognizing that no matter how frustrating the D’s stubbornness may be, continued incarceration is not going to yield any productive results.
P796: Catena v. Seidl (1975): The standard for review is whether there is a substantial likelihood that continued incarceration would accomplish the purpose of causing the person confined to comply with the order on which confinement is based.
Each case must be decided on an independent evaluation of all of the particular facts. Age, state of health, and length of confinement are all factors to be weighed, but the critical question is whether or not further confinement will serve any coercive purpose. Henke: you either believe the guy or you don’t.
N11, P802: Ochoa v. US (1987) – Mix of criminal and coercive contempt: Where after serving time for coercive contempt, the D is then charged and tried (jury) for criminal contempt with no credit for time already incarcerated.
N5, pg 799 – limits: a federal W cannot be held more than 18 months, even in coercive contempt, and even if the testimony is still needed. It has become common to move for release before the 18 months has expired, on the ground that there is no substantial likelihood that the witness will testify, and that the imprisonment has therefore lost its coercive effect.
N9, 801 – The impossibility defense is often plausible in child custody cases; the imprisoned parent eventually loses control or even knowledge of where the child is. The defense arises most often in the context of injunction to pay money, or to deliver specific assets to plaintiff. If D no longer has the money or the property, he can’t turn it over. How is the court to know whether compliance is really impossible?
P812
Collateral Bar Rule
Definition: The validity of the court’s injunctive order cannot be attacked at the prosecution for criminal contempt.
If you think that the court’s order is defective or invalid, you must attack and challenge the order before you violate it. You cannot violate it first, get knocked for contempt, and then at the contempt proceeding challenge the order ex post facto.
The D is collaterally barred or estopped from challenging the order at that contempt hearing. The rule does not apply to civil contempt – only to criminal contempt.
Walker v. City of Birmingham (1967)
Dr. King and his supporters seek to obtain a parade ordinance and are summarily rejected. The ordinance that gives the authority to issue the permits is clearly unconstitutional on its face. After denial, the day before the demonstration, the city gets an ex parte order prohibiting them from demonstrating.
They symbolically march on Good Friday. The city moves to hold them in criminal contempt and they now try to challenge the authenticity of the order. You must first challenge the order before violating it in criminal contempt scenario.
P821
Dissent: The First Amendment rights to march must preempt the state court order.
DEFENSES
1. EQUITABLE ESTOPPEL
P983
Three Element Formulations
1. The actor who knows the true facts “communicates” something to another in a misleading way. The Communication by the one party might be an intentional communication, negligent, inadvertent, or a failure to speak.
2. The other person justifiably relies on the communication.
3. The other person would be materially harmed if the other actor is allowed to disaffirm their earlier statement. We say that the original speaker is estopped from denying what he said originally.
Geddes v. Mill Creek Country Club (2001)
P is given a choice – live next to the bicycle path or the golf fairway. P finds 2000 golf balls in his yard and P seeks an injunction. D pleads the affirmative defense of equitable estoppel.
P affirmatively communicated that he wanted to live next to the fairway. D justifiably relies upon the statement and constructs his house next to the fairway. The developer will be harmed if P walks away from his earlier representation. We therefore say that the P is equitably estopped from denying or disaffirming his earlier representation about where he wanted to live.
P983
N3, P983: Counter defense. – It would matter if what they said before were induced by Ds’ own misrepresentations or withholding of information. EE is a defense but this is a counter defense. That is the point in Geddes of arguing that P knew nothing of golf, and that is why the court has to say that basic information about golf is readily available and they must be held to have known it.
My representation was based upon a misunderstanding; therefore, I now ought to be able to walk away from it. It is common knowledge the golfers don’t always make very shot.
P984, N6: Closely related to fraud. This is very much like the tort of misrepresentation but now it is a defense.
N7: EE is only a defense – the golf course doesn’t sue anybody under estoppel. It is a defense to P’s nuisance and trespass claim.
2. WAIVER
Waiver: Intentional or inadvertent relinquishment of a known right.
• KEY IN Procedure
N8, P992: This comes up in matters of civil procedure. Harms v. Sprague (joint tenants in property). Sprague takes out a mortgage, private loan from the sellers, and brother agrees to put up property as collateral and then dies. Other brother becomes survivor. Mortgage should have passed to brother subject to the encumbrance according to the probate code, but Ps did not raise the issue and it was deemed to be waived.
A court may raise waiver sua sponte.
NOTE: Multistate is testing heavily on mortgages Q in property component.) – Courts regularly say that litigants waive a claim, defend, or procedural right by not asserting it at the proper time.
FN6, p443 – Raiders case – new issue brought up on appeal and therefore, it was deemed waived.
P990: The difference between waiver and estoppel – Waiver does NOT require actual reliance; rather reliance is presumed. Waiver is essentially unilateral in its character; it results as a legal consequence from some act or conduct of the party against whom it operates; no act of the party in whose favor it is made is necessary to complete it. It need not be founded upon a new agreement or be supported by consideration, nor is it essential that it be based upon an estoppel.
3. LACHES
Limit your discussion of laches to causes of action that are equitable. In a PI fact pattern where damages were for compensatory and punitive loss, you shouldn’t go near laches because the time period within which to see a remedy at law is the SOL. Laches should be confined to equitable circumstances.
See page 997 for a definition: The doctrine of laches bars relief to those who delay the assertion of their claims for an unreasonable time. Laches is founded on the notion that equity aids the vigilant and not those who slumber on their rights.
Notes, P1003 – Interplay between laches and SOL (N2 & N3) – When laches and when SOL is used:
1. If the legal remedy is all that is being sought, then be guided by the applicable SOL;
2. If an equitable remedy is all that is sought, then the relevant time period to bring the case is laches; and
3. If there is both a legal and equitable remedy for the same underlying wrong, then SOL applies to both remedies. (See example in N3)
NAACP v. NAACP Defense Fund (1985)
NAACP allows the legal defense fund to use their moniker. The NAACP realizes that some charitable funds that should go to them, is going to the defense fund. The NAACP requests informally that the defense fund cease to use its moniker.
Finally, the NAACP seeks an injunction and file suit in 1982. The defense fund claims laches.
P997
1. A substantial delay by P prior to filing (specific – awareness of trademark infringement)
2. The P’s awareness that P has a viable cause of action (general – whatever it might be)
3. A reliance interest (one party will be badly prejudiced and suffer harm if NAACP can enjoin from using the moniker)
“Equity aids the vigilant and not those who slumber on their rights.”
Use Laches as an affirmative defense for those causes of action that are strictly equitable.
Hypo: Say that between 1966-1978 the parties were negotiating, trying to resolve the dispute. Can you use laches then? Absolutely not. Look to see what kind of prejudice is actually being suffered by the other side. Laches is a combination of time and prejudice.
4. SOL
The period of time within which a suit must be filed after the cause of action has accrued – accrual is the critical term. This may be far from straight forward (as in the O’Brien case).
Equitable Discovery Rule: suspend SOL until such time as if a P knew or should have known that the injury from which they suffer is of tortious origin. It does not apply to the four-year SOL under the UCC. Most jurisdictions have held that the discovery rule does not apply to wrongful death actions.
Statute of Repose: A period of time after which a lawsuit cannot be filed even if the cause of action has yet to accrue. This protects architects, building constructors, etc.