I. The Basic Remedial Tools
A. Types of remedies
1. Coercive Remedies – injunction or special performance order.
2. Damages – Monetary Relief for losses sustained in violation of D’s rights.
3. Restitution – Restore property to its rightful owner by returning the plaintiff to position prior to the wrong.
4. Declaratory Remedies – declaration of legal rights of the parties.
II. Clients Goals and Remedial Choices
A. Action/inaction (injunctive relief), leverage, publicity, clarify legal rights, set precedent, clarify legal rights, monetary compensation, deterrence and vindication.
III. Law v. Equity
A. Definition – generally monetary recovery v. generally coercive.
B. Decision maker – jury (though not always in state courts – 7th amendment doesn’t apply) v. judge in federal court & in most states.
C. Flexibility – Not flexible (legal right and amount are fixed) v. flexible (whether privilege exists and what amount)
D. Priority – First v. Secondary (only awarded if legal remedy is inadequate).
E. Defenses – Few v. Many (discretionary)
F. Subject of Judgment – In rem (you just become a judgment creditor) v. In personum (not just money, if they don’t follow though they could face jail for contempt).
IV.Compensatory Contract Damages
A. Types of Damages
1. Expectation Damages
a) Completes the contract from P’s perspective
b) Difference between perfect world (performance) and actual world.
2. Reliance Damages
a) Undo the contract from P’s perspective
b) Difference between before the contract and actual world (non-performance)
a) Undo the contract from D’s perspective
b) Difference between before the contract and actual world (non-performance)
B. Steps in calculating damages
1. Was a substantive right violated? (check for violation of statute)
2. What are the available remedies? (check for liquidated damages). If no liquidated damages then you have common law legal damages.
3. Requirement for remedy? None
4. Limitations for defenses
a) No double counting remedies & P may generally elect remedy (assuming he proves damages for each remedy).
b) No distress damages (except if there is physical harm or emotional interest).
c) P may generally elect a remedy assuming he meets all the requirement for a remedy.
d) Damages must be foreseeable
e) Must be causation/fact of damages
f) There must be certainty in amount of damages
g) Damages must not have been avoidable by mitigating actions of P.
h) Collateral source rule – D can’t show that P’s bills were paid for by insurance.
i) Punitive Damages are not available unless there is a special relationship or independent tort. Also the 14th amendment due process clause and state statutes limit punitive awards of damages.
5. Extent of relief – Amount of money or extent of injunction
a) Calculate performance in perfect world (P v. D)
b) Calculate actual world (P v. D)
c) Calculate before the contract (usually 0)
d) Then calculate expectation, reliance, and restitution.
V. Compensatory Contract Damages
A. Incidental & Consequential Damages
1. Incidental damages = direct damages as result of the breach (i.e. mitigation)
2. Consequential Damages = indirect damages as a result ot the breach (i.e. lost profits)
3. Consequential Damages available to buyer and not seller
B. Breach by Seller (Buyer’s damages)
1. Difference in construction:
a) Cost of Completion = Cost of Completion (performance) – K price unpaid
b) Diminution in Value = Value as promised – Value as received
2. Ex. Eastlake used a combination of cost of completion and Diminution in value.
a) Expectation = Difference in Construction + Delay + incidentals & consequential – costs saved (remaining price of K)
(1) Difference in Construction (Cost of completion unless clearly disproportionate; then diminution in value)
(a) Factors to consider: Ratio of cost to complete (assets of party, difference in value of item, difference in value of contract), absolute $ at issue, aesthetic v. functional, personal v. commercial, Bad faith (not in CA.), Economic Waste, plaintiff likely to complete, defect related to objective of contract.
(2) Incidentals = furniture storage &
(3) consequential = lost business opportunities Delay & lost profit
(4) minus Costs saved = remaining price of k
3. Ex. Bamboo problem
(1) Cost of replacement = $5000 vs. Difference in value of redwood($6,000 – $2000) v. bamboo
(2) Costs saved = ($5,000 – $2,500) = $2,500
C. Breach by Buyer (Seller’s damages)
1. Expectation Damages = Lost profits (k price – mkt. price (re-rental or resale) – expenses saved – amount paid on k) + incidental damages
2. Portrait problem
a) Expectation Damages = Remaining k price – variable costs saved
b) Reliance Damages = Variable costs expended – k Amount received
c) Restitution Damages = value to buyer at seller’s expense – k price received.
d) Variable costs arguably could be supplies, overhead and labor. Argue both.
3. Two measures to calculate damages:
a) Expenditures prior to breach + Lost Profits – Amount Paid – Expenses Saved by Breach (Salvage) + other
b) Contract price – Cost of Completion (amt. saved by not completing) – Amt. Paid – Expenses Saved by Breach (Salvage) + other
4. Ex. Sprague – Must give notice of intent to sell
a) (b) K price ($197k) – salvage ($144k) + other incidental damages ($216k – not lost logging time because that is consequential damages)
(1) Resale price must be commercially reasonable and generally seller must give notice to breacher or recovery is limited.
5. Ex. Collins Entertainment
a) Lost volume seller allows for lost profits despite resale of goods or services that are the subject of the litigation.
(1) The seller would have solicited the person who bought the “resold” good even if there had been no breach
(2) The solicitation would have been successful
(3) The seller could have performed both the original contract and the contract for resale.
c) Lost Profits = k price – expenses saved – amount paid on k + incidental damages
d) New businesses and new products = hard to prove profit.
6. Ex. Kenco Homes
a) Kenco entitled to lost profits because it is a non-breaching seller who cannot reasonably resell on the open market. It didn’t order the breach goods before buyer repudiated. Seller never came into possession of the goods.
(1) Loss of market (not worth making goods) constitutes lost profits damages.
(2) Specialty items get lost profit damages
7. Coins problem (seller can’t resell goods)
a) 60k coins which cost .50 each to make = 60k *.5 = $30k. For remaining contract .2 profit on each coin and so lost profit (because loss of market).
A. General Rule
1. Liquidated damages are enforceable whereas a penalty is not.
a) Damages resulting from breach would be difficult to determine.
(b) Amount of damages
b) Stipulated amount has a reasonable relationship to the potential damages if a breach occurs.
(3) Fixed sum regardless of gravity of breach/harm
(4) In general Recovery > actual damages
(5) In specific case Recover > actual damages
(6) Rationale for formula in K
(7) Sophisticated parties, represented by counsel
(8) Unequal bargaining power?
B. Ex. Boyle v. Petrie
1. Executive awarded damages as stated by contract. So long as the liquidated damages provision is not unconscionable nor contrary to public policy.
a) LD clause upheld where coach quit school
b) LD can’t deter breach through compulsion because of high economic loss.
c) LD must be expressly designated as liquidated damages and there must be a material breach.
d) Designation or not as a penalty is given little merit.
C. Truck v. Puritan farms
1. The amount stipulated for damages bears a reasonable relation to the amount of probable harm and is not a penalty.
a) Where actual damages are not difficult to determine, LD may not be enforced.
b) UCC just uses uncertainty as one factor and not a requirement.
D. LakeRiver v. Carborundum
1. Where one company is assured more than its actual damages it can be considered a penalty. Amount fixed may be considered valid if it approximates anticipated or actual harm.
2. Burden – party challenging enforceability has burden
VII. Tort Damages (personal property injuries)
1. Destroyed Property
a) Compensatory Damages = Pretort value– scrap value + Lost use (trend yes)
2. Permanently Damaged Property
a) Compensatory Damages = Difference in value (Usually FMV) + Lost Use (trend yes but unusual)
3. Temporarily Damaged property
a) Compensatory Damages = Cost to Repair + Lost use
4. Permanently and Temporarily Damaged Property
a) Compensatory Damages = change in value + cost to repair + lost use (trend yes, but unusual)
B. Definitions & issues
a) Entitled to Cost to Repair or Loss of Value?
b) How to Measure Value?
2. Measure of lost use
a) Cost to rent a substitute
b) Lost rental value
c) Actual value to P: lost business profits due to not having property.
3. When is P entitled to cost of repair?
a) Property is temporarily damaged, not destroyed or permanently damaged
b) Test: Is the repair economically feasible.
(1) Majority: Capped at Pre-tort value
(2) Minority: Capped at Difference in Value
4. Measure of Value?
a) FMV (Fair market Value) (predominant)
(1) Arm’s length transaction with full information
(2) Market value to P
(a) If retailer can replace damaged car at wholesale price without losing a sale, wholesale price.
(b) If consumer can only replace damaged car at retail price, retail.
b) Actual Value to Plaintiff
(1) Required: No FMV or deficient mkt & value to P >> FMV
(2) Does not include sentimental value
(3) Some objective measure
(a) Cost of replacement (less depreciation)
(b) Original cost (less depreciation)
(c) Cost to reproduce
(d) Depreciation: condition, age, wear & tear
(e) Example clothes: value of clothes to owner is much more than value of secondhand clothes.
c) Sentimental Value
(1) Almost purely sentimental value
(2) Generally capable of attracting sentiment
(a) Not “mawkish” emotion
(3) Most courts: refuse to award
(4) Ex. – irreplaceable photos
VIII. Tort Damages (real property injuries)
A. Categories are the same
1. Destroyed -> pre-tort value + lost use(?).
2. Perm. Damaged -> change in value + lost use(?).
3. Temp. Damaged -> cost to repair + lost use.
4. Change in value + cost to repair + lost use(?)
a) Property: Permanently and Temporarily Damaged?
b) E.g., hazardous waste -> repair plus “stigma.”
1. Entitled to Cost to Repair or Loss of Value?
a) Majority – cost to repair < change in value
b) Minority – cost to repair < Pre-tort value
c) Cost to repair justified by “reason personal”
2. General Measure: FMV
3. Measure of lost use
a) Cost to rent: Cost to P as substitute
b) Rental Value: $s P could receive as rental
c) Actual Value to P: Eg. Lost business profits because they did not have the property.
4. Real Property: Permanent v. Temporary Damages
(1) For purposes of SOL
(2) Measure of Recovery
b) Test: permanent v. temporary & continuing
(1) Economic: too expensive to repair
(2) Formal: Can abate 1. Salt 2. injury (can’t grow corn) 3. Activity (mining)
IX. Tort Damages (personal injury)
A. Categories of damages
1. Lost earnings/lost earning capacity,
a) Lost Earnings – money from an existing job that P lost or will lose because of a temporary absence.
b) Lost Earning Capacity – money from a potential job that P lost or will lose because of an injury.
c) Issues – Lost Earning Capacity
(1) Possible considerations: Race? Sex? Other?
(2) Present Value?
(4) Expenses Saved?
(5) Other issues
(a) Medical Expenses
(b) Special Expenses
(c) Pain and Suffering
2. medical expenses,
3. special expenses, (inflation)
4. pain and suffering (closing arguments)
a) Closing Argument
(1) Lump sum: Suggest $ amount to jury
(2) Per Diem: Suggest $ amount per day to jury.
(3) Golden Rule: What would jury…
(a) Pay to avoid plight or Demand to suffer plight.
B. Other considerations
1. Lump sum v. periodic payments.
C. Frankel Case
1. Facts: woman injured by negligent driver
a) Past medical bills and related expenses (from the accident to the trial)
b) Loss of Earning Capacity
(1) Past loss of earning capacity (from the time the plaintiff would have begun earning an income to trial)
(2) Future loss of earning capacity (from trial into the future)
c) Pain, Suffering, and Related Items
d) Future Institution expense
2. Interest rates – have gone up as well as the cost of living. It is different to predict. Also whether you get return on investment depends on how guardian invested the money.
3. Periodic payments – Have tax advantages (interest is taxable), assure against over/underpayment,
4. Unemancipated minors – both parents and child have a cause of action (parent pays medical bills)
D. Wilburn Case (boat man thrown overboard)
1. Judge allowed future increased earning capacity for promotion at job.
2. Award of $1m for psychological damages was excessive because man could improve
3. Latent disease- claim accrues and SOL starts when the plaintiff knows or reasonably should know that he or she has been injured.
4. Loss of Chance and shortened life expectancy – guy negligently diagnosed as no cancer.
1. Woman injured by falling boxes.
2. Plaintiff attorney can use a per diem of suffering argument.
X. Limits on Contract and Tort Damages
A. General Approach: Distress, Economic Loss, Foreseeability
B. Substantive Theory: Tort.
1. Element of Cause of Action – No Liability
2. D Wins.
C. Remedial Theory: Contract.
1. Unrelated to Elements – Liability
2. P Wins – Only nominal damages?
D. Distress Damages
1. General rule (contracts) – Contract claim will not support mental distress damages.
a) Physical Harm – really a tort claim?
b) Emotional Interest Contract
3. General rule (torts) – there is no substantive claim for negligently caused distress without physical injury.
a) Rule: Only If Core Injury (Parasitic)
(1) Distress Causes Physical Harm
(2) Zone of Danger (Bystander)
(a) In zone of danger; and Immediate family member; and Distress from witnessing harm to other.
(3) Intentional Tort (IIED, possibly NIED)
4. Crinkley Case
a) Hotel knew of bandits but did nothing. Woman suffered heart attack a few months later, man suffered injuries.
b) Medical procedures to try to clear arteries as well as injury (heart attack) were sufficiently related to stress that court could award damages.
c) In personal injury cases mental distress damages are usually allowed even for thin-skulled plaintiff.
d) General rule is that distress without physical manifestations is not compensable. California abolished this rule (woman mistakenly told she had VD and it ended her marriage).
e) Intentional infliction of emotional distress – not subject to the same physical harm requirement.
5. Goldberg Case
a) Doctor not allowed to recover mental distress where he administered a dye which paralyzed patients.
(1) Held: injuries not severe and verifiable. He was not in zone of danger, exposed to a risk of bodily harm by conduct of D.
b) Reasons why mental distress is not awarded: difficulty of proof, speculative, floodgates may open.
c) Emotional distress damages – (dealership wouldn’t take back Mercedes) only awarded for breach of contracts “very personal in nature”.
E. Economic Loss Damages
1. Traditional rule (torts) – precludes any recovery for negligently inflicted economic losses absent physical harm to person or property.
a) Rule (torts): Only If Core Injury (Parasitic)
(1) Note: injury to subject of K not enough.
(2) Some courts: except if catastrophic (tort-like)
(a) Special Relationship
(a) Contract was intended to benefit P.
(b) Harm to P was foreseeable.
(c) Harm to P was certain.
(d) Close connection between D’s conduct and P’s injury.
(e) D’s conduct morally blameworthy.
(f) Public policy favors a duty.
(b) Intentional Tort (e.g., fraud)
2. Rule (contracts): No limitation
3. Clark case
a) Person bought defective tractor and wanted future as well as present damages for lost business. Question is whether purchaser of a defective product who has not sustained any property damage or personal injury, but only economic losses, can recover those losses in a negligence action against the manufacturer. Held – no.
b) Not purely economic losses
(1) Physical injury to a person – automobile
(2) Physical injury to property – fire is caused
(3) Economic injury from loss of bargain – must claim fraud, breach of contract, etc.
c) Negligent in not reporting fire in NY skyscraper.
(1) Damages in tort and contract
1. Contract damages – Loss must be reasonably “foreseeable” from the perspective of the breaching party at the time the contract was formed. Could D anticipate harm?
a) Contract to buy for $100 and sell for $200. Cost to replace is $150. You only get $50 absent showing that other company would have reasonably foreseen consequences of breach.
(1) Remedial Theory
(2) Required: Kind and Degree
2. Tort damages – affects elements such as duty, proximate cause, etc.
a) Substantive Theory
b) Required: Kind, But Not Degree
3. Redgrave Case
a) Woman supported PLO and was dropped by Orchestra. Resulting damages must be caused by breach proven by facts.
b) Hadley v. Baxendale established foreseeability of probable result as a requirement for recoverability.
c) Strict interpretation of Hadley, if there is tacit agreement to accept risk of loss then P can recover. Most courts use the test more generally.
d) Under UCC damages depends on whether the seller at time of contracting, had “reason to know” of the requirements of the buyer.
e) General damages flow directly from wrongful act, special damages must be foreseen as they don’t flow directly.
f) Duty is a limiting factor in torts because a reasonably prudent person acts in accordance with foreseeable consequences of voluntary conduct. Once liability is found the tortfeasor is liable for all damage that is proximate.
g) Palsgraf – foreseeability limits duty (firecracker on train platform).
XI. Certainty & Nominal Damages
1. Substantive theory – Plaintiff must show with sufficient definiteness that D acted in a manner which invaded a legally protected duty. Preponderance of the evidence. (Causation/Fact of Damage)
2. Remedial theory – P must produce a reasonable evidentiary basis that would allow damages to be calculated without speculation or conjecture. Forgiving evidence. (Amount of Damages)
1. Higher level of certainty for damages from breach of k than torts.
a) Problematic for new businesses.
2. Two types of certainty: 1. fact of damages 2. amount of damages
C. Value of lost chance v. Youst (all or nothing rule)
1. Certainty – Change in Odds
a) Causation/Fact of Damage.
b) Must establish D more likely than not caused harm to P for claim in tort (substantive).
2. Youst: Full recovery or no recovery.
a) Possible rule: D must more than double the odds of an adverse result to satisfy the preponderance of the evidence standard.
3. Value of Lost Chance: Get value of change in odds.
4. Ex. Tiger
a) Value of lost chance – $51,000 (51% chance) & $49,000 (49% chance)
b) Youst Rule – $100k & $0
5. Ex. Lost chance of living
a) Value of lost chance = Value of make whole amount for death * % of lost chance
b) Youst = $0 or full value of make who amount for death.
D. Cannon Case
1. Restaurant patron found worm in food. Owner lost significant amount of business. No certainty of negligence on part of canner and damages of lost profits are too speculative. Foreseeable and certainty in this case.
2. Common law and UCC provide that manages must be determined in a manner that is reasonable.
3. New businesses – prove lost profits via:
a) Before and after theory – profits before incident and after
b) Yardstick test – study profits of similar enterprises.
4. Certainty may be “reasonable certainty” based on opinion evidence.
5. For policy reasons sometimes certainty may be relaxed. (photographer who lost photos)
E. Youst case
1. Other rider whipped horse causing it to break stride. Held Deprivation of the chance of winning a horserace does not present a basis for tort liability for interference with prospective economic advantage.
2. Value on chance – Other cases (typewriter repair guy had chance of getting government contract) award value for lost chance. Breach of contract case.
3. Certainty less of a problem for torts. Man awarded future earnings as a singer though he hadn’t begun after getting leg tortiously injured.
4. Where no rational basis exists to measure damages in tort the task of calculating a recovery is insurmountable. Wrongful life on behalf of birth-defective child (emotional stress damages to child).
5. Youst v. value of lost chance = all or nothing v. more exact and fair but involves more uncertainty (splitting baby). You get it right or you don’t you shouldn’t split the baby using value of lost chance.
6. Youst rule: D must more than double the odds of an adverse result to satisfy the preponderance of the evidence standard.
XII. Limits on Damages
A. Avoidable consequences
1. Positive side – allows damages reasonably incurred to mitigate damages.
a) Affirmative – P’s effort to mitigate increases damages.
(1) Remedial level.
b) Burden on P: Component of Damages.
2. Negative side – injured parties can’t recover damages that could have been averted by taking reasonable steps following accrual of the harm.
a) P’s failure to mitigate reduces recovery.
(1) Remedial level.
b) Burden on D: Affirmative Defense.
1. Negative –
a) P’s failure to accept employment reduces recovery only if the substitute is not different or inferior.
b) P’s acceptance of substitute employment (even if not required) reduces recovery.
2. Affirmative –
a) P’s reasonable efforts to obtain substitute employment increase damages.
C. Avoidable consequences and surgery
1. Plaintiff decides (pro-P)
2. Reasonable person standard
3. Doctor decides (pro-D)
D. RockinghamCounty v. Luten Bridge Co.
1. Bridge builder that continued construction after contract was cancelled because they failed to mitigate. They get expenses in part performance prior to repudiation, plus the profit which would have been realized if it the bridge had been completed.
E. Parker v. Twentieth Century-Fox Film
1. Actress was supposed to play female lead in one film but was offered same compensation for a different film. The rule is that an employee under contract does not have to accept inferior employment to mitigate damages.
a) Where the offer of a substitute contract is conditioned on surrender by injured party of its claim for breach, one is not required to accept that contract to mitigate.
F. Damaged Fence problem
1. This is a tort problem. The general rule is that a tort victim must exercise reasonable diligence is mitigating or not aggravating the damages caused by the tortfeasor. Here, the owner of the puppies learned of the damage to the fence after the puppies had been lost so the Potters have a good argument that they could not have mitigated the damages by mending the fence in time to save the puppies. Davis may argue that the Potters didn’t show due diligence in inspecting the fence. However, a court would likely award damages for the loss of the puppies.
2. Here, Davis would have a good argument that after the first three puppies had been lost that the Potters should have immediately mended the fence. Therefore, the Potters may not receive compensation for the veterinarian’s bill.
3. The general rule is that tort victims may be compensated for reasonable actions they take to mitigate damages. Since the Potters need the backyard to raise puppies they would argue that immediate repairs were necessary. Davis may argue it would have been more reasonable for the Potters to make other arrangements for the puppies and immediately make permanent repairs.
G. Lobermeier v. General Telephone Company of Wisconsin
1. Man’s ear was electrocuted by a phone and he took a long time to get proper care and surgery.
2. Failure to mitigate damages is an affirmative defense.
3. An injured party is obligated to exercise that care usually exercised by a person of ordinary intelligence and prudence, under the same or similar circumstances, to seek medical or surgical treatment and to submit to and undergo recommended surgical or medical treatment within a reasonable time.
H. Collateral Source Rule
1. Compensation or other benefits which an injured party receives from a source unaffiliated or independent of the responsible party are not deducted from the defendant’s liability.
2. Condition: If P receives compensation from a source wholly independent of D. . .
a) Result: D cannot use that compensation as a basis for reducing damages.
a) Collateral Source (not reduced).
b) Direct Source (reduced).
4. Common application: insurance.
5. CA Civil Code § 3333.1
a) (a)[i] [I]n an action for personal injury against a health care provider based upon professional negligence, [a defendant] may introduce evidence of any amount payable as a benefit to the plaintiff as a result of the personal injury pursuant to the United States Social Security Act, any state or federal income disability or worker’s compensation act, [or] any [insurance]. [ii] [T]he plaintiff may [then] introduce evidence of any amount which the plaintiff has paid. . . to secure his right to any insurance benefits concerning which the defendant has introduced evidence.
I. Helfend v. Southern Cal Rapid Transit
1. Bus collision accident with public entity at fault.
2. Court ruled that the collateral source rule a government entity where plaintiff’s medical bills had been paid through a medical insurance plan that requires the refund of benefits from tort recoveries.
3. Policy considerations
a) Defendant shouldn’t get windfall because party has insurance.
b) Insurance purchasers should get benefit of insurance.
c) Money should not go to person commiting a wrong.
d) Rule deters future wrongdoing.
e) Most insurance contracts have subrogation rights.
XIII. Punitive Damages
1. Punitive damages are awarded to punish defendants for egregious conduct and deter defendants and others from future offenses.
2. Available to punish and deter only egregious misconduct.
3. D acts with an evil motive such as spite, ill will, intent to injure or fraud or with gross recklessness or a willful disregard for the rights of others.
4. Jury can consider the defendant’s financial condition and whether they profited financially from its misconduct.
5. Supreme court says at some point punitive damages violate a defendant’s right to due process.
6. Courts are unlikely to award punitive damages in breach of contract cases.
7. Derivative claim – Claim for punitive damages are not an independent claim. Although elements of proof differ, entitlement to them is dependent upon the success of the underlying claim.
8. Actual damages – some jurisdictions require the jury to award compensatory damages for there to be punitive damages. Most jurisdictions allow punitive damages based on an award of either nominal or compensatory damages.
1. Underlying claim
a) Derivative (Not Indep.)
b) Compens. v. Nom. Dmgs.
c) Tort Claim (or K Exc.)
2. Requisite Intent
b) Reckless Indifference
(1) Known Danger; &
(2) Conscious Indifference.
c) Gross Negligence (not in CA.)
a) Jury may award PD or not.
D. Determining amount
a) Jury Determination: State law
(a) D’s wealth
(b) Reprehensibility of Behavior: duration, concealment, profit, intent, (actual & potential harm), recitivism
(c) Mitigation (Other Sanctions)
(i) Additionally State of Mind – evidence of a defendant’s state of mind is admissible with respect to an award of punitive damages.
b) Judicial Review – Trial and Appellate: State Law
(1) Jury determination at trial Court
(a) Qualitative – Unreasonable v. Shocks the conscience / passion v. prejudice
(b) Quantitative – e.g. ratio, $ cap
(2) Appellate Court
(a) Abuse of discretion v. de novo
c) Constitutional Limit
(1) Procedural Due process
(a) Minimal Restriction: meaningful judicial review
(2) Substantive Due process
(a) Progressively more restrictive
(b) Must be “grossly excessive”
(i) Reprehensibility: D’s conduct
(a) May consider conduct regarding reprehensibility
(b) Cannot punish for conduct to Third Parties.
(ii) Ratio: between actual harm and PD.
(a) Usually not more than 9:1.
(iii) Other Sanctions: Civil (and criminal) as benchmark for PD.
2. Other Reforms (State law limits on punitive damages)
a) Clear and Convincing evidence (90%)
b) Punitive Damages go to state treasury
c) Caps – Ratio? Fixed $ amount?
d) D’s wealth – Limits on Discovery?
e) Bifurcation Liability/Award of Punitive Damages v. Amount of Punitive Damages
3. Waucop v. Domino’s Pizza
a) Reasonable trier of fact could have found that Domino’s acted with reckless disregard for the safety of others.
b) Maliciousness – Did the actor have an “evil mind” in committing an offense.
c) Reckless disregard – Reckless and conscious disregard for plaintiff’s rights.
d) Gross negligence – entire want of care for the rights of others.
4. Punitive Damages in contract cases – Parties are not permitted to recover punitive damages for breach of contract unless:
a) Breach represents an independent tort
5. Entitlement and Proceedings
a) Silverman v. King
(1) Man lifted up other man and caused him a heart condition. Compensatory damages were awarded and punitive damages. Punitive damages dismissed because the conduct was not sufficiently egregious to warrant punitive damages.
b) It is possible if tortfeasor knew dealer was thin-skulled that punitive damages would have been awarded.
c) Government case – punitive damages is a legal term of art. Federal tort claim act only barred legal punitive damages and not non-compensatory damages.
d) Standard of Conduct – In California the standard for punitive damages are
(1) malice(intended by the D to cause injury to P or willful disregard of P’s rights.
(2) Oporession – despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.
(3) Fraud – Intentional misrepresentation, deceit, or concealment of material fact.
e) Derivative Claim – A claim for punitive damages is not considered an independent cause of action but depend upon the success of the underlying claim.
f) Vacarious Liability –
(1) Majority of jurisdiction follow the “complicity liability” rule. Under this theory, liability for punitive damages based on the agent’s egregious conduct usually does not extend to the principal unless:
(a) The principal authorized, participated in, consented to or ratified the conduct
(i) Principal deliberately retained an unfit servant; or
(ii) If the agent engaging in the conduct was employed in a managerial capacity and acted within scope of employment
(2) Minority – vicarious liability rule – liability while acting within scope of actor’s authority.
1. State Farm v. Campbell
a) Single digit ratio of punitive damages to compensatory damages will satisfy due process.
2. Constitutional challenges to punitive damages – ultimately procedural and substantive due process restricts punitive damages.
3. Substantive due process limitations: court should look to:
a) The degree of reprehensibility of the defendant’s misconduct
b) The ratio of the actual and potential harm to the plaintiff to the punitive damage award;
c) Civil and criminal sanctions available for comparable misconduct.
4. Third-party misconduct – Evidence of misconduct directed at other parties cannot be used to impose punitive damages on a D for that misconduct directly but can be used to show increased reprehensibility toward plaintiff.
5. Related Misconduct – In general the evidence of other misconduct is only relevant if it is of the same sort.
6. Exxon v. Baker – set a 1:1 ratio of compensatory to punitive damages because the compensatory damages were substantial.
XIV. Restitutionary Remedies
A. Remedy: P Recovers Gain to D.
B. Elements of Restitution
1. D enriched at P’s expense
a) Benefits to D
b) At P’s expense
2. Retention is unjust
a) P not disclaim $
(1) Not voluntary or gift
b) D knowingly accepted benefit
c) Unjust for D to keep the benefit
C. Measures of Legal Restitution ($ damages)
a) Profit to D
c) Cost saved to D
(1) Sometimes these measures are the same; sometimes they vary; sometimes one or more is inapplicable.
D. Guiding principles
1. Court imposes deal that would have been made
2. Greater D’s fault, more likely court will err in favor of P
E. Equitable Restitution
a) Equitable element
(1) Fiduciary/confidential relationship; or
(2) Fraud/mistake/undue influence
b) Remedy at law inadequate
2. Two types
a) Constructive trust
(1) Right to good itself
(2) As if D as trustee is holding the good for P
(3) Right to new property if tracing is possible.
(a) P get priority over other creditors
(b) P enjoys any increase in value
(c) P can recover from a third party (except a bona fide purchaser for value)
b) Equitable lien
(1) Right to money secured by property
(2) P has priority over other creditors
(3) Security interest in new property if tracing is possible
P gets deficiency judgment if property decreases in value.
No benefit of increase in value
1. Names for restitution at law
a) quasi-contract – often used in circumstances of failed contract.
b) Quantum meruit – used for value of services without a contract
c) Unjust enrichment, restitution, or assumpit
2. Key names for Restitution in Equity
a) Constructive trust and equitable lean.
G. Unjust Enrichment
1. Court must find an enrichment in the sense that the D has received something of value.
2. Court must find that the enrichment should be disgorged from the defendant to rectify an unjust result.
H. Uses of Restitution
1. Instead of tort or contract claim.
a) Example – Pyeatte (failed contract).
2. In addition to tort or contract claim.
a) Example – model case – “borrowed” crane (inadequate tort remedy).
I. Pyeatte v. Pyeatte
1. Wife put husband through law school and then he divorced her. Ruled he has to pay her $23k.
2. Implied in fact contract – express contract which has been inferrd from the intentions an dconduct of the parties in recognizing the existence of contractual rights an duties.
3. Quasi-contract – implied by law for the purpose of preventing someone from obtaining a benefit of money, services, or property without paying just compensation.
J. Resenberg v. Levin
1. Contigency fee attorney discharged.
a) Held – an attorney employed under a valid contract who is discharged without cause before the contingency has occurred or before the client’s matters have concluded can recover only the reasonable value of his services rendered prior to discharge, limited by the maximum contract fee.
K. Monarch Accounting Supplies v. Prezioso
1. Advertising sign put on roof of building owned by two people. Half of rent (in the past and not future) minus expenses from engineer is what one party gets.
2. Restitution usually limited to the measure of D’s gains.
3. It is not necessary to prove tortious, illegal, or fraudulent conduct by the defendant to establish that the enrichment is unjust.
L. Construction Trust
1. A flexible restitutionary device that imposes an equitable duty on a defendant to convey property under certain circumstances to the rightful owner.
M. County of Cook v. Barrett
1. Man caused country to pay him more for voting machines than they would have otherwise.
2. Chancery can declare County’s equitable interest, the complete remedy obtainable through an accounting.
3. By obtaining specific enforcement of a constructive trust, the beneficiary will effectively have a first priority position over other creditors of the defendant.
4. The equitable interest will prevail except against bona fide purchasers for value.
5. Beneficiary’s equitable interest will be effective to obtain specific restitution of property which has been transferred to a third party who is not a bona fide purchaser.
N. Stauffer v. Stauffer
1. Wife unjustly enriched after husband cheated on wife, she convinced him to transfer a house to her.
2. Use of constructive trust requires:
a) A confidential or fiduciary relation
b) A promise
c) A transfer of legal title to property in reliance on the promise
d) Unjust enrichment of the transferee
3. Constructive trust used for fictional trustee in property transfer. Man murdered wife, and he got constructive trust as beneficiary of part he owned as community property.
4. Government can have constructive trust of profits from book published by former CIA agent.
5. Inadequacy rule – restricts grant of equitable remedies to cases where the legal remedy is inadequate. It is sometimes used to deny a constructive trust.
6. Constructive trust is available to recover unique property wrongfully withheld.
7. Right to jury trial is affected where equity takes jurisdiction.
O. Equitable Liens
1. Operates as a charge or encumbrance on property.
2. Only available where the plaintiff can trace misappropriated property to its product.
3. Equitable lien is preferred where
a) Property has declined in value
b) There is not a severable interest in D’s property against which the plaintiff is making the equitable claim.
4. Middlebrooks v. Lonas
a) Parents didn’t pay back loan. Plaintiff who establishes entitlement to an equitable lien takes subject to the rights of a mortgagee only if the mortgagee is a bona fide purchaser.
b) Equitable lien claimant has a charge or encumbrance on the indentified property and is entitled to a deficiency judgment against the wrongdoer for the balance of the claim.
c) Equitable interests yield to legal interests such as may be asserted by a bona fide purchaser for value.
d) Requirements for imposition of an equitable lien on a specific property.
(1) Debt, duty or obligation between the parties arising out of an express or implied agreement of the parties.
(2) Specific property or res to which the debt or obligation attaches.
(3) A clear intent, express or implied, that the property serve as security for the payment or obligation
(4) No adequate remedy at law.
e) Equitable liens constitute a security interest in property rather than specific relief.
XV. Coercive Remedies
A. Preventative injunctions
a) Inadequacy of Legal Remedies
(1) Damages Uncertain
(2) Multiple Lawsuits
(3) Insolvent Defendant
(4) Unique Item (esp. land)
(5) Infringement of Right where forced rent (damage) insufficient
b) Irreparable Harm
(1) Usually synonymous with remedy at law: if damages are insufficient, harm is irreparable
(2) Sometimes – harm must be great (or at least not trivial).
2. Considerations (whether to grant injunction; scope of injunction):
(1) Ease of enforcement
(2) Determining violation
(3) Prohibitory (negative) generally preferred to mandatory (affirmative).
b) Balancing of Hardships
(1) Harm to P without injunction against
(2) Harm to D with injunction
c) Public Interest
(1) Interests of nonparties as affected by the injunction – individuals, community, society at large.
d) Tribunal Integrity
(1) Court will not issue injunction impossible (too difficult) to enforce
(2) Court will not issue coercive injunction affording inappropriate bargaining power to a party.
3. Gang Injunction: “B Street Boys”
a) Gang as Public Nuisance:
(1) Geographic Scope: Four square blocks.
(2) Targets: Identified Members of Gang
(a) Conduct: (1) Crimes; (2) Loud Noise,
(3) Harassment, Threats; and (3) Gathering
(4) (Driving, Walking, Talking, Sitting, or Appearing Together in Public).
B. Preventative Injunctions
1. Court order designed to avoid future harm to a plaintiff by controlling a defendant’s behavior.
2. Equity will not grant relief when the remedy at law, usually damages, is adequate.
C. Thurston Enterprises v. Baldi
1. User of easement tore it up. Equitable remedy will be limited to future conduct affecting the reasonable use of easement.
2. Greater use of judicial resources in an equitable decree because the court retains jurisdiction of the case while the defendant complies with the order.
3. Multiplicity of lawsuits – Damages for past losses is the province of law but prevention of a multiplicity of future suits for damages is a ground for equitable relief.
4. Traditional equitable rule holds that damages provide an inadequate remedy at law in land sales contracts because every parcel of land is considered unique. Not always followed.
D. The borrowed lot
1. Injunction maybe appropriate because multiplicity of lawsuits may follow. They are likely to continue to use the land.
E. Wheelock v. Noonan
1. One party obtained license to place upon unoccupied lots a few rocks. Rocks were never cleaned up. Ordinarily courts of equity will not wield their power merely to redress a trespass, yet they will interfere under peculiar circumstances, and have done so where the trespass was a continuing one, and a multiplicity of suits at law was involved in the legal remedy.
2. Future infringements
a) Continuing trespass – requires a showing that the D will not follow a demand to vacate.
b) Repeated trespasses – requires a showing that the D is likely to continue to repeat the invasions in knowing violation of the P’s rights.
3. Trespass by trash – Remedy at law is considered adequate if the D simply littered the plaintiff’s land w/ trash.
4. Waste – Injunction is appropriate to prevent ongoing waste if the injunction is necessary to halt immediate serious injury to the detriment of the inheritance.
5. Old rule – Oral license without consideration can be revoked even if the licensee has incurred expenses in good faith.
F. Irreparable harm
1. Courts frequently say that equity will aid a suitor only if the threatened future harm would be “irreparable.” Harm is irreparable because the damage remedy is inadequate.
2. Some courts require you must show also that the harm threatened is great.
G. Muehlman v. Keilman
1. D’s kept starting diesel engine at night and awakening neighbors.
2. If plaintiff can show great damage and no adequate remedy at law, he is entitled to injunctive relief.
3. Irreparability and Inadequacy – Inadequate remedy is indistinguishable from the irreparable injury requirement. The very thing that makes injury irreparable is that no remedy exists to repair it.
4. Nuisance – Courts enjoin private nuisances if loss in the use or enjoyment is great.
5. Intangible business interests – Irreparable harm sufficient for injunction often found in cases involving intangible business interests such as customer lists.
H. Balancing interests and practicality considerations
1. Judge may weigh the relative hardships of the parties and may consider any problems of practicality in enforcing an order.
I. Triplet v. Beuckman
1. Easement holder constructed a causeway where the easement said bridge. Injunctive relief granted for rebuilding of a bridge.
2. Balance of hardships – Relative hardship that an injunction would place on each party is an important consideration.
3. Burden on D may not be a dollar loss. (disinter bodies).
4. Speech – Restraint on speech must be tailored to withstand constitutional scrutiny.
5. Nuisance – If there is sufficient social value to private nuisance activity then it should continue to operate while it pays its way with damages to those privately harmed.
J. Public interest and tribunal integrity
1. The public interest affects the decision whether to grant an equitable remedy as well as scope and nature of any relief granted.
2. Courts will also consider how a ruling will affect the negotiating positions of the parties.
3. Graham v. Circocco – Surgeon left employ after signing a non-compete agreement. Judge looked at injury to public welfare of having one essential surgeon for 700k people.
4. Public may have slight interest in preserving nature.
5. When speech is involved, an injunction must be narrowly tailored to protect the D’s right of expression.
6. Boomer v. Atlantic Cement Co.
a) Cement factory produced pollution (nuisance). Injunction is granted which shall be vacated upon payment by D of such amounts of permanent damage to P’s.
7. Nuisance decisions could affect where factories are placed in the future.
8. Could really be classified as inverse condemnation where court allows polluting entity a right to pollute if they pay.
9. Can health concerns be measured against economic gains?
10. Pollution abatement v. economic efficiency
K. United States v. Oakland Cannabis Buyers’ Cooperative
1. Ruled it was error for the court of appeals to instruct the Discrict court to consider the criteria for a medical necessity exemption.
2. Statutes affecting public interest determinations – Supreme court has held that if the congressional assessment of the public interest is clear and unambiguous then courts are bound by it.
L. Walgreen v. SaraCreek Property
1. Sara creek rented to other Pharmacy against lease agreement. Judge did not exceed the bounds of reasonable judgment in concluding that the costs (including forgone benefits) of the damages remedy would exceed the costs (including forgone benefits) of an injunction
XVI. Coercive Remedies
A. Wandering Golf balls (53)
1. Relocating the hole is very expensive and not in the public interest. Court would have to supervise the relocation of the ninth green (very expensive). No irreparable harm could come from a flying golf ball barring injury.
XVII. Limits on Coercive Remedies: Equitable Defenses
1. Generally apply only to equitable relief (e.g., injunctions, specific performance, constructive trust, equitable lien).
2. But sometimes applied to claims at law for damages from most to least likely: Unconscionability, Estoppel, Laches, Unclean Hands.
3. Our Rule for Class: Apply only in equity.
1. Laches: (1) Unreasonable delay; and (2) Prejudice.
2. Estoppel: (1) Inconsistency (misleading); and (2) Prejudice.
3. Unclean Hands: (1) Serious wrongdoing (2) related to accrual of claim.
4. Unconscionability: Oppressive contract (1) Procedural (formation); and (2) Substantive (terms).
C. Laches vs. Statute of Limitations (“SOL”)
1. Π seeks legal remedy (SOL only)
a) P files before SOL – no defenses
b) P files after SOL – D wins
2. Π seeks equitable remedy – SOL exists (SOL & laches)
a) P files before SOL – D might win: laches (D’s burden)
b) P files after SOL – D wins SOL
3. Π seeks equitable remedy – no SOL exists (SOL & laches) (laches only)
a) P files before SOL – D might win: laches (D’s burden)
b) P files after SOL – D probably wins: laches (D’s burden)
1. The court will not grant equitable relief if the plaintiff has behaved in a way prejudicial to the defendant or offensive to public policy.
2. Was delay unreasonable?
a) Inability to determine the facts & prejudice to defendant?
b) Diligence in asserting rights?
E. Laches and Estoppel
1. Laches bars a plaintiff who has not acted promptly in bringing the action.
Stone v. Williams – Daughter claims royalties from Hank William’s songs. Since delay in filing claim was unexcused and D was prejudiced by delay, laches bars the claim.
a) Ultimately she brought suit in another court and settled.
2. Laches serves public policy of discouragement of stale demands.
3. Burden of proving laches is on D.
4. Principle is that claimant must have knowledge of material facts constructive notice to not have acted with reasonable diligence.
5. Laches defense turns on inequity rather than the mere passage of time.
6. Delay alone is not sufficient for laches; the delay must be prejudicial.
7. Running of the time period for evaluating delay in laches may be tolled in certain circumstances (minority of plaintiff).
8. Innocent infringer
a) Amount of delay – 5 years
b) Constructive notice of lawsuit was given
c) However, no subsequent communication so company may believe the lawsuit is finished and may have relied on that so there may be prejudice.
9. Geddes v. Mill Creek Country Club
a) Complaint of home owner about private nuisance and intentional trespass based on errant golf balls from course.
b) General rule for equitable estoppel – party claiming estoppel must demonstrate that:
(1) The other person misrepresented or concealed material facts
(2) The other person knew at the time he or she made the representations that they were untrue
(3) The party claiming estoppel did not know that the representations were untrue when they were made and when they were acted upon
(4) The other person intended or reasonably expected that the party claiming estoppel would act upon the representations
(5) The party claiming estoppel reasonably relied on the representations in good faith to his or her detriment
(6) The party claiming estoppel would be prejudiced by his or her reliance on the representations if the other person is permitted to deny the truth.
c) Injunction refused because complainant has actively encouraged D to undertake work and P stayed silent.
10. Kohle v. Kodak Case – Claim that Kodak used patented catalysts. Suit brought 6 years later. They were embroiled in another lawsuit. However, they gave letter to Kodak saying they would pursue their claim later. Ruled: they can pursue action. No misleading conduct, and they were clear they would defend their interest.
F. Unclean hands and unconscionability
1. Bar plaintiffs whose claims are in some way morally tainted even if they are legally sound.
2. Defense applies when the party seeking relief has behaved inequitably with respect to the rights being asserted in the case.
3. Senter v. Furman – Dr. was facing malpractice and gave his home to a woman. He transferred corporation to his sons to avoid estate taxes. He thus came with unclean hands and so must fail.
4. The college star’s secret
a) Can automaker enforce a secret agreement that is against the college rules? Probably not because of unclean hands.
5. North Pacific Lumber Co. v. Oliver
a) Employee with non-compete agreement left company to work for competitor. Employer was shady.
b) Conduct sufficiently affect the relations between the parties to justify invocation of the clean hands rule. Manager had to participate in illegal and immoral activity.
6. Offending conduct must be directly related to the merits of the case.
7. Judge rejected unclean hands of sister of shah by Iran’s government.
8. Plaintiff’s posture is at issue, not cleanliness.
9. Court rejected unclean hands argument partly on the rationale that the basis of the defense cannot be conduct which occurs during the litigation of a lawsuit; rather the conduct must occur during accrual of the action.
10. In Pari Delicto – common law in cases of equal or mutual fault the position of the defending party is the better one.
a) In securities and antitrust the court has sometimes declined to apply the doctrine.
1. Fraud is a tort cause of action that can provide remedies. Transactions that do not constitute fraud may be unconscionable.
XVIII. Interlocutory Injunctions
1. P seeks relief before trial.
2. Traditional Rationale: Maintains the status quo while litigation pending.
3. P generally must post bond -> reimburse D if wins interlocutory relief and loses at trial.
1. Traditional Substantive Requirements:
a) Requirement 1: Preserve the Status Quo.
b) Requirement 2: Substantial Likelihood of Success on the Merits: (30-50%)
c) Requirement 3: Irreparable Harm (to P) (before trial): (50%?)
d) Requirement 4: Balancing of Irreparable Harm to P and D.
e) Requirement 5: Must serve the Public Interest.
2. Modern Trends:
a) Preserve the Status Quo (deemphasized).
b) Sliding Scale:
(1) Likelihood of Success on the Merits.
(2) Amount of Irreparable Harm (before Trial to P
(3) Amount of irreparable harm to D.
(a) Goal: minimize risk of harm from error.
c) Test: % P wins x irrep. harm to P > %D wins x irrep. harm to D?