Remedies Outline PDF

Usse equitable remedies when legal remedies are inadequate Remedial Goals A. Remedies FOR Plaintiff 1. Specific Performance 2. Injunction 3. Award Money B. Remedies TO Defendant 1. Transfer title or possession of property 2. Injunction 3....

Usse equitable remedies when legal remedies are inadequate Remedial Goals A. Remedies FOR Plaintiff 1. Specific Performance 2. Injunction 3. Award Money B. Remedies TO Defendant 1. Transfer title or possession of property 2. Injunction 3. Confine them (limited) 4. Enter a money judgment C. Tort Remedial Goals 1. Prevent tort from occurring 2. Restore status quo 3. Compensate plaintiff for the harm 4. Deterrence 5. Establish, declare and vindicate plaintiff’s rights 6. Punishment of wrongdoers D. Contract Remedial Goals 1. Fulfill plaintiff’s expectancy of gain 2. Restore losses and reliance expenditures 3. Restitution 4. Punish bad behavior 5. Deter bad behavior 6. Clarifying or terminating contractual rights E. Unjust Enrichment Remedial Goals 1. Unjust enrichment- substantive law 2. Often goes with torts/contracts, but doesn’t have to 3. Remedy for unjust enrichment is restitution 4. Theory: to restore benefits defendant unjustly holds F. 1. II. Modern Damages A. Damages Vocab 1. Damages (Torts)- compensate, restore, put plaintiff in position where she would have been but for the defendant’s behavior (to the extent money can) 2. Non-compensatory Money a) Nominal damages b) Attorney fees and costs c) Punitive damages d) Restitution e) Statutory Damages B. Proving Existence of Damages 1. Youst v. Longo, 43 Cal.3d 64 (1987) a) RULE (1) A defendant’s interference with a plaintiff’s chance to win a sports contest does not give rise to tort liability for interference with prospective economic advantage (based on the facts in this case) b) HOLDING (1) “Sports are inherently unpredictable”  (2) Support for either: (a) Possibility 1: Probable need 51% more likely than not would have finished as a winner needed to show to recover (b) Possibility 2: impossible to ever show probability of winning a sporting evidence c) NOTES (1) Case tossed after complaint so no opportunity for discovery (2) Value of the chance approach (a) Alt. Opinion: P would not recover full value of lost price, but value discounted by probability of winning in absence of defendant’s interference (CoA would’ve done that, but CA SCOTUS not persuaded) 2. Lost Chances Approach a) K cases (1) Beauty queen breach of K, opportunity to compete AT ALL (2) Hogs delivered by Rail b) Lost Chance to Survive ok if less than 50% (1) Lower than 50/50 survival rate, but die based on negligent medical issue (2) Can recover based on lost survival rate (30% recovery rate allowed rather than 0) (3) LA Sct left to jury, CoA would’ve applied lost chance (4) Mass - allows for reduction of threshold based on survival but for medical malpractice i. DISCUSSION: What approach is best? 1. Lost Chances calculation gives more of an opportunity if less than 50/50 2. Youst 50/50 threshold may be better for non survival cases to create a cleaner rule when human life is not involved a. But would a 50/50 rule incentivize cheating? 3. Maybe allow for lost chance in sports when not even given the chance to compete These ABOVE cases only arise when damages is an element C. Plaintiff’s Lost Capacity to Earn 1. Washington v. American Community Stores Corp. a) Car accident injury of future olympic wrestler b) RULE (1) Damages for lost earning capacity are general damages and need not be specifically pleaded and proved. c) “Proof of an actual loss of earnings or wages is not essential to recovery for loss of earning capacity” (1) Factors relevant to an award for lost earning capacity include: (a) the plaintiff’s age, (b) Health, (c) life expectancy, (d) habits, (e) job, (f) skills, and (g) Experience. (2) General evidence based on above factors was enough to support compensatory award in jury verdict d) DISCUSSION a. Would lost chance be better to analyze this case? i. P no and D yes ii. Lost chance would preclude the full amount iii. Incentive to bring cases like this would be damaged by not allowing recovery for full amount of percentage 2. Childs v. United States a) Woman and unborn child killed by USPS truck  b) RULE (1) A plaintiff in a wrongful-death action may recover both items with a proven monetary value such as potential lifetime earnings and lost intangible items such as a family member’s society and counsel. c) Should this determination be based on statistics or based on the realities of her life to this point? Should look to both, maybe model that allows for assigning weights to each statistic (1) If statistics show women are more likely to leave worforce to raise children should damages adjust? (2) No legal retirment age so why 65? (3) Consider religion? COURT AGREES WITH P EXPERT 1. Work until 65 is more realistic 2. Exceptional employee 3. Single mother with no other choice d) Conceded Damages: $8794 (1) Funeral expenses (could contest (everyone dies) but an asshole move) (2) Medical expenses (3) Damage to debra’s car e) COURT FOUND $1,350,000 (1) Court concludes that the full value of General’s life is $1,083,000. D. Calculating Medical Damages 1. Plaintiffs get to recover medical damages. 2. How to calculate? a) “Reasonable value of medical expenses” 3. Common Law Collateral Source Rule a) Bars evidence of compensation plaintiffs received from collateral (non-party) sources. (1) Note: this rule broader than just medical insurance payments, but comes up often in medical damages cases. b) Tort Reform of Collateral Source Rule (1) The majority of states have altered the common law collateral source rule by statute. (a) Some have abolished entirely (b) Others have modified it (2) Some states treat collateral source rule different only for medical malpractice claims from other types of claims. c) Patchett v. Lee, Indiana Supreme Court 2016 (1) How to calculate “reasonable value of medical services?” (a) P: Look at the medical bills- ~$88k (b) D: Look at the amount accepted as full satisfaction of the charges- ~$12k (2) Stanley (2009) (a) State Supreme Court held the statute permits a defendant in a personal-injury suit to introduce discounted reimbursements negotiated between the plaintiff’s medical providers and his private health insurer, so long as the insurance is not referenced (i) Plaintiff here tries to distinguish because here the medical providers aren’t negotiating at all. Must accept the reimbursement rates if participating in the program (ii) Defendant: they don’t have to participate in the program (3) Since Stanley: (a) 6 states entirely preclude admission of discounted reimbursements to prove reasonable value (b) 2 states held only the discounted amount paid for medical services is admission to prove reasonable value (c) 2 states allow both amount charged and amount accepted. (4) We believe the middle ground “fairest approach” honors trust in the jury.  (5) Statute seems clear. Prohibits evidence of payments by the state or any agency of the state. d) Lagerstrom v. Myrtle Werth Hospital-Mayo Health System Supreme Court Wisconsin 2005 (1) Reasonable value of medical services rendered (a) Plaintiff: $89,000 in medical bills (admitted) (b) Defendant: $755 actual out of pocket expenses (admitted) (c) Jury: $755 (2) Majority: means courts should instruct juries to consider the collateral source payments only in determining the reasonable value of the medical services rendered not to offset the payments (a) Jury is instructed not to use the evidence of collateral source payments to reduce the award for medical services but only to determine the reasonable value of medical services (b) Dissent: thats silly E. Plaintiff’s Pain and Suffering 1. Types a) Physical pain b) Grief/Bereavement c) Fear/Terror d) Frustration e) Loss of enjoyment of life (separate?) (1) not recoverable (2) Recoverable as part of the damages for pain and suffering (a) Evidence must be specific to the Plaintiff (3) recoverable as an element of the permanency of injury (4) Recoverable as a separate element of damages f) Consortium (derivative damages category?) 2. Justifications a) Compensatory- even though can’t really compensate b) Substitutes- allows to use money to purchase a substitute or a distraction c) Deterrence d) Help finance litigation/plaintiff’s lawyers (camouflaged attorney fees) 3. Loth v. Truck-A-Way Corp. a) QP: was plaintiff’s expert economist’s testimony on “hedonic” damages- damages to compensate for the loss of enjoyment of life admissible? b) In California, a pain and suffering award may include compensation for the plaintiff’s loss of enjoyment of life…only one component of a general damage award for pain and suffering. It is not calculated as a separate award.” (#2 from options above) c) Evidence must be specific to the plaintiff! d) Some courts prohibit counsel from suggesting a specific amount (1) Others more flexible 4. McDougald v. Garber Court of Appeals of NY, 1989 a) QP: Need to be conscious to recover for either pain and suffering OR loss of the pleasures of life b) Majority: damages for loss of enjoyment of life to a person whose injuries preclude any awareness of the loss does not serve a compensatory purpose c) Dissent: no fault with trial court’s award for loss of enjoyment of life even in the absence of any awareness of that loss by the injured plaintiff Limits on Tort Damages A. Causal connection (usually “but for” relationship) 1. Proximate Cause B. Certainty - can’t be speculative, must be provable with “reasonable” certainty C. Unavoidability - only those losses that could not reasonably have been mitigated are recoverable 1. Burdon on D to show P could have reduced or avoided damages D. Avoidable Consequences 1. What substitute employment must a p accept to limit damages? a) Disabled veterinarian who specialized in equine surgery: “not required to mitigate damage to such an extent as to alter her professional career path to an unreasonable degree…not required to accept alternative employment even though she could earn more money in said employment, provided that the higher paying job is unreasonably different from her chosen occupation.” b) But plaintiff “is not entitled to recover for the rest of his life what he would have earned at sea; the law requires him to mitigate his damages by finding other employment…Even if he was unfit for sea duty after that time, he could have mitigated his damages by finding another line of work.” 2. Unsure whether avoidable consequences are to reduce damages or substantive defenses of contributory negligence, comparative negligence, assumption of risk and last clear chance a) Ex. admissibility of failure to buckle seatbelt (1) Majority rejects this evidence 3. Vocab NOTE (mitigation of damages) a) Technically “mitigation of damages” refers to how a defendant can decrease a plaintiff’s damages. b) When it is steps plaintiff should take to prevent damages from increasing the more accurate term is “avoidable consequences” or “minimize damages” c) Nonetheless frequently lawyers and judges use “mitigation of damages” for both. E. Tort Economic Loss Rule 1. Common law rule is that absent an injury to person or property a plaintiff may not recover in negligence for economic loss a) Economic loss is losses not directly from an injury or direct property damage (second degree losses of economic nature b) Purpose: shield d from unlimited liability for all of the economic consequences of a negligent act, particularly in commercial setting → keep risk of liability reasonable 2. Local Joint Executive Board, Culinary Workers Union, Local NO. 226 v Stern a) Employees of hotel brough class action for lost salaries and benefits b/c of unemployment due to fire caused by negligence b) Court: can’t recover because of economic loss rule c) EXCEPTIONS: (1) where the plaintiff sustained damage i.e. personal injury or property damage (2) where the plaintiff’s damages are proximately caused by a defendant’s intentional, false representation, i.e. fraud (3) where the plaintiff’s damages are proximately caused by a negligent misrepresentation by a defendant d) DOESN’T FALL UNDER IF: (1) purely economic loss is recoverable in actions for tortious interference with contractual relations or prospective economic advantage, but the interference must be intentional (2) Can recover under contract where there is privity of contract 3. In Re Chicago Flood Litigation a) P seeking lost wages, revenues and sales, profits and good will b) Trial court barred p who did not allege physical property damage c) S Ct of Illinois: “P who did not incur personal injury or property damage may not recover solely economic losses” d) “At common law, solely economic losses are generally not recoverable in tort actions.” (1) Note: court not limiting to only negligence cases e) “plaintiffs do not seek damages for the loss of continuous electrical service, which is a disappointed commercial expectation. Rather, class plaintiffs seek damages for property loss, in the form of lost perishable inventory, as a result of a tortious event.”  4. Exxon Valdez Oil Spill a) Electric utility claimed it lost its largest customers when seafood processing companies closed or operated at low levels because of shortage of fish to process. (1) Seafood restaurant- lost most of its customers (2) Tourist businesses- loss of customers for the fishing season (3) Boat repair company- decline of business. b) Court upheld denials under maritime version of economic loss rule. 5. More examples a) Employer can’t recover lost income after an important employee is put out of action by a negligent tortfeasor b) Hotel operators and local businesses couldn’t recover from contractor who negligently built a bridge that had to be closed for repairs. 6. Practice Problem a) Because of the defendant’s negligence when its truck hits the electrical service entry, electric power to an office building is shut off. Phil’s Pharmacy’s drugs in an uncooled cooler spoil. Next door Dr. Crowns’ dentist’s drill wont’ drill. (1) Who can recover under economic loss rule? (2) If you think the distinction is arbitrary and unjust which direction should the line be moved? F. Reduction to Present Value (adjust down) 1. Damages awarded as lump sum that include money earned in the future 2. Ct reduces or discounts p’s lump sum judgment to present value by assuming rate of interest it will be expected to earn 3. Often statutes with charts or set rates G. Prejudgement Interest (Adjust Up) 1. Rationale: measures time value of money 2. Otherwise incentive to litigate rather than settle 3. Common Law (liquidated v. unliquidated damages rule) a) Liquidated damages: (1) Defendant had to pay prejudment interest on claims that were certain or clearly ascertainable with a calculation. b) Unliquidated damages: (1) No prejudment interest on uncertain, incalculable claims c) Damages for most tort claims 4. Prejudgement Interest Reforms a) “Ragged” trend is in direction of adding prejudgment interest to all money judgments rather than strict liquidated/unliquidated rules (1) Court can expand category of what can be calculated or ascertained beyond traditional liquidated damages (2) Court can restate rules as discretion Punitive Damages A. Tuttle v Raymond III 1. Should Maine allow punitive (exemplary) damages? a) Arguments for yes: (1) Deterrence (2) Punishment (3) Express society’s disapproval of intolerable conduct b) Arguments for no: (1) Punishment/deterrence should be criminal (2) Civil law lacks procedural safeguards  (3) Double jeopardy (4) Windfall to Plaintiff (5) Invites abuse because no real formula 2. Punishment should be criminal a) Jury should be instructed on evidence of criminal punishment 3. Civil law lacks procedural safeguards a) That’s because no risk of incarceration 4. Double jeopardy: that’s criminal only 5. Windfall to Plaintiff a) Cover uncompensated expenses and motivate reluctant plaintiffs 6. Invites Abuse because no Real Formula a) Asset, can individualize to what is needed for deterrence. 7. Although D was driving with disregard it did not amount to malice a) Reckless operation of a vehicle b) Can’t justify punitive damages based solely upon a defendant’s reckless disregard c) Defendant’s conduct was not accompanied by malice, express or implied. d) Court: vacate award of punitive damages. B. Status of Punitive Damages in Other States 1. NO COMMON LAW PUNITIVE DAMAGES (only allowed if specifically provided for in statute) a) Louisiana b) Massachusets c) New hampshire d) Washington 2. Nebraska forbids ALL punitive damages 3. All other states and federal court allow punitive damages in some circumstances. 4. Maryland - “actual malice” 5. Hawaii - “conscious wrongdoing” C. Standard of Misconduct for Punitive Damages 1. Generally accepted not “mere negligence” 2. Some decisions have said “wanton, malicious, reckless or grossly negligent conduct.” 3. Court: “punitive damages are available based upon tortious conduct only if the defendant acted with malice” a) Motivated by ill will or deliberate conduct that is SO OUTRAGEOUS malice can be implied b) Mere reckless disregard is not enough 4. Whats best? a) Actual malice b) Conscious or reckless disregard c) Gross negligence D. Restatement: “Punitive damages may be awarded for conduct that is outrageous, because of the defendant’s evil motive or his reckless indifference to the rights of others. 1. Majority of states use some version of this rule 2. Allow punitive damages not just for actual malice but also for recklessness or serious indifference E. Smith v Wade 1. Supreme Court in a prison inmate’s civil rights suit under Section 1983 against a guard: 2. Punitive damages allowed “when the defendant’s conduct is shown to be motivated by evil motive or intent, or when it involves reckless or callous indifference to the federally protected rights of others.” 3. Successful p gets attorneys fees F. Standard of Proof 1. Preponderance of the evidence (usual) 2. Court: higher standard of of proof is appropriate  3. “plaintiff may recover exemplary damages based upon tortious conduct only if he can prove by clear and convincing evidence that the defendant acted with malice.” 4. Majority of states have raised punitive damages burden of proof from preponderance of evidence to clear and convincing evidence (some by common law and some by statute) G. Insurance for Punitive Damages 1. Industry hasn’t excluded 2. Some courts oppose bc undermines deterrence H. Defendant’s Wealth 1. Restatement: wealth of the defendant is also relevant, since…the degree of punishment or deterrence resulting from a judgment is to some extent in proportion to the means of the guilty person.” 2. California requires evidence of defendant’s wealth I. Punitive Damages in Contracts 1. Traditional rule: punitive damages may never be recovered in pure breach of contract suits 2. Only a few courts have allowed punitive damages in a contract case, e.g. breach of a covenant not to compete 3. Creates powerful incentive for plaintiff to characterize defendant’s behavior as a tort. J. Post-verdict judicial review of punitive damages 1. State excessiveness review a) Eight Amendment forbids “Excessive Fines?” (1) Browning-Ferris Industries v. Kelco Disposal- 1989- holding the Excessive Fines Clause does not limit civil punitive damages 2. Procedure: defendant files post-verdict motion for remittiturconditional new trial on ground of excessiveness 3. Common law tests: a) Shows passion, prejudice, or partiality b) Shocks the judicial conscience 4. NY: whether verdict “deviates materially from what would be reasonable compensation” K. Due Process Rights 1. Pacific Mutual Life Insurance Co. v. Haslip, 1991 a) $840,000 punitive damages (4:1) did not violate due process b) Punitive damages not per se unconstitutional c) Unlimited jury discretion may invite extreme results that d) are unacceptable under the Due Process Clause. e) No mathematical bright line f) Good jury instructions and post-verdict judicial review 2. TXO Production Corp. v. Alliance Resources Corp, 1993: a) Ratio was 526:1 punitive to compensatory b) SCOTUS found no due process violation because it was not “grossly offensive,” but refused a clear test c) Scalia criticized saying most future challenges would be able to say “this is no worse than TXO” 3. Honda Motor Co. Ltd. V. Oberg, 1994 a) Compelled states to include in post-verdict judicial review a factual evaluation of the jury’s punitive damages for excessiveness L. BMW v. Gore 1. No bright line rules, but “fully convinced that the grossly excessive award imposed in this case transcends the constitutional limit” 2. Facts a) Jury awards actual damages of $4,000. b) Jury also gave $4 million in punitive damages because c) BMW’s non-disclosure policy was “gross, oppressive or malicious fraud” d) Alabama Supreme Court reduces to $2 million b/c jury impermissibly looked at sales outside Alabama 3. Guidepost 1 a) Degree of reprehensibility  b) How reprehensible is the non-disclosure? (1) Non-violent (2) Purely economic not safety (3) Chose a policy coinciding with strictest state statute (4) No deliberate false statements, just omission c) Court: behavior not so reprehensible to justify $2 million in punitive damages. 4. Guidepost 2 a) Disparity between the harm or potential harm suffered and his punitive damages award b) Courts look to ratios, but no mathematical formulas c) Court: “When ratio is a breathtaking 500 to 1 award “must surely raise a suspicious judicial eyebrow” 5. Guidepost 3 a) Difference between remedy and civil penalties authorized or imposed in comparable cases (1) Maximum civil penalty in Alabama $2k, other states $5-10k (2) Resulted in deterrence, but we don’t’ know whether lower number would have worked too. 6. Scalia: as long as there is some reasonable judicial review and process that is all the 14th amendment requires. No substantive review or limits. 7. Ginsberg: would leave the state court’s judgment undisturbed, and resist unnecessary intrusion into an area dominantly of state concern 8. Remand a) Alabama Supreme Court says Court’s 3 guideposts are just factors to be emphasized as part of overall state court review b) “We reject the easy answer of adopting one ratio… frustrate the purpose of punitive damages, which is to punish and deter” c) Reject statutory penalty- doesn’t cover BMW’s profit from sale of car to Gore d) Analyzed defendant’s wealth, plaintiff’s litigation expenses, criminal sanctions and other civil lawsuits. e) Conclude $2 million is grossly excessive- reduce to $50,000 M. Cooper Industries v. Leatherman Tool Group, 2001 1. SCOTUS says Court of appeals should conduct review of district court’s punitive damages verdict de novo rather than deferential abuse of discretion a) Jury’s decision to grant punitive damages isn’t’ really a finding of fact, but conclusion of moral condemnation N. State Farm v. Campbell, 2003 1. Utah courts approved compensatory damages of $1 million, and punitive damages of $145 million a) Utah court ignored the strong hint that 1:1 ratio might make sense because compensatory damages were high. b) Set Campbell’s punitive damages at little over $9 million so “single digit ratio” c) SCOTUS denied cert 2. SCOTUS again says no “rigid benchmarks” but a) 1:1 ratio enough when compensatory damages substantial b) 4:1 ratio mentioned in earlier cases as close to the line of constitutional impropriety c) 9:1: “single digit- multiplies are more likely to comport with due process than awards with ratios of …in this case 145 to 1” O. Philip Morris USA v. Williams, 2007 1. Compensatory damages of $821,000 2. Punitive damages of $79.5 million 3. Proposed Jury Instruction a) “you may consider the extent of harm suffered by others in determining what the reasonable relationship is” between any punitive award and “the harm caused to Jesse Williams” by Philip Morris’ misconduct, “but you are not to punish the defendant for the impact of its alleged misconduct on other persons, who may bring lawsuits of their own in which other juries can resolve their claims”  4. New limits a) “Constitution’s Due Process Clause forbids a State to use a punitive damages award to punish a defendant for injury that it inflicts upon nonparties” (1) No opportunity to defend (2) How many victims? How seriously injured? (3) Jury has to speculate. b) Jury can consider potential harm to plaintiff c) Jury can also consider evidence of actual harm to non-parties to help show reprehensibility. 5. Dissents a) Stevens: “I see no reason why an interest in punishing a wrongdoer ‘for harming persons who are not before the court’ should not be taken into consideration when assessing the appropriate sanction for reprehensible conduct” especially where award is “payable in whole or in part to the State” b) Thomas: “Constitution does not constrain the size of punitive damages awards” c) Ginsubrg: Oregon courts followed our decisions, and shouldn’t vacate them. 6. Remand a) Oregon Supreme Court held Philip Morris’s lawyers hadn’t objected properly at trial to the rejection of the jury instruction or presented a satisfactory substitute jury instruction, under Oregon law it didn’t preserve its favored instruction for review b) SCOTUS initially grants cert again, hears oral arguments and then dismisses. P. Vicarious Liability for Punitive Damages 1. Restatement of Torts rule: punitive damages only allowed against principal for act of the agent if a) (a) principal authorized doing and manner of the act OR b) (b) agent was unfit and principal was reckless in employing OR c) (c) agent was employed in a managerial capacity and was acting in the scope of employment, OR d) (d) employer or manager ratified or approved the act 2. CA: while an employer may be liable for an employee’s tort under respondeat superior, he is not responsible for punitive damages where he neither directed nor ratified the act.” 3. Florida: employee willful and malicious AND employer independently negligent 4. Cts more willing to make employers pay: a) Alabama- originally question whether employee acted within scope of employment (changed by statute) b) Arizona- “employee’s misconduct in furtherance of the business and within the scope of employment” c) Oregon “scope of employment” Q. Mathias v. Accor Economy Lodging (7th Cir. 2003) 1. Defendant’s behavior was outrageous but the compensable harm done was slight and at the same time difficult to quantify because a large element of it was emotional. 2. If stakes capped at $50k, plaintiff’s might have difficulty financing the lawsuit. 3. Defendant’s aggregate net worth of $1.6 billion relevant…enables the defendant to mount an extremely aggressive defense against suits such as this…make it difficult for the plaintiffs to find a lawyer willing to handle their case. 4. “would have been helpful had the parties presented evidence concerning the regulatory or criminal penalties to which the defendant exposed itself by deliberately exposing its customers to a substantial risk of being bitten by bedbugs” as “recommended by the Supreme Court” 5. Do not think its omission invalidates the award 6. Can take judicial notice that under Chicago law unsanitary conditions can lead to hotel losing its license and presumably they prefer punitive damages to losing license. 7. All things considered, we cannot say that the award of punitive damages was excessive, albeit the precise number chosen by the jury was arbitrary 8. The judicial function is to police a range, not a point. 9. Reasons for Punitive Damages a) Punishment b) Deterrence  c) Relieve pressures on overloaded system of criminal justice d) Incentive to sue in civil system e) Alternative to responding with violence R. Tort Reform Punitive Damages 1. Have judges set amount. a) Constitutional? Ohio court said no b/c right to a jury trial. 2. Heighten burden of proof (saw in Tuttle case) 3. Bifurcation 4. Caps (various types) a) Numerous state courts upheld constitutionality, but Missouri court said violated state jury trial provision 5. Diverting/Splitting Punitive Damages a) Constitutional issues? V. Attorneys Fees A. American Rule 1. Both winning and losing litigants bear their own expenses, including attorney fees. 2. EXCEPTIONS a) Contract Exception b) Statutory Exception c) Judicial Created Exceptions (1) Insurance exception (a) Applies when insurer forces the insured to commence legal action to obtain the full benefits of the insurance contract between them (b) Declined to extend this exception to third party actions where there is no privity of contract (c) Here insurance exception doesn’t apply because not suing their own insurance company. (2) Bad-faith litigation exception (controversial) (3) Litigation with a third party (4) Common-fund doctrine (a) Class actions (5) Common Benefit exception (variation on above) (6) Private Attorney General (a) Ex. civil law suits B. UFBDH v Davis County Clerk 1. Attorney fees under private attorney general doctrine? 2. Precedent said “when the vindication of a strong or societally important public policy takes place and the necessary costs in doing so transcend the individual plaintiffs’ pecuniary interest to an extent requiring subsidization” 3. Precedent said “exceptional nature” and requires “extraordinary case” 4. Court clarifies that monetary benefits are not required 5. Also clarified that no need to show inability to pay attorney fees 6. Attorney fees under private attorney general doctrine? 7. Argument: no monetary benefit created 8. Argument: UFBDH can afford attorney fees. 9. Court clarifies that monetary benefits are not required 10. Also clarified that no need to show inability to pay attorney fees 11. Rule Application a) Case implicated the sacrosanct and fundamental right of the people to directly legislate through the constitutional processes of initiative and referenda. b) This meets the “vindication of a strong or societally important public policy” requirement (1) Supported by Oregon case awarding attorney fees in similar facts.  c) Vindication of constitutional rights implicated in this case falls well within extraordinary and exceptional case C. Measure Atty Fees 1. Lodestar Method a) Number of hours reasonably spent on case x reasonable billing rate (1) Note: not actual hours spent and actual billing rate (2) Reasonable billing rate takes into account geographical area, services provided and experience (3) How can judge figure out reasonable number of hours spent? b) Usually used in statutory attorney fees cases c) The existence of statute means case is presumed to serve the public interest so want to make sure lawyers are reasonably compensated. d) Want to incentivize counsel to take socially beneficial litigation (as identified by the statute’s choice to award attorney’s fees) e) Perdue v. Kenny A (1) Lawyers represented 3000 foster children suing Georgia’s system for inadequate medical and mental health services and overcrowded and unsafe institutions. (2) Plaintiff’s sought a $14 million attorney fee, part lodestar and part asked for enhancement for superior representation and results (3) Trial judge said lawyers were extraordinary (4) Six Considerations: (a) 1) reasonable fee is one sufficient to induce a capable attorney to represent plaintiffs, but not economic relief to improve financial lot of attorneys (b) 2) “strong” presumption that lodestar method is sufficient (c) 3) never sustained enhanced lodestar amount for performance but had said a judge could award enhancement for “rare” and “exceptional” circumstance (d) 4) judge can’t base enhancement on factors already included in lodestar such as case’s novelty- already baked into the numbers (e) 5) burden of proof on party seeking attorney fees that enhancement is necessary (f) 6) Need to produce “specific evidence” to support enhancement 2. Percentage of Recovery Method a) Layers recover a certain percentage of recovery (common fund cases) b) Deciding Percentage (1) Less than 3%- court approved 2.829% in a case where settlement was $151 million and attorney fee was 3.5 million. (2) 38%- approved in another case where class members recovered much of the money they lost when they invested with defendants c) Sometimes courts use a lodestar method crosscheck to determine the reasonableness of the request for a particular percentage under the percentage of funds method. (1) If lodestar cross check shows a higher number than percentage of funds method, easy to agree (reasonable number) (2) If shows lower number, hard to know what to do. (3) Circuits have complex multi-factored tests. D. Common Law Third Party 1. If your litigation makes a litigation with a third party VI. Tort Reform A. Concerns 1. Rising insurance premiums 2. Tort system inefficient with high delays 3. High transaction costs (atty fees)  4. Lottery like results - erratic high payouts B. Goals 1. Decrease number of plaintiffs’ damages judgments 2. Reduce amount of judgments that remain 3. Major Targets: a) Collateral source rule b) Pain and suffering damages c) Joint and several liability d) Punitive Damages C. Tools 1. Legislative and judicial advocacy a) Statutory caps on types of recovery (1) Fair to women, young, elderly, most serious injured? b) Medical malpractice reform - including caps c) Post verdict judicial review d) Periodic payments D. Challenges 1. Federal constitutional challenges (not succeeded) a) No SCOTUS case, but Court of Appeals briefly rejected jury trial and equal protection claims. b) Logic if legislature can abolish a cause of action, it can keep the action and just limit damages. c) Equal protection claim is subject to rational basis review as economic regulation and legislation is rational. 2. State constitutional challenges (varies) a) State constitutional provisions with federal counterpart: (1) Right to a Jury Trial (2) Separation of Powers (3) Equal Protection b) State constitutional provisions with no federal counterpart: (1) Ban on “special legislation” (2) Requirement of “open courts” (3) Specific separation of powers provisions (4) “right to a remedy” E. Atlanta Oculoplastic Surgery v Nestlehutt 1. Georgia law capped noneconomic damages in medical malpractice cases to $350,000 2. Georgia’s state constitution guarantees trial by jury 3. Does the cap violate state constitution? a) Court: yes, violates right to trial by jury (1) Nullifies jury’s findings of fact regarding damages and thereby undermines the jury’s basic function (2) $350,000k doesn’t save it. Very existence of the caps, in any amount, is violative of the right to trial by jury. (3) Different from punitive damages cases as those aren’t really facts tried by juries. b) Don’t have to address whether violates separation of powers or equal protection clauses. F. Other challenges under right to jury: no violation 1. Maryland (1992) - a) $350k cap on “noneconomic” damages does not interfere with jury’s right to determine damages. If legislature could remove the cause of action completely, then can remove remedy over $350,000 (cap number since raised). 2. Kansas (2012)- a) cap on non-economic damages did not infringe jury trial right. 3. Mississippi*- a) no violation of jury trial guarantee G. Workers Compensation 1. Major successful tort reform 2. Removes most employee-employer damages claims from jury 3. Does it violate right to jury trial? a) NY CoA in 1911 said yes in dictum b) NY then amended state constitution 4. Gourley v. Nebraska Methodist Health System a) Nebraska Hospital Medical Liability Act limits recoverable damages (including compensatory) in medical malpractice actions to $1,250,000 b) Challenges under Nebraska state constitution: (1) Special legislation (a) Cap does not violate principles prohibiting special legistation (2) Equal protection (a) We apply rational basis test because the interests are economic. Here the concern about a perceived insurance crisis passes the test (3) Open courts and right to a remedy (a) Majority of courts have said no (b) minority (4) Right to a jury trial (a) Majority says no, others disagree. Conclude no b/c legislature has right to completely abolish a common-law cause of action, so can limit recovery. (5) Taking of property (a) No vested property interest in any rule (6) Separation of powers (a) one court has said yes, others say no. Not a legislative determination of the amount of damages in any specific case, so doesn’t violate. c) Connolly concurrence: special legislation test has a different focus from an equal protection analysis d) Gerrard concurrence: reluctantly concur that the act does not violate any provisions of Nebraska Constitution raised, briefed and argued in this case, but very concerned whether a cap that denies even full economic damages for some people may violate substantive due process rights of injured persons. e) McCormack dissent: I would find the cap is special legislation in violation of the Nebraska Constitution. f) Nebraska legislature: raises cap to $2,250,000 for occurrences 2015+ 5. Challenge as special legislation a) Gourley (Nebraska) said no. b) Best v. Taylor Machine, Illinois Supreme Court (1997) struck down $500k cap on non-economic damages partially under special legislation c) Special legislation clause is intended “to prevent arbitrary legislative classifications that discriminate in favor of a select group without a sound, reasonable basis” This cap impermissibly penalized the most severely injured persons. 6. Challenge as Equal Protection a) Wisconsin S Ct. (2005) invalidated $350k malpractice cap on noneconomic damages as violating equal protection: (1) Majority applies “rational basis with teeth” or “rational basis with bite” (2) Determine whether the legislation has more than a speculative tendency as the means for furthering a valid legislative purpose (3) The cap’s greatest impact falls on the most severely injured victims and young people who will be affected by their injuries for more years (4) Concurrence: would also have found a jury trial problem (5) Dissent: second-guessing policy choices to keep health care affordable b) Legislature capped at $750,000, struck down again  c) FL ct struck down cap on “non-economic damages” under state equal protection clause bc it lacks rational basis H. Other Tort Reform Items 1. Joint and several liability 2. Post-verdict judicial review- heightening like in NY 3. Periodic Payments VII. Injunctive Relief A. Equitable Remedies 1. Injunctions 2. Constructive Trust* 3. Resulting Trust 4. Equitable Lien 5. Subrogation 6. Accounting for Profits or accounting-disgorgement 7. Equitable Recision 8. Reformation 9. Specific Performance* B. Major Equity Differences 1. No right to jury if action under equity 2. Judge uses contempt power to enforce a) Bc equity acts in personam b) Also means need personal jxs over the D 3. Some fields entirely equity: quiet title, partition, liens and mortgages, trusts, fiduciaries, guardianships, dissolution of marriages and adoptions 4. Other fields equitable and legal remedies are “concurrently” available: contracts, torts, property constitutional law, intellectual property a) Can seek damages for past conduct b) Injunction to stop future conduct 5. Injunction* a) Most common type of equitable remedy b) Court order directed to a person or entity to do or not do something (1) Prohibitory injunction- most common- don’t do something (2) Mandatory injunction –less common- do something c) Injunction Procedure (1) Federal System: (a) Temporary Restraining Order- F.R. Civ Pro 65(b) Fastest- can be issued with no adversary hearing  (i) SUBSTANTIVE TEST FOR TRO (a) 1) likelihood of success on the merits (i) Need to look at requirements for substantive claims (ii) Lane: degree needed to show “changes based upon the irreparable harm inquiry” (iii) Where the balance of harms clearly favors the plaintiff, the likelihood of success need not be particularly strong. (iv) With this diminished threshold in mind, court finds plaintiffs have established a reasonable likelihood of success on at least one of their claims (breach of contract) (v) Lane is using a sliding-scale standard (vi) Courts mixed on sliding scale test (b) 2) likelihood of suffering irreparable harm without preliminary relief (i) Lane: “well established that the potential erroneous foreclosure upon real property constitutes irreparable harm because real property is unique” (ii) Winter: we know that need to show irreparable injury is likely. Not enough to show mere possibility of irreparable harm. (c) 3) balance of equities in plaintiff’s favor (i) Favors Plaintiffs (ii) Denial of TRO would deprive Plaintiffs of their home, likely irrevocably so (iii) Only harm to defendants due to TRO would be “modest delay in a foreclosure” (iv) Thus, the balance of the equities tips in favor issuing TRO (d) 4) TRO/prelim injunction is in public interest. (i) Favors Plaintiffs (ii) Denial of TRO would deprive Plaintiffs of their home, likely irrevocably so (iii) Only harm to defendants due to TRO would be “modest delay in a foreclosure” (iv) Thus, the balance of the equities tips in favor issuing TRO (ii) Lane: counsel represents that he will “immediately” notify Defendants’ attorney of the Complaint and TRO Motion and provide them with copies (a) Plaintiff’s lawyer in contact with defendant’s lawyer. (b) Forwarded Complaint and Motion and informed him by phone (b) Preliminary Injunction- F.R. Civ Pro 65(a) (i) Follows a hearing and adversary proceeding (2) (a) Permanent Injunction (or just injunction) (i) Slow- after a full trial. (3) States: may have different names for things d) Inadequacy/Irreparable Prerequisite/Test (1) Traditionally, before granting an injunction, court required plaintiff to demonstrate that her legal damages remedy will be inadequate or that without an injunction she will suffer an irreparable injury (a) Are courts still really doing this, or just paying lip service? (b) Breach of contract to sell ordinary goods- damages adequate (c) Breach of contract to sell land- specific performance because damages inadequate (d) Courts still state and cite the rule to deny injunctions (2) Prereq Common Situations (a) 1) plaintiff is deprived of something to which he is entitled. Plaintiff needs the thing itself (b) 2) Repeat-offender, would need continuous suits (c) 3) money damages speculative, or harm not yet ripe (i) E.g. civil rights cases- deprivation of constitutional rights usually not deemed fixable by money damages. (d) 4) irreparable injury  (i) E.g. once a building/art is destroyed its gone e) eBay Inc. v. MercExchange L.L.C. - federal permanent injunctions (1) Context: courts in patent cases were routinely granting injunctions automatically if plaintiffs win. (a) In this case district court had denied the injunction. (b) Court of appeal reversed saying patent case injunction should be denied only in “unusual” case (2) SCOTUS: (a) Nothing in Patent Act says automatic injunctive relief. (b) Patent Act says courts “may grant injunctions” (c) Patent cases courts should apply same “four-factor test historically employed by courts of equity”* (3) Plaintiff must show: (a) 1) it has suffered an irreparable injury (b) 2) remedies available at law are inadequate to compensate for that injury (c) 3) Considering the balance of hardships between P and D a remedy in equity is warranted (d) 4) public interest would not be disserved by a permanent injunction (4) Pro-injunction concurrence (Roberts with Scalia and Ginsburg)- courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases…discretion is not whim… a page of history is worth a volume of logic. (5) Anti-injunction concurrence (Kennedy with Souter and Bryer)- the lesson of the historical practices is most helpful and instructive when the circumstances of a case bear substantial parallels to litigation the courts have confronted before (6) Patent Troll Twist (a) Kennedy concurrence: remember “the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike earlier cases. An industry has developed in which firms use patents not as a basis for producing and selling goods, but, instead, primarily for obtaining licensing fees. For these firms, an injunction, and the potentially serious sanctions arising from its violation, can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy license to practice the patent. f) Injunction Hypo (1) City is converting a public parking lot into affordable housing. The parking lot is the only place in the neighborhood with accessible parking for individuals in wheelchairs. How do you make out the case for the remedy of injunction? 6. Salinger v. Colting Second Circuit 2010 a) TAKEAWAY (1) Even though Ebay test is only for permanent injunctions → higher level lesson of ebay no presumptions on the prongs b) Ebay applies with equal force (a) to preliminary injunctions (b) that are issued for alleged copyright infringement. (1) Central lesson: “a court deciding whether to issue an injunction must not adopt “categorical” or “general” rules or presume that a party has met an element of the injunction standard.” (2) Dicta: we see no reason that eBay would not apply with equal force to an injunction in any type of case. c) Rule application for Prelim injunction test (1) (1) Probability of success on the merits (a) Central lesson: “a court deciding whether to issue an injunction must not adopt “categorical” or “general” rules or presume that a party has met an element of the injunction standard.” (b) Dicta: we see no reason that eBay would not apply with equal force to an injunction in any type of case. (2) (2-3) Irreparable harm and balance of hardships (a) P has IP interest and might have interest in NOT speaking  (b) D has property interest and 1st Amendment interest (c) Proving loss of sales due to infringement is notoriously difficult (d) Infringement of right not to speak is irreparable injury (e) Can’t just presume, but as an empirical matter most copyright plaintiffs may be irreparably harmed. (3) (4) Public Interest (a) Copyright law- promote knowledge (b) Free expression - need to consider (4) Remand to district court to consider all four 7. Disfavored Preliminary Injunctions a) 10th Circuit: identifies 3 disfavored categories (1) 1) one that alters rather than preserves the status quo (2) 2) one that is mandatory (do something) as opposed to prohibitory (don’t do something) (3) 3) gives plaintiff full relief sought at trial b) Judge should scrutinize carefully and require strong showing of both likelihood of success and balance of harms 8. State Version a) That is the test for injunctions in federal court. (1) What about in state court? (a) Can follow their own procedures b) Utah Supreme Court presumed irreparable injury from defendant’s misappropriation of plaintiff’s trade secret. C. Equity Acts In Personam 1. True for equity generally: injunction, constructive trust and specific performance 2. Judge orders defendant to do or not to do something 3. If defendant refuses/ignores, judge can use contempt 4. Contrast collecting unpaid money judgments by writ of execution, garnishment and lien, can seize and sell defendant’s property (acts in rem). 5. Cross Jurisdictional Disputes a) Court can grant a land buyer specific performance ordering the defendant to convey land in another jurisdiction b) Court with personal jurisdiction over defendant can order that defendant to act or refrain from acting in another state c) Land or Property in another state (1) No jurisdiction over land/property in another state BUT (2) Court with jurisdiction over the person, can still issue an injunction with an indirect impact on land/property in another state within scope of in personam theory d) Calvin Klein, SDNY 1989 (1) Facts (a) Calvin Klein had contract with defendants to manufacture clothing. (b) After defendants had massive delays, Calvin Klein refused to accept merchandise because of tardiness and didn’t meet manufacturing requirements. (c) Garments remain in Hong Kong (2) Trademark case: Klein wants an injunction prohibiting defendants from selling the garments. (3) Can court issue injunction preventing sale of goods abroad? (a) Yes. Should they? (b) Multi-factor test: (i) 1) whether defendant’s conduct has substantial effect on US commerce; (ii) 2) whether defendant is a US citizen;  (iii) 3) whether extraterritorial enforcement of the trademark will encroach upon foreign trademark rights. (c) 2) Here (i) 1) yes; (ii) 2) close enough; (iii) 3) none e) United States v Mcnulty 1978 (1) Facts (a) Defendant won the Irish Hospitals Sweepstakes,a nd collected 50,000 Irish pounds. (b) IRS wanted to collect taxes from him on it. (c) He put the $ on the Island of Jersey (2) This court, by virtue of its jurisdiction over the defendant, has the power to order him to repatriate the assets located in the foreign bank. (3) A court’s personal jurisdiction over an individual grants the court the authority to order the individual to transfer property, regardless of the property’s location (a) Refused, put in jail, released five months later D. Need Help Fast 1. Immediate or prompt interlocutory relief 2. Temporary restraining order (TRO) 3. Preliminary injunction a) Irreparable injury rule plays a huge role here. b) Less clear how much it makes sense for permanent injunction Jury Trial after Merger A. Seventh Amendment: “In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any court of the United States, than according to the rules of the common law (emphasis added.)” B. Easy Cases 1. Compensatory Damages - jury 2. Pure injunctive reliev/ specific performance - no jury right C. Jury Trial 1. Dairy Queen v. Wood SCOTUS a) Plaintiff wanted injunctive relief and accounting for profits from TM infringement and breach of licensing agreement. b) Defendant asked for jury trial, plaintiff opposed saying their claim was purely equitable. c) Justice Black: agreed with defendant that this sounded like a normal damages case even though called accounting. d) Seemed more simple whether plaintiff seeks money e) So-called “Remedies Test” (1) 1) historical- status of cause of action before merger of law and equity (2) 2) remedy- relief plaintiff seeks (3) 3) jury’s practical ability and limitations* 2. Woodell 2 Part Test Survives a) First we compare the statutory action to 18th century actions brought in the courts of law and equity (historical) b) Second, we examine the remedy sought and determine whether it is legal or equitable in nature” (1) Second inquiry more important? Yes says Second Circuit 3. Common Law Subject to Jury trial Right a) Compensatory money damages  b) Replevin c) Ejectment d) Ownership of real property e) Legal restitution D. Feltner v. Columbia Pictures TV 1. QP: does Seventh Amendment provide for right to a jury trial when a copyright owner selects statutory damages? 2. Short answer: yes 3. Procedure: trial judge thought no and did a bench trial. Found 440 acts of infringement, willful and so $20,000 per act. Total $8.8 million plus costs and attorney’s fees. 4. Note: Possible range between $100k each- $44 million and $500 each- $220,000. If innocent infringer can be as low as $200 or $88,000 5. Defendant appealed saying he had right to a jury trial. 6. Court tried to avoid constitutional question by looking at statute (statute can provide a jury right even where constitution doesn’t) 7. Statutory damages are to be assessed in an amount that “the court considers just” 8. Thinks “court” means judge not jury. 9. Scalia: would interpret to say statute provides for jury 10. SCHWARTZ NOTE a) "(1) Except as provided by clause (2) of this subsection, the copyright owner may elect, at any time before final judgment is rendered, to recover, instead of actual damages and profits, an award of statutory damages for all infringements involved in the action, with respect to anyone work,... in a sum of not less than $500 or more than $20,000 as the court considers just.... 11. “we examine both the nature of the statutory action and the remedy sought” 12. Nature of the statutory action: a) Close analogues to actions seeking statutory damages in England- tried in courts of law before juries b) Columbia doesn’t try to argue an analogy between statutory damages and any historical cause of action that was equitable. Just argues statutory damages are equitable in nature. 13. Remedy sought: a) Columbia argues statutory damages are equitable in nature. b) Court not persuaded. c) General rule that monetary relief is legal d) Statutory damages serve purposes traditional associated with legal relief: compensation and punishment 14. Defendant “wins”: “Seventh Amendment provides a right to a jury trial including “right to have a jury determine the amount of statutory damages” 15. Jury trial: $70k per episode (judge had said $20k), for $31.6 million (judge had awarded $8.8 million) 16. ON EXAM a) Does the Court apply a “historical” test or a “remedy” test? (1) Find support for your answer b) What sorts of considerations does the court use to help answer the questions? E. C&K Engineering Contractors v. Amber Steel Co. Supreme Court of CA 1978 1. QP: “whether or not defendant was improperly denied its [California state] constitutional right to a jury trial” for “plaintiff’s suit for damages for breach of contract[that] was based entirely on the equitable doctrine of promissory estoppel.” a) Answer: “neither party was entitled to a jury trial” 2. CA Jury Right a) “right as it existed at common law in 1850” which is “a purely historical question” b) “In determining whether the action was one triable by a jury at common law, the court is not bound by the form of the action but rather by the nature of the rights involved and the facts of the particular case- the gist of the action. A jury trial must be granted where the gist of the action is legal.”  3. Rule application a) “gist of the action must be deemed equitable in nature” b) Doctrine employs equitable principles c) Purpose “injustice can be avoided” and “it is only fair” d) Trial court properly treated the action as equitable in nature, to be tried by the court. e) Only a court of equity can pierce the corporate veil so no right to jury trial of the alter ego issue. f) “gist” of a taxpayer’s suit against tax collectors for a refund is equitable. 4. Newman Dissent a) “When California courts decide whether a jury trial should be assured, I believe that they should focus not on rights but on remedies. A plaintiff who seeks damages should be entitled to a jury” b) Michigan court of appeal- jury trial required for promissory estoppel claim because remedy sought was money damages. (1) Who gets it right? Restitution A. Vocabulary 1. Restitution- possible based on defendant’s unjust enrichment in the absence of a tort or a breach of contract a) What is unjust? b) What is enrichment? 2. Also possible as an alternative remedy choice in a contract, tort or property case. a) Chosen when defendant’s gain exceeds plaintiff’s loss 3. Restitution can be legal or equitable (just like tort remedies, contract remedies, etc.) 4. Legal restitution- quasi-contract 5. Equitable restitution- e.g. constructive trust 6. Note: courts in legal restitution cases sometimes use the word “equitable” to mean fair 7. Legal restitution- quasi-contract a) 1) money or value restitution- plaintiff recovers money from plaintiff’s unjust enrichment b) 2) Specific restitution- replevin and ejectment- defendant returns plaintiff’s exact chattel (replevin) or real property (ejectment) c) Quasi-Contract Vocab (1) 1) money had and received (2) 2) goods sold and delivered (quantum valebant) (3) 3) quantum meruit- money paid for services rendered d) Confusion (1) Quasi-contracts also called “contract implied in law” (a) Important: not a contract at all. (b) Really about unjust enrichment (2) NOT the same as contract implied in fact (a) Actual contract created through conduct 8. Equitable restitution- e.g. constructive trust, equitable lien, equitable accounting, equitable subrogation a) Constructive Trust (1) Legal fiction to prevent unjust enrichment (2) “Tracing”- process of identifying a particular asset that belonged to the plaintiff that resulted in defendant’s unjust enrichment. (3) Plaintiff will “trace” asset into the defendant’s ownership and identify it as constructive trust “res” (4) Defendant initially owns the “title” of the asset. (5) Court decrees the defendant to be the constructive trustee of the asset for the plaintiff’s benefit. (6) The order to the trustee is to “execute” the constructive trust to convey the asset to the plaintiff (7) Example of the equitable maxim “equity acts in personam”  9. Restitution Mistakes a) 1) contract fallacy (1) E.g. wrongly apply contract statute of limitations (2) No quasi-contract because some contractual issue b) 2) equity fallacy (1) E.g. need to show legal remedy is inadequate (2) No right to a jury trial c) 3) tort fallacy 10. Synonym Games a) Legal Restitution= b) General Assumpsit= c) Indebitatus Assumpsit= d) Contract implied in law= e) Quasi-contract f) All are actions at law, subject to jury trial right, even though courts sometimes use term “equitable” B. Kistler v Stoddard 1. “doctrine of unjust enrichment is an equitable one, providing that one party should not be allowed to benefit at the expense of another because of an innocent mistake or unintentional error.” 2. How to measure? a) A) Stoddard’s cost of putting the crop in? b) B) crop’s value in the ground when Shannon purchased the land? c) C) crop’s value when harvested minus harvesting costs? 3. “absent restitution being paid to Stoddard, Shannon would without justification reap the benefits of Stoddard’s labor and expenses” and is “unjustly enriched in the amount [Stoddard] expended to plant the crop.” 4. 1) was Shannon enriched? 5. 2) Was Shannon’s enrichment (if any) at Stoddard’s expense? 6. 3) Was Shannon’s enrichment unjust? 7. Restatements a) First: “A person who has been unjustly enriched at the expense of another is required to make restitution to the other.” b) Third: “a person who is unjustly enriched at the expense of another is subject to liability in restitution” 8. Common Law Disqualifications a) 1) giving a gift or volunteering and then claiming restitution (1) Also family duty for closely related persons b) 2) officious intermeddler, volunteer (1) Restatement (1st): “A person who officiously confers a benefit upon another is not entitled to restitution thereof” (a) Painter example 9. Restatement Limiting Principles a) 1) The fact that a recipient has obtained a benefit without paying for it does not of itself establish that the recipient has been unjustly enriched. b) 2) A valid contract defines the obligations of the parties as to matters within its scope, displacing to that extent any inquiry into unjust enrichment. c) 3) There is no liability in restitution for an unrequested benefit voluntarily conferred, unless the circumstances of the transaction justify the claimant's intervention in the absence of contract. d) 4) Liability in restitution may not subject an innocent recipient to a forced exchange: in other words, an obligation to pay for a benefit that the recipient should have been free to refuse. C. Bailey v. West, Supreme Court of Rhode Island 1969 1. “Knowing at the time he accepted the horse for boarding that a controversy surrounded its ownership, plaintiff could not reasonably expect remuneration from defendant nor can it be said that defendant acquiesced in the confinement of a benefit upon him. 2. “It is our judgment that the plaintiff was a mere volunteer who boarded and maintained “Bascom’s Folly at his own risk and with full knowledge that he might not be reimbursed for expenses he incurred incident thereto. 3. A contract is implied in fact if there is a mutual agreement between the parties and intent to promise, but the agreement and promise are implied from the parties’ conduct and other facts, rather than made in words. 4. Notes a) Can get restitution for rescue services D. Kossian v. American National Insurance Co. CA Ct. App. 1967 1. QP: whether in a jurisdiction that recognizes the equitable doctrine of unjust enrichment one party should be indemnified twice for the same loss, once in labor and materials and again in money, to the detriment [] of the party who furnished the labor and materials’ 2. “defendant should not be allowed to have the fruits of plaintiff’s labor and also the money value of that labor. This, of course, is a simplified pronouncement of the doctrine of unjust enrichment, a theory which can, in some instances, have validity without privity of relationship.” 3. No close cases in precedent, but not surprising because “essential nature of equity cases concerned with problems of restitution makes definitive precedent unlikely” 4. We conclude that the doctrine of unjust enrichment is applicable to the facts of this case, and that plaintiff is entitled to reimbursement out of the insurance proceeds paid defendant for work done by plaintiff. 5. Notes a) Not just argument that Kossian says he cleaned up and now the bank is unjustly enriched b) He argues they are unjustly enriched and double dipping E. Knaus v. Dennler, Illinois App. 1988 1. “Recovery under an unjust enrichment theory requires a showing that the defendant has voluntarily accepted a benefit which it would be inequitable for him to retain without payment” 2. We are unable to find that defendants voluntarily accepted a benefit, as required to establish unjust enrichment. 3. Instead, because the benefit was conferred in the face of opposition and disinterest, it appears to fall into the category of “officiously” or “gratuitously” conferred benefit for which quasi-contractual relief is not available in Illinois.” F. Free Rider Problem (as result of Knaus) 1. Other solutions of not restitution? 2. Knaus got the benefit of fixed up dam without paying for it, they had the legal right to say no, but bc its about safety they basically get to free ride a) This wasn’t an imminent emergency, so they didn’t have to pay b) HOA is contractual solution to this problem G. How to measure 1. How to Measure the Defendant’s Benefit for legal restitution? a) Standpoint of the plaintiff? b) Standpoint of the defendant? c) Role of party communication versus market? H. Legal Restitution 1. Maglica v. Maglica, Cal. Court of Appeal (1998) a) Implied-in-fact contract theory AND Restitution theory b) Jury Instructions: reasonable value of plaintiff’s services was either the value of what it would have cost the defendant to obtain those services from someone else or the “value by which” he had benefitted as a result” of those services. c) Court: second half is wrong. Allows recovery for value of beneficial services, not value by which someone benefits from those services d) Rule of Thumb  (1) Recover on an “as if” contract as a rule-of-thumb measure of damages adopted in quasi contract cases where the actual unjust enrichment or benefit to the defendant is too difficult to prove.” (a) Here “the actual benefit to TVA would not have been susceptible of proof. The value realized by a library in having a particular reference work available to its patrons cannot be adequately expressed in dollars and cents.” (b) So fair market value of the microfilm is good rule of thumb measure instead e) Quantum Meruit: “Where one person renders services at the request of another and the latter obtains benefits from the services, the law ordinarily implies a promise to pay for the services.” I. Equitable Restitution 1. Constructive Trust a) Consequences of ability to race asset for constructive trust (1) 1) plaintiff can capture appreciation if trust res was invested and gained value (2) 2) if trust res was used for a homestead that usually would be safe from creditors’ collection under state law, plaintiff can still recover it. (3) 3) plaintiff can recover even if defendant’s debts exceed assets, so other creditors won’t fully recover (4) 4) If plaintiff’s asset is an heirloom, plaintiff can recover it, and not a money substitute. b) Simonds v. Simonds (1) Wife 1: Mary Simonds (a) Divorce separation agreement says she is beneficiary of life insurance policy at minimum $7k plus interest. (2) Wife 2: Reva Simonds (a) After husband dies she (and her daughter) receive $55k from 3 different life insurance policies. (3) Substituted trust res. (4) Can she really trace her interest in the first policy to the other 3 (2?) policies? (5) Court: mere substitution of policies, or even substitution of insurance companies, does not defeat the equitable interest of one who has given sufficient consideration for a promise to be named as beneficiary under an insurance policy” (6) The persistence of the promise’s equitable interest is all the more evident where the agreement expressly provides for a change in policies, and in effect provides further that the promise’s right shall attach to the new policies (7) See Rogers v. Rogers, 1984- finding the “all the more evident” language wasn’t essential to the holding, and extending Simonds to situation where the separation agreement didn’t have such an express provision. (8) Test (9) Test?: “constructive trust is the formula through which the conscience of equity finds expression. When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee”- Judge Cardozo (10) What is required generally, is that a party hold property ‘under such circumstances that in equity and good conscience he ought not to retain it’ (11)No Real Test (12) “More precise definitions of a constructive trust have been termed inadequate” (13) Court does not restrict itself by describing all the specific forms of inequitable holding which will move it to grant relief, but rather reserves freedom to apply this remedy to whatever knavery human ingenuity can invent. (14) Constructive trust will be erected whenever necessary to satisfy the demands of justice. Its applicability is limited only by the inventiveness of men who find new ways to enrich themselves unjustly by grasping what should not belong to them. (15) Innocence Defense (16) Argument: second wife didn’t do anything wrong  (17) Court: “unjust enrichment, however, does not require the performance of any wrongful act by the one enriched. Innocent parties may frequently be unjustly enriched.” (18) Rule Application (19) “unjust enrichment in this case is manifest” (20) “Had the husband kept his promise, the beneficiaries would have collected $7,000 less in proceeds. To that extent, the beneficiaries have been unjustly enriched, and the proceeds should be subjected to a constructive trust.” (21) “True, some courts have decided the issues differently. Those cases, however rely heavily on formalisms and too little on basic equitable principles…especially relevant when family transactions are involved.” (22) Massachusetts- refused to impose constructive trust in proceeds of second insurance policy. (23) Who is right? (24) Misconduct Threshold (25) Is unjust enrichment enough for a constructive trust or do you need to show more? (26) Third Restatement: constructive trust requires “A transaction in which the defendant (a) i. has been unjustly enriched (b) ii. By acquiring legal title to specifically identifiable property (c) iii. at the expense of the claimant or in violation of the claimant’s rights. (27) Unjust enrichment not enough: (a) Wisconsin: “this court has consistently said that unjust enrichment alone is not sufficient. Additional factors suggested have included actual or constructive fraud, duress, abuse of confidential relationship, mistake, commission of a wrong or any form of unconscionable conduct.” (b) Texas: 2 “general prerequisites:” 1) prior, unrelated history of close and trusted dealings of the same general nature or scope as the subject transactions; 2) unjust enrichment 2. Equitable Lien a) Court may impose an equitable lien when a constructive trust would yield too much recovery for the plaintiff. b) Instead of owning all the asset, just have a security interest in the asset for a specific amount. c) E.g. Dan embezzles $25k from boss and spends to put A/C into his house worth $300k. Court can give boss equitable lien on Dan’s house for $25k. 3. Note 4: Crooked Architect and Turkish Bathhouse a) Contractor’s (plaintiff’s) expectancy = $33,721 b) Homeowner’s (defendant’s) expectancy= $23,200 c) Enhanced market value of premises (Homeowner’s actual enrichment) = $22,000 d) Contractor’s cost of services = $32,950 e) Appraised value of work and materials- $33,500 f) If difference between expectancies are split = 28,460 Equitable Defenses Maxims A. He who comes into equity must come with clean hands (Unclean Hands) 1. Judge can raise it sua sponte 2. Discretionary for judge 3. Supposed to be defense for equitable remedies, but sometimes gets applied to legal remedies too 4. Error? 5. Public policy can override it. See e.g. Ralston vs. Alp dog-food fight. 6. Green v. Higgins, Kansas 1975 a) Unclean Hands:  b) 1) date contract to cheat realtor out of commission c) 2) fictitious contract for $40k inflated price to discourage exercise of right of first refusal. d) “no person can obtain affirmative relief in equity with respect to a transaction in which he has, himself, been guilty of inequitable conduct.” e) Courts act for their own protection f) Limitations on Unclean Hands: (1) Conduct must be willful conduct which is fraudulent, illegal or unconscionable (a) But: “It is difficult to formulate a general statement as to what will amount to unclean hands other than to state it is conduct which the court regards as inequitable.” g) Misconduct must be related misconduct h) Rule Application (1) Greens actively and willfully participated in fraudulent and unconscionable activities to obtain title to the land and to defeat various legal rights held by third parties. (2) This “must be classified as related misconduct, not collateral misconduct” i) Does the defendant need to be harmed by the misconduct? (1) No- because about the court. (2) Best-reasoned cases hold that the maxim applies even though the defendant himself was a participant in the misconduct B. Laches - Equity aids the vigilant, not those who slumber on their rights 1. Laches v. Statute of Limitations a) Stone I: “although laches promotes many of the same goals as a statute of limitations, the doctrine is more flexible and requires an assessment of the facts of each case– it is the reasonableness of the delay rather than the number of years that elapse which is the focus of the inquiry. b) Laches defense only applies to equity so only statute of limitations applies in action at law c) TEST: Look to nearest statute of limitation to decide whether delay was unreasonable for laches? (1) Option 1: statute of limitations creates rebuttable presumption of unreasonable delay and prejudice for laches. (2) Option 2: disregard statute of limitations in laches analysis (3) Option 3: treat statute of limitations as one element among many in deciding whether delay unreasonable and prejudice was great. - 8th Circuit. d) Can you find laches within SOL? NO (1) SCOTUS: Laches doesn’t bar a P claims that are sued on within time allowed by a SOL 2. Stone v. Williams, 2nd Circuit 1989 Stone I a) QP: whether district court abused its discretion when it granted defendants’ motion for summary judgment and dismissed appellant’s complaint on the grounds of laches. b) Laches “test”: c) Laches askes whether the plaintiff in asserting her rights was: (1) guilty of unreasonable delay (2) That prejudiced the defendants d) Reasonableness of the delay: e) 1974-1980- excusable (1) Didn’t want to hurt feelings of adoptive parents (2) Worried about stigma from illegitimacy f) 1980-1985- no explanation for further delay g) Prejudiced the defendant: (1) Key people have died (2) Memories have gotten worse (3) Entered into transactions licensing the songs assuming they had full ownership. 3. Stone v. Williams, 2nd Circuit 1989 Stone II a) Just kidding  b) Which part of the original opinion do they change? c) “prejudice to defendants we identified in our prior opinion, would not have existed but for the failure of the present defendants to reveal the facts of which they had knowledge.” 4. Stone III a) But, wait there is more. b) District court says her claims barred by statute of limitations. c) Second Circuit disagrees, says each infringement is a separate cause of action so she can recover for past 3 years for each time defendants’ withheld royalties (1) Later SCOTUS agrees with this logic in Petrella v. MGM Defenses to Equitable Restitution Unclean Hands and Restitution A. Unclean hands clearly a defense to equitable restitution B. Third Restatement says also a defense to legal restitution Time Bars and Restitution A. Legal Restitution: assumpsit, quasi-contract, contract implied in law, quantum meruit or money had and received- time barred under state statute of limitations (often contract statute of limitations) B. Equitable restitution (constructive trust, resulting trust, equitable lien, subrogation or accounting)- time barred under equitable doctrine of laches. Change of position A. Primarily a defense to plaintiff’s transfer by mistake B. Can apply to both legal restitution and equitable restitution 1. E.g. social security overpayment Estoppel A. Narrower than change of position, need to show relied on plaintiff’s representation Bona Fide Purchase A. Not subject to constructive trust and tracing B. Simonds v. Simonds: “A bona fide purchaser of property upon which a constructive trust would otherwise be imposed takes free of the constructive trust, but a gratuitous donee, however innocent, does not.” Bona fide creditor A. Banque Worms v. BankAmerica International: 1. Spedley tells his bank Security Pacific to transfer $2,000,000 to Banque Worms (he owed them more than that). 2. Spedley then changes mind and tells them to stop the payment and pay Xera Bank instead, but despite stop order the money goes to Banque Worms. 3. Security Pacific tries to get the money back from Banque Worms and Banque Worms as a bona fide creditor successfully keeps the money. Contract Remedies A. Settlement v. Litigation 1. Most contract cases settle. 2. Remedies help lawyers know what would happen if settlement fails, which informs negotiation 3. Cases that don’t settle have certain unusual features a) Contract a really bad deal for one side b) Deal unraveled in a way that caused major losses c) One or both parties uninterested in long-term relationship B. Buyer’s Remedy Example 1. Sal agrees to sell his house to Ben for $100k. 2. The house has an appraised market value of $102k  3. Who has incentive to breach? a) Sal 4. Who wants to keep the deal? a) Ben 5. Sal agrees to sell his house to Ben for $100k. 6. The house has an appraised market value of $102k 7. If Sal breaches/fails to deliver the land, how would we calculate Ben’s general damages? a) General damages = Expectancy Damages- b) Had contract been fulfilled Ben would have a house worth $102k and he would have paid $100k. So $2k (1) Nothing about this is specific/unique to Ben 8. Sal agrees to sell house to ben for 100k but valued for 98k a) Ben has incentive to breach and Sal wants to keep deal Buyer always entitled to general damages, but may ask for specific C. Special Damages 1. Can get added to general expectancy damages 2. Unique or peculiar to the particular plaintiff 3. Back to hypo: Ben had a contract in his pocket to resell Sal’s house for $110k. 4. What are Ben’s special damages? a) 10k → If ben had no k then not 10k damages because not proven 5. Special damages must be realized, proved, and not remote. 6. Realized- loss must actually occur 7. Proved- most prove special damages with reasonable certainty 8. Not remo