I.
II.
Introduction
a. Tort goals
i. Prevent a tort from occurring
ii. Restore the status quo
iii. Compensate the plaintiff for loss
iv. Deter Future Torts
v. Establish, declare, and vindicate the plaintiff’s rights
vi. Punish wrongdoers
b. Contract Breaches
i. Fulfill the plaintiff’s expectancy of gain
ii. Special damages to restore plaintiff’s losses and reliance expenditures
iii. Restitution
iv. Punish or deter the defendant
v. Declare or terminate parties’ contractual rights or duties
c. Bifurcation of the court system
i. Chancery Courts (most eliminated now)
1. No right to a jury trial: but did have bench trial, in personam
remedy, specific remedies, discovery
2. Couldn’t award damages unless equity clean-up doctrine
3. Orders or forbids the defendant’s conduct: injunction, specific
performance, grant relief
ii. Common Law
1. Clear rules, jury trials, money damages
2. Soon there was a movement to join the two.
Modern Damages
a. Proof of the Existence of Damages
i. Fact of economic loss must be proved by preponderance of the evidence.
ii. Youst v. Longo – Youst and his horse entered a horse race, but Longo
allegedly drove his horse into Youst’s horse. Youst ended up finishing
sixth (after Longo was disqualified, he got fifth), but Youst alleged he
would have placed higher if Longo wouldn’t have run into him and sued
for intentional interference with prospective economic advantage.
1. Issue: Is a racehorse owner entitled to tort damages when the
harness driver of another horse negligently or intentionally
interferes with that owner’s horse during a race, preventing the
owner from the chance of winning a particular cash prize? No.
2. There is a threshold causation requirement: proof that it is
reasonably probable that the lost economic advantage would have
been realized but for the defendant’s interference.
a. Sports involve the application of unpredictable skills and
techniques. Even the Restatement discusses the speculative
nature of horse races.
b. Courts do not allow much speculation when it comes to the
proof of existence of damages; the person alleging the
wrong has the burden of proof on whether damages exist.
3. Youst loses at the pleading stage because he failed to show that
there was a reasonable probability that the economic damage
would have been realized. He failed to plead with reasonable
specificity that he would have finished better.
iii. When it comes to proof of the existence of damages, there must be some
concrete proof, not just speculation.
iv. There could be some examples where not too speculative
1. Magazine competition of who gets most magazines because could
have substantial certainty or high probability of success.
2. This vs. a horse race where anything can happen in the last 100
yards and this horse wasn’t even winning.
v. Lost Chance or Opportunity
1. Chaplin v. Hicks – plaintiff lost chance of winning beauty contest
prizes due to not being properly notified. She lost the value of any
chance she had at winning (one of 50 contestants).
2. Smith v. State Dept. of Health – A doctor failed to diagnose and
treat a patient for 15 months who had a cancer mass. He died, and
the negligence of the doctor deprived him of a 10% chance of
surviving for five years.
a. One method: this is a distinct injury: find the % and put a
value on that based on evidence in the record.
b. Second: Full damages for loss of life partially caused by the
malpractice without regard to the chance of survival.
c. Third: compute the percentage of probability by which
defendant’s conduct diminished the likelihood of achieving
a favorable outcome. (Didn’t agree with this and chose to
use a less rigid version)
3. Matsuyama v. Birnbaum – Massachusetts courts follow a five-step
calculation:
a. Determine full wrongful death damages
b. Determine chance of survival prior to malpractice (45%)
c. Then determine how much the physician’s actions reduced
that survival to (15%)
d. Calculate the difference (45-15) = 30%
e. Multiply the number by full damages: 30% of full damages.
4. Minnesota: % loss X total damages.
b. Proving the Amount of Damages
i. Introduction
1. Courts allow a lot more room for speculation and conjecture.
2. The necessity to be precise lessens considerably when it comes to
proving the amount of damages.
ii. Plaintiff’s Lost Capacity to Earn
1. Washington v. American Community Stores Corp. – Defendant hit
plaintiff in a car accident. The plaintiff was a big collegiate athlete
and a candidate for the Olympics. The plaintiff offered no evidence
of his earnings at the time. Jury awarded 76K, and defendant
appealed, arguing this amount was too speculative.
a. Loss of earning capacity is a separate element of damage
from loss of wages, salary, or earnings.
b. Factors
i. Life expectancy
ii. Health
iii. Habits
iv. Occupation
v. Talents
vi. Skill
vii. Experience
viii. Training
ix. Industry
c. Here, he was a recent college graduate, had 50 more years
to live, and was in top shape.
d. A jury could predict his loss of earning capacity based on
this evidence. It doesn’t have to be certain. This was
somewhat speculative but not too speculative.
2. Childs v. United States – A USPS truck hit Debra and her unborn
child, General, and killed both of them. The US admitted liability
and the action was brought under the Federal Tort Claims Act.
Debra was 33 and worked at Kroger as a faithful employee.
General would have been born into a close-knit family, but his dad
was not in the picture.
a. The Experts: the Court heard testimony from economic
experts about lost future income, fringe benefits, and
household services. Both relied on census data and bureau
of labor statistics
i. Four elements in loss future income calculation:
1. Base-year income – actual or projected
before-tax income
2. Income growth rate – Base-year income will
grow over time as a result of inflation,
productivity gains, and progression in one’s
career.
3. Worklife expectancy – probable length of
time a person would have remained in the
workforce.
4. Discount rate – calculate present value of
decedent’s future income loss because
income earned in future is less valuable that
income earned today.
ii. The defendant’s expert tried to offset with person
tax and person expense/consumption, but this was
not allowed under FTCA or Georgia law.
iii. Loss fringe benefits: Health insurance, pension
benefits, social security.
iv. Loss of household services: work done around the
house that is not compensated
b. Testimony
i. Plaintiff’s expert: considered actual work history
instead of demographic tables for Debra and
speculated General’s income based on a 2-year
degree or 4-year degree. (OPTIMISTIC)
ii. Defendant’s expert: relied on worklife tables for
both Debra and General (black male). He also used
the gender and race which is not supposed to be
done. (NEGATIVE)
c. The Court’s Holding
i. These appraisals are going to be speculative
because valuing the life of human being is super
hard, especially with General where there is no
ascertainable economic loss.
ii. When measuring the full value of the human life
under wrongful death, you don’t deduct expenses
and should include items of proven monetary value
and intangible items whose value cannot be clearly
ascertained.
iii. The court agreed for the most part with the
plaintiff’s expert on Debra. It was good that the
expert used her personal characteristics and talked
to her employer.
iv. The court decided to give General less money
though because his damages are too speculative.
d. This case teaches: the assumptions and methodology of
arriving at a present value of future earning opportunities
lost both for an adult in the midst of her working career and
an unborn child are very difficult – but this a routine
measure in cases where someone dies or is harmed and
consequently loses earning capacity.
iii. September 11th Damages
1. Congress authorized money to be paid to victims.
2. Within 14 days, Congress authorized damages totaling 7 billion
dollars.
3. Kenneth Feinberg administered the program.
a. Statistical charts, such as mortality tables and work-life
expectancy tables prepared by the DOL, compiled averages
and are often deemed authoritative, particularly in absence
of contradictory particularized evidence.
b. Hard to know what to do when parents paint a picture of a
rosy future.
c. Tried to narrow the gap between higher and lower income
earning decedents.
iv. Other issues
1. Courts sometimes take years off of worklife for women to take off
to raise children.
2. Race-based classifications: could possibly violate Equal Protection
and be subject to strict scrutiny. But Cain says this probably
survives strict scrutiny. Example: for autistic child, would use
autism statistics.
3. Household services:
a. Economic value of each component of decedent’s activity
b. Deceased’s earning capacity on job market.
4. Variables: age, employment, type of defendant, type of harm,
policy limit, location, trial v. settlement.
5. See page 60 hypos.
c. Plaintiff’s Pain and Suffering (Nonpecuniary/noneconomic)
i. Introduction
1. Pain is physical, but suffering describes the way a person perceives
or processes pain, including fear, grief, bereavement, and
frustration.
2. Purposes:
a. Compensation: try to make a person whole
b. Substitutes: but this is weak
c. Deterrence: keep defendant from doing this again
3. Proof
a. May focus on quality of plaintiff’s daily cycle of home,
family, and work life.
b. Can call variety of witnesses
c. Award damages for amount that will allow plaintiff to
participate fully in community life.
4. Hedonic damages: damages to compensate for the loss of
enjoyment of life.
ii. Loth v. Truck-a-way Corp. – California – Defendant hit plaintiff in a car
accident, but both walked away. However, plaintiff continued to have
back pain. Plaintiff submitted evidence for both pain and suffering AND
loss of enjoyment of life, but defendant objected that this was double
recovery. Plaintiffs used an expert to calculate for loss of enjoyment of
life. The jury returned a verdict of 890K and defendant appealed, arguing
that loss of enjoyment evidence was inadmissible and the amount was too
high.
1. Views on hedonic damages:
a. Damages not recoverable
b. Damages are recoverable as part of the damages for pain
and suffering***
c. Such damages are recoverable as an element of the
permanency of the injury
d. Such damages are recoverable as a separate element of
damages.
2. How do you decide the number?
a. There is no definite standard or method of calculation.
b. CANNOT use expert testimony here. The jury should make
a determination individualized to the victim not the general
population (statistics)
c. Remember golden rule: it is impermissible for jury to
examine own feelings; person should only consider the
plaintiff’s feelings
d. However, per diem argument is okay: attempt to aggregate
damages by day, month, year – this person will suffer harm
for such an amount of time.
e. Day in the life video is the best way to explain to the jury
the extent of assistance and attention needed.
f. DO NOT put an expert on the stand unless the matter is
beyond the common experience of the trier of fact. This is
not the case in pain and suffering cases.
3. Here, there was no meaningful connection between the benchmark
statistics and the plaintiff’s individual life. The figures had nothing
to do with the plaintiff’s hobbies, condition, injuries, skills, or
other factors relevant to her loss of enjoyment of life.
iii. Baron Tube – Per diem measures can lead to excessive verdicts. Here, the
court did not give a cautionary instruction, and the jury adopted the exact
estimate. Therefore, courts should proceed with caution when there is a
unit of time formula involved.
iv. McDougald v. Garber – New York – Plaintiff suffered oxygen deprivation
during a C-section which resulted in severe brain damage. The jury
awarded 1 million for pain and suffering and a separate award of 3.5
million for loss of pleasures and pursuit of life. Trial court reduced this to
one award of 2 million. The main dispute was what the damages should be
for nonpecuniary damages. The trial court instructed the jury to view the
two types as different types of damages and said that the plaintiff did not
need cognitive ability for the loss of pleasures of life.
1. Do you need cognitive ability?
a. Must be conscious of pain and suffering.
b. What about for loss of enjoyment of life?
i. No, without cognitive capabilities an award cannot
provide a victim with any consolation or ease any
burden resting on him. Need awareness to serve
compensation purposes.
ii. However, Cain explains that there is still a deterrent
value here that would not change no matter how the
plaintiff uses the money. Kind of weird that there is
almost an incentive to make sure someone has no
cognitive capabilities.
iii. Cognitive awareness is required but court does not
set out degrees of cognition. There just must be
“some level of awareness.”
2. Are pain and suffering and loss of enjoyment of life separate
categories of damages? No.
a. Loss of enjoyment of life is one type of suffering to be
factored into the general award for nonpecuniary damages,
commonly known as pain and suffering.
b. Suffering easily encompasses frustration and anguish
caused by inability to participate in activities that once
brought pleasure.
c. Adding a separate category creates more difficulty and
makes it more likely that there will be double recovery.
3. Because this is a negligence case, there is no malicious intent and
cannot fall into punitive realm.
4. Dissent:
a. Loss of enjoyment of life is an objective damage item,
which is conceptually distinct from conscious pain and
suffering. There is no real overlap between the damages.
b. Because it is objective, there is no need for plaintiff to
know that he or she lost this enjoyment unlike pain and
suffering which is subjective and must be felt.
c. There are many different forms of awareness, so this is not
simple. Is it fair to say that someone with minimal capacity
can recover but someone without cannot? What is the
distinction? This arbitrary line will often be contested by
expert testimony.
v. Pre-Death Fear, Anguish, and Pain and Suffering.
1. Debra Gordon didn’t recover pain and suffering because she died
immediately.
2. Plaintiff must prove consciousness for at least some period of time
following an accident in order to justify an award of damages.
a. Example: New York allowed when child drowned for six to
seven minutes.
b. Look at degree of consciousness, severity of pain,
apprehension of impending death, duration.
vi. Post-Verdict Judicial Review of a Jury Verdict
1. Remittitur: A court’s conditional new-trial order, effective unless
the plaintiff accepts a reduce figure
a. Test: Remit if “shocks the conscience.”
b. NY test: Legislature enacted statue that required courts to
ask whether a verdict “deviates materially from what would
be reasonable compensation.” Look at similar cases.
c. Could also look at ratio of nonpecuniary damages to
pecuniary damages
2. Additur: Offer defendant a new trial unless it agrees to additional
damages
a. Not recognized by federal courts or Arkansas.
3. Arkansas comparative fault: if you’re 50% responsible, you get
nothing.
vii. Norfolk & Western Ry. Co. v. Ayers – This was a Federal Employee
Liability Act case, involving railroad workers who were exposed to
asbestos and developed asbestosis. Those with asbestosis have a one in ten
chance of dying from mesothelioma. The railroad filed a motion in limine,
arguing that any mention of cancer should be excluded because none of
the plaintiffs had cancer. The trial court instructed that jury that the jury
couldn’t award damages for cancer or the increased risk of cancer but that
it could award damages to plaintiffs who had a reasonable fear of
developing cancer as a result of their asbestosis.
1. The Supreme Court ruled that under FELA those with asbestosis
could recover for fear of developing cancer because it was tied to a
discrete, present injury.
a. Two previous cases – must show zone-of-danger when
seeking emotional distress claim only:
i. Gottshall – Emotional distress damage can only
occur in a stand-alone claim: must be in the zone of
danger or have suffered an injury.
ii. Metro North – exposure alone is not enough to
show physical impact under the zone of danger test.
b. However, here, the emotional distress was tied to a physical
injury.
i. Second Restatement: if there is any bodily harm, a
defendant is also liable for fright, shock, or other
emotional disturbance resulting from that harm.
ii. US argues for separate disease rule but the SC
rejects and explains that the plaintiffs could not
recover for fear if they later developed cancer.
iii. Asbestosis increases the likelihood of cancer.
2. However, there are some qualifications.
a. The plaintiff seeking fear of cancer damages who is
presently injured has to prove that the fear is genuine and
serious.
b. Here, there wasn’t much proof on this though.
c. Railroad should have targeted its attack more to this
insufficiency of the evidence argument, but it tried to get a
broader shield of liability. Also, it did not have separate
area for fear of cancer on the jury verdict form so
impossible to know how much jury attributed to this.
3. Finally, under FELA, even if the railroad is only partially
responsible, the railroad is joint and severally liable. (Arkansas has
statute that took away J&S liability). Railroad must file for
indemnification.
d. Plaintiff’s Emotional Distress
i. Criminal Restitution
1. Introduction
a. Compensate a person who was the victim of the criminal
wrongdoer’s wrongful act.
b. Must pay restitution on the plaintiff’s loss not the
defendant’s gain.
2. Paroline v. U.S. – Defendant was convicted of possessing between
150 to 300 images of child pornography. The Violence Against
Women Act requires to award restitution for certain federal
criminal offenses, including child pornography possession. One of
the victims who he had two pictures of filed for restitution. She
was sexually abused by her uncle, who took the pictures, and he
had to pay 6K in restitution. The victim obviously suffered
devastating harm, and she asked for 3.4 million. The District Court
found that the government didn’t prove proximate causation, but
the Court of Appeals said that the defendant should be liable for
the whole loss.
a. The statute (2259) reads: that the district court “shall order
restitution for any offense.”
i. Government has the burden of proving the amount
of loss sustained.
ii. Must order restitution for full amount of victim’s
losses, which includes “any other losses suffered by
victim as a proximate result of the offense.”
b. Was there causation here?
i. There is no but-for causation here. The government
could not show that the victim’s trauma would have
been any different but for Paroline’s offense.
ii. The government tried to propose aggregate
causation, where there is a combined effort of harm.
However, if this were the case, every offender
would be liable for the entire damage no matter how
minor a role the defendant played.
iii. Paroline’s role was very minor compared to other
offenders, such as distributors or producers.
c. Holding a defendant liable for the entire amount might
raise an Excessive Fines issues.
d. Although the victim cannot recover the entire amount, can
she recover some?
i. It would undermine the purpose of the statute to
turn away victims.
ii. RULE: Where it can be show that a defendant
possessed a victim’s image AND that a victim has
III.
outstanding loses caused by the continuing traffic in
those images but where it is impossible to trace a
particular amount of those losses to the individual
defendant by recourse to a more traditional causal
inquiry, a court apply 2259 should order restitution
in an amount that comports with the defendant’s
relative role in the causal process that underlies the
victim’s general losses.
iii. Starting point: Determine the amount of victim’s
losses caused by the continuing traffic in the
victim’s images
iv. When setting this award, courts should consider a
variety of factors that bear on the relative causal
significance of the defendant’s conduct in
producing those losses:
1. Number of past criminal defendants
2. Number of future offenders
3. Total number of offenders involved
4. Whether defendant reproduced or distributed
images of victim
5. Whether the defendant had any connection
to production
6. How many images the defendant possessed
7. Other facts relevant to the defendant’s
relative causal role
e. Dissent (Roberts): This is criminal law, and arbitrary is not
good enough for criminal law. The government could not
meet its burden.
f. Dissent (Sotomayor): Should have paid whole thing.
g. Note: Congress recently has added a particular provision in
the statute for child pornography.
Collateral Source Doctrine
a. Overview
i. Default rule: A defendant cannot use payments from third-party sources to
offset his/her whatever the defendant owes to the injured party.
ii. If the defendant harms the plaintiff, the defendant is responsible to the
extent possible, including pecuniary and non-pecuniary losses.
iii. Example: insurance; even if insurance pays, it should not offset the
defendant’s liability.
iv. If there is going to be a windfall, it should be to the benefit of the wronged
party.
v. This is COMMON LAW so can be changed by statute.
vi. This is a pecuniary damages issue.
b. Hamlin v. Charter Twp. of Flint – 6th Circuit – Plaintiff worked at a fire
department. He had a heart attack, so he worked a desk job. The new fire chief
wanted to make him work the front lines, but he couldn’t. In his case, the plaintiff
prevailed on his ADA claim. However, the court ordered the attorney’s fees to be
reduced by 50%. The jury verdict was 500K. Because the plaintiff was now
getting money from a pension fund, the defendant argued that the pension fund
should offset his damages.
i. General rule: the defendant cannot have damages offset by a collateral
source.
1. The defendant tried to argue that this was city-funded retirement so
not a collateral source, but the court rejected this because it is
normally contracted retirement not injury compensation.
2. In age discrimination cases, a pension benefit cannot be used to
lower an award.
3. MAJORITY rule: pension benefits are collateral sources.
4. Factors for deciding whether it is a collateral source:
a. Whether employee makes a contribution – if so, leans in
favor of collateral source.
b. Whether benefit plan arises as collective bargaining – if
yes, leans in favor of collateral source.
c. Cover work-related or non-work-related injuries
d. Whether payments from the plan are contingent upon
length of service of employment
e. Whether plan contains specific language about set-off
benefits under plan in judgment of tort.
ii. Attorney’s fees:
1. Title VII and the ADA both have fee-shifting statutes
2. A prevailing plaintiff is entitled to attorney’s fees, but a defendant
can only get attorney’s fees if the defendant can prove that the
lawsuit was frivolous or unreasonable. (Obviously not frivolous if
a jury trial).
3. Johnson Factors
a. Time and Labor
b. Novelty and Difficulty
c. Skill requirement
d. Preclusion of employment
e. Customary fee – what do other lawyers charge?
f. Fixed or contingent – could be adjusted upward for risk.
g. Time Limitations
h. Amount Involved and Resulted Obtained
i. Experience and reputation
j. Undesirability of case
k. Nature and length of relationship with client
l. Result in similar cases.
4. District court said it cut the amount because of the close call of the
case, but shouldn’t this actually make it more money? Also, even
though the district court was not pleased with the pleadings, the
circuit explained that this should not reduce the fees.
5. Lessons from Cain:
a. Don’t block bill.
b. Should always keep time records even if normally don’t get
paid that way.
c. Don’t put a specific amount in the demand for relief.
c. Patchett v. Lee – Indiana – Patchett negligently hit Lee and admitted liability at
trial. However, the defendant and plaintiff disagreed over whether Patchett could
introduce evidence that Lee’s medical providers accepted a reduced price
compared to the original medical bills. The bills reflected 87K, but the insurance
provider only paid 12K. Lee filed a motion in limine to exclude the collateral
source from evidence, arguing that it was excluded under the Indiana Statute and
prejudicial under 403.
i. Indiana statute allows collateral sources into evidence, except for life
insurance, insurance benefits that family has paid for directly, or payments
by government or any agencies.
ii. Compensatory damages are allowed to put plaintiffs in substantially
equivalent position as they were in before the injury.
iii. What is the reasonable value of medical services?
1. Amount billed could show charges and establish prima facie
evidence that the charges are reasonable.
2. Reduced amount that represent payment in full to medical provider
a. Stanley – collateral source statute does not bar evidence of
discounted amounts in order to determine reasonable value.
b. May be allowed (discounted amount, adjustments, accepted
charges) if can be introduced without referencing their
source.
c. The identity of the payor does not matter. What matters is
that the medical care provider accepted the payment in full
for a certain amount.
iv. Indiana follows middle choice: may introduce evidence of both the
original bill and the amount accepted to determine the reasonable value of
medical expenses.
1. Six states preclude admission of discounted reimbursements.
2. Two states only allow discounted amount actually paid.
3. Two other states join Indiana in the middle ground.
v. The concurrence believed Stanley was wrongfully decided because there is
no way to let this information in without a reference to insurance.
d. Other Issues
i. Subrogation: insurance company will pay benefits, so if plaintiff gets a
judgment, insurance company will put a lien on the proceeds.
ii. Even if a party received complimentary services, may still receive
reasonable amount of services from the wrongdoer.
iii. Arkansas:
1. In Arkansas, a defendant may only introduce a collateral source if:
a. Rebut plaintiff’s testimony about being forced to do
something.
b. Contribute condition to some other cause.
IV.
c. Impeach plaintiff’s testimony that paid himself/herself.
d. That had to go to work to pay off.
e. Financial condition.
2. Negotiated discount is a collateral source.
3. Gratuitous services and negotiated discounts are collateral sources
that are not allowed into evidence for assessing damages.
4. So in Arkansas, the billed amount only is considered by the jury
when determining the reasonable value of services.
e. Defendant gives Benefit
i. Defendant will try to argue: If a defendant’s tortious conduct confers a
benefit, as well as a harm, upon the plaintiff, the jury may weigh the value
of the benefit against the claimed harm.
ii. Example: A plaintiff gets hit by defendant before trying to catch a flight
and misses flight. The flight crashes, and everyone on board dies.
iii. British government decided that those wrongfully imprisoned received a
benefit in living expense.
iv. Consider the follow examples:
1. A contract breach actually saves the plaintiff money: there is no
collateral source here because there is no third party in the
contract. No contract damages.
2. Tortfeasor kills someone’s husband. Her next husband has more
money and is better. This is a collateral source because new
husband’s income is from a third source (him). However, a
majority of courts say that remarriage is kept from a jury.
3. Wrongful birth but the parents end up loving the child. The
majority rule is that courts allow parents to recover the expenses of
having the child but nothing else.
4. “Plaintiff receives royalties from her book about her kidnapping.
The Restatement Section 920 Illustration 6 Comment B show that
this is a collateral source. “A tortiously imprisons B for two weeks.
In an action brought by B for false imprisonment in which
damages are claimed for pain, humiliation and physical harm, A is
not entitled to mitigate damages by showing that at the end of the
imprisonment B obtained large sums from newspapers for writing
an account of the imprisonment.”
Avoidable Consequences
a. Introduction
i. General test: reasonably prudent person
ii. A tortfeasor may end up paying higher damages because of the way the
plaintiff’s religious beliefs after her decisions. May that require the
tortfeasor to subsidize the plaintiff’s religious practice? Because the
insurance pays for that and insurance is mandatory, doesn’t that almost
become a tax?
iii. Courts divided on whether to admit evidence of not seeking other
employment or not buckling seatbelt.
V.
iv. Mitigation of damages: the way a defendant may decrease a plaintiff’s
damages.
v. Avoidable consequences: the steps the plaintiff should take to prevent her
damages from mounting.
b. Williams and Robbins v. Bright – Robbins was a passenger in a car driven by her
father when he had an accident. She suffered an injury to her hip. Because she
was a Jehovah’s witness, her beliefs did not allow her to have blood transfusion;
therefore, she would be wheelchair bound for life. Defendants proposed a jury
instruction explaining that the plaintiff had a duty to avoid damages by using
means that a reasonably prudent person would have used. However, the trial court
instructed “reasonably as a Jehovah’s Witness refusing surgery.”
i. Majority view: reasonably prudent person test
ii. Trial court’s errors:
1. Defining fundamental issue about assessing whether any verdict
could conflict with plaintiff’s religious beliefs.
2. Tried to extend eggshell doctrine to religious beliefs.
iii. The State may not endorse religion.
1. Here, the trial court removed any question of validity of beliefs.
(Appellate court seems to think that should be able to question the
views).
2. But also don’t want to admit expert testimony about religion.
iv. Also, the objective standard (defendant’s proposed instruction) without
any evidence of why the plaintiff was in her position would be an injustice
to the plaintiff.
v. Therefore, the New York Court of Appeals adopted the following test, the
“reasonable believer” charge: In considering whether the plaintiff acted as
a reasonably prudent person, the jury may consider the plaintiff’s
testimony about her religion. The belief is just a factor to consider with all
of the evidence. However, the overriding test is whether the plaintiff acted
as a reasonably prudent person under all of the circumstances confronting
her.
Contorts
a. Tort and Contract Damages
i. Overview
1. Torts: As a general matter, in the tort world, if a harm can be
reasonably foreseen and the harm comes to fruition, the wrongdoer
is responsible for the entire amount of damages in the absence of
unreasonably failing to avoid additional loss.
a. Purposes: compensation, deterrence, loss allocation.
b. This is public.
c. Exclude pure economic loss damages.
2. Contracts: In contract cases, only damages specifically contracted
for or in the reasonable contemplation of the parties are
recoverable.
a. Fundamental premise that defendants should not be liable
for special damages unless the defendant has been put on
notice that a breach would result in those damages.
b. This is private. Damages are much more limited.
c. Allows to economic damages but not always.
d. Hadley v. Baxendale – Damages must be specifically
contracted for or within reasonable contemplation.
3. Differences:
a. While torts only involve foreseeability, contract deals with
foreseeability plus the contract amount.
b. Example: injuring pop singer
i. Tort: responsible for all damages
ii. Contract: if did not know that the pop singer was a
famous singer when contracted to do a surgery,
cannot be liable for her high earning capacity so
liable for general damages not special damages.
ii. EVRA Corp. v. Swiss Bank Corp. – Hyman Michaels, a scrap dealer, lost a
valuable charter contract with Pandora Shipping because Swiss Bank
failed to deposit Hyman Michael’s money into Pandora’s Paris account.
The trial court awarded lost profits for this because Hyman Michaels lost a
profitable contract with Pandora (special damages). EVRA did not know
that the two other parties already had a strained relationship, so Hyman
could not be late.
1. Although this is a tort case, Posner applies contract law.
2. Hadley – consequential damages not awarded unless the defendant
was put on notice of the special circumstances.
a. Illinois applied this to many cases.
b. Siegel – plaintiff told defendant to direct money to friend to
bet on horse, but the defendant did not do this. However,
the court did not hold the defendant liable because it had no
notice or knowledge of the purpose for which the money
was being transmitted.
i. Here, Swiss did not know when payment due, what
the terms were, or that the contract was favorable to
Hyman-Michaels.
ii. However, Cain points out that the two above cases
were contracts cases. But in both cases, negligence
was conceded.
3. Lack of prudence in all of these cases.
a. Hyman-Michaels should have mailed a letter explaining
what was going on (contributory negligence).
b. Should not have waited until the last minute.
c. Similar to avoidable consequences (but those occur after
the injury).
i. Seat belt cases: show that doctrine of avoidable
consequences applies whether the victim acts
imprudently before or after.
ii. Similar to not buckling up.
4. Contract and torts both involve foreseeability.
a. Circumstances are too remote from Swiss Bank’s practical
knowledge.
b. But Swiss Bank could foresee the harm just not the
magnitude of the harm. (Posner wrong here).
c. Posner brings out the insurance argument.
d. Note: restatement third of torts section 1 illustration five
backs this position. 5. Charterer leases vessel from foreign
Owner, and is obliged to make payments to Owner by the
end of each month. In late May, Charterer orders Domestic
Bank to wire payment to Owner. Domestic Bank transmits
the request to Swiss Bank. Swiss Bank negligently delays
payment. Owner does not receive payment on time, and
thus cancels the lease. Charterer cannot find a replacement
lease at the same good price. Charterer seeks to recover
from Swiss Bank. Since Charterer was not a client of Swiss
Bank and Swiss Bank did not act to provide a basis for
reliance by Charterer, liability from Swiss Bank to
Charterer under §§ 4- 6 of this Chapter is not available. The
general principles of this Section likewise yield no duty.
Owner can readily enough seek protection against loss from
delay by contractual or other means; liability for Swiss
Bank would be indeterminate, since Swiss Bank cannot
know the stakes of the transfers it is asked to make; and the
best allocation of the risk at issue is not clear, since
Charterer is in a better position than Swiss Bank to foresee
the consequences of a mishap and to gauge the extent of the
precautions or insurance that are appropriate in response.
iii. General Damages v. Special Damages
1. General (direct damages): typical consequences of a defendant’s
breach, the harm any victim would encounter, as “following
naturally from the breach”
2. Special damages: harms that are peculiar to a plaintiff; the
plaintiff’s harms that would not occur regularly to others.
a. Pleadings: a plaintiff must plead special damages
specifically
b. Proof: A plaintiff must prove special damages with a
reasonable certainty.
c. Remoteness: The plaintiff may not recover special damages
that are too remote, even if they were realized, pleaded, and
provided. (Proximate cause and Hadley are examples).
d. Waiver: A plaintiff’s opportunity to recover specialconsequential damages is subject to bargaining
3. Personal Injury Cases – so when hear special damages, ask what
kind of case you’re talking about?
a. General: non-pecuniary loss (uncertainty and open
endedness)
b. Special: pecuniary – lost earnings, medical expenses
iv. Rardin v. T & D Machine Handling, Inc. – Rardin contract with Whitacre
for a printing press. The two had a contract with an indemnification
clause, which stated that Whitacre would be responsible for damage to
press incurred by negligence of Whitacre’s contractors. Whitacre hired T
& D to dismantle the printing press for shipping, but T & D was negligent
and damages the printing press. Rardin sought damages from T & D for
profits that he lost as a result of the delay in putting the press into
operation in his business.
1. Watch example (this is a duty issue): A watch maker would have
no clue that failure to have right time on a watch would make the
plaintiff miss a court date and receive damages from failure to
appear.
a. Similarly, T & D had no reason to foresee the consequence
of its negligence. (But Cain says this is definitely different
than a watch). There is no way to know the myriad of
circumstances for repairs.
b. Also, Rardin could have protected himself from this in his
contract with Whitacre (very unlikely).
c. Rardin could have reduced his dependence on a printing
press. (How?).
2. EVRA: plaintiff could not recover consequential damages.
a. But Hadley doesn’t brood over this case. This is the 7th
Circuit making this up not Illinois.
b. It is worth noting that Rardin was much more prudent than
Hyman-Michaels.
c. However, the main issue is that the defendants are not in a
position to assess the consequences of negligence.
3. Contractual-type limitations on liability make sense in many tort
cases that are not contract cases only because there is no privity of
contract between the parties.
4. Different than personal injury:
a. Potential variance in liability is larger when the victim of a
tort is a business.
b. Many losses are offset elsewhere. The competitors will still
get paid. This is stupid.
c. Tort law is a field largely shaped by the special
considerations involved in personal injury cases, as contract
law is not.
5. Economic loss: although not in this excerpt in the book, the court
did bar under Moorman as well.
a. The exception is to injury or other property. Here, the
printing press was a property damage as a result of the
disappointed commercial expectation.
b. This is different than the pharmacy example.
v. Seventh Circuit Decisions
1. When a tort claim arises out of a commercial transaction, the line
between contract and tort almost doesn’t exist.
2. In both EVRA and Rardin there was no contract or privity between
the plaintiffs and the defendants. And in both, the defendant
admitted negligence but only caused a pure economic loss.
3. Both sued in tort, seeking lost profits, and in both cases the 7th
Circuit ruled that the plaintiffs could not recover anything other
than general damages because in Hadley a defendant in a contract
case is not liable for consequential damages unless specifically
provided for or in the reasonable contemplation of the parties.
4. With respect to these cases, neither defendant could foresee what
would befall the plaintiffs if those defendants acted negligently
besides general damages.
5. The lack of foreseeability was compelling enough to import
Hadley into a tort case because the 7th Circuit basically thinks this
was a contract case with tortious conduct.
b. Economic Loss Rule
i. In re Chicago Flood Litigation – The City entered into a contract with
Great Lakes to remove wood pilings under the central business district
with the condition that to only drive pilings at places specified by the City.
Great Lakes didn’t follow this instruction, and the area flooded. The class
plaintiffs sought damages for injury to property, lost revenues, sales, etc.
1. Economic damages
a. At common law, solely economic losses are generally not
recoverable in tort actions.
i. Economic consequences are limitless.
ii. No way to insure these risks.
b. Moorman Doctrine: Products liability plaintiff could not
recover solely economic loss under the tort theories of strict
liability, negligence, and innocent misrepresentation.
i. Exceptions: where the plaintiff sustained damages
(personal injury or property resulting from a sudden
or dangerous occurrence)
ii. Plaintiff’s damages proximately caused by a
defendant’s intentional, false representation (fraud)
iii. Plaintiff’s damages are proximately caused by a
negligent misrepresentation by a defendant in the
business of supplying information for the guidance
of others in their business transactions.
c. Definition: Damages for inadequate value, costs of repair
and replacement, or consequent loss of profits.
d. Economic loss applies to property if damage is caused by
disappointed commercial expectations, gradual
deterioration, internal breakage, or other nonaccidental
cause. (Property damages limited to contract – example
construction defect).
2. Inventory
a. Must be showing of harm above and beyond commercial
expectations. So must be personal injury or other property
damage. Think of fallen chimney example
i. Other property: living room furniture
ii. Personal injury: brick hit a family member
b. Therefore, lost inventory is recoverable. It is different than
loss of electricity, which is a disappointed commercial
expectation.
ii. Problem: Defendant’s negligence on electric service spoiled a pharmacy’s
drugs and stopped a dentist from being able to drill.
1. Pharmacy may cover for drugs (other property)
2. Dentist cannot recover for lost wages from having no drill.
iii. Local Joint Executive Board, Culinary Workers Union v. Stern – Nevada –
The MGM Grand Hotel burnt down, so employees brought suit to recover
lost salaries and employment benefits. The unions also sued. Defendants
were involved in negligently designing and constructing the hotel. Here,
there was no privity of contract because not beneficiaries of the contract.
1. Common law: A plaintiff may not recover in negligence for
economic loss.
2. Purely economic loss is recoverable in actions for tortious
interference with contractual relations or prospective economic
advantage, but the interference must be intentional. This is the
MAJORITY view.
3. Why?
a. Negligence would sweep too broadly.
b. The scope is socially harmful.
iv. J’Aire Corp. v. Gregory – California – The plaintiff operated a restaurant
in the airport. The defendant contracted with the county to provide the
airport heat and air conditioning, but the defendant did not complete the
work on time. The restaurant had to go without air and heating.
1. Minority and California view: A plaintiff’s interest in prospective
economic advantage may be protected against injury occasioned by
negligent as well as intentional conduct.
2. Where a special relationship exists between the parties, a plaintiff
may recover for loss of expected economic advantage through the
negligent performance of a contract although the parties were not
in contractual privity.
VI.
a. Didn’t argue contractual privity because did not want to be
in contract realm.
b. Exception: union activity
3. Here, there was a special relationship because the contract was for
the plaintiff’s premises, it was foreseeable that would adversely
affect plaintiff, plaintiff suffered harm, and defendant lacked
diligence. There needed to be a duty of care here.
4. May recover if:
a. Risk of harm is foreseeable to defendant.
b. Negligence is the proximate cause of the economic loss.
c. Damages cannot be speculative (pecuniary).
d. Cannot be a part of the plaintiff’s ordinary business risk.
e. Note: restatement rejects this case. Owner operates a
restaurant at an airport in space leased from County.
County hires Contractor to renovate the restaurant's
ventilation system. Contractor's negligence causes the work
to take longer than is customary. The delay causes business
losses to Owner. Owner has no tort claim against
Contractor under § 6 of this Chapter, because Contractor's
purpose was not to provide a basis for Owner's reliance.
The general principles of this Section likewise yield no
duty. Owner can readily enough seek protection against the
cost of delays in its contract with County or by other
means.
5. West Virginia agrees.
Enhancement and Adjustment of Compensatory Damages
a. Prejudgment interest
i. Definition: interest on the judgment from the time the plaintiff’s claim
arose until judgment.
1. Some people oppose prejudgment interest – could argue that the
plaintiff is better off because of a collateral source, but the money
is a loan from the plaintiff to the defendant and puts everyone in
the same financial shape.
2. The interest is discounted to present value to the date of injury
because money today is worth more than money tomorrow due to
inflation.
ii. Postjudgment: interest on the judgment from the date of judgment until the
defendant pays it.
1. When a party wins and the other appeals, the appellant has to post
a bond (125% of judgment).
2. This protects the winner and makes sure that the other party
doesn’t get rid of its assets.
b. Punitive Damages
i. Tuttle v. Raymond – The defendant was driving 25 miles over the speed
limit when he hit and killed the plaintiff. The jury awarded punitive
damages. The defendant argued that Maine should abolish punitive
damages, but if it didn’t do that, punitive damages should not be
applicable here.
1. Majority view: allow punitive damages.
a. Continues to serve useful purpose of expressing society’s
disapproval of intolerable conduct.
b. There is an artificial line between civil and criminal law.
Civil law can be more than compensatory and serves to
shape social behavior.
i. However, where there has been a criminal sanction,
a factfinder may consider the criminal penalty as a
mitigating factor.
ii. But crime could be one that is rarely prosecuted.
c. If there is going to be a windfall, it should be to the benefit
of the plaintiff. Here, punitive damages are awarded to the
plaintiff and the state
d. There can be no objective formula because punitive
damages should be individualized for each case.
i. Avoid situation where benefit of the wrongdoing
would outweigh the known liability
ii. Rich defendant vs. poor one
e. Must establish prima face burden on issue of punitive
damages then, weigh all relevant aggravating and
mitigating factors:
i. Egregiousness of conduct
ii. Ability of defendant to pay such an award
iii. Any criminal punishment imposed for the conduct
in question
2. Dicta?
a. Negligence is in all flavors: simple negligence is not
enough but Main recognizes wanton, malicious, reckless or
grossly negligent conduct. This standard is OVERBROAD.
b. Therefore, the standard is malice – motivated by ill will
toward the plaintiff or deliberate conduct by the defendant,
although motivated by something other than ill will toward
any particular party, is so outrageous that malice toward a
person injured as a result of that conduct can be implied
(possibly shooting into a crowd??).
c. Here, this was not met.
3. Standard of proof = clear and convincing evidence
th
ii. 8 Circuit: Bowles v. Osmose Utilities Services – Bowles sued, saying that
Osmose subjected him to racially hostile work environment. The district
court awarded $20,000 in compensatory damages and $80,000 in punitive
damages. The 4:1 ratio was well within the boundaries set by the Supreme
Court, especially here where the compensatory damages were not high.
The gravity of the defendant’s offense was also important.
iii. Extras
1. Restatement 2 of torts sec. 908:
a. (1) Punitive damages are damages, other than
compensatory or nominal damages, awarded against a
person to punish him for his outrageous conduct and to
deter him and others like him from similar conduct in the
future.
b. (2) 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. In assessing
punitive damages, the trier of fact can properly consider the
character of the defendant's act, the nature and extent of the
harm to the plaintiff that the defendant caused or intended
to cause and the wealth of the defendant.
2. Arkansas (AMI 2218)
a. In order to recover punitive damages from (defendant),
(plaintiff) has the burden of proving by clear and
convincing evidence[either, first]:
b. [That (defendant) knew or ought to have known, in the
light of the surrounding circumstances,
that [his][her][its] conduct would naturally and probably
result in (injury)(damage) and that [he][she][it] continued
such conduct (with malice or) in reckless disregard of the
consequences from which malice may be inferred]
3. Punitive damages are not available in contract cases where
breaches of contract normally do not create the type of pain that
torts do.
4. Post-verdict judicial review:
a. Does the size of the punitive damages verdict (a) show
passion, prejudice, or partiality, or
b. (b) Shock the judicial conscience
5. But how do we even make a rule? Even a ratio would kill punitive
damages in cases with nominal damages.
6. States:
a. When states decide issues on independent grounds that are
not unconstitutional, then states are insulated
i. Adequate: no federal matter
ii. Independent: genuine matter of state law
iv. Constitutional Challenges to Punitive Damages
1. BMW of North America, Inc. v. Gore – Dr. Gore bought a BMW.
He took it to a detailer who found evidence that care had been
repaired due to damage by acid rain, but BMW never disclosed this
to Dr. Gore. The trial court awarded 4K in actual damages but 4
million in punitive damages, assessing the amount of incidents
nationwide not just in Alabama. BMW filed a motion to set aside,
arguing that the actions were lawful in half of the states. Trial court
affirmed, but the Alabama Supreme Court said the damages were
too high and said 2 million was more accurate.
a. The Supreme Court of the United States granted cert to
illuminate the character of the standard that will identify
constitutionally excessive awards of punitive damages.
b. Damages must be reasonably necessary to vindicate the
State’s legitimate interests in punishment and deterrence.
i. Prohibit deceptive trade practices
ii. But under comity, may not impose sanctions with
the intent of changing the tortfeasors’ lawful
conduct in other States (Cain: this is harder than it
sounds).
c. This was grossly excessive (500:1 ratio) and no adequate
notice:
i. Degree of reprehensibility of nondisclosure
1. Fraud worse than negligence; violent crime
worse than non-violent crime.
2. Here, purely economic in nature and 9
months after purchase. Fact that didn’t
disclose didn’t really affect the value of the
car. No deliberately false statement.
3. No safety issues.
ii. Disparity between the harm or potential harm
suffered by the plaintiff and his punitive damages
award
1. Damages must bear a reasonable
relationship to compensatory damages
2. TXO – not more than 10:1
3. The court will not set in place a
mathematical formula, but 500:1 is WAY
too much.
iii. Difference between this remedy and the civil
penalties authorized or imposed in comparable
cases.
1. Substantially greater than any statutory
fines.
2. Says no history of noncompliance but there
was a history.
3. Don’t want to start extraterritorial
punishment.
4. Remember, this is a big corporation and US
wants to promote commerce.
2. State Farm v. Campbell – The Supreme Court ruled that 145:1 was
excessive. It explained that higher ratios might be warranted in
noneconomic harm situations, but 9:1 was most likely to comport
with due process.
3. Philip Morris USA v. Williams – Williams was a heavy smoker.
Family sued, arguing that Philip Morris deceitfully convinced
people that smoking was not bad for you. Awarded punitive
damages of 79.5 million and judge remitted to 32. The appellate
court restored the full amount, so Philip Morris appealed. (This is
about 97:1 ratio.
a. The SC granted cert to decide whether could get damages
for non-party victims.
b. The 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 or those whom they
directly represent. This would add a standardless
dimension.
c. While a plaintiff cannot use evidence of nonparties for
adding up punitive damages, may do so to show that the
conduct that harmed the plaintiff also posed a significant
risk of harm to the general public, and was particularly
reprehensible.
v. When is an employer on the hook for punitive damages?
1. Under restatement, punitive damages against an employer if:
a. The principal authorized the doing and the manner of the
act
b. The agent was unfit and the principal was reckless in
employing him
c. The agent was employed in a managerial capacity and was
acting in the scope of employment
d. The employer or manager of the employer ratified or
approved the act.
2. Different states:
a. Alabama: did employee act within the scope of
employment?
b. Arizona: if in furtherance of business and within scope of
employment
c. Oregon: liable no matter whether the employee is classified
as menial or managerial
d. Florida: If employee’s conduct rises about the willful-andmalicious liability threshold for punitive damages and if the
employer was independently negligent, then the jury may
impose punitive damages on the employer.
vi. Mathias v. Accor Economy Lodging – (Illinois and 7th Cir.) – Brother and
sister stayed in a Red Roof Inn in downtown Chicago. The room they
stayed in had bed bugs. The hotel had known about this problem but did
nothing about it and kept renting out the infested rooms. The jury awarded
each plaintiff 186K in punitive damages and 5K in compensatory.
VII.
1. Here, the defendants were reckless and grossly negligence by
failing to take care of a known issue. The agents also told the
principal, so everyone was aware.
2. The ratio was 37.2:1.
3. Punishment should be in proportion to the wrongfulness of the
defendant’s action.
4. Also, there should be reasonably clear standards so that defendant
has a reasonable notice of the sanction for unlawful acts.
5. This is close to spitting case vs. a million-dollar verdict.
6. The defendant’s behavior was outrageous, but it caused little
compensable harm. It would be almost impossible to sue without
this type of punitive damage award.
vii. Kentucky upheld punitive award 386 times the compensatory damages.
The hospital discharged a homeless, paraplegic in a great amount of pain
twice who then died of a ruptured liver. The court noted that limiting noneconomic awards has a disparate impact of the poor, unskilled,
uneducated, and the elderly.
Tort Reform
a. Overview
i. Caps on nonpecuniary damages disproportionately affect plaintiffs who
have unequal incomes or no income.
ii. Although the federal Seventh Amendment’s jury trial provision does not
apply to state courts, states have their own provisions for jury trial.
Therefore, a State’s supreme court has the final say on what its
constitution means.
iii. Worker’s compensation is the granddaddy of tort reform.
iv. Maryland: statutory limitation does not interfere with the jury’s right to
determine damages properly because legislature had power to abolish
causes of action.
v. 6th Circuit Court of Appeals said that Mississippi’s cap would not violate
the constitution.
b. Atlanta Oculoplastic Surgery v. Nestlehutt – Georgia limited noneconomic
damages in medical malpractice cases to $350,000. Nestlehutt had a face lift and
suffered permanent disfigurement. The statute would’ve reduced the plaintiff’s
damages by 800K. The Georgia Legislature adopted the statute to help the crisis
of diminishing access to and increasing costs of procuring liability insurance.
Georgia also has a right to jury trial.
i. The court decides that a cap on noneconomic damages violated the
constitutional right to trial by jury.
ii. Medical malpractice was already established when the right to jury trial
was enacted.
1. The right to a jury trial includes the right for a jury to conclude the
amount of damages.
2. Noneconomic damages are an element of total damages in a tort
case.
iii. Does a cap infringe on this right?
1. A limit nullifies the jury’s finding of fact regarding damages and
undermines the jury’s basic function
2. Different than punitive limits because unlike the measure of actual
damages suffered, punitive are not really facts tried by a jury.
3. Cannot abrogate constitutional rights that may inhere in common
law causes of action. (Weird distinction here because legislature
can eliminate a whole cause of action).
iv. Different than remittitur because judges have a carefully circumscribed
power only exercised in certain circumstances to reduce damages or grant
a new trial under Art. VI, Sec. I, Par. IV.
c. Gourley Ex Rel. Gourley v. Nebraska Methodist Health System – Plaintiff
received prenatal care from Knolla and the OB/GYN group. Because of their
negligence, her child suffered from cerebral palsy. The plaintiff filed suit in
Nebraska, and the jury awarded 5,625,000, which was less than the expected
future medical expenses. The court concluded that the cap on damages violated
equal protection and the right to a jury trial. The Nebraska Hospital Medical
Liability Act was created to address a medical liability crisis. It explained that any
action could not exceed 1.25 million, there was a medical review panel, and any
excess of 200K per medical provider would come from the Excess Liability Fund.
Medical providers had to pay into the fund and provide proof of financial
responsibility.
i. This case was doomed because made a facial challenge not an as-applied
challenge. Also, didn’t argue due process.
ii. Special Legislation – argued that the statute provides a special privilege to
health care professionals while placing a burden on the most severely
injured patients.
1. Special legislation arbitrarily benefits or grants “special favors” to
a specific class. Legislation should normally benefit all.
2. Must be based upon some reason of public policy, some substantial
difference of situation or circumstances, that would naturally
suggest that justice or expediency of diverse legislation with
respect to objects to be classified.
3. Focus: purpose in created class and ask if there is a substantial
difference of circumstances to suggest the expediency of diverse
legislation.
4. This case – why was the class created in the first place:
a. Pendergrast ruled that class was okay.
b. Legislature considered the rising cost of malpractice
insurance. And in return, insurance prices went up.
c. The court deferred to the legislature. Since there was some
evidence to justify the public policy and difference between
medical providers and other tortfeasors, the court will not
engage in judicial factfinding.
iii. Equal Protection
1. Keeps government from treating differently persons who are in all
respects alike. This will be rational basis.
VIII.
2. A majority of jurisdictions apply a rational basis or other similar
test and determine that a statutory cap does not violate equal
protection. A few jurisdictions have applied a heightened standard.
3. This does not limit access to the courts. So satisfied if:
a. Plausible policy reason for classification.
b. Legislative facts may rationally have been considered to be
true.
c. The relationship of the classification is not arbitrary or
irrational.
4. A legislature doesn’t even have to articulate its rational basis.
There just must be a conceivable one. Legislature gets major
deference.
iv. Open Courts
1. A majority of courts say that a cap on damages does not violate the
open courts and right to remedy provisions of their state
constitution.
2. A legislature is free to create and abolish rights so long as no
vested right is distributed.
3. Legislatures may abolish causes of action, which includes lesser
action of limiting remedies.
v. Jury Trial
1. Courts are split on this issue.
2. The primary function of the jury is factfinding; however, a remedy
is a question of law, not fact, and is not a matter to be decided by
the jury.
3. If right to abolish a whole cause of action, may limit recovery.
vi. Takings Clause
1. A person has no property and no vested interest in any rule of the
common law or a vested right in any particular remedy.
2. Courts have rejected that a cause of action and determination of
damages are property.
vii. Separation of Powers – again, legislature may abolish common law cause
of action so this is no more power than that.
Equitable Remedies — The Injunction
a. Introduction
i. An equitable remedy is there when there is no adequate remedy at law and
the problem cannot be addressed by money.
ii. The Big Three:
1. Injunction: mandatory and prohibitory
a. Court order directed at a party to either do something or
refrain from doing something.
b. Mandatory: must affirmatively do something
i. Example: order school to re-admit expelled student
c. Prohibitory: stop an actor from doing something
i. Compel compliance
ii. Contempt powers
2. Constructive Trust
a. Someone has wrongfully taken possession of your property.
b. Something that belongs to you is under the dominion and
control of someone else.
c. Therefore, that person is required to convey it back to the
owner.
d. That person holds in trust for owner and acts as if he or she
is a fiduciary.
3. Specific performance
a. Transaction where the substance is unique.
b. Ex. Land
c. There is no adequate substitution so must perform.
iii. Historical matters of equitable jurisdiction: guardianships, trusts and
fiduciary relationships, probate, enforcement of liens, and quiet title.
These cases don’t have juries.
iv. In areas like contracts, torts, property, and constitutional law, the court
looks to whether a remedy is adequate and irreparable harm.
b. Injunctions
i. eBay Inc. v. MercExchange – eBay operated a popular website.
MercExchange sought to license patents to eBay, but even though the
negotiations failed, eBay used the products anyways. The district court
denied Merc’s motion for permanent injunctive relief, but the Court of
Appeals for the Federal Circuit reversed, explaining that as a general rule,
a court should issue permanent injunctions against patent infringement.
1. The Supreme Court granted cert and explained that the district
court’s adoption of expansive principles was too much of a
categorical rule and the Court of Appeal’s general rule for patents
was too big of a departure from the four-factor test.
2. Therefore, the decision to grant or deny injunctive relief rests
within the equitable discretion of the district court applying the
traditional four-factor test – a plaintiff seeking injunctive relief
must demonstrate:
a. (1) That it has suffered an irreparable injury;
b. (2) That remedies available at law, such as monetary
damages, are inadequate to compensate for that injury;
c. (3) that, considering the balance of hardships between the
plaintiff and defendant, a remedy in equity is warranted;
and
d. (4) that the public interest would not be disserved by a
permanent injunction.
ii. 8th Circuit Test:
1. Threat of irreparable harm to the movant
2. The state of balance between this harm and the injury that granting
the injunction will inflict on other parties involved in the litigation
3. The probability that the defendant will succeed on the merits –
doesn’t have to be 50%.
a. Fair chance standard
b. However, if injunction seeks to enjoin a statute, the
standard moves to the more rigorous: likely to prevail
4. The public interest
iii. Equity Acts in Personam
1. Introduction
a. Sub-category of personal jurisdiction
b. Once a court has personal jurisdiction, it can order party to
do things inside and outside of the jurisdiction, even if res
is outside of the jurisdiction (preserve, convey, etc.)
c. (maybe important) foreign:
i. Whether the defendant’s conduct has substantial
effect on US commerce
ii. Whether defendant is a US citizen
iii. Whether extraterritorial enforcement will encroach
upon foreign rights
d. Why recognize out of state injunction?
i. Comity: is it consistent with public policy?
ii. Full Faith and Credit Clause (doesn’t apply to
foreign entities)
iii. Statute prevents federal courts from enjoining state
court litigation.
2. Tabor & Co. v. McNall (Illinois) – McNall, a Wisconsin
corporation, entered into a contract with Tabor in Illinois for the
sale of grain. However, McNall defaulted. Tabor filed a complaint
in Illinois. McNall then filed a suit in Wisconsin, admitting default
and seeking to limit its damages. Tabor then petitioned the Illinois
court to enjoin McNall from proceeding further with suit in
Wisconsin. Illinois issued the injunction, but McNall continued the
action in Wisconsin, so Illinois court order McNall to show cause
for why shouldn’t be held in contempt. McNall appealed.
a. The Illinois Court had the authority to enjoin, but was it
proper?
b. Here, the only reason was fear that Wisconsin law might
not protect the Illinois defendant.
c. This was improper. A court can only enjoin a party’s
general right to press his action in any jurisdiction which he
may see fit where the prosecution of action in a foreign
state will result in a fraud, gross wrong, or oppression.
d. This injunction was erroneous.
3. Matarese v. Calise – The dispute involved property in Italy.
Matarese told Calise he would buy the property from Anna in Italy
and then would transfer property to Calise if he had a down
payment. Calise sent 3K to Matarese, and Matarese got the
property but he wouldn’t transfer it. Could this Rhode Island court
order Matarese to transfer the property?
a. Yes, the court can because Matarese committed fraud.
b. The court also had personal jurisdiction over him so didn’t
matter that he was now in Italy.
c. Therefore, Matarese had to convey to Calise as a
constructive trustee.
4. United States v. McNulty – McNulty won 50,000 Irish pounds but
wouldn’t pay IRS. He deposited the pounds in a secret bank
account in the UK. McNulty went to prison but the funds remained
uncollected; therefore, the government ordered him to repatriate
his assets.
a. 26 USC 7402 provided that government had jurisdiction
over such an order and had the authority to order the
money.
b. Several cases before also involved repatriation of asserts.
For example, the 9th Circuit ordered a corporation, which
was subject to personal jurisdiction of the court, to produce
corporate books located in Mexico.
c. Only for the most compelling reasons should a court refuse
relief to the Government where a citizen of the United
States keeps most of his assets in a foreign country and
claims they are immune from application to his income tax
lability because their situs in a foreign country.
d. Fun fact: McNulty was found in contempt after he refused
to obey this order and was thrown into jail for civil
contempt (he held the keys to his own jailhouse). However,
after five months, a judge concluded that further
incarceration would cease to serve the coercive objective of
civil contempt and would become punitive.
5. What if defendant is in the US? A district court can order someone
to stop doing something and it applies all over the US (travel ban).
This power is limited to parties, agents, and others with notice in
active concert or participation to obey.
c. Equity Lacks Jurisdiction to Enjoin a Criminal Prosecution
i. Norcisa v. Board of Selectmen – Plaintiff lived in Province, Massachusetts
where she operated retail clothing business. However, she failed to pay the
license fee or apply for a license. Plaintiff argued that she was not a
transient vendor so this did not apply to her. The city issued a criminal
complaint, so she commenced this suit to enjoin the pending criminal
prosecution.
1. GR: Courts of general equity do not normally enjoin criminal
prosecutions.
2. Courts with general equity powers may have the power to enjoin
criminal prosecutions to restrain institution of prosecutions under
unconstitutional or void statutes when property rights would be
injured irreparably.
3. This court extends this rule to protect personal rights by injunction
upon the same conditions which it will protect property rights by
injunction:
a. (1) Unless relief is granted a substantial right of the
plaintiff will be impaired to a material degree
b. (2) That the remedy at law is inadequate AND
c. (3) that injunctive relief can be applied with practical
success and without imposing an impossible burden on the
court or bringing its processes into disrepute.
4. Here, there is already a remedy at law.
a. Different than Kenyon where judge convicted multiple
Jehovah’s Witness despite the fact that Supreme Court
decisions held the ordinance unconstitutional. Even more,
the defendant threatened to continue to make false arrests.
b. Here, the plaintiff was charged with the violation of a
single statute and argued that it was unconstitutional.
However, this could be a defense in her criminal
prosecution.
c. All of her defenses could be raised in the criminal
prosecution; therefore, she had an adequate remedy at law.
d. Could file a motion to dismiss the prosecution and make
arguments within the prosecution itself.
ii. Younger v. Harris – A federal court should not enjoin a state prosecution
except upon a “showing of bad faith, harassment, or any other unusual
circumstance that would call for equitable relief.”
1. This is a dual federalism issue.
2. A federal court should abstain from doing something would affect
state proceeding.
3. Example of exception: Prosecutor has absolute immunity from
civil damages when deciding whom to prosecute. However, if a
prosecutor was bringing charges for racially discriminatory reasons
and was vocal about those reasons, a federal court could enjoin.
This is bad faith.
iii. People ex. Rel. Gallo v. Acuna – City sought injunction relief in
Rocksprings to enjoin gang members from a variety of activities that
constituted a public nuisance, and superior court granted an ex parte
temporary restraining order enjoining all 38 defendants and issued an
order to show cause why a preliminary injunction should not be issued.
The Court of Appeals upheld only provisions of the injunction that
enjoined acts defined as crimes. The City only appealed two provisions.
1. Public Nuisance
a. In the public nuisance context, the community’s right to
security and protection must be reconciled with the
individual’s right to expressive and associative freedom.
b. Definition: unreasonable interference with public health,
safety, peace, comfort, or convenience.
c. Anything injurious to health, indecent or offensive to the
senses, or an obstruction to the free use of property, so as to
interfere with the comfortable enjoyment of life or
property.
d. To be enjoined, must be substantial and unreasonable.
Measure objectively: if normal persons in that locality
would not be substantially annoyed or disturbed by the
situation then the invasion is not a significant one.
e. However, the ultimate legal authority to declare a given act
or condition a public nuisance rests with the Legislature,
and the Court cannot expand the scope.
2. Relation Between Crimes and Public Nuisances
a. If it is indictable as a crime, it does not bar the remedy in
equity because the citizen and general public have an
immediate right to the enjoyment of the thing interfered
with.
b. A public nuisance is a misdemeanor; therefore, acts or
conduct with qualify as public nuisances are enjoinable as
civil wrongs or prosecutable as criminal misdemeanors.
c. Non-criminal conduct can be enjoined as well.
3. First Amendment Challenges
a. Injunction: “standing, sitting, walking . . .with any other
defendant” in the area.
i. First Amendment does not protect activities of gang
members within a four-block area.
ii. This is not overly broad because this not a statute
and the preliminary injunction is addressed to
identifiable parties and to specific circumstances.
iii. Argued that no way to know violating when don’t
know the other 37 defendants; however, the court
explained that an element of knowledge is implied
in the decree. And if it isn’t, a trial court will
impose a limiting instruction by inserting a
knowledge requirement if there is an attempt to
enforce the injunction.
b. Injunction: Cannot confront, intimidate, harass, challenge
residents of Rocksprings.
i. Madsen case had the same words, which were held
to be sufficiently definite. (However, this case is
much broader than Madsen which involved
enjoining certain actions right outside of an abortion
clinic).
ii. Again, trial court can handle this.
4. The Limits of the Injunction
a. Does this activity fall within definition of public nuisance?
i. Yes, this is clear from the beginning of the opinion.
IX.
ii. Don’t have to put up with the hooligan-like
atmosphere.
b. Does this comply with constitutional standards by
burdening no more speech than necessary to serve a
significant government interest (so not fundamental?)?
i. No constitutionally protected or even lawful goals
within the limited territory.
ii. Engaged in no expressive or speech-related
activities which were not either criminally or civilly
unlawful.
iii. Not unconstitutionally vague because would tell an
ordinary person of intelligence what this means.
iv. THIS IS BASICALLY BANISHMENT.
5. Dissent:
a. There is no standard for determining when a violation has
occurred.
b. This is enjoining some crazy things: communicating with
occupants of any vehicle.
iv. New York v. Andrews – Here, criminal acts created a nuisance to those in
the Queens Plaza area; however, that did not mean that it should be
handled with a civil injunction. Basically, City wanted to bypass criminal
court, but this court didn’t buy the Acuna argument. Also, injunction,
which banned them from Queens Plaza, infringed on right to travel and
remain in the area.
Injunction Procedure
a. Preliminary Injunctions and Temporary Restraining Orders
b. Introduction
i. Rule 65 of the FRCP governs issuance of injunctions in federal court.
ii. TROs – can be issued on an ex parte basis 65(B)
1. Request for TRO is verified by petitioners and has to be
specific on facts that harm is immediate and irreparable.
(NEVER money).
2. Must show that have attempted notice and state reasons why
notice is not required.
3. A party better not ask for this and lie about it.
4. Also, there must be some form of security which dissuades
unnecessary TROs: may be conveyed to nonmoving party is
TROs was erroneous. Needed for preliminary injunctions as
well.
iii. Preliminary injunction: follows hearing and adversary proceeding.
c. Lane v. Ocwen Loan Serving, LLC. – Plaintiffs sought loan modification and
began making payments but were never notified of the amount even though
asked. The defendants later notified the plaintiffs they were in default and had
14 days until a foreclosure sale. Plaintiffs had a buyer and filed this injunction
to stop foreclosure sale.
i. This was an ex parte restraining order; however, courts often waive the
security requirement in the foreclosure context given that there is
already property involved.
ii. TRO Requirements:
1. Likelihood of success on the merits
a. If the harm clearly favors the plaintiff, then this does
not have to be particularly strong.
b. Here, there was likely a breach of contract by
defendants.
2. Irreparable Harm
a. Losing real property constitutes irreparable harm
because the property is unique.
b. Losing real property is also irreversible.
3. Balance of the equities
a. Here, this tips in the plaintiffs’ favor.
b. Defendants will face at most a delay.
c. Plaintiffs would be deprived forever of their home.
4. Public Interest
a. Public does want lenders which promote free flow of
capital.
b. However, unnecessary foreclosures could lead to more
litigation and clouded titles.
iii. This TRO would last 14 days. This is the maximum length under
FRCP 65(b)(2).
iv. Contents: must state the date and hour it was issued; describe the
injury and state why irreparable; state why issued without notice; and
be promptly filed in clerk’s office.
d. Florida Panthers Hockey Club, Ltd. v. Miami Sports & Exhibition Auth.
– City owned arena where the Panthers played hockey. The two teams entered
into contract for a lease. However, the City didn’t like the length so decided to
terminate and asked the Panthers to vacate.
i. Panthers asked for a preliminary injunction to enjoin arena’s order to
vacate.
ii. Standard:
1. Likelihood of success on the merits:
a. City tried to argue that the contract was for personal
services which could not be subject to specific
performance but court rejected this.
b. Court found that once the Panthers submitted
Amendment for approval, City had to accept it without
any materially adverse terms.
2. Irreparable harm.
a. Panthers will lose home team advantage.
b. This will hurt good will among fans.
3. Balance harm.
a. Panthers will have nowhere to play and lose substantial
revenue.
b. The City will be able to collect from these revenues.
4. Public Interest
a. Sports provide economic benefit. (Even though no
studies show this).
b. No adverse public effect to let them stay.
e. Salinger v. Colting – Second Circuit – Salinger published The Catcher in the
Rye in 1951. In 2009, Colton wrote 60 Years Later: Coming Through the Rye,
which was obviously based off of the original novel. Marketing efforts even
broadcasted it as a sequel to the book. The district court granted Salinger’s
motion for a preliminary injunction and barred defendants from
manufacturing, publishing, etc.
i. Preliminary injunction if:
1. Irreparably harmed if not granted (pay particular attention to
available remedies) AND
a. Occurs to parties’ legal interests
b. Cannot be remedied after a final adjudication
2. Either likelihood of success on the merits OR
3. Sufficiently serious questions going to the merits to make them
fair ground for litigation AND
4. Balance of hardships tipping decidedly in plaintiff’s favor
AND
5. Public interest
ii. eBay set the standard. Cannot assume irreparable harm for copyright
cases.
iii. The district court only consider the likelihood of success on the merits
so this case is remanded.
f. Note: The loss of First Amendment freedoms unquestionably constitutes
irreparable injury.
g. See Winter maybe?
h. Arkansas focuses on irreparable harm and likelihood of success on the merits
i. Jury Trial After Merger of Law and Equity
i. Introduction
1. Arkansas merged its courts in 2007
2. All states have a right to jury trial similar to the 7th Amendment
3. What do we look at?
a. History
b. Nature of the remedy
ii. Feltner v. Colombia Pictures Television – Feltner acquired three TV
stations and kept playing certain shows after licenses from Colombia
terminated. This was willful copyright infringement. The damages would
have been much less for just licensing fees than the statutory fees here.
Defendants wanted a jury trial but didn’t get one.
1. Statutory damages:
a. Can reach 20K per infringement but willfulness increases
to 100K per incident.
b. Trial judge decided that Columbia was entitled to 8.8
million dollars by fixing damages at 20K per act.
c. 7th Circuit ruled that the Seventh Amendment does not
provide a right to jury trial on the issue of statutory
damages because an award of such damages is equitable in
nature
2. Start with statute:
a. The language of 504(c) does not grant a right to have a jury
assess statutory damages.
b. Legislature creates statutory damages to entice litigants to
litigate a certain cause of action that may not otherwise be
worth it.
c. Here, the reference to court indicated a judge not a jury.
3. Does the Constitution allow a jury trial?
a. If there is a right to a jury trial, you must plead it. (Rule 38)
b. Consider the history. If there is no historical match, is there
a historical analog?
i. In 1791 with Right to Jury trial created, there were
already similar copyright actions. Look to before
and during the time of amendment.
ii. During this time, common law and statutory
copyright actions were determined by juries.
iii. In 1790, damages were determined by juries.
iv. Colombia didn’t dispute this history.
c. What is the remedy sought?
i. General rule: monetary relief is legal.
ii. Not equitable simply because it is not fixed or
readily calculable from a fixed formula.
d. Therefore, there is a right to a trial by jury here.
4. Ironically, the damages went up with a jury.
iii. C&K Engineering Contractors v. Amber Steel Co. – California – Amber
submitted a bid to be a subcontractor on a project C&K was going to work
on. Although there was no contract, Amber knew that C&K would rely on
its bid when submitting its proposal. Amber said it made a mistake with its
bid but never informed C&K. This is a promissory estoppel issue. Amber
demanded a jury trial. Judge denied request but empaneled an advisory
jury to consider the sole issue of plaintiff’s reasonable reliance on
defendant’s promise.
1. Nature of promissory estoppel:
a. Definition: A promise that the promisor (Amber Steel)
should reasonably expect to induce action or forbearance of
a definite and substantial character on the part of the
promise (C&K) and that does induce such action or
forbearance is binding if injustice can be avoided only be
enforcement of the promise.
b. As justice requires is the epitome of equitable power.
2. History. Who tried promissory estoppel claims?
a. Jury trial right existed in 1850.
b. What is the gist of this cause of action? It is equitable and
jury won’t decide.
c. Here:
i. The plaintiff sought to seek monetary damages
through promissory estoppel.
ii. Damages at law were unavailable for such an
action.
iii. Court said that despite request for damages, this is
not an action of law with the incidental adopts of
equity.
iv. However, Cain doesn’t agree. Yes, promissory
estoppel is the route to getting money but this is not
dispositive depending on type of relief you seek. If
money and nothing more, should be allowed jury.
v. This court places emphasis on route to relief, which
raises a question: which is more important – how
you get to the relief or the relief you want?
3. Dissent
a. Should focus on remedies not right.
b. A plaintiff who seeks damages should be entitled to a jury.
j. Equitable Cleanup
i. Ziebarth v. Kalenze – North Dakota – Buyer and seller entered into a
contract for the sale of cattle. The seller sold the cattle to another party and
breached the contract. Buyer sought specific performance, but since the
cattle had already been sold, seller argued that had to dismiss because
remedy was unavailable. Now appeals because didn’t have jury trial.
1. It is clear that specific performance was allowed in the case
because goods were unique (2-716); however, it is not clear
whether the Code allows damages to be awarded in lieu of a decree
in equity.
2. Here, defendant knew that specific performance wasn’t available
and didn’t say anything.
3. Tradition view: Court cannot give judgment for damages in an
action brought in equity unless the plaintiff first proves his right to
equitable relief. (Overruled here).
4. Existence of remedy at law does not prelude equitable relief if the
equitable remedy is better adapted to render more perfect and
complete justice than the remedy at law. But legal remedy should
be granted if equity fails.
5. Here, right to jury trial waived if not demanded in a case where the
complaint demands equitable relief but the defendant is aware that
only legal relief could be granted if the plaintiff should prevail.
ii. There is a split authority on this: if equitable relief pled only and
unavailable, majority say you are out of luck.
iii. This is not the best example of the clean-up doctrine. Normally oriented
towards courts where split between law and equity, and if you file in
equity court and there are some damages that come along with it, the
equity cleanup doctrine allows courts to award those, too.
k. Discretion and Flexibility
i. Remedy without a right
1. Definition: declaratory judgment: make a judicial finding
regarding the rights, responsibilities, and duties; can use as a spring
board to seek other relief.
2. Navajo Academy v. Navajo United Methodist Mission School –
The Navajo Academy moved its location to the Mission School
after being invited. There was an understanding that the school
could occupy the land for as long as it provided a quality
education. The Academy applied with Bureau of Indian Affairs to
get money to fix up the school. It was understood that the lease
would last a good duration; however, the relationship began to
deteriorate, and the Mission charged substantial rent then sought to
evict the Academy. Academy in response filed a declaration that it
was entitled to continued occupancy under a constructive long
term lease.
a. Issue: can there be a remedy when there is no right?
b. Here, the trial court ordered that Academy could stay three
more years.
c. Cain: how could there be a breach of agreement here?
Statute of frauds would apply because this was set to last
more than a year, and this contract was never written down.
Also, why didn’t Academy argue promissory estoppel? But
face barrier that money came from Bureau.
d. However, here, the lease was terminable at will. But the
trial court considered the practical effect of this.
e. *A court may validate an equitable solution to a problem
such as the one before this court when a party asks for
justice and a legal remedy is inadequate.
i. Has power to meet problem presented and fashion a
remedy
ii. Equitable relief is flexible and adaptable.
iii. Costs of improvement can be considered as years of
rent.
f. Note: Cain is not a fan of this case and it is an outlier.
3. This case is difficult because there is no viable theory of property,
contract, tort, or restitution.
4. See Douglas v. Independent Living Center: A court of equity may
not create a remedy in violation of law or even without the
authority of law.
ii. Right without a remedy
1. Weinberger v. Romero-Barcelo – The Navy used an island off the
Puerto Rico coast for weapons training, which included bombings
into the waters. This was illegal under the Federal Water Pollution
Control Act because discharge of pollutant requires a permit. The
district court ordered the Navy to get a permit; however, it did not
enjoin in the meantime because the “technical violations” were not
causing any harm to the environment. The First Circuit vacated
this decision, saying statute made duty to stop, but then Supreme
Court sided with the district court.
a. The court should balance the conveniences of the parties
and possible injuries to them according they may be
affected by the granting or withholding of the injunction.
i. A grant of jurisdiction to insure compliance with a
statute hardly suggests an absolute duty to always
do so.
ii. Here, there were other methods of compliance such
as the fines and criminal penalties.
iii. The purpose of statute was to ensure biological
integrity of waters. Here, the discharge had not
polluted the waters and Navy was going to get a
permit. In contrast, harm would be great to Navy
and nation if enjoined.
iv. Statute has phased compliance.
v. Administrator also has right to commence actions
for an injunction when there is substantial harm, so
Congress obviously didn’t mean for an injunction in
every situation.
b. Here, equity should only intervene when there is no other
remedy
c. This case is different than TVA v. Hill
i. In that case, a dam would have immediately
destroyed the snail darter.
ii. The Endangered Species Act was also more direct
in what a court cannot do and had a flat ban on
destroying habitats.
iii. Congress easily chose the snail darter over the dam.
iv. (But there was also a flat ban on discharges without
a permit).
l. Clean Hands and Laches
i. Clean Hands
1. Green v. Higgins – Higgins sold plot of land to Brown and agreed
that would have right of first refusal to the adjacent plot. In
addition, McCully obtained an agreement where she could handle
any sell prior to June 1, 1971. In April, Higgins decided to sell to
the Greens. They postdated the contract in order to defeat
McCully’s commission and created a fake contract for selling land
for 40K in order to get the Browns to refuse even though land was
worth 30K. Higgins then changed his mind. The Greens tendered
the remaining purchase price and requested a warranty deed. When
Higgins didn’t do this, they sued for specific performance.
a. Money damages: difference between market price and sale
price.
b. Here, the Greens and Higgins were both involved in
willful, fraudulent, illegal, and unconscionable behavior, so
neither had clean hands.
c. The clean hands doctrine provides that no person can
obtain affirmative relief in equity with respect to a
transaction in which he has, himself, been guilty of
inequitable conduct.
i. Conduct which will render a party’s hands uncleans
so as to deny him access to a court of equity must
be willful conduct which is fraudulent, illegal, or
unconscionable.
ii. Also, the conduct must be related misconduct rather
than collateral misconduct arising outside the
specific transaction which is the subject matter of
the litigation before the court.
d. Court has discretion. Here, the purpose is to refuse to lend
aid to either party in such a filthy transaction.
2. Extra
a. A defendant may interpose unclean hands when plaintiff
seeks injunction, specific performance, a constructive trust,
or any other equitable remedy.
b. Principles:
i. Misconduct must be related to the dispute
ii. Discretionary
iii. Public policy may override an unclean hands
defense
c. Today unclean hands really just means that in equity as in
law the plaintiff’s fault, like the defendant’s, may be
relevant to the question of what if any remedy the plaintiff
is entitled to.
d. There is a move to allow this in legal relief as well.
ii. Laches
1. Stone v. Williams (I) – Cathy Stone’s biological father was Hank
Williams. At first, she was raised by his mother, but when she
died, she became a foster child and the Deuprees adopted her in
1959. In 1967, there was litigation over assignment of Williams’s
music and guardian at litem represented Cathy, but she never
knew. When she turned 21 in 1973, her mom told her about the
rumors. Finally, in 1980, her dad encouraged her to find out if
Williams was her biological father. However, she did not file a
declaratory judgment until 1985 to declare her a natural daughter
and get a portion of copyright sales. She also sued in state court,
who ruled that she was not an heir at law. Jr. filed MSJ that laches
barred her.
a. Laches is an equitable defense.
i. Equity aids the vigilant, not those who sleep on
their rights.
ii. Laches asks whether the plaintiff in asserting her
rights was guilty of unreasonable delay that
prejudiced the defendants.
iii. Laches can still be invoked even if file under the
SOL.
b. This is more flexible and requires an assessment of the
facts of each case. Has the person waited an unreasonable
amount of time to file the case and has that delay caused
prejudice on the defendants?
i. Here, it was reasonable to wait until 1980 due to her
loyalty to her parents, embarrassment, and the state
of illegitimate children (Levy v. Louisiana (1968)).
ii. But not explanation after 1980.
c. Where plaintiff has not slept on her rights, but has been
prevented from asserting them based on justified ignorance
of the facts constituting a cause of action, personal
disability, or because of ongoing settlement negotiations,
the delay is reasonable and the equitable defense of laches
will not bar an action.
i. However, where there is no excuse for delay,
defendant need show little prejudice.
ii. There is a balance between the reason for delay and
prejudice.
iii. Prejudice here: witnesses dead, evidence growing
stale, reliance
d. Finality is more important than rectitude. Sometimes, due
to an unreasonable delay and prejudice to a defendant, a
case needs to stop in its tracks. Ending the case is better for
all than allowing it to proceed.
2. Stone v. Williams (II) – After the above case, the Alabama court
found that defendants had intentionally, willfully and fraudulently
concealed plaintiff’s identity, existence, claim and rights as a
natural child.
a. This completely changes laches because fraud is now
present.
b. The prejudice to the defendants would not have existed but
for the failure of the present defendants to reveal the facts
of which they had knowledge.
c. Reversed dismissal of summary judgment because equities
now fell on the plaintiff’s side.
3. Note: laches must be pleaded.
4. Laches v. SOL
a. Different courts use the two differently.
b. Can treat the similarly: equity follows the law as it holds
the SOL either to govern or to define the plaintiff’s delay
period.
c. Or can completely disregard SOL
d. Or can treat as a factor.
5. Laches may bar from equitable remedy but leave free to pursue
legal remedy.
X.
Contempt
a. Introduction
i. Definition: contempt power is an inherent power of a court for anybody
appearing before it to obey the courts commands and respect the being.
1. Direct v. indirect
a. Direct: this occurs right in front of a judge, where a court
can engage in summary disposition because there is no
factual matter to develop
b. Indirect: much more concerning
i. A defendant’s disobedience occurred outside of the
courtroom.
ii. Therefore, an order must be very clear and specific.
If you are going to be deprived of life, liberty, or
property, you are entitled to know what precisely
may trigger those deprivations so that you know
how to act.
iii. There must be a factual record developed. So a
defendant charged with indirect contempt is at least
entitled to notice and a hearing.
2. Criminal vs. civil
a. Distinction turns in part on why the court imposes the
consequence that it does.
b. Criminal
i. Purpose: punish a deter, public: PUNITIVE
ii. Triggers full protection of criminal procedure:
presumption of innocence, proof beyond reasonable
doubt, right to counsel, right to jury trial, right not
to testify, be told of charges, unbiased judge, etc.
iii. However, remember, this is only for indirect,
criminal contempt.
c. Civil
i. Purpose: secure for private plaintiff the benefits of
the injunction: COERCIVE
ii. Two types
1. Compensatory contempt where contemnor
must pay plaintiff for loss caused by
violation
2. Imprison for continued disobedience – here,
may be released once comply with order so
“have keys to your own jail door”
iii. No jury required, so a judge presides over the
hearing.
iv. Burden: clear and convincing
3. Retrospective vs. Prospective
a. Retrospective
i. A party has breached the injunction and the judge
can no longer secure for the plaintiff the conduct
which she is entitled.
ii. Must substitute compensatory contempt, money
compensation, or criminal contempt, punishment of
the wrongdoer.
b. Prospective/coercive contempt
i. Devised by judge to compel the defendant’s future
conduct.
ii. Usually threats to fine or imprison someone to
coerce conduct.
iii. This can backfire. Ex. McNulty
b. H.K. Porter Co. v. National Friction Products – The two parties settled, which
provided an agreement that National would not sell any of the compounds for use
in making of an air conditioner pulley. The Court entered an order adopting the
decree by reference. Later, plaintiff issued order to show cause and for contempt
judgment. Asked for defendants to purge through compensatory and punitive
damages.
i. Notice Requirements of 65(d)
1. Contents: An order granting injunction must:
a. State reasons why issued
b. State its terms specifically
c. And describe in reasonable detail (not referencing other
document) the acts to be restrained
2. It binds those who receive notice OR
a. Parties
b. Parties’ agents
c. Anyone in active concert
ii. This court failed to comply with 65(d)
iii. Requirement: must have been disobedience of an operative command
capable of enforcement and command must have complied with 65(d).
1. Specific detail
2. But he didn’t use language which turned a contractual duty into an
obligation to obey a command.
iv. Rule: Injunction shall describe in reasonable detail and not by reference to
the complaint or other document the act or acts sought to be restrained.
1. Because of risk of contempt proceeding, paramount interests of
liberty and due process make it indispensable for the chancellor or
his surrogate to speak clearly, explicitly, or specifically if violation
of his direction is to subject a litigant to coercive or penal
measures, as well as payment of damages.
v. Note: some courts have ruled that this literal interpretation doesn’t always
have to be invoked and stapling was okay. Davis v. City & County of San
Francisco. (9th Cir.) Cain says this is clearly erroneous.
c. Playboy Enterprises v. Chuckleberry Publishing – An Italian named Tattilo set up
a version of Playboy called PLAYMEN. Playboy sought an injunction of the use
of this name, which was granted. Later, Playboy discovered that PLAYMEN had
an internet website, which was available in the US.
i. Purpose of civil contempt: is to enforce compliance with an order of the
court or to compensate for losses or damages.
ii. A court has power to hold party in civil contempt when:
1. There is a clear and unambiguous court order – one specific and
definite enough to apprise those within its scope of the conduct
that is being prescribed.
2. There is clear and convincing proof of noncompliance
3. The party has not attempted to comply in a reasonably diligent
manner
iii. Purpose of this injunction: restrict ability of Defendant to distribute its
products in the United States
1. This should be applied to cyberspace.
2. US citizens had to give their credit cards and purchase images.
3. It distributed images through US and advertised in US.
iv. While Court has neither jurisdiction nor the desire to prohibit the creation
of Internet sites around the globe, it may prohibit access to those sites in
this country.
v. Motion 59(e) for Reconsideration
1. Similar to Motion to Alter or Amend a Judgment in 8th Circuit –
must be filed within 28 days and tolls time period for appeal.
2. Here, tried to argue Playmen Lite was different but it still reached
into the US and invited downloads.
d. In re Yoho – Yoho was a drug user who pleaded guilty to a drug offense. The
State told Yoho that it would dismiss two charges if he would testify against his
dealer, but Yoho wouldn’t because he was concerned for the safety of his family.
The state issued a subpoena for him to testify in front of a grand jury and gave
him immunity. He refused still, so warned that he would be held in contempt. The
court sentenced him to jail until he would testify.
i. Immunity:
1. Transactional immunity – whatever testimony the person gives
cannot be prosecuted for any offense to which the testimony relates
2. Use immunity – cannot be prosecuted based on compelled
testimony and any evidence that results.
ii. This is a matter of state law and procedural so long as it does not violate
constitutional norms.
iii. Direct contempt
1. Here, he refused to testify because of fear of harm. It is universal
that fear of retribution doesn’t provide a sufficient basis for
refusing to testify.
2. The Supreme Court says that refusing to testify before a grand jury
is indirect contempt; however, some states disagree.
3. This Court decides that this is direct contempt. This was in the
presence of the court.
iv. Civil or criminal?
1. Basically, this was “go to jail until you decide to testify”
2. Act itself doesn’t answer this question; rather, it depends on the
purpose served by the sanction imposed.
3. Where purpose is to compel compliance with a court order by the
contemnor so as to benefit to party bringing the contempt action by
enforcing, protecting, or assuring the right of that party under the
order, it is civil.
4. Purpose was to coerce compliance and the sentence was indefinite.
v. Remedial or coercive?
1. Can be incarcerated or fined
2. This was coercive.
vi. Notice and opportunity to be heard: because this was direct, could have
summary disposition and rights were protected. Also, he failed to request a
hearing, which was fatal, and court might have viewed differently
otherwise.
vii. Note: because this is civil, must end when witness testifies or at end of
jury’s term.
e. United Mine Workers of America v. Bagwell – Unions and coal companies had
dispute and started to strike. In 1989, the companies sought an injunction to
prevent the striking, and the trial court entered an order saying that the union
couldn’t strike. In May, trial court found that union had committed 72 violations
and explained that would be fined 100k for any future violent breach and 20K for
any nonviolent infraction. However, they kept violating, which resulted in over 64
million dollars in fines, where 12 million was payable to the companies. After
this, the companies reached a settlement agreement and moved to dismiss the
charges. However, the court appointed Bagwell to collect the fines. The Appellate
Court reversed, saying that fines should be vacated pursuant to the settlement
agreement. The Supreme Court of Virginia disagreed, saying that couldn’t avoid
fees by just entering a settlement. SCOTUS granted cert.
i. Distinction between civil and criminal contempt:
1. Purpose and character are important:
a. Civil: remedial and for benefit of the complainant
b. Criminal: vindicate the authority of the court
2. However, this is not enough. Must exam the character
(“purgability”) of the relief itself.
a. Civil fine: coerces the defendant into compliance with the
court’s order or compensates the complainant for losses
sustained.
b. Where fine is not compensatory, it is civil only if the
contemnor is afforded an opportunity to purge.
c. Thus, a flat, unconditional fine is criminal if the contemnor
has no subsequent opportunity to reduce or avoid the fine
through compliance.
ii. Discrete category of indirect contempts:
1. Contempts involving out-of-court disobedience to complex
injunctions often required elaborate and reliable factfinding.
2. Right to counsel and proof beyond a reasonable doubt necessary.
iii. Are these fines, despite their noncompensatory character, coercive civil or
criminal sanctions?
1. Here, didn’t try to calibrate fines to damages or award
nongovernment parties
2. This here was no different than criminal law where laws provide
prior notice both of the conduct to be prohibited and of the
sanction to be imposed.
3. These fines are analogous to fixed, determinate, retrospective
criminal fines which petitioners had no opportunity to purge once
enforced.
4. Levied contempt fines for widespread, ongoing, out-of-court
violations of a complex injunction.
iv. Therefore, need some procedural burdens on courts’ ability to sanction
widespread, indirect contempts of complex injunctions through
noncompensatory fines. But may still adjudicate direct contempts
summarily and enter broad compensatory awards for all contempts
through civil proceedings. May also impost noncompensatory, petty fines
without a jury trial.
f. Thoughts
i. Advice: The Constitution requires criminal procedural protection to
impose a criminal contempt sanction on a defendant. Therefore, one way
to avoid reversal is to observe all criminal contempt procedural
requirements.
ii. Requirements: presumed innocent, proved guilty beyond a reasonable
doubt, accorded right to refuse to testify, advised of charge and
opportunity to respond, permitted the assistance of counsel and right to
call witnesses, given public trial before unbiased judge, and jury trial.
g. Moss v. Superior Court, Ortiz – Moss and Ortiz got a divorce, and Moss was
ordered to pay child support. However, he wouldn’t pay so Ortiz asked for order
to show cause why he hadn’t paid. Moss argued that Ortiz had the burden of proof
on ability to pay support. Moss had no job, so he argued he didn’t have ability to
pay. Trial court said that Moss had the burden of proof, and he didn’t prove that
he couldn’t work so still had to pay.
i. He sentenced him to five days in jail for each six counts with the ability to
purge himself by making payments. Side note:
1. This has a finite end date but also ability to purge so is it criminal
or civil?
2. This is for sure indirect.
3. Purpose of order was to punish for past misconduct but also get
him to pay going forward.
4. This seems like a hybrid. But this issue wasn’t raised. Even if
hybrid, would need jury.
ii. This is not involuntary servitude in violation of the 13th Amendment.
1. 13th does apply to private entities and public entities.
2. Employment undertaken to meet a child support obligation is not
analogous to government-controlled labor and does not otherwise
create a condition of slavery.
3. Employment chosen by employee which the employee is free to
leave either in favor of another employer of it the working
conditions are objectively intolerable, is simply not akin to slavery.
4. This is also not a personal services contract.
5. Even if this was subject to strict scrutiny, it would likely survive.
iii. Prohibition of imprisonment for debt does not apply to child support
agreements.
iv. Where there is an ability to pay and willfulness to not seek employment,
can be jailed for willful failure to not gain employment.
v. Burden of Proof
1. Elements of contempt: valid court order, contemnor’s knowledge
of order, and noncompliance.
2. If petitioner proves those elements beyond a reasonable doubt the
violation is established.
3. To prevail on affirmative defense of inability to comply with the
support order, the contemnor must prove such inability to pay by a
preponderance of the evidence.
h. The Collateral Bar
i. Introduction
1. What do you do when you think an order is unconstitutional?
2. Challenge when issued, or if doesn’t work, disobey and then
challenge again or appeal.
3. GR: Cannot use problems of order you violate as a defense. If a
court reviewing the order finds it to have any appearance of
validity, collateral bar rule attaches.
a. Exception: transparently invalid.
4. Appeal: did trial court have arguable basis for entering order?
ii. Ex Parte Purvis – On July 31, Purvis told The Water Works Broad of
Birmingham that he planned to strike on August 2. The court granted a
TRO on the strikes the morning of August 2 and served notice to Purvis
later that afternoon. Purvis ignored, and on August 3, Board filed petition
to show cause, and then Purivs filed motion to dissolve, arguing that it was
unconstitutional. The court said no because Purvis violated before asking
to be dissolved and held him in criminal contempt (where’s the jury?) and
sentenced to prison for 15 days.
1. A party must obey an order until it is reversed by orderly and
properly proceedings even though the order may be
constitutionally defective or invalid.
2. Therefore, Purvis couldn’t violate the order then later argue that
unconstitutional when he got in trouble.
3. Exception: where compliance would cause irreparable injury and
appellate vindication would not have its ordinary consequences of
totally repairing the error.
4. Court made no finding on the constitutionality of the order.
iii. In re Providence Journal – 1st Circuit – TRO forbid journal from
publishing material about a deceased man who had reputation to be
involved with organized crime.
1. Although exception is appropriate for transparently void orders, it
is inappropriate for arguably proper orders.
2. Presumption: if court reviewing finds the order to have pretense of
validity, reviewing court should enforce collateral bar.
3. Here, was transparently invalid as prior restraint on pure speech.
But remember if choose to violate the order and turns out not to be
transparently invalid, you will be in contempt.
4. RULE: must make a good faith effort to seek emergency relief
from appellate court. If that doesn’t work, may violate then raise
defense in contempt order.