Morgan Stephens
REMEDIES OUTLINE
FALL 2011
HOFFHEIMER
§ 1 – Introduction
§ 2 – Modern Damages
§ 3 – Proving the Amount of Damages
§ 4 – Limitations on Damages Recovery
§ 5 – Interest
§ 6 – Tort Reform
§ 7 – Punitive Damages
§ 8 – Attorney’s Fees
§ 9 – Injunctions
§ 10 - Maxims of Equity
§ 11 - Unjust Enrichment
§ 12 – Restitution in Transactions
§ 13 – Tort and Contract Damages
§ 1 – Introduction
I. TYPES OF RELIEF AVAILABLE – 8/22
a. Compensatory Damages
i. Compensate for a loss
b. Punitive Damages
c. Preventative Remedies
i. Legal court order
1. Temporary restraining orders
2. Injunctions
ii. Declaration of the rights and liabilities of the parties
1. Declaratory judgments
d. Restitution
i. Payment of money in which the measure of the remedy is not the loss
suffered by the plaintiff but unjust enrichment
ii. No legal wrong occurred
e. Ancillary Remedies
i. Supplemental or auxiliary
ii. Attorney’s fees
II. GENERAL PRINCIPLES
a. Rightful position
i. Restore the plaintiff to the position they would have been in but for the
wrong
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ii. Focus on value (something take, property destroyed)
b. No double recovery
i. Must elect one of the remedies
c. Cheapest possible way
i. Once plaintiff elects a remedy, you cannot impose unnecessary costs on
the defendant
III. HISTORY OF REMEDIES
a. Seventh Amendment
i. Preserves the right to trial by jury
ii. Not incorporated to the states
1. But all states have similar provisions
b. English Courts
i. Difference between courts of law and courts of equity
§ 2 – Modern Damages
I. MEAN AND NATURE OF DAMAGES
a. Cooper v. FAA (9th Cir. 2010)
i. Facts – Concerns the Privacy Act and what actual damages mean; the
plaintiff was looking for actual damages for nonpecuniary injuries after
the FAA disclosed his private medical information to the Social Security
Administration. Pilot lost his license and was fined as a result. Trial court
held that actual damages were economic in nature.
ii. Issue – Whether humiliation, mental anguish, and emotional distress.
iii. Holding – Plaintiff was entitled to recover for both pecuniary and
nonpecuniary injuries; In using the term actual damages, Congress clearly
intended that when a federal agency intentionally or willfully failed to
uphold its recordkeeping obligations under the Act
iv. Analysis – Given the nature of the injuries that most frequently flowed
from privacy violations, it was difficult to see how Congress’s stated goal
of subjecting federal agencies to civil suit for any damages resulting from
a willful or intentional violation of the Act could have been fully realized
unless the Act encompassed both pecuniary and nonpecuniary injuries
v. Notes – There is a split on whether actual damages include nonpecuniary
damages. Congress could clear this up.
II. MISSISSIPPI LIMITS ON DAMAGES
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a. § 11-1-60 – Limits on Med-Mal Cases
i. Noneconomic damages ($500,000 max) means subjective, nonpecuniary
damages include:
1. Death
2. Pain and suffering
3. Inconvenience
4. Mental anguish
5. Worry
6. Emotional distress
7. Loss of society and companionship
8. Loss of consortium
9. Bystander injury
10. Physical impairment
11. Disfigurement
12. Injury to reputation
13. Humiliation
14. Embarrassment
15. Loss of the enjoyment of life
16. Hedonic damages
17. Other nonpecuniary damages
18. Any other theory of damages such as fear of loss, illness or injury
19. NOT included
a. Punitive (exemplary) damages
ii. Actual economic damages means objectively verifiable pecuniary
damages arising from:
1. Medical expenses and medical care (out-of-pocket)
2. Rehabilitation services
3. Custodial care
4. Disabilities
5. Loss of earnings and earning capacity
6. Loss of income
7. Burial costs
8. Loss of use of property
9. Costs of repair or replacement of property
10. Costs of obtaining substitute domestic services
11. Loss of employment
12. Loss of business or employment opportunities
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13. Other objectively verifiable monetary losses.
iii. Limits on other civil cases
1. $1,000,000 max on noneconomic damages
b. § 11-1-69 – Prohibition of hedonic damages in civil actions
i. Loss of enjoyment of life is bundled with pain and suffering damages and
is not considered a separate item
1. Expert testimony is not allowed for loss of enjoyment of life
III. PROOF OF THE EXISTENCE OF DAMAGES
a. Dura Pharmaceuticals, Inc. v. Broudo (2005)
i. Rule – Must be some kind of loss or damages before a claim arises
b. Youst v. Longo (Cal. 1987)
i. Facts – Plaintiff harness racehorse owner’s horse broke stride during a
race when a horse driven by defendant harness racehorse driver moved
into his path and defendant struck him with a whip. Plaintiff brought an
action for intentional interference and conspiracy to interfere with
prospective economic advantage.
ii. Holding – Affirmed; losing the chance to win a horse race did not present
a basis for tort liability for interference with prospective economic
advantage because the nature of the sporting event was too speculative
iii. Notes –
1. Sporting events
a. Impossible to predict the outcome
2. Recover for lost chance of living longer
a. I.e., reduction in chance of survival due to physician’s
malpractice
b. Some jurisdictions recognize this cause of action
3. Recovery for fear of dying younger
a. Like pain and suffering; emotional as opposed to value of
the life
b. Example – mother’s fear that her daughter will have
cervical cancer because mother took a certain drug while
pregnant
c. BUT there MUST be some kind of physical injury to recover
for fear of dying
4. Recovery for medical monitoring
a. In this instance, not trying to recover for fear of dying
younger, just the costs associated with the annual doctor
visits
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c. Rhodes v. E.I. Du Pont De Nemours & Co. (D.C. W. Va. 2009)
i. Facts – The company had, for an extended period of time, admittedly
discharged chemicals into the environment surrounding a county in West
Virginia. All causes of action, except medical monitoring were disposed at
summary judgment.
ii. Holding – Plaintiffs survived summary judgment on their cause of action
to recover for medical monitoring despite lack of physical injury
iii. Notes –
1. Strong policy reason to disallow recovery of medical monitoring in
that the number of suits will increase
§ 3 – Proving the Amount of Damages
I. SPECIAL VS. GENERAL DAMAGES
a. Introduction
i. Distinguished primary for the purposes of pleading
ii. Special damages must be itemized and listed in the complaint, while
general damages do not
b. Types of special damages (subject to easy calculation)
i. Out of pocket expenses
1. Medical
2. Lost wages
c. Types of general damages (hard to calculate)
i. Non-pecuniary, non-economic
1. Pain and suffering
2. Emotional distress
ii. Economic damages not easily calculable
1. Future earnings
II. PLAINTIFF’S LOST CAPACITY TO EARN
a. Washington v. American Community Stores Corp. (Neb. 1976)
i. Facts – Plaintiff was injured in car wreck. Plaintiff was a collegiate
wrestler before the accident and sued for loss of earning capacity
because he was likely to be an Olympian and then wrestling coach.
ii. Issue – Should the jury have heard evidence on plaintiff’s loss of earning
capacity?
iii. Held – It was proper and plaintiff was allowed to recover.
iv. Notes –
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1. Once you calculate the total amount of damages, you then need
to assess whether they are making more money than they
otherwise would. I.e., if he falls back on his second job as a brain
surgeon, he’s not really lost anything
2. Why is this case different? Because the evidence that Washington
was to be a wrestler was reasonable
b. Childs v. United States (S.D. Ga. 1996)
i. Federal Law – Sues under the FTCA. Liability is governed by state law, and
the case is decided by a judge, not a jury. No punitive damages,
regardless of what state law says.
ii. State Law – In wrongful death suit, entitled to full measure of expense:
funeral expenses, pecuniary losses, but no recovery for grief. To value
decedent’s lost future income:
1. Base–year or entry level income
2. Income growth rate
3. Work life expectancy
4. Discount rate
iii. Facts – Lady and her unborn fetus were killed when a USPS truck ran a
red light and struck her car. Family of decedents brought wrongful death
suit seeking damages for lost future income. Competing experts look at
lost future income, lost fringe benefits, and lost household services
iv. Issue – Which expert correctly estimates future lost income for both
decedents?
v. Held – The court does not feel bound to go with either expert. It makes
its own determination to arrive at total damages.
III. PAIN AND SUFFERING
a. Includes –
i. Physical pain
ii. Mental pain
iii. Anguish
iv. Fear
v. Emotional distress
vi. Loss of enjoyment of life
vii. Loss of consortium
viii. Inconvenience
b. Justification for pain and suffering damages – pg. 77
i. Compensation
ii. Substitutes
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iii. Deterrence
iv. Litigation finance
c. How to prove –
i. Plaintiff’s lawyer shows how plaintiff was hurt and how plaintiff’s life has
been hindered
1. Use demonstrative evidence – pictures or videos to show
plaintiff’s lack of enjoyment in life – “Day in the life video”
2. Try not to overstate the case because it will seem greedy – you
just want to fully inform the jury
d. Loth v. Truck–A–Way Corp. (Cal. Ct. App. 1998)
i. Facts – In her personal injury suit filed after an automobile accident with
defendants, a truck owner and its employee driver, the jury awarded
plaintiff motorist general damages of $ 890,000. The trial court issued
separate instructions on pain and suffering and on loss of life’s
enjoyment.
ii. Holding – Reversed; loss of enjoyment was a component of pain and
suffering damages, and the two instructions could have resulted in an
award of double damages. It was also error to admit the expert
testimony, because the loss of enjoyment damages was within the jury’s
ken and because the expert’s baseline figure was arbitrary.
e. McDougald v. Garber (N.Y. Ct. App. 1989)
i. Facts – Plaintiff undergoes a caesarean section and tubal ligation. During
the surgery, the plaintiff suffered oxygen deprivation, which resulted in
severe brain damage and left her in a permanent comatose condition.
ii. Rule – Cognitive awareness is required for an award for loss of enjoyment
of life and pain and suffering. It does not serve any compensatory
purpose otherwise.
iii. Analysis –
1. There are no separate awards for loss of enjoyment and pain and
suffering—this would be double recovery.
2. In determining damages for conscious pain and suffering
experienced in the interval between injury and death, the degree
of consciousness, severity of the pain, apprehension of impending
death, along with duration are all elements to be considered.
§ 4 – Limitations on Damages Recovery
I. INTRODUCTION
a. These are doctrines to assure that we are not going past the putting the person
in their rightful position
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b. Plaintiff has a “duty” to mitigate damages
i. No dispute that person should take reasonable steps to minimize
damages to the extent practicable
c. Offsetting benefits
i. If the plaintiff received a benefit as a consequence of the breach, the
defendant should be able to offset this
ii. Very fact specific
II. AVOIDABLE CONSEQUENCES
a. Williams and Robbins v. Bright (N.Y. 1997)
i. Facts – Jehovah’s Witness wouldn’t have surgery to mitigate the damages
that resulted from car wreck. Received $2.75 mil in future damages even
though she could have probably avoided a lot of this by having surgery.
She refused to do this, not because of the risk, but because of her
religious beliefs.
ii. Trial court – Did not use the standard reasonable prudent person
standard, but presented the question as whether she acted as a
reasonable Jehovah’s Witness in refusing surgery which would involve
blood transfusions.
iii. Holding – Reversed and remanded for new trial on damages; the trial
court’s standard was too subjective
1. You may consider religious beliefs in deciding whether she acted
as a reasonably prudent person
2. YOU CANNOT ASK IF SHE ACTED AS A REASONABLY PRUDENT
JEHOVAH’S WITNESS WOULD
iv. Notes –
1. The “eggshell skull”—traditionally limited to a plaintiff’s preexisting physical condition, mental illness, or psychological
disability—does not include a person’s religious beliefs.
b. Substitute Employment
i. Person who loses job must seek substitute employment, HOWEVER, the
plaintiff is not required to mitigate damage to such an extent as to alter
her professional career path to an unreasonable degree
1. Does an equine specialist have to take employment as a general
veterinarian? It depends – is this unreasonably different?
ii. What’s reasonable substitute employment? You can see how this will just
keep going and going
1. Commuting for a short distance probably okay
2. Relocation is probably not okay
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iii. Consequence of not seeking substitute employment may reduce the
recoverable damages
c. Lost Use
i. A plaintiff whose vehicle is damaged may seek lost use damages for the
period it is out of service
III. COLLATERAL SOURCE RULE
a. Introduction
i. Traditional Rule – If plaintiff recovers from a source that is independent
from the defendant, defendant is not allowed to bring it up OR deduct
it from the plaintiff’s whole recovery
1. Rule of evidence – prohibits testimony or documents from coming
in at trial
2. Rule of damages – precludes the defendant from offsetting the
plaintiff’s receipt of collateral compensation
ii. States have changed
1. More than half of the states’ legislatures have changed the
common law collateral source rule: some have abolished it
outright, and some have modified it
iii. Principal Sources
1. Insurance (not the defendant’s insurance company, of course)
2. Workers’ Compensation
3. Medicare
4. Life Insurance
b. Lagerstrom v. Myrtle Werth Hospital (2005) – pg 117
i. Facts – Supreme Court of Wisconsin had to decide whether the circuit
court erred in admitting evidence of collateral source payments in this
medical malpractice action, in refusing to admit evidence of the estate’s
potential obligation to reimburse Medicare, and in instructing the jury
that it may, but need not consider the collateral source payments in
determining the reasonable value of the medical services rendered
ii. Holding – Evidence of collateral payments may come into to evidence,
but court cannot automatically reduce the award
iii. Notes – Tortfeasor must pay the reasonable value of medical services,
not the lower “written off” amount actually paid
§ 5 – Interest
I. PREJUDGMENT INTEREST
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a. Definition
i. Amount of interest you can recover before judgment is rendered
ii. In order to be made fully whole, the plaintiff should be made whole ON
THAT DAY, not a year later
1. I.e., judgment should reflect the delay in the payment
b. Still a common law rule
i. Interest only if liquidated (ascertainable)
ii. What’s not ascertainable? Pain and suffering
c. Interest rate varies by jurisdiction
i. In Mississippi, interest is set by the judge UNLESS the contract in dispute
provides otherwise (§ 75-17-7)
1. No prejudgment interest before the complaint is filed
2. Statute applies to both pre and postjudgment interest
II. POSTJUDGMENT INTEREST
a. Old Common Law – at the legal rate (prime), simple but not compound
i. Simple – every year you would pay just the flat rate on the principal
b. Current Rule – Statutory based
c. Federal law – compounding interest (§ 1961)
i. Compound– every year you earn interest on the principal plus interest
already earned
§ 6 – Tort Reform
I. LIMITATION OF JOINT AND SEVERAL LIABILITY
a. Entergy Mississippi v. Hayes (Miss. 2004)
i. Facts – Wrongful death case involving lots of economic and noneconomic
damages. Plaintiffs were first awarded $505,000 by jury, 33% of which
EMI was liable for. However, court reallocated EMI’s fault to 67% once it
learned that Hayes’ employer was immune. After new trial, jury returned
verdict for $10.2 million
ii. Holding – Trial court erred by reallocating fault to the electric company
from the immune employer (see § 85-5-7 below) and reversed judgment
for new trial; reinstated original judgment of $505,000 (33% of which EMI
was liable)
iii. Analysis: Prior to this case, the court had already decided that one party’s
immunity does not affect the allocation of fault
iv. Notes:
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1. Of the $10.2 million second verdict, $10 million was for noneconomic damages
a. Non-economic damages for civil cases are currently
capped at $1 million
2. Contributory negligence has been eliminated in Mississippi in
favor of comparative negligence standard
3. Mississippi legislature capped non-economic damages
a. Med-mal cases = $500,000 max
b. Other civil suits = $1,000,000 max
b. § 85-5-7
i. Each separate tortfeasors is only liable for his or her damages which or
proportionate to his or her percentage of fault
1. Applies to negligence, malpractice, strict liability, absolute liability
or failure to warn
2. Judge should determine percentage of fault for each party alleged
to be at fault without regard to whether the joint tortfeasor is
immune from damages
ii. $100k in damages – D1 is 60% responsible, D2 is 40% responsible then D1
is liable for only $60k and D2 is only liable for $40k
iii. Basically – this requires plaintiff to sue every defendant
c. Exceptions
i. Common plan scheme
ii. Specific wrongful intent (may be the same as an intentional tort)
II. Krieser v. Hobbes (5th Cir. 1999)
a. Facts – Plaintiff v. doctor and hospital (doctor settles for $650k). Hospital is liable
for 50% of the $200k jury verdict = $100k). Defendant hospital argues that the
plaintiff should not receive so much money because the doctor’s settlement paid
so much more than the jury verdict.
b. Holding: Hospital’s argument did not work because the pro-tanto rule/one
satisfaction rule has no application to liability in light of changes made by the
Mississippi Legislature in § 85-5-7
c. Notes –
i. Because Mississippi treats claims against multiple defendants as separate
claims, the fact that one party settles has no effect on the remaining
defendants
ii. Proportionate Share Reduction (Majority) - settlement reduces
judgment in proportion to settling ∆’s fault
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1. Does NOT change other ∆’s obligations in regards to their % share
III. Tanner v. Westbrook (5th Cir. 1999)
a. Facts – Tanner’s newborn diagnosed with cerebral palsy. Evidence revealed that
baby untreated in the nursery despite her condition. Tanner awarded $3 million
to the newborn and $100,000 to each parent. Tanner had an expert witness
testify about the cause of the cerebral palsy.
b. Holding – Reversed and remanded for new trial; expert was not qualified to
testify as to the cause of the cerebral palsy, only the standard of care to be given
to a baby suffering from asphyxia.
c. Analysis – According to the court, expert did not have the kind of specialized
knowledge required to testify, nor did he rely upon medical literature directly
addressing the cause issue in the cause. Therefore, his testimony is not reliable.
d. Notes –
i. 20 years ago, this would have been a close factual issue left for the jury
ii. Hoffheimer – this case shows how judges also play a role in tort reform –
they distrust jury verdicts
§ 7 – Punitive Damages
I. INTRODUCTION
a. Also called exemplary damages
b. Less than 4% of verdicts include punitive damages (they are often asked for but
rarely granted)
II. PUNITIVE DAMAGES – LIMITATIONS (§ 11-1-65)
a. STARTS WITH JURY
i. Hears evidence and awards compensatory damages
ii. Jury is told that compensatory damages make the plaintiff whole
b. GOES TO JUDGE
i. Conducts evidentiary hearing on whether jury may even consider
punitive damage arguments
ii. May ONLY award punitive damages if clear and convincing evidence that
defendant acted with:
1. Actual malice
2. Gross negligence which evidences a willful, wanton, or reckless
disregard for the safety of others
3. Actual fraud
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c.
d.
e.
f.
iii. There will be some division here – varies judge to judge on what
constitutes fraud
BACK TO JURY
i. Jury told that the purpose of punitive damages . . . punish/deter
defendant
ii. Determines award of punitive damages based on:
1. Defendant’s net worth
2. Reprehensibility of defendant’s conduct
3. Duration and frequency of conduct and attempts to conceal
4. Any other circumstances
BACK TO JUDGE
i. Determines if award is excessive based on:
1. Reasonable relationship between award and probable or actual
amount of harm
2. Defendant’s net worth
3. Degree of reprehensibility of defendant’s conduct
4. Sanctions for comparable conduct (criminal or civil)
ii. May issue remittur or new trial if excessive (see below)
1. Can only remit to highest amount jury could have awarded
2. Plaintiff has choice: accept remittur (if is one) OR new trial
Seller’s Exclusion
i. No liable for punitive damages unless seller exercised substantial control
over that aspect of the design, testing, manufacture, packaging, or
labeling of the product that caused the harm
ii. Basically – not going to happen unless seller had actual knowledge of the
defective condition of the product
Monetary Caps
i. Do not need to memorize
ii. Jury is NOT told about these caps
iii. Greater than $50 million = cap is statutory (never above $20 million)
iv. Less than $50 million = cap may NOT exceed 2% of defendant’s net
worth
v. Caps DO NOT apply when . . .
1. Defendant convicted of felony (Mississippi or federal law only)
which caused injury OR
2. Defendant under the influence of alcohol or drugs while causing
injury
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III. DUE PROCESS
a. BMW v. Gore (1996)
i. Facts – Recent purchaser of a BMW was upset because his car was
repainted before he bought it and he was not informed of it. He claimed
that failure to disclose equated to suppression of a material fact. The
jury returned a verdict for Gore of $4,000 in compensatory damages and
$4,000,000 in punitive damages for the nondisclosure was thought to
constitute gross, oppressive, or malicious fraud.
ii. Holding – Reversed because no aggravating factors were found
iii. Rule – Supreme Court states that punitive damages must conform to due
process by giving defendant fair notice; which is done by factoring:
1. Degree of Reprehensibility of defendant’s conduct
a. Most important factor
b. Repeated unlawful behavior is aggravating factor but
Court hesitant to punish conduct that may be legal in
other states
2. Ratio of punitive to compensatory damages
a. 500:1 unconstitutional, 10:1 may even be too high
3. Sanctions for comparable conduct (criminal or civil)
4. Punitive damages that are grossly excessive are
unconstitutional!!
b. Philip Morris v. Williams (2007)
i. Facts – Jury found Philip Morris negligent and in addition to economic
and noneconomic damages, the jury hit them up for $79.5 mil in punitive
damages (reduced and later reinstated). Nearly 100-1 ratio to the $821k
in compensatory damages.
ii. Issue – Whether a jury may base an award in party upon its desire to
punish the defendant for harming persons who are not before the court
iii. Holding – No, such an award would amount to taking of “property” from
the defendant without due process
iv. Rule – Due Process Clause forbids a state to use a punitive damages to
punish a defendant for injury that inflicts upon nonparties or those
whom they direct represent (strangers to litigation)
1. Jury may consider third party harm when considering
reprehensibility, but it may not punish for it
2. How to apply this rule – trial court should give a jury instruction
IV. ADMIRALTY/MARITIME
a. Exxon Shipping v. Baker (2008)
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i. Facts – Exxon oil tanker spilled lots of oil; captain was an alcoholic and
was drinking right before the tanker departed; captain left bridge during
a maneuver that needed his attention; left inexperienced person in
charge; tanker hit reef and spilled 11 mil gallons of crude oil; Exxon spend
$2.1 bil on clean up and paid fines for violations in CWA, Refuse Act, and
Migratory Bird Treaty Act
1. Cleary gross negligence on part of captain
2. Jury returned verdict for $287 mil in compensatory (reduced to
$192.5 mil) and $5 bil against Exxon and $5,000 against captain
3. 9th Cir. reduced punitive damages to $2.5 bil
ii. Held – Reduced award to match compensatory damages ($507.5)
iii. Rule – Punitive to compensatory ratio of 1:1 is maximum punitive
damages
V. Vicarious Liability
a. Will come up a lot with corporations
i. Impugning liability on the corporation for the acts of the agent
b. Courts are Divided
i. Some courts say that punitive damages are NOT attributable to the
principal in a vicarious liability situation unless:
1. Principal authorized the act or
2. Ratified or approved the act
3. California and Restatement of Torts follow this
ii. Other courts are more willing to charge an employer with punitive
damages
1. Alabama – allows punitive damages if employee was acting within
scope of employment
VI. TAX CONSEQUENCES
a. Introduction
i. Tax liability will push some parties to settle
ii. Structured settlements allow you to classify damages by type
b. Punitive Damages
i. Taxable
c. Compensatory Damages
i. Taxable
1. Any type of damages that substitutes for income
a. Lost wages – just as they would have been
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2. Emotional distress (not medical treatment)
ii. Excludable
1. Physical injury – disfigurement, or pain, and suffering
2. Lost wages during recovery from personal injury
3. Consortium damages for another’s physical injury
4. Medicals – actual treatment costs
a. Including psychiatric costs for emotional distress
5. Property value that’s been destroyed
§ 8 – Attorney’s Fees
I. INTRODUCTION
a. Contracts and Statutes
b. Attorney’s fees must always be reasonable
i. Court may deny attorney fees altogether if an unreasonable request is
made
c. May only be awarded to a prevailing party
i. When plaintiff only wins on some of its theories, they may only be able to
recover for fees dedicated
ii. Must be some consent decree, or judgment on the merits
II. AMERICAN RULE
a. Generally
i. Both willing and losing litigants bear their own expenses, including
attorney’s fees
ii. Policy behind – making the loser pay the winner’s lawyer’s bill brings a
possible deterrent effect for poor litigants with meritorious claims
b. Exceptions
i. Contracts – Some contracts call for the breaching party to pay the
nonbreaching party’s attorney fees
ii. Statutes – Congress created more than 100 exceptions in statutes and
state courts have followed suit
iii. Bad faith – Federal district judges have the power to sanction a litigant’s
abusive, bad-faith litigation misconduct
iv. Common-fund doctrine – A litigant who recovers a common fund for the
benefit of persons other than himself or his client is entitled to a
reasonable attorney’s fee from the fund as a whole
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1. Court may award fees from the entire fund and thereby spread
litigation costs proportionately among those the suit benefits
2. Class actions - Attorneys who create a settlement fund in a class
action are entitled to recover gees against the fund
3. Fees paid from plaintiffs’ recovery (fee sharing) as opposed to
being paid by defendant (fee splitting)
v. Private-attorney-general – attorney who litigates successfully and
implements a strong public policy may request attorney fees
vi. Common-benefit doctrine – court may award attorney fees when
plaintiff’s meritorious action creates a substantial, but nonmonetary,
benefit for a clear defined group
1. I.e., awarding attorney fees when a share holder’s successful
lawsuit creates a significant, substantial nonmonetary benefit for
the entire corporation (Delaware)
c. Tort Reformers
i. Want to reverse the American Rule and require the loser to pay all or part
of the winner’s attorney fees
ii. Argue that the loser-pays rule deters frivolous litigation, give defendants
a respite, and clear congested court dockets
III. COMPETING APPROACHES
a. Lodestar Approach
i. Reasonably hourly billing rate * Hours Reasonably Worked *
Enhancement (if any) = Lodestar amount
1. Lawyer’s billing rate is based on geographic area, nature of the
services provided, and lawyer’s experience
2. Judge gets to decide what’s reasonable
ii. Enhancement – either add it in before to increase the amount or come
up with a total and then figure out the multiplier
1. Reserved for cases where the issues litigated were complex and
the prospect of success dim
2. Supreme Court’s standards or considerations
a. Reasonable fee is one that is sufficient to induce a capable
attorney to represent plaintiffs in meritorious civil rights
case
b. Trial court applies strong presumption that loadstar
method yields sufficient attorney fees
c. Never sustained an enhanced attorney fee but may award
one in rare and exceptional circumstances
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d. May not base enhancement on factor that is subsumed in
lodestar calculation – i.e., novelty, complexity, or quality of
attorney’s performance
e. Attorney-fee applicant bears burden of proof that
enhancement is necessary
f. Attorney-fee applicant must produce “specific evidence”
to support the enhancement
b. Percentage-of-Recovery
i. Take actual recovery (dollars and nonmonetary winnings) and multiply by
some percentage
ii. Percentage may vary from case to case (3% to as much as 38%)
IV. UFBDH v. Davis County Clerk (Utah 2007)
a. Facts – In the 2000 election, Davis County asked its residents whether they
wanted fluoride in the water. 52% favored adding fluoride. UFBDH sought
declaratory and injunctive relief against the Davis County clerk, questioning the
constitutionality of placing the revote on the 2002 ballot. Lower court found in
favor of UFBDH but did not award them attorney’s fees.
b. Held – Reversed the lower court’s decision on attorney’s fees
i. Awarded UFBDH because of vindication of a strong or societally
important public policy
V. Nilsen v. York County (D. Maine 2005)
a. Facts – Class action strip search case; after class was certified, the county settled
with the inmates for $3.3 mil, which was placed in a common fund. Fund was to
be distributed to inmates after deduction of costs and fees, with plaintiffs’
lawyers receiving 30% along with costs. Lodestar was $520,000 and plaintiffs was
30% of the common fund, or $990,000
b. Analysis – Judge does not adopt the lodestar approach; rather, he prefers the
percentage approach for common fund; judge went through a lot of analysis to
determine that the attorney’s fees for the $3.3 mil common fund was 25% or
$825,000
i. This resulted in a multiplier (enhancement) of 1.6 times the lodestar
amount
ii. Multifactor approach – huge range where judge could pick anything
iii. Market mimicking approach – what percentage of fees the plaintiffs and
attorneys would agree upon in the real world
c. Notes –
i. If lodestar is higher than percentage, then the judge will go with the
lodestar approach
18
ii. A court of appeals judges decisions setting lawyers’ fees for an abuse of
discretion.
iii. If a winner’s attorney fee requested is excessive, the judge may deny the
fee request entirely.
§ 9 – Injunctions
I.
INTRODUCTION
a. Mississippi Courts (separate courts with overlapping jurisdiction)
i. Chancery courts – full jurisdiction over all equitable remedies
ii. County courts – up to $200,000
iii. Circuit courts – have supplemental jurisdiction to issue equitable
remedies
b. Types of Equitable Remedies
i. Injunctions – order to private persons to do or not to do something
ii. Specific performance
iii. Constructive trusts – create a property interest
iv. Subrogation
v. Accounting for profits
c. Requirements
i. Irreparable injury
ii. Remedies available at law are inadequate to compensate
iii. Considering the balance of hardships between the plaintiff and
defendant, a remedy in equity is warranted; and
iv. Public interest would not be disserved by a permanent injunction
II.
PLAINTIFF’S INADEQUATE LEGAL REMEDY, IRREPARABLE INJURY
a. eBay v. MercExchange (2006)
i. Facts – MercExchange sued eBay seeking an injunction for patent
infringement; district court denied the injunction because MercExchange
was willing to sell the patent; court of appeals reversed under its general
rule that courts will issue permanent injunctions against patent
infringement absent exceptional circumstances
ii. Holding – Reversed
iii. Rule – Before court may grant an injunction, plaintiff must demonstrate:
1. Irreparable injury
2. Remedies available at law (money damages) are inadequate to
compensate
19
3. Considering the balance of hardships between the plaintiff and
defendant, a remedy in equity is warranted; and
4. The public interest would not be disserved by a permanent
injunction
iv. Notes –
1. Lots of discretion given to the trial judge
2. Standard of review is for abuse of discretion
III.
EQUITY ACTS IN PERSONAM
a. Introduction
i. Equity requires a personal, in personam response or conduct from the
defendant
ii. Judges uses contempt to enforce in personam relief
iii. Court may order defendant to act or refrain from acting in another state
1. Cannot exercise power over land in another state because of local
action rule – lies with court where land is located
2. If the court has personal jurisdiction over the defendant, then the
court can order the defendant to do pretty much anything
(including transferring land that lies outside of the court’s
jurisdiction)
iv. Equity ordering someone to stop litigating in another state
1. CANNOT do
b. Tabor & Co. v. McNall (Ill. 1975)
i. Facts – Tabor (Illinois corporation) and McNall (Wisconsin corporation)
had a contract, which McNall defaulted on. Tabor sued McNall in Illinois
and McNall brought a proceeding in Wisconsin. Tabor petitioned the
Illinois to enjoin McNall from proceeding further with its suit in Wisconsin
(anti–suit injunction)
ii. Holding – Reversed. Court can only enjoin defendant from proceeding in
an out-of-state lawsuit if there is a showing of fraud, gross wrong, or
oppression
iii. Notes –
1. Federal courts CANNOT do this (statute)
2. Local action rule forbids a court from entertaining an action for
trespass to out-of-state land or for title or ownership of out-ofstate land
3. Dueling injunctions
a. Forum court may enjoin litigant from litigating in an outof-state court but the forum court cannot affect the out20
of-state court itself (even with personal jurisdiction of
litigant
b. Out-of-state court may in turn enjoin the other litigant
from litigating back in the forum court
c. Matarese v. Calise (R.I. 1973)
i. Facts – The plaintiff, a businessman from Italy, brought suit against an
American citizen over a piece of land located in Italy. The plaintiff
purchased a piece of land in Italy, and needed to purchase as adjacent
piece of another American citizen, whom he could not easily find in the
beginning of the case. The defendant said he knew where the other
citizen was, and that he would do his best to get her to contract away her
land. But, the defendant put title in the land in his own name, and
breached his agency contract. Thus, this suit followed.
ii. Issue – Does a U.S. court have the power to issue an injunction requiring
the defendant to sell the land to the plaintiff?
iii. Analysis – The court is not rejecting the local action rule, but they do not
see it as a bar to jurisdiction in this case. It had original personal
jurisdiction over this defendant because he was served in the U.S. It has
the power to directly order the defendant to take action—it is not
directly doing something to the land. The court says it is acting indirectly
on the land.
d. United States v. McNulty (N.D. Cal. 1978)
i. Facts – Defendant McNulty won the Irish Hospitals Sweepstakes and
collected $128,410. IRS believed his winnings were taxable, so the
defendant deposited the money in a bank account on the Island of
Jersey. Defendant was convicted on tax evasion and the government
prevailed on civil action to collect taxes ($67,791). However, the
government cannot collect the money unless the defendant transfers his
assets from the Island of Jersey. Government moved for an order
directing the defendant to repatriate his assets and deposit them with
the court clerk.
ii. Holding – Because the court has jurisdiction over the defendant, the
court has the power to order him to repatriate the assets located in the
foreign bank
iii. Analysis –
1. No problem with local action rule because no land is involved
2. United States v. First National City Bank (1965)
a. No personal jurisdiction over defendant but did have
jurisdiction over bank whose branch the corporation
maintained an account
b. Government allowed to freeze the account
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3. SEC v. Minas De Artemisa (9th Cir. 1945)
a. Corporation ordered to produce corporate books located
in Mexico
iv. Notes –
1. Defendant never paid; after serving his criminal conviction for tax
evasion, he was found in contempt for failing to obey the court
order
2. Held in prison for five months before being released
IV.
EQUITY LACKS JURISDICTION TO ENJOIN A CRIMINAL PROSECUTION
a. Norcisa v. Board of Selectmen (Mass. 1975)
i. Facts – Petitioner/plaintiff owned and operated a retail clothing business
in Provincetown, Massachusetts. While the criminal complaint was
pending, plaintiff sought an injunction in probate court against the town,
arguing that she was not a transient vendor, but the owner of a full time
retail clothing shop. The probate court enjoined the town from enforcing
any of the provisions of Mass. General Law 101 against the plaintiff
ii. Holding – Reversed the order to enjoin the pending criminal prosecution
iii. Analysis –
1. The probate judge should have applied the test for an injunction
a. Substantial right will be impaired
b. Remedy at law is inadequate
c. Injunctive relief can be applied with practical success and
without imposing an impossible burden on the court
2. Sole issue is whether the remedy at law would be adequate
3. Plaintiff argued that the law was unconstitutional on its face or as
applied, or that the statute does not apply to her at all
a. These defenses amount to an adequate remedy at law
4. Shuman
a. Six merchants alleged that the chief of police threatened
to prosecute them for operating with a business license
that the claimed they were not obligated to obtain
b. Plaintiffs argued that it would take several months to
obtain a decision and during that time they would lose
profits and suffer harm to their business relations
c. Court found that the repeated complaints were not
sufficient to issue an injunction
5. Kenyon
22
a. Jehovah’s Witnesses were repeatedly arrested,
prosecuted, and convicted under an unconstitutional
ordinance prohibiting the distribution of handbills
b. Evidence showed that the defendant judge knew that the
ordinance was unconstitutional
c. Court found that actions for malicious prosecution or false
arrest were not adequate
6. Here, plaintiff was charged with only one violation of the statute
7. Her defenses, would, if established, constitute a complete
defense to the violation charged
b. Reasons not to enjoin
i. Burden on the court system
ii. Sanctions are increased
1. Including contempt of court
iii. Creates private legislation
1. Should be left up to the legislature
V.
EQUITY LACKS JURISDICTION TO ENJOIN A CRIME
a. People ex rel. Gallo v. Acuna (Cal. 1997)
i. Facts – City of San Jose filed for injunction against gang members because
they were creating a public nuisance; preliminary injunction was granted
by the lower court; leaders of the gangs ordered not to engage in certain
behavior; actual history of gang activity within this small area of San Jose
ii. Issue – Only two of the provisions are being appealed (Provisions A & K)
1. Provision A said that a known gang member cannot be seen in
public with another known gang member
2. Provision K said that gang members cannot annoy, harass, or
provoke members of the community
iii. Rule – Equitable relief is available to counter conduct that substantially
and unreasonably interferes with private property based on collective
values arising out of a shared ideal of community and the minimum
conditions for a civilized society
iv. Holding – Reversed; court held that the two challenged provisions fell
within the trial court’s equitable power to abate a public nuisance, and
did not violate defendant’s constitutional rights. Trial court’s preliminary
decree was not overbroad, because it was addressed to identifiable
parties and to specific circumstances, and the enjoined acts were
particularly described.
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VI.
EQUITY WILL NOT ENJOIN A LIBEL
a. General Rule
i. Injunctions of speech are normally treated like prior restraints, which
are disfavored but not always barred
1. An injunction is a prior restraint if, in advance, it forbids a
defendant’s speech
2. Not an absolute rule – courts simply indulge a heady presumption
against the constitutional validity of a prior restraint
b. Tory v. Cochran (2005)
i. Facts – Accusations and findings that the statements are libel against
Johnnie Cochran; lower court issued an injunction from picketing,
displaying signs, or orally uttering statements about Johnnie Cochran or
his law firm.
ii. Holding – An order issued in the area of First Amendment rights must be
precise and narrowly tailored to achieve the pin-pointed objective of the
needs of the case. Much of the underlying rationale for the injunction
was gone because of Cochran’s death.
iii. Notes –
1. SC basically punts because of Cochran death
2. California Supreme Court held that a judge could grant a plaintiff
an injunction that forbids the defendant from repeating a specific
defamatory statements
a. Distinguishable from Tory v. Cochran because the prior
restraint here was narrowly tailored to one statement
VII. INJUNCTION PROCEDURE
a. Note:
i. Courts’ goal is to preserve the status quo unless the status quo is the
result of some wrong doing
b. Temporary Restraining Orders – FRCP 65(b)
i. No adversary hearing needed if:
1. Specific facts in an affidavit or a verified complaint . . .
2. Clearly show that immediate and irreparable injury, loss, or
damage . . .
3. Will result to the movant . . .
4. Before the adverse party can be heard in opposition
5. Also, movant’s attorney certifies in writing . . .
a. Any efforts made to give notice and
b. Reasons why it should not be required
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c.
d.
e.
f.
ii. 14 day limit
iii. Bond – must provide security to the court
1. Defendant’s only remedy
iv. NOT APPEALABLE!!!
Preliminary Injunctions – FRCP 65(a)
i. Adversary proceeding needed
1. I.e., must provide notice to the adverse party
ii. Bond – must provide security to the court
iii. Plaintiff must establish:
1. Likely to succeed on the merits
2. Likely to suffer irreparable harm in the absence preliminary
injunction
3. Balance of equities is in his favor
iv. Appealable
Permanent Injunction
i. May only grant after a full trial
ii. Appealable
Winter v. Natural Resources Defense Council (2008)
i. Court reasserts that the four factors for injunctions are independent
1. You cannot eliminate one factor by weighing it against the other
three
ii. Must make an individual determination in every case before granting an
injunction using each of the four factors
Salinger v. Colting (2d Cir. 2010)
i. Facts – J.D. Salinger sues some guy for copyright infringement, seeking an
injunction to prohibit the guy from selling his book
ii. Holding – Remand to the lower court, but set up a “quasi” preliminary
injunction for ten days to allow plaintiffs an opportunity to apply for a
TRO pending the rehearing of the motion for the preliminary injunction
iii. Notes – Seemed to adjust the test
1. Probability of success (eBay) OR serious questions that require
litigation with the balance tips decidedly in favor of the plaintiff
2. Likely to suffer an irreparable injury
3. Balance of hardships between the defendant and the plaintiff tips
decidedly in favor of the plaintiff
4. Must ensure that the public interest will not be disturbed by the
issuance of the preliminary injunction
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a. eBay states it differently (“that the injunction is in the
public interest”)
VIII. JURY TRIALS
a. Introduction
i. Must demand/request jury trial in federal court
ii. Legal – right to trial by jury
1. Claims for compensatory (money) damages
2. Punitive damages
b. Federal Trial By Jury Test
i. History of Cause of Action – Status of the cause of action before the
merger of law and equity
ii. Remedy Involved – the relief sought (most important/give greater
weight)
c. Mississippi
i. No state constitutional right to trial by jury in chancery courts
ii. Chancellors may panel a jury but it’s a matter discretion
1. Results of the jury in chancery court are purely advisory!
d. Feltner v. Columbia Pictures Television (1998)
i. Facts – Columbia sued Feltner alleging copyright infringement arising
from the stations’ unauthorized broadcasting of the a few television
shows. Columbia sought an injunction along with actual damages or in
the alternative statutory damages. Columbia opted for statutory
damages. The district court denied Feltner’s request for a jury trial on the
statutory damages, ruling instead that the issue would be determined by
a bench trial. The Ninth Circuit affirmed.
ii. Law – A copyright owner may recover statutory damages ($500 to
$20,000) instead of actual damages and profits
iii. Issue – Whether § 504(b) or the Seventh Amendment grants a right to a
jury trial when a copyright owner elects to recover statutory damages
iv. Holding – Seventh Amendment provides a right to a jury trial, which
includes a right to a jury determination of the amount of statutory
damages
v. Analysis – Court first determined that the Copyright Act does not grant a
right to have a jury assess statutory damages. However, the right to a jury
trial includes the right to have a jury determine the amount of statutory
damages, if any, to be awarded to a copyright owner.
1. LONG HISTORY of copyright cases being heard by jury
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IX.
EQUITABLE CLEANUP
a. AKA Equitable Pendant Jurisdiction in Mississippi
i. If the chancellor has appropriate jurisdiction over the dispute, then the
chancellor exercise pendant jurisdiction can provide equitable relief
1. Judge looks at the face of a well-pleaded complaint
ii. To get into chancery court, first state a claim for equitable relief
1. I.e., specific performance of the contract and then ask for
damages to the extent that the specific performance will not
make you whole
2. Just requesting for an equitable remedy does not mean you are
automatically in – the remedy must be available
iii. Chancellor’s discretion
1. Not required to exercise pendant jurisdiction, especially if the
equitable side of the case has been dismissed
b. Ziebarth v. Kalenze (N.D. 1976)
i. Facts – Ziebarth, a cattle buyer, sought specific performance of a contract
of a contract for the sale of cattle from Kalenze. Ziebarth brought this
case in equity. District court found for Ziebarth and awarded $4,589
instead of specific performance.
ii. Issue – Whether the trial judge erred in denying Kalenze’s motion to
dismiss when it became apparent that the specific relief that plaintiff was
asking for was impossible to grant as a remedy.
iii. Holding – The right to a jury trial is 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 should the plaintiff prevail.
iv. Traditional Rule – Court does not have equitable jurisdiction unless
plaintiff proves that he is entitled for equitable relief
v. Notes –
1. If we’re in the federal system or a state with a uniform court
system, can you bring a claim that’s a combination of legal and
equitable relief? Yes, of course
X.
MODERN INJUNCTION: DISCRETION AND FLEXIBILITY
a. Extraordinary writs at common law – KNOW FOR EXAM!
i. Habeas corpus
ii. Mandamus
iii. Prohibition
iv. Petition for a writ of certiorari
b. Equitable Forms of Relief
27
i.
ii.
iii.
iv.
Injunctions
Specific performance
Accounting – actual and constructive trusts
Interpleader – stakeholder that is subject to multiple claims petitions the
court to decide who is entitled to the property at issue
1. Rule interpleader – FRCP 22
2. Statutory interpleader – § 1335
a. Deposit money
b. Diversity between claimants
c. Amount in controversy just $500
v. Quiet title – removing clouds on a title
vi. Bill of peace – some potential defendant can preempt something by
suing all of the potential plaintiffs; differs from interpleader because
there’s no property at issue; sort of like an early class action suit
vii. Ne exeat – ordering a person not to leave the jurisdiction; not very
common
viii. Writ of attachment
c. Chancellor’s Discretion
i. Navajo Academy v. Navajo UM Miss. Sch. (N.M. 1990)
1. Facts
2. Issue
3. Holding
4. Analysis
5. Notes:
ii. Weinberger v. Romero–Barcelo (1982)
1. Facts:
2. Issue
3. Holding
4. Analysis
5. Notes –
a. Discretion does not mean anything goes – can have
conflicting decisions BUT the abuse of discretion appellate
review will consider whether:
i. Wrong legal standard was used (e.g., no using eBay
standard)
ii. When trial court issues (or doesn’t) an injunction
without explaining why – must articulate reasons
28
§ 10 - Maxims of Equity
I.
UNCLEAN HANDS
a. Introduction
i. “He who comes into equity must come with clean hands”
1. Person who’s invoking jurisdiction of equity court must have clean
hands
ii. To establish unclean hands defense:
1. Trial court discretion (abuse of discretion on review)
2. Conduct must be willful + either fraudulent, illegal, OR
unconscionable
3. Objectionable misconduct must bear an immediate relation to the
subject-matter of the suit and the subject matter of suit (relief
being sought)
4. Public interest may come into play –Alpo Petfoods v. Ralston
Purina on page 390
b. Green v. Higgins (Kan. 1975)
i. Facts – Higgins executed a contract for some property to the Greens in
April 1975. In order to avoid paying the real estate commission to Lienna
McCulley, the contract was dated June 2, 1971.
ii. Holding – On appeal, the court affirmed the judgment of the district
court. The district court, in its discretion, properly dismissed the action.
iii. Analysis – Neither of the parties was entitled to equitable relief because
their conduct, which was related to the issues before the court,
constituted seeking relief with unclean hands. The facts were undisputed
that the parties’ conduct towards the sales agent and the third-party
purchasers was fraudulent, illegal, and unconscionable.
II.
LACHES
a. Introduction
i. “Equity aids the vigilant not those who slumber on their rights”
ii. Equitable equivalent to statute of limitations
iii. Requirements
1. Laches asks whether the plaintiff in asserting her rights was guilty
of unreasonable delay that prejudiced the defendants
2. Possible prejudices includes an inability to litigate the case
because of fading memories or stale evidence OR change in
defendant’s position (reliance)
3. Abuse of discretion on review
29
b. Stone v. Williams (2d Cir. 1989) (Stone I) \
i. Facts – Appellant, illegitimate daughter of famous musician, sued her
father’s heirs and several music companies for share of copyright renewal
rights to songs composed by her father. The trial court granted summary
judgment and dismissed complaint based on laches because of 11-year
delay in filing suit from time she became aware of her parentage.
ii. Holding – The court affirmed the dismissal because appellant’s delay in
filing suit was unexcused and prejudiced appellees, and so the trial court
did not abuse its discretion in barring suit on ground of laches.
iii. Analysis – On appeal, the court reviewed the record and concluded that
the trial court did not abuse its discretion in dismissing complaint against
appellees because appellant’s delay in filing suit was both unjustified and
prejudicial to appellees. The court acknowledged that a delay for the first
six years might have been excusable based on appellant’s desire for
privacy, the delay for last five years, after appellant had received a
certain amount of publicity, was inexcusable. Furthermore, appellees
were prejudiced because evidence had been lost by death of witnesses
during the delay, and appellees might have acted differently concerning
renewal rights had they known there was another interested party.
c. Stone v. Williams (2d Cir. 1989) (Stone II)
i. Facts – In the time since the first federal appellate court decision, state
supreme court had found that heirs had fraudulently concealed facts
relating to appellant’s claims against estate, and held that this fraud
excused appellant’s delay in asserting her state claim.
ii. Holding – Petition for rehearing was granted, previous opinion of court
was vacated, and court reversed dismissal of appellant’s complaint by
trial court on ground of laches because state supreme court in separate
proceeding had found that heirs fraudulently conspired to keep facts
relating to plaintiff’s claim concealed from her.
III.
REVIEW
a. Example 1 – Stealing Property Worth $100
i. Plaintiff (victim) sues defendant (thief)
ii. Types of relief
1. Either
a. $100 of compensatory damages OR
b. Specific relief in the form of replevin to get the property
back
2. May get punitive damages if there’s malice
b. Example 2 – Contract for Sell of Land
30
i. Defendant agreed to sell plaintiff land (worth $100K) for $10K and the
defendant breaches
1. Money damages
a. Measure of damages is likely $90K (benefit of the bargain)
b. FMV – contract price
2. No punitive damages for just a breach of contract
3. Specific performance for property
a. Courts have been enforcing land-sale contracts for a long
time (under the theory that land is unique)
b. Talk about eBay four factors and traditional specific
performance stuff
c. Cannot recover damages AND compensatory damages
(must elect)
ii. What if plaintiff only paid defendant $100 in the form of a deposit?
1. Entitled to $90,100
iii. What happens if defendant sold property to third person?
1. Of course, plaintiff can still get money damages from defendant
2. No specific performance because the defendant no longer has the
land
3. If third person paid value for the property and did not have notice
of the other contract (thereby taking legal title and becoming
bona fide purchaser for value), then the plaintiff cannot use
specific performance to get the property back
a. However, third party cannot be in collusion with
defendant or equity will step in and return the property to
the plaintiff by way of specific performance (if requested)
IV.
CONTEMPT
a. Introduction
i. Direct vs. Indirect Contempt
1. Direct – behavior occurs within the courtroom
2. Indirect – behavior occurs outside of the courtroom
ii. Civil vs. Criminal Contempt (turns on whether you can get out of
contempt)
1. Civil
a. Compensatory
b. Coercive (fines, prison with opportunity to get out if X)
2. Criminal
31
a. Fines, prison for X amount of time
b. FRCP 65(d) – Injunctions and Restraining Orders
i. (1) Contents
1. Every order granting an injunction and every restraining order
must:
a. (A) state the reasons why it issued;
b. (B) state its terms specifically; and
c. (C) describe in reasonable detail—and not by referring to
the complaint or other document—the act or acts
restrained or required.
i. Note: BE VERY SPECIFIC
c. Criminal Contempt
i. International Union, United Mine Workers v. Bagwell (1994)
1. Facts – The unions and their members repeatedly violated the
trial court’s orders regulating the conduct of a labor dispute. The
trial court announced a schedule of fines for various acts and,
after hearings at which the trial court required that contumacious
acts be proved beyond a reasonable doubt but did not afford a
right to jury trial, imposed $64 million in fines against the unions.
After the unions settled the labor dispute, the trial court refused
to vacate the fines it had made payable to the counties. The
Supreme Court of Virginia held that the fines were civil and
coercive in nature.
2. Holding – Reversed. The Court held that the unions were entitled
to a criminal jury trial. Supreme Court reviewed the differences
between civil and criminal contempt and held that the fines were
criminal in nature.
3. Analysis – The unions had no opportunity to purge once the fines
were imposed, their conduct did not occur in the court’s presence
and did not implicate its ability to maintain order, and the fines
effectively policed the unions’ compliance with a code of conduct
imposed by the court. Finally, the fines were serious in amount.
4. Notes –
a. If it’s criminal contempt – you have to follow criminal
procedure (i.e., right to jury trial, right to counsel, right not
to testify against yourself, etc.)
b. Where a fine is not compensatory, it is civil only if the
contemnor is afforded an opportunity to purge
c. Clearly Criminal Contempt
i. Fixed prison term
32
ii. Fixed fines for past behavior
d. Confinement, Contempt, and Cash
i. Moss v. Superior Court, Ortiz (Cal. 1998)
1. Facts – Respondent, real party in interest mother, brought an
action petitioner contemnor father for contempt to pay child
support. Petitioner alleged that he was unable to pay child
support because he was unemployed. Respondent mother alleged
that petitioner refused to seek employment. The trial court held
petitioner in contempt and imposed a sentence of 5 days in jail for
each of 6 counts of contempt and 10 hours of community service
for each of 6 counts. Petitioner alleged that an order to force him
to seek employment violated his U.S. Const. amend. XIII right
against involuntary servitude. The appellate court set aside the
contempt judgment and concluded that the Todd decision was
controlling.
2. Holding – The court overruled its previous holding in the Todd
decision that a parent who refused to work could not be held in
contempt.
3. Analysis – Because petitioner contemnor father reasonably relied
on case precedent, the court refused to apply its ruling
retroactively and affirmed the appellate court’s reversal of the
trial court’s finding of contempt.
4. Notes –
a. Elements (prove beyond reasonable doubt)
i. Valid court order to pay sum certain
ii. Knowledge
iii. Non-compliance
b. If unsure about whether the contempt is civil or criminal,
then treat it like criminal contempt – the higher burden of
proof!
e. Collateral Bar Rule
i. Introduction
1. Prevents challenges to the validity of the injunction
a. I.e., cannot challenge injunction because the court
conduced an improper analysis under eBay or that the
injunction is unconstitutional
2. Procedure
a. Injunction hearing conducted by court
33
i. Allows defendant to directly challenge
constitutionality of injunction or raise other
defenses
b. Injunction issued by court
i. Defendant either lost or didn’t appear
c. Defendant then held in contempt for violating the
injunction (must obey until injunction is modified)
i. Collateral bar prevents defendants from raising
defenses that were either lost at the original
hearing or waived by not appearing
3. Note: there is no statutory right appeal issuance of a TRO in
federal court
a. Reasons – TROs are temporary and defendants have a
right to hearing within two days
ii. Ex Parte Purvis (Ala. 1980)
1. Facts – Petitioner was an employee of the city’s water works
department and joined other employees in a strike when the
water works board (board) refused to engage in collective
bargaining with their union. The board successfully obtained a
TRO to enjoin the strike, which petitioner disobeyed on three
occasions. The trial court denied petitioner’s motion to dissolve or
modify the TRO and entered three separate judgments of criminal
contempt against him. Sentenced to 15 days in prison.
2. Holding – The court denied petitioner’s application for a writ of
habeas corpus and vacated the stay of execution for the
remainder of his sentence.
3. Analysis – Petitioner was obligated to obey the TRO issued by the
trial court until its reversal in proper proceedings, regardless of its
impact on petitioner’s First Amendment rights. Violent picketing
on the street did not warrant the level of protection afforded to
peaceful picketing under the First Amendment. The board had a
compelling interest in seeking the TRO as the city’s water supply
was threatened by the strike and a hearing on the validity of the
TRO was scheduled within five days in accordance with Ala. R. Civ.
P. 65(b)(1).
4. Notes –
a. ON TEST – apply eBay test to determine whether TRO was
warranted
b. Exceptions to collateral bar where compliance would
cause irreparable injury:
34
i. Injunction is transparently invalid (maybe means
invalid on its face?)
1. California is more generous than Alabama
2. Texas doesn’t follow the collateral bar rule
ii. Frivolous pretense to validity
f. Who must obey?
i. Introduction
1. Certainly the defendants are bound
2. If defendant is unnamed:
a. Notice – publication or email
b. Enforcement might be an issue
3. FRCP 65
a. Allows court order to bind anyone
ii. People v. Conrad (Cal. Ct. App. 1997)
1. Facts – Appellant protestors challenged their convictions for
disobedience of a lawful court order under Cal. Penal Code
§ 166(a)(4). The trial court denied appellants’ motion for acquittal.
The appellate court reversed the judgment of conviction because
the evidence linking the enjoined parties to appellants was
insufficient to prove that appellants acted with or for the enjoined
parties.
2. Holding – The court reversed appellant protestors’ convictions for
disobedience of a lawful court order
3. Analysis – The evidence linking the enjoined parties to appellants
was insufficient to prove that appellants acted with or for the
enjoined parties where the evidence showed a single interaction
between appellants and an enjoined party, and this was too
insubstantial to support the conclusion that appellants acted in
concert with an enjoined party.
4. Notes:
V.
ENFORCING CONSTITUTIONAL AND PUBLIC LAW THROUGH STRUCTURAL
INJUNCTIONS
a. Introduction – 10/31 at 6 min
i. Has the effect of restructuring government bureaucracy
ii. Parties are a class of plaintiffs versus the federal government or a state
iii. Object of the litigation is to change the way the government is behaving
iv. If it’s prison litigation – 30 min
1. No further than necessary to correct the violation
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VI.
INJUNCTION REFORM
a. Frew ex rel. Frew v. Hawkins (2004)
i. Facts – The officials contended that state immunity barred enforcement
of the consent decree since the program complied with general Medicaid
requirements and thus any failure to comply with specific requirements
of the decree did not otherwise constitute a violation of federal law. The
officials also argued that enforcement of the decree would undermine
the officials’ accountability in deciding how best to discharge their
governmental responsibilities.
ii. Holding – Reversed and remanded
iii. Analysis – state immunity did not bar enforcement of the consent decree
since the decree was a federal court order that resulted from a federal
dispute and furthered the objectives of federal law, and the officials
voluntarily accepted the obligations set out in the decree. Even though
the decree required state action which Medicaid did not specifically
require, it reflected a choice among various ways that the officials could
implement the Medicaid program. Further, any infringement of the
officials’ sovereign authority and responsibilities was subject to remedial
modification of the decree upon a showing of appropriate grounds.
§ 11 - Unjust Enrichment
I.
RESTITUTION
a. Introduction
i. Free standing remedy for unjust enrichment – defendant’s breach of
contract, tort, or violation of plaintiff’s property rights is not a
prerequisite
ii. Example – plaintiff’s mistaken transfer to defendant is an example of
freestanding restitution (i.e., bank accidentally gives you $10K)
iii. May seek restitution as an alternative remedy to compensatory damages
or an injunction
b. Restatement’s Definition
i. A person who is unjustly enriched at the expense of another is subject to
liability in restitution
c. Analysis
i. Buyer must first receive a benefit (often clear but perhaps debatable)
d. Kistler v. Stoddard (Ark. Ct. App. 1985)
i. Facts – A farmer planted wheat on the land and the landowner dies. The
new owner terminates the lease. Before the former landowner died,
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there was a twenty year agreement of planting on the land. Stoddard’s
efforts were undertaken in good faith, because he reasonably could have
relied on past practices and was unaware of the impending sale to
Shannon until well after the planting date.
ii. Holding – New landowner has to reimburse Stoddard for his costs in
planting the wheat
iii. Analysis – New landowner would unjustly reap the benefits of the
Stoddard’s labor and expense. While Stoddard had no legal or equitable
claim to the wheat crop, the new landowner was not entitled to be
unjustly enriched in the amount expended to plant the crop.
1. Stoddard’s efforts were undertaken in good faith since he
reasonably could have relied on past practices and was unaware
of the impending sale until after planting time
iv. Rule – One party should not be allowed to benefit at the expense of
another because of innocent mistake or unintentional error
e. Patureau-Miran C. Boudier (1892)
i. Facts – Patureau rented property to Garnier in March 1886 for 5,500
francs – the lease terminated in December 1888 when the tenant owed
15,000 francs for rent and equipment. Garnier gave Patureau the
standing crop and Patureau took back possession of the improved
property. Boudier, plaintiff, billed Patureau for 324 francs for manure
sold and delivered to Garnier before termination of the lease.
ii. Holding – Awarded judgment to Boudier
iii. Analysis – Patureau’s crop was improved by the plaintiff’s fertilizers; i.e.,
he was unjustly enriched
iv. Notes:
f. Kossian v. American National Insurance Co. (Cal. Ct. App. 1967)
i. Facts – Owner of an inn that burned down contracted with plaintiff to
clean up the debris, but declared bankruptcy after the clean up was
finished. The property was subject to a deed of trust in which defendant
was the beneficiary. Defendant had no knowledge of the agreement
between owner and plaintiff. Trial court granted defendant’s motion for
summary judgment.
ii. Holding – Reversed
iii. Analysis – Doctrine of unjust enrichment applied to situations regardless
of the intent of the parties. Defendant’s indemnity payment was based in
part upon a claim of loss that did not exist because plaintiff had already
remedied the loss by his work for which he was not paid.
iv. Notes:
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II.
CAPRICE ROBERTS
a. Unjust enrichment
i. Benefit
ii. Unjust?
b. Freestanding unjust enrichment
i. Bank accidentally deposits money into your account
c. Opportunistic Breach
i. Example
1. A agrees to sell a book to B for $15
2. Before the exchange, A sells to C who is willing to pay $100
3. B entitled to difference between FMV and agreed contract price
(I.e., if book valued at $50, then B is entitled to $35)
4. B cannot get specific performance from A because he no longer
has the book
ii. Under opportunistic breach, the buyer may be able to obtain the profits
made by the seller if . . .
1. It was deliberate AND
2. It would be unjust for them to keep it
iii. Problems
1. Not a lot of case law on point
2. How does this work in practice?
III.
MEASURING THE DEFENDANT’S BENEFIT
a. Legal Restitution
i. Quasi contract – very different than contracts
1. No contract (express or implied) because . . .
a. No meeting of the minds
b. Statute of frauds required the contract to be in writing
c. Matters of public policy required something more
d. Party did not have authority to enter into a contract
2. Restitution is the only remedy for quasi contract
ii. Quantum Meruit
1. Valuable materials or services rendered
2. Services were conferred for the benefit of the person sought to be
charged
3. Defendant accepted and enjoyed the benefits
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4. Circumstances demonstrate that the plaintiff had a reasonable
expectation of being compensated by the defendant for the
benefits conferred
b. Campbell v. TVA (5th Cir. 1969)
i. Facts – Campbell made an oral agreement with Daniel, director of the
TVA Technical Library, to put a bunch of journals onto microfilm. Daniel
did not have the authority to make the contract here. This was going to
be a huge contract, with lots of money involved—$30,000. This is all
ORAL. With unjust enrichment, the statute of frauds does not come into
play. TVA later did not accept the microfilm when delivered, and sent it
back to Campbell with a note from Daniel saying there was no contract.
Campbell promptly sent it back to the TVA, where it was stored. TVA
refused to pay for the film.
ii. Holding – Court found that the proper measure for damages was the fair
market value – not the actual benefit realized by TVA from the
microfilm
iii. Analysis –
1. Court used the contract price for fair market value because the
microfilm had no readily available market value to anyone except
TVA.
2. The value of the microfilm to TVA cannot be expressed in dollars
and cents. Original copies were destroyed making the microfilm
copies the only ones available.
3. TVA benefits because the microfilm is available for use
c. Maglica v. Maglica (Cal. Ct. App. 1998)
i. Facts – Man and woman hold themselves out as husband and wife, and
then they start the Mag-Light Company. The woman helped the
defendant with the multi-million dollar business. They then break off
their relationship when she sees that he is sneakily providing for his
children and not her. She sues for breach of fiduciary duty, implied-in-fact
contract, and quantum meruit. The trial jury looked at the evidence and
found that he had a fiduciary duty to her, and that he owed her in
restitution. It awarded $84,000,000.
ii. Holding – Fiduciary claim must fail because California did not recognize
common-law marriage. The court then focuses on the unjust enrichment
theory and decides to value the restitution at the fair market value, not
the actual benefit of the defendant.
iii. Analysis – People who make $84 mil own equity in the company—it’s not
payment for services; no employee would ever earn that much
iv. Notes –
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1. Legal test for recovery in quantum meruit is not the value of the
benefit, but value of the services (assuming the services are
beneficial in the first place)
IV.
EQUITABLE RESTITUTION
a. Constructive Trust –
i. Introduction
1. If the defendant’s fiduciary breach or fraud deprived the plaintiff
of property, the chancellor reasoned that a defendant who was
enriched unjustly is constructively a “trustee” for plaintiff, the
“beneficiary.”
2. When property is in the possession of someone who cannot in
good conscience keep it, a constructive trust will be imposed
a. Can reclaim the actual item
3. Elements
a. A transaction in which the defendant
i. Has been unjustly enriched
ii. By acquiring legal title to specifically identifiable
property
iii. At the expense of the claimant or in violation of the
claimant’s rights
ii. Simonds v. Simonds (N.Y. Ct. App. 1978)
1. Facts – The Simonds were married, and created a separation
agreement in which the husband would insure the wife at least
$7,000 in life insurance. Husband remarries. He let his original life
insurance policy lapse. He purchased three more policies, none of
which were named plaintiff as a beneficiary. He then he died.
Essentially, second wife got the insurance that the first was
entitled to. She could not sue her husband’s estate because it
was insolvent, so she went after the second wife under unjust
enrichment.
2. Holding – Second wife holds legal title to the insurance proceeds,
but the court finds that that it was never hers to hold; gets $7,000
plus interest
3. Analysis – Since the first wife was entitled to $7,000 of the
insurance proceeds at the time of the husband’s death, she is no
less entitled because the proceeds have already been converted
by being paid, erroneously, to the named beneficiaries
4. Notes –
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a. Must have consideration (contractual) before you can
trace
b. First wife has no legal claim against the insurance
company because they did nothing wrong
c. If the first wife demands that the insurance company pay
her, insurance company could use interpleader to bring
both parties to court OR seek declaratory judgment
d. Massachusetts
i. Idea of substitution that the New York court
approached does not work; the innocence of the
legal title holder (spouse) is relevant to tracing the
constructive trust
e. Wisconsin
i. Additional factors include actual or constructive
fraud, duress, abuse of confidential relationship,
mistake, commission of a wrong, or any form of
unconscionable conduct
b. Tracing
i. Plaintiff must trace!
1. Plaintiff identifies her asset which effected the defendant’s
enrichment
2. Plaintiff traces or identifies the asset as belonging in “good
conscience” to her even though the defendant owns title of the
asset
3. Chancellor, assuming that the defendant owns title, decrees the
defendant to be trustee of the asset for the benefit of the plaintiff
4. Defendant then ordered to convey the property
ii. Exceptions
1. Numerous Fraud Victims
a. When there are lots of victims of fraud, only the most
recent victims of the fraud will be able to trace their funds
b. Courts will normally treat all the fraud victims equally
2. Illegally Obtained Funds (Innocent spouse)
a. Accountant embezzles $75K and used $250 to buy $100K
life insurance policy
b. Account dies, leaving nothing to his estate – proceeds
were claimed by employer and his surviving spouse
c. Court awarded $75K of the insurance proceeds to
employer, not the typical $100K
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i. Innocent wife changes the analysis
iii. Hypotheticals
1. Defendant committed fraud against Plaintiff
2. Plaintiff sues defendant for $75K
a. Can seek punitive damages
3. Paid some of the money for a piece of property
4. Plaintiff can go after the legal owner of the property (tracing the
money from fraud to new property)
5. If the property appreciated, Plaintiff may recover more than the
amount he was defrauded
iv. Tillman v. Mitchell (Miss. Ct. App. 2011)
1. Facts – Tillman sued Mitchell (his half brother) for constructive
trust. Mitchell owed the property and Tillman rented the house.
Mitchell counter-sued for back rent. Trial court denied Tillman’s
claim and awarded Mitchell back rent.
2. Holding – Affirmed. No constructive trust and ordered Tillman to
pay back rent.
3. Notes –
a. Constructive trusts are not always winners
b. They go to chancery court
c. Standard of review on appeal
i. Question of law – de novo
ii. Question of fact – plain error or abuse of
discretion
d. What gives rise to constructive trusts? Unjust enrichment
i. Crime, fraud, duress, concealment, breaches of
trust/fiduciary relationship
ii. Any other situation in which equity and good
conscience would make it improper to retain the
property
e. In Mississippi, the existence of a constructive trust must be
proved by clear and convincing evidence
i. Higher standard than normal
V.
DEFENSES TO RESTITUTION
a. Introduction
i. Affirmative defense if different than negating an element of plaintiff’s
cause of action (failing to plead or otherwise prove)
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ii. Rather, affirmative defense consists of new factual material that the
defendant brings in, not to challenge the truth of plaintiff’s facts, but to
defeat or reduce the plaintiff’s recovery
b. General defenses apply
i. Issue preclusion
ii. Claim preclusion
iii. Unclean hands
c. Restitution-specific defenses
i. Time bar
1. For legal restitution (i.e., quasi-contract, quantum meruit,
contract implied in law)
a. Can be time-barred under the state’s contract statute of
limitations
2. For equitable restitution (i.e., constructive trust, subrogation or
accounting)
a. Can be barred under chancery’s equitable doctrine of
laches
ii. Change of position estoppel
1. Ought to accept defense to both legal and equitable restitution
2. Primary used as a defense to plaintiff’s transfer by mistake
3. Defendant must not learn of mistake before disbursing the funds
iii. Bona fide purchase or purchase for value
1. Third party who buys property for value and without notice of
constructive trust claim
iv. Bona fide creditor or payment for value
1. X mistakenly received $500 from Bank
2. X used money to pay debt to Y
3. Bank sues Y to recover
4. Y is a bona fide creditor with a successful defense
a. Y lacked notice that the money was not X’s and gave up X’s
debt to him in return for the money
§ 12 – Restitution in Transactions
I.
ELECTION OF ANOTHER REMEDY
a. Introduction
i. You can plead multiple, and even inconsistent theories, of recovery
43
1. BUT you cannot get a double recovery
ii. No requirement at the beginning of the case to elect a remedy
iii. You should think about pleading all of the following claims at the
beginning of the case—Ex. Sale for Little Bear book
1. Breach of contract
a. Elements – contract existed, it was breached, damages
2. Tort
a. Elements – duty, breach, causation, damages
b. Damages – loss suffered, expectation damages
3. Restitution
a. Elements – unjust enrichment
b. Damages – benefit to seller could be recovered
b. Gannett Co. v. Register Publishing Co. (D. Conn. 1977)
i. Facts – Register refused to pay after learning of overvaluation of assts
and inflated circulation figures (fraud). Action was brought by Gannett of
newspaper against buyer for failure to pay amount due. Buyer
counterclaimed for compensatory and exemplary damages or in
alternative for rescission.
ii. Holding – Buyer not entitled to rescission
iii. Rules –
1. May rescind contract that’s induced by fraud
a. Remedy – goes back to the status quo
2. Right to rescind must be exercised within a reasonable time
iv. Analysis –
1. Register gave no notification of intent to rescind to Gannett
within reasonable time after it discovered alleged frauds
2. Register exercised dominion over newspaper by treating it as its
own property
a. Increased prices, changed typeface, alter editorial policies,
altered geographic regions of distribution, etc.
3. Register did not operate it as gratuitous bailee for benefit of
ultimate owner
v. Notes –
1. So much time has passed that it would be difficult to put the
parties back in their original position
2. Mutual Mistake
a. There was no contract so you cannot get breach of
contract
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b. You only get restitution!
II.
LACK OF INJURY
a. Earl v. Saks & Co. (Cal. 1951)
i. Facts – Barbee and Earl went to the store's fur salon and chose a $5,000
fur coat for the donee. Barbee offered to buy the coat for $4,000 and the
store refused. Unknown to the Barbee, the Earl asked the store to
pretend to sell the donor the coat for $4,000, and that the Earl would pay
the difference. Earl later paid difference. Barbee then came to the store
and said he had revoked the gift of the coat to the Earl, and that he
wanted the coat. The store tried to return to the Earl her money on the
coat, but she refused. She sued Saks and Saks interpleads Barbee.
ii. Holding – Reversed for Barbee
iii. Notes –
1. Allowed to rescind the contract for fraud
§ 13 – Tort and Contract Damages
I.
WILL BE ON EXAM – Buy and Seller Situation
a. Facts
i. Buyer is a restaurant
1. Spends $2000 on advertisement and menus
2. $1000 deposit
ii. Contract with seller for 10,000 oysters at $0.50 per oyster
1. Friday by 2:00 pm
2. Statute of frauds is satisfied
iii. Seller breaches contract
1. Sells oysters to third party for $1.00 per oyster
iv. Buyer intends to sell oysters for $2.00 per oyster
1. All oysters would have been sold
v. Buyer still turns a profit, but restaurant gets a bad reputation
vi. Buyer goes out of business
vii. Seller offers to give back $1000 deposit
b. Potential Remedies
i. Rescission, plus $1000 deposit
1. WATCH OUT – state that you’ll need to research whether agreeing
to rescission waivers your contractual or tort damages
45
a. Don’t waive remedies
ii. Contract Damages
1. Specific performance is out (not fresh)
2. Entitled to be put in the place they would have been but for the
breach
a. Difference and consequential damages = $15,000
b. BUT the restaurant still made a profit
3. Expectation Damages
a. Cover + incidentals
i. If you can get the oysters, party must pay for
replacement costs
b. Difference + incidental + consequential
i. FMV – some evidence that $1.00 per oyster is FMV
ii. $0.50 per oyster is difference between contract
price and FMV
c. Lost sales for Friday night
i. Expected to sale 10,000 at $2.00 = $20,000
ii. Paid $0.50 per oyster = $5,000
iii. Entitled to $15,000
d. No reliance damages in addition to expectation
4. Consequential Damages
a. You don’t get all of the damages that have been caused
b. Hedley Test – Must be loss that is directly related to
breach or within the reasonable contemplation of the
parties
c. Lost profits after Friday
i. Hard to show
iii. Tort Damages
1. Fraudulent Misrepresentation
a. Misrepresentation (Fraud/Deceit; Negligent; or Innocent)
b. Reasonable Reliance
c. Damages
d. Degree of Fault
i. Fraud/Deceit- intentional: knowledge and reckless
disregard
ii. Negligent- breached duty to speak truthfully
iii. Innocent- strict liability
iv. Compensatory Damages
e. General – reasonably foreseeable
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f. Special – business failure, decline in reputation
2. Punitive Damages
a. Only with malice or gross negligence
iv. Restitution
1. Unjust enrichment
II.
INTRODUCTION
a. Contract Limitations
i. Reasonable Liquidated Damages
ii. Exclusion of Certain Damages
1. Not all liability
2. Personal and property exclusions unconscionable
b. Consequential Damages
i. Parties are entitled to but recovery is limited
ii. Contracts
1. Directly caused or within the reasonable contemplation of the
parities
2. Requires knowledge or notice
iii. Torts
1. Reasonable foreseeability
c. Evra Corp. v. Swiss Bank Corp. (7th Cir. 1982)
i. Facts – Swiss Bank failed to deposit Hyman-Michaels’ money in the bank
account of a third party. Failing to do so cost Hyman-Michaels its charter
contract with Pandora Shipping. Hyman-Michaels sued Swiss Bank to
recover arbitration costs and los profit due to cancellation of charter.
ii. Holding – Swiss Bank was not required in the absence of a contract to
take precautions or insure against a harm that it could not measure but
that was known with precision to Hyman-Michaels, which could by the
exercise of common prudence have averted it completely
iii. Analysis –
1. If you can avoid the consequences, you cannot recover damages
iv. Notes –
1. General and special damages have different meanings for
contract/tort and personal injury
2. General Damages
a. Harm any victim would encounter as following naturally
from the breach
i. Contract – difference
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b. Calculation of general damages is based on value
i. Breach – buyer recovers item’s FMV less its
contract price
ii. Property – owner recovers diminished value, the
property’s value before the harm less its value
after
c. Here, seeking funds or interest that were lost during
transfer (i.e., the $27,000 Hyman-Michaels tried to
transfer)
3. Special Damages
a. Special damages that are peculiar to a plaintiff
b. Here, seeking loss from dislocation in one’s business
triggered by failure to pay
c. Types
i. Incidental and consequential damages
d. Limits – harder to recover
i. Pleading – FRCP 9(g) requires plaintiff must plead
special damages specifically
ii. Proof – Plaintiff must prove special damages with
reasonable certainty, as accurately as is reasonably
possible
iii. Remoteness – Plaintiff may not recover special
damages that are too remote, even if they were
realized, pleaded, and proved
iv. Waiver – Plaintiff’s opportunity to recover special
damages is subject to bargaining
III.
ECONOMIC LOSS RULE
a. Local Join Executive Board v. Stern (Nev. 1982)
i. Facts – Employees and union brought suit against the architects of the
MGM Grand to recover lost wages as a result of a fire.
ii. Holding – Employees may not recover economic losses whose persons or
property have not been touched by the tortfeasor’s negligence
iii. Analysis – Employees did not have contract with defendant, nor were
injured by the fire
iv. Rule –
1. Absent privity of contract or an injury to person or property, a
plaintiff may not recover in negligence in economic loss
2. Reasons
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a. Not proximately caused – Too remote and speculative
b. Not foreseeable – Economic damages in these
circumstances are not foreseeable
c. No duty – A plaintiff suffering purely economic damages
from defendant’s negligence is outside the circle of those
defendant owes a duty
d. Policy approach – slippery slope
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