Professor Cupp Pepperdine University

Spring 2015

Remedies Outline
I. DAMAGES
I.

II.

Types of Remedies:
a. Compensatory damages: goal is to put the P in their rightful position.
b. Coercive: generally meaning injunctions. Ct coerces behavior rather than exclusively
focusing on monetary damages.
c. Declaratory: judge is just ruling on an issue. It is an FYI from the judge.
d. Restitutionary: Constructive trusts. Focuses not on what the p has lost but rather on
disgorging what the D has gained from their wrongful conduct.
e. Punitive: not intended to compensate, intended to punish wrongdoers and deter future
wrongdoers.
The Nature of Remedies:
a. Substitutionary vs. Specific
b. Legal vs. Equitable
c. Procedural, substantive, or remedial
d. Substantive norms vs. remedial consequence

A. RIGHTFUL POSITION
a. Hatahley case: Court holds that the fundamental principle of damages is to restore the P to her
rightful position.
i. TORTS: trying to put humpty dumpty back together; make everything just as it would have
been before the harm occurred.
ii. For CONTRACTS: more forward looking; want to put in the position as if the K would have
been fulfilled; want to make sure people get what they reasonably expect.
iii. This case raises the unanswerable question of how much should we work on
generalized/holistic justice and how much should we focus on very narrow case-specific
justice?
iv. Majority Rule: No damages beyond market value for the tortious death of an animal,
including a pet. (there is very active litigation on this issue).
b. Rationales for Rightful Position:
i. Corrective Justice Notion = basic fairness. There has been a wrong that needs to be righted.
ii. Economic efficiency = encourages efficient behavior if D has to pay for damages they inflict.
Thus, they will only engage in behavior if it is efficient to do so.
1. For TORTS: sometimes would rather make profit by continuing to pollute BC paying
for the damages caused by pollution is still a lesser amount.
2. For CONTRACTS: breaching K- sometimes you get enough money to pay the other
guy and still come out ahead.
a. What are the moral implications of this? Does it make a difference if we are
talking about personal injury/harm to someones body/reputation Vs. a
business transaction?
b. Enhanced difficulty in translating damages in tort compared to Ks.
c. Value As A Measure Of Rightful Position:
i. Rightful Position in K: Allows P to collect loss from benefit of the bargain (expectation
interest).
ii. American List Corp vs. US News and World Report: D is US News and p is supposed to get
college student addresses. In the K: more payment for P in the first 5 years and less in the
last 5 years. D cancelled K when new management took over.
1. First issue: General Damages vs. Special damages in CONTRACTS:
a. General damages flow directly from the breach (natural and probable
consequences of the breach).
b. Special damages do not flow directly from the breach.
i. Usually NO special damages in breach of K cases. To recover specials, P
must show that the damages were foreseeable and within the
contemplation of the parties when the K was formed.
2. Second issue: General Damages vs. Special damages in TORTS:

a. General damages: pain and suffering, generally. These are non-economic

damages.
b. Special damages: out of pocket losses.
3. This is a Ks case: court says the damages involved are general. Court addresses Ps
ability to perform in the future in determining how much to discount the present
value. Comes up in situations where there are going to be damages that are going to
accrue over time.
a. Dispute over how much to discount the damages in this case.
4. Value as a measure of rightful position: Often the value of real property or a chattel is
the appropriate means of determining how to put the P in her rightful position.
Usually fair market value is a pretty straightforward concept- but not always.
iii. In Re September 11th Litigation: Two months after Larry Silverstein took possession of the
World Trade Center towers, they were destroyed by the 9/11 attacks. Silverstein filed suit
against the airlines, the airport security companies, and the operator of Bostons Logan
Airport, alleging that but for their negligence, the terrorists would not have gained entrance
into the aircrafts they hijacked. Seeks recovery of 16.2 billion dollars. On the books, the
value of the leases is 2.84 billion dollars. By 2001, WTC were profitable enterprise.
Silverstein also took on obligations on part of lease to take on rebuilding/replacement of the
towers if they were ever destroyed.
1. General Rule for harm to Property (both damaged property and destruction to
property): P is entitled to be made whole, but D is entitled to have P made whole in
the least expensive way possible. The usual rule is:
a. Determine FMV, factoring in age and condition of property;
b. Determine cost of repairs (if repair possible)
c. Make D pay for whichever is less repair or FMV.
i. EXCEPTIONS to this General Rule:
1. Replacing component parts of a larger whole: courts may award
replacement costs rather than FMV, without even depreciating the
component parts as used (in other words, not reducing their value
even though they are worth less as used).
2. Where exceptional circs exist that convince the ct replacement value
is only fair measure:
a. Example: King Fisher case: Barge sunk due to ds negligence
during WWII. Barges scarce and only 6 of this kind in the
world. Would cost 233,000 to replace. FMV is 30,000 dollars.
Court took mercy on the P and rewarded replacement cost of
233,000 BC it was fair to do so instead of the FMV.
2. In WTC case, wanted replacement cost instead of FMV: BC he is on the hook for
rebuilding the whole thing.
a. Court discusses specialty properties: situation where replacement value will be
allowed instead of FMV. Must be a kind of property that is seldom traded and
has no normal market value.
i. WTC NOT considered special properties.
ii. Examples of special properties: churches; hospitals; clubhouses; spaced
held by nonprofit organizations for use as community centers.
iii. Court rejected WTC as special property BC: we should focus on the type of
use being special as opposed to unique aspects of the property.
1. WTC were flourishing profit centers & had determinable and verifiable
value in the marketplace.
b. Court also held that Ps obligation to replace the towers is not a form of
damages that the P can seek from the airlines BC it is too remote and
unforeseeable.
iv. Trinity Church v. John Hancock Mutual Life Insurance Co: Church is a historical landmark,
made of stone masonry which cracks easily. Construction project nearby undertaken by D
that cracked the Churchs foundation causing the structure to weaken. Building did not fall
down; it was not made unusable; people inside building would not have a different
experience; but you could still tell it cracked. P hired experts to figure out how much stress
on the building before there would need to be a takedown. It was 65% of the way toward
total destruction. Building is fine now, but increasingly going towards deterioration.

1. Court allows damages: gets a percentage of what it would cost to rebuild the church
TODAY. To represent the percentage that the D pushed you further along the road to
which you would need the re-build done.
a. Assume: church would be totally destroyed? Ct would have awarded
replacement costs (special property).
b. Assume: consider the church is already 26% of the way toward destruction
before the D engages in wrongful conduct and the church is now 65% of the
way towards total destruction, is it damaged at all?
i. Argument: You can still go there; there is no different experience you will
have. There is no certainty that the church is going to fall down. One could
make an argument that the church/people have not been damaged at all.
1. But if we go that way: now we have a church that is in six pieces that
didnt used to be in six pieces, is it just to say this is not damage at
all?
2. If you give the church money, what is the church going to do with the
money? Does it matter that when they get these damages they dont
need them?
a. This doesnt matter to the court.
c. Assume: what if we get the church selling just the land and then going out to a
suburb and buying a small church that is a lot cheaper and they have a lot of
money left over in the bank. Should they still get damages in this case even
though they have a lot of money in the bank?
2. Recognize when determining damages that some kinds of property fluctuates heavily
in value and sometimes courts will create distinctive value rules.
a. Most common example: Farm crops.
i. Have a wildly differing value from year to year based on supply and
demand.
b. Consumed goods often see fluctuations in value so courts create special rules:
i. General Rule: Value of farm crops is measured at harvest, not later. Rental
value of damaged portion of land is an alternative measure when the
tortious harm prevented crop planting.
1. Rationale: prices may fluctuate and farmers might engage in market
speculation otherwise.
c. Loss of use as a measure of damages:
i. Example: Driving and crash into someone else disabling their car.
1. Liable for loss of use of vehicle (until it is either repaired or reasonable
amount of time until it can be replaced).
2. Damages = what they had to pay to rent a car of approximate equal
value and for reasonable amount of time.
ii. General Rules on loss of use measurements:
1. Cost of renting a replacement
2. Lost profits or earnings
3. Interest on the market value of the property
B. RELIANCE AND EXPECTANCY
a. Two important measures for putting P in his rightful position in Breach of K:
i. Reliance Interest: This is designed to put the P in the position he or she would have been in
prior to entering into the K (basically out of pocket losses incurred in reliance on a promise).
1. A agrees to buy a boat from B. Bs reliance interest includes the money that was
spend having the boat transported; in storage; etc.
ii. Expectancy Interest: This is the dominant approach to awarding K damages. Provides the
monetary value of the promised performance. Gives the P the full benefit of where he would
have been if the K would have been performed.
1. A agrees to buy boat from B but then breaches, B is entitled to profits reasonably
expected to have been obtained.
b. Neri v. Retail Marine Corp: P contracted to purchase a boat from D. 6 days later, the P breaches
the K BC he is going to be hospitalized and will not be able to pay. The P wants the deposit he
made of 4,250 back. D argues that P should not get deposit back. D countersues and seeks
reliance interest damages and seeks his expectancy damages (lost profits).
i. Court awards D 2,579 (amount of profit seller was able to prove he reasonably expected
from the sale). And 674 (costs incurred by seller prior to resale for insurance, storage, etc.)

c.

d.

e.

f.

g.
h.

P gets 997 dollars when all is said and done ( a little bit of his deposit back). His original
deposit minus the two amounts given to the D.
1. Expectancy is the 2,579 amount the lost profits. It doesnt matter that the retailer
later sold the boat BC he would have had two boat sales had the man gone through
with the K and bought the boat in the first place.
2. Reliance is the 674 dollar amount- money the retailer spend storing the boat, upkeeping it, insurance. Note that the court adds this to the expectancy loss in this
case rather than forcing the retailer to choose one or the other.
3. 4, 250 in restitution for deposit minus the above amounts equals 997 for the buyer.
a. Restitution is to avoid unjust enrichment. It focuses on d and what she
gained from breach of K. The gain of the D is given back to P.
Arguments in favor of reliance only:
i. Business norms permit cancellation of Ks in the absence of their substantial reliance rather
than forcing you to pay the benefit of the bargain.
1. Example: buying a pair of shoes and u decide u dont want the shoes, if they can be
sold as new they can be returned.
ii. You are making it more expensive to breach, you should make it less expensive to breach.
Arguments for allowing both reliance and expectancy damages:
i. Psychological damage: if we dont get what we expected we are not really put in our rightful
position.
ii. Reliance is hard to prove and allowing expectancy damages discourages breach of K.
iii. Moral force of K: is it immoral to breach a K BC you can get a better deal spending your
money elsewhere?
1. handshake idea: when you make a handshake with X you know that deal is going to
go through.
2. her word is her bond: if she says she is going to do it, she will do it. Her reputation
is stellar BC of this attribute.
a. These sound like moral overtones.
b. Might actually develop resources in a more effective way: develops reputation
if you take a loss on one K even if there was a better deal out there. Might
lead to more people wanting to K with you in the future.
i. Note 6 pg. 45: A duty to keep promises? 88% of businesspeople said that
such a breach was unethical and 81% said they would withhold future
business from such a breacher.
Smith v. Bolles: P bought mining stock for 1.50/share but D said they would be worth 10.00.
This was too good to be true, and D misrepresented things/committed fraud. P says they should
get what they reasonably expected (10.00/share). D says NO, you should get back your reliance
of 1.50/share.
i. Court says Ds measure is correct and P only gets back 1.50/share.
Chatlos systems, Inc. v. National Cash Register Corp.: P bought computer from D for 46,000 but
they expected the computer would be able to do more functions than it actually did BC D
warranted it would do all of these wonderful things for Ps business. Court awarded damages of
202,000 (the difference between value warranted which was 208,000 and the value delivered
which was only 6,000). In this case, P got its expectancy interest.
i. In both of these cases, sellers made representations to the buyers. In both of these cases, if
the representations were true the thing would be worth far more than the purchase price. In
both, the representations are false and the things are worthless. BUT the courts apply
different measures of damages:
1. In Chatlos, the court allowed expectancy interest damages, but in Smith it did not.
Why?
a. It has to do with the difference b/w a tort & a K. The computer case is Ks case
and smith is torts case (fraud)
General Rule: Expectancy Interest is generally not recoverable in tort.(at least under the federal
rule) but usually they are recoverable in Ks cases. even if it is a big expectancy.
Rule: Federal approaches to Fraud claims that say expectancy is not allowed is actually a
MINORITY position.
i. MOST jurisdictions, even though fraud is a tort, allow expectancy damages.
1. Remember: Expectancy must be REASONABLE.

C. CONSEQUENTIAL DAMAGES
a. General damages:

b.

c.
d.

e.

f.

g.

i. in CONTRACT, this is the money value of the expectancy interest.

ii. In TORT, it is non-economic damages such as pain and suffering.
Consequential damages: Defined by the UCC section 2-715(2) as losses resulting from general
or particular requirements and needs of which the seller (breaching party) at time of contracting
had reason to know and which could not reasonably be prevented by cover. To cover is to buy
goods elsewhere.
i. Things that happen as a consequence of the Ps initial loss AND there has to be factual
evidence that the breaching party could forsee that these types of damages could be
recoverable.
ii. Not often allowed.
Incidental damages: Reasonable expenses related to breach including commercially reasonable
charges, expenses related to cover, return, or resale, and expenses related to reasonable
rejection or stopping delivery of goods (UCC section 2-710; 2-715).
Special damages: In K they are economic losses, but ones that are caused by consequences
specific to the K in question. They include both consequential and incidental damages. Typically
recoverable when the breaching party had reason to forsee them as a result of breach at the
time the K was formed.
i. In Tort, special damages are out of pocket losses.
Buck v. Morrow: Morrow leased a tract of land to Buck so he could graze his cattle there at the
rate of 125/annum. After two years, Morrow sold the land to someone else, and Buck had to find
another suitable pasture, during which at that time he had to turn his cattle out onto the
commons at large and had to hire an extra hand at the rate of 1.50/day to tend to his 140 head.
Eventually, Buck lost 15 dollars per head. Consequential damages are available Buck had to
expend more money BC of Morrows breach.
i. Court held that general damages were to be measured by the difference, if any, between the
K price and the rental value of the pasture for the unexpired term.
ii. Court held that P should get special damages for loss of 15 cattle and expenses incurred in
the pasture situation b/c they were proximately caused by the breach and reasonably
forseeable by the parties.
Meinrath v. Singer Co: P is an entrepreneur and he wants bonus money from the D based on a
transaction. He wants 300k on top of bonus money and also wants Consequential damages in
the amount of 770k.
i. Allowing consequential damages to always be recovered would result in us having very large
recoveries. That is why they are frowned on.
ii. Argument: P argues that D knew that P needed the bonus to be paid promptly and was
relying on prompt payment to keep other businesses afloat. P lost some of his businesses
and lost money on others this was proximately caused by the D.
iii. RULE: Interest is the measure of damages for withholding money. No consequential
damages allowed.
1. That means, if someone owes you 300k, and they dont pay it on time, your damages
are the interest value on that 300k for the time they dont pay it, rather than the
negative things that happen to you in your life b/c of the money not being paid on
time.
a. Rationale: unmanageable to allow consequential damages in every K dispute in
which money is withheld.
b. Also an argument that consequential damages are too remote or speculative.
i. Courts repeat the mantras of remote/speculative in late payment cases to
describe the conclusion they are headed towards rather than phrases to be
given substantive meaning.
ii. Many jurisdictions award the P the actual interest rate rather than the legal
rate.
iv. If there is a K to LOAN money, and K is breached, courts in most jurisdictions will then allow
consequential damages.
1. K to loan money and breaching party knows there will be after-effects if they dont go
through with the loan.
2. But in most loan situations, consequential damages not recoverable for breach. BC
special circumstances must be proven: special knowledge of consequences and
consequences must be proximately caused.
Texaco, Inc. v. Pennzoil Co: Texaco, Inc. (competitor) came in and interfered with K that Pennzoil
had with Getty Oil co.

i. Sometimes courts will allow tort damages in situations of interference with existing K or
interference with a prospective economic advantage IF the interfering party is really
outside the rules of the game.
ii. For damage purposes- we allow consequential damages freely in interference with K tort
claims limited only by tort proximate cause rules.
iii. Even if this had been a Ks case, we can see an argument that consequential damages
should have been allowed anyway.
1. Courts focus on: did the parties reasonably forsee that these damages would ensue?
Here, Texaco could have reasonably forseen that these would be the consequences if
they initiated the breach.
2. Here, consequence of the breach: now Pennzoil has to do 5 years of explorations to
find equivalent reserves
iv. Are we comfortable with consequential damages?
1. Just seeing how much money can be involved when we start allowing them.
2. Analogy to think about: the reason courts limit tort damages through a proximate
cause principle is b/c they are worried that causation could just go on forever. If we
dont have a limitation, the ripple effect can be huge.
3. Billions and billions dollars more than the benefit of the bargain.
v. GENERAL RULE: Although there is some uncertainty in the damages, that we are going to
tolerate that when the Ds misconduct is the cause of the uncertainty.
1. P almost always is going to have some uncertainty, especially when they are
considering lost profits. Hard to know what variables come into effect.
2. Courts have a rule that you have to prove your damages with certainty, but as this
court points out, if the ds misconduct makes it difficult or impossible to know with
certainty what the loss profits will be, we will allow the P more uncertainty and still
allow lost profits.
a. Might depend on how bad the misconduct was.
LIMITATION OF REMEDY AND CONSEQUENTIAL DAMAGES
h. Kearney & Trecker Corp v. Master Engraving Co: K had a clause that said the D would repair or
replace product if it did not function correctly. Product had a lot of problems. P blames the
product, and d says it is the Ps fault and the way they are using it. Jury awards 57k. NJ Supreme
Court reverses.
i. Note: this kind of provision: waiver of consequential damages is EXTREMELY common in
sales Ks. Most consumers dont have the sophistication to negotiate terms.
ii. Main issue: Whether an exclusion of consequential damages is voided when a limited
remedy fails in its essential purpose
1. UCC section 2-719 applies to this issue: states that at least a fair quantum of
remedies must be retained, and that if the limited remedy fails of its essential
purpose the limitations wont apply.
a. You cant enforce a K if essentially the seller has gotten away with excluding
essentially all of the remedies.
2. Here, argument is that the remedy of repair and replace fails of its essential purpose,
cause it wasnt done, thus we should be able to get consequential damages.
3. Court says NO- the exclusion of consequential damages is still valid, but recognizes a
split on this issue:
a. Some jurisdictions interpret this to allow the exclusion of consequential
damages even if limited remedy fails on its essential purpose.
b. Other juxs say exclusion of consequential damages is invalid if limited remedy
fails on its essential purpose.
iii. Why must there be some limited quantum of remedy?
1. How much do we believe in freedom of K?
2. A rational person could enter in a K where they think Im probably out of luck if this
person breaches.
3. We have courts stepping in and being paternalistic here
iv. With regard to personal injury cases, courts often treat waivers and exclusion of damages
where a P suffers personal injury differently as opposed to K damages.
1. Under the UCC rules are aggressive against sellers trying to waive damages in a
personal injury context.

2. UCC 2-7193: A waiver provision of the UCC. Drafters make clear that waivers of
liability are presumed unconscionable under this section in a personal injury context.
The presumption is extremely difficult to overcome.
a. Note: if there is a situation in which presumption can be rebutted, we dont
know of it. This shows how strong the presumption is.
b. We like to protect injured consumers and their bodies.
c. Another way to say this: tort law cares. Ks is cold-hearted and mean.
LIQIUDATED DAMAGES
a. Damages provided in a set sum in part of a K
b. Enforceable if reasonable in light of:
i.
The anticipated or actual loss caused by the breach.
ii.
And the difficulties of proof of loss (Rest. 2d of Ks section 356)
1. If its difficult to establish loss and the amount is reasonable, you probably will be
allowed liquidated damages.
c. Look out for a PENALTY: where there is a LD clause that is not reasonable, but it is an arbitrary
sum that has the effect of punishing a breach rather than compensating a breach.
i.
If Penalty is attached to it, LD will be invalidated
d. Section 2-718-1 adds a THIRD FACTOR: The inconvenience or nonfeasibility obtaining an
adequate remedy.
e. In Re Trans World Airlines, Inc: TWA entered into an agreement to lease two planes from
interface Group.
ii.
Why do we care about whether LD are punitive or not?
iii.
Are we hurting the free flow of commerce BC we are telling people you cant really count
on what you K?
iv.
When we have courts say, oh you contracted to this but surprise you dont win, we are
going to call it a penalty, is that a good or bad thing? Courts apply Penalty rules with LD
even between sophisticated parties.
v.
Do you agree that this is a penalty? Court says this is a Penalty.
1. We are especially likely to see this with consumer transactions, but you will see it
with merchant to merchant transactions as well.
vi.
Court says it doesnt matter whether you have sophisticated parties. If it is a penalty, it is
a penalty. And it doesnt matter what the parties say.
f. Northern Illinois Gas Co. v. Energy Cooperative, Inc. : P produced Naptha which D converted into
natural gas. D contracted to buy 56 million barrels over a 10 year period. But then it became
cheaper to buy from others and D stopped buying. Had LD provision of 1 cent/gallon. Jury
awards damages of 305 million. Appellate court said LD was proper remedy.
i.
Although we often talk about LD when they are big and we are worried about when they
are a penalty, they are also sometimes too small.
ii.
When LD is too great, the question is whether they are void as a penalty.
iii.
When they are too small, the question is whether they are exclusive
1. Should P have an option of exercising LD or actual damages instead?
a. Court looks to UCC 2-718 and 2-719: Here the court focuses on 2719(b) which says that resort to a remedy is optional UNLESS the
remedy is expressly agreed to be exclusive.
i. This court holds that LD clause is not a limitation on remedies. Not subject
to option provision, P does not have the option of choosing actual damages
instead.
ii. Courts will usually treat LD clause that is too small that you are generally
going to be stuck with it.
g. UCC Section 2-719(1)(b) Summary:
i.
Resort to a remedy is optional unless the remedy is expressly agreed to be exclusive.
ii.
Liquidated Damages is not treated as a limitation of remedies, and thus is not optional
under 2-719 (even if LD are smaller than lost profits, the party suing for breach is stuck
with the LD and cannot choose to seek lost profits instead).
iii.
Example: Northern Illinois case (see above) where LD for breach of naptha purchase
agreement was much smaller than provable lost profits and P was stuck with LD.
OTHER TYPES OF LIMITATIONS ON DAMAGES
a. Avoidable Consequences Rule
b. Offsetting Benefits Rule (with collateral sources exception)

c.
d.
e.
f.

Causation Rules (including proximate cause)

The contractual special damages rule (The Hadley rule)
The reasonable certainty rule
Substantive policy limitations

A. AVOIDABLE CONSEQUENCES RULE

a. Ps can only recover losses that they could not have avoided by making reasonable efforts to
minimize the losses.
b. Applies pretty much the same way in torts and Ks.
c. S.J. Groves & Sons Co. v. Warner Co.: G is going to get the concrete from W. G filed lawsuit
claiming extensive losses BC of Ws failure to deliver adequate supplies at scheduled times.
Court said G had other options:
i. Completely switched over to Trap Rock the other supplier
ii. Could have made a K with Trap to supply just the 25% of concrete that they werent getting
from Warner.
1. But Groves stayed with Warner- lost money.
2. D Warner claims the Avoidable Consequences Rule should apply and they shouldnt
have to pay the full damages sustained, just the damages that werent avoidable.
3. Third circuit does not agree with Warner
a. Trap Rock is getting some of their supplies from Warner and Warner would not
have been happy with the situation if Trap Rock became a competitor so
maybe Warner would have made things even worse.
b. Note: court emphasizes this was a bad faith breach of the K.
c. Court notes: with two independent suppliers, may have had even more
problems. It is messy to say in hindsight that you should have done it
differently.
d. RULE: Where there is uncertainty over whether the P could have saved money,
the D bears the burden of that uncertainty.
iii. Change facts: suppose it is clear P suffered 100k worth of damages, but they could have
avoided 70k of those damages, if we give P 30k, does that restore P to the position he would
have been in if D had not breached?
1. Well- what was the expectation? 100k. When we give the P just 30k, we arent
putting the P in the position had the K not been breached.
2. Courts want to put the P in their rightful position think of this more BROADLY.
a. Normally rightful position would be 100k b/c that is reasonable expectation
that was lost. If you give you 30k BC you could have avoided 70k, you are
getting the benefit of the bargain you thought you were going to get, BUT we
are using the concept more broadly- BC the D was able to meet this burden of
establishing that you did not act reasonably to avoid these consequences, then
the 30k becomes the new rightful position of the P.
d. Employment Contracts
i. Avoidable consequences problem comes up frequently in this context, specifically in
wrongful discharge cases.
ii. Hypo: Prof. is wrongfully fired by Pepperdine and refuses to take any other job. Pepperdine
might argue that there was avoidable consequences- you should have been able to get
another job and your lost profits are larger BC you sat around and didnt even try. We
(Pepperdine) shouldnt have to pay you what you reasonably failed to mitigate.
iii. Hypo: One of the top law firms makes a K to hire you and then breaches. K had a set salary.
Question of what job should you have to take to reasonably mitigate the damages?
1. One job you could choose: digging ditches. There is a shortage of ditch diggers in the
area, should the big firm be able to bring in evidence that you could have taken a job
as a ditch digger?
a. No. This is not a substantially equivalent position.
2. Two-lawyer firm in Bakersfield that takes anyone that comes through the door and
focuses on low-income clients
a. Issues: re-location; lower salary; different kind of law firm.
3. A medium sized firm in LA but it pays 40k/year less.
a. This is getting closer- maybe need to take this job.
iv. Avoidable Consequences in wrongful termination cases:
1. Ps usually are not required to travel a long distance from their geographic area to find
work.

2. They need not accept work outside of their field

3. need not accept a job significantly inferior to the job from which they were
discharged
a. are these good rules?
b. Are these rules stronger when dealing with professionals?
i. Highly trained professionals find a lot of their self-worth in their profession.
Malpractice suits against professionals really hurt BC their identity is built
strongly around their career.
c. Question of what exactly outside of your field means
d. Entertainment Ks we see especially a focus on something that an individual
gives that cant easily be replaced/interchangeable.
e. Isnt there an argument to be made for just getting off of your butt and still just
doing something?
f. Pure tort situation: example: Professional baseball pitcher; right handed;
really good. Can get 30 million/year but Im not super bright; never finished
college; dont have good communication or writing skills. Somebody
negligently runs over me in a car pure negligence action. Right hand
crushed. I sue for negligence, what should the law require me to do to mitigate
my loss?
i. What if the Pitcher says surgery scares me; should he be required to
undergo surgery to mitigate a 30 million dollar loss? = Courts tend NOT to
require surgeries.
ii. Should he have to work at McDonalds?
iii. In pure tort cases- courts will sometimes be more harsh on Ps and say they
will subtract even income from jobs that arent a good fit from what they
were doing before.
1. Avoidable consequences more often used to reduce recovery in pure
tort cases. Less sympathetic to Ps in these types of cases.
e. Note 1- pg. 88: The avoidable consequences rule is closely related to contributory/comparative
negligence. How is this like/unlike avoidable consequences?
1. In both- there is something that the P could have done, but didnt.
2. In a contributory/comparative negligence situation, P is doing something that helps
create the injury.
3. With avoidable consequences, we are criticizing Ps conduct AFTER the injury has
taken place.
4. Contributory/comparative negligence only applies to tort claims; Avoidable
consequences applies in tort & K claims.
5. Avoidable consequences rule: labeled as the DUTY TO MITIGATE DAMAGES (term
used in tort law)
f. What if the P just doesnt have the financial ability to mitigate? D hits P in fender bender that
makes Ps car not driveable without repairs, but P cant pay towing and repair bill; car sits in
shop accruing storage costs indefinitely. Did the P act unreasonably?
1. We are looking at the D having to prove that a reasonable P would have mitigated
loss. If P is not financially able to mitigate loss it doesnt seem fair to take their
recovery away from them.
g. Summarizing Avoidable Consequences Rule:
i. P who fails to use reasonable efforts to avoid losses caused by D cannot recover for those
losses that could have been avoided.
ii. P who makes reasonable efforts but is unsuccessful in avoiding losses can still recover full
damages
iii. P can recover from D for expenses incurred in making reasonable efforts to avoid a loss.
B. OFFSETTING BENEFITS RULE:
a. Ps damages are reduced to the extent that he received an offsetting benefit that resulted from
Ds conduct.
i. Example: If d destroys my old car negligently he is allowed to consider the extra benefit to
me if I am given a new car in exchange: D is allowed to pay market value of my car that I
had rather than what I paid for it (in this case I had an old car so the market value of my
old car).
b. How far should we go with the offsetting benefits rule: Hypo: Woman is married and husband is
tortuously killed. Should the D be able to point to the womans remarriage to offset damages?

Should we be able to consider that she has not really suffered financially BC the guy she remarried is even better off financially?
i. Most jx say remarriage is not admissible.
C. THE COLLATERAL SOURCE RULE: An exception to the offsetting benefits rule. The rule provides:
a. A P who is injured by D and who receives compensation for those injuries from sources
independent of the D is STILL entitled to recover damages from D for the same losses that have
been compensated by the collateral source.
b. Oden v. Chemung County Industrial Developmental Agency: Oden was an ironworker who was
injured by a falling steel column. Got different categories of damages. Issue: he also received
lost ordinary pension benefits and lost earnings, and health and welfare benefits. Aside from
that he was going to receive disability retirement benefits. The worry was that this was double
recovery.
i. Court says that the money awarded for pension benefits should only be reduced to the
extent that the jury awarded for that category- so lets cap it at 66k. Here a reduction was
done BC NY is one of the many jx who have some sort of limitation on the CL collateral
source rule. Generally, allows evidence of collateral sources.
ii. Court says he gets to keep 80k for lost earnings and benefits.
iii. The case revolves around how to apply a tort reform statute that legislatively eliminated the
collateral source rule: only collateral sources that correspond to a category of damages
should be reduced.
1. Ex: if he got future pension benefits only allow offsetting benefit to be applied to
pension that he was awarded.
iv. Judicial skepticism toward the legislation that eliminated the collateral source rule. Court
wanted to find a way to limit the statute. Going to limit the specific type of damages rather
than reducing from the overall judgment.
c. What do we think of the Traditional Collateral source Rule:
i. Pros: not fair to people who invest in insurance otherwise; often there is a subrogation
clause which forces P to pay back the insurance company anyway so if I double recover Im
paying back insurance anyways; Often general damages are a multiple of special damages;
Ps dont get their attorney fees paid so if they get a bit of double recovery thats okay then
they can still pay their attorney and still recover (make them truly whole).
ii. Cons: double recovery is not fair.
d. Collateral Source Rule: Summary
i. Not only is it not deducted from damages, it is also inadmissible for the D to tell the jury that
there was a collateral source of funds b/c that would taint the jurys view of how much the P
should be awarded.
ii. A lot of jx either got rid collateral source rule or limit it in certain circumstances.
D. PROXIMATE CAUSE
a. Another type of limitation on damages.
b. The proximate cause rule is a limitation on damages holding that only proximately caused
damages may be recovered.
c. In tort cases, P must prove both cause in fact and proximate cause regarding damages.
i. Cause in fact: factual, scientific question.
ii. Proximate cause: purely a policy question is it good for society to allow liability to extend
this far?
d. Pruitt v. Alllied Chemical Corp: chemical spill in the river. Three categories of Ps. 1. People who
were harvesting the sea life. 2. Tackleshops and others who sold goods and services to sports
fisherman. 3. Seafood dealers, restaranteurs who have losses BC the seafood that they got from
the bay and river was now not available. All three Ps bring suit against the polluter. Fight over
which category of Ps should be able to recover and which category is too remote.
i. Court creates a brightline approach: the commercial fisherman can recover; people who
have oyster beds can recover; people actually harvesting the sea life and tackleshop can
recover; BUT the seafood dealers and restaurateurs cannot recover.
ii. Court spent a lot of time repeating that it felt there was a need to somehow limit liability it
would be messy to allow limitless liability up to the point of bankruptcy. Not good for policy.
iii. Proximity in time or space is not the key issue dont get confused that it is the case even
though it is called proximate cause. The real focus is on overall policy concerns.
iv. Often formulated in language of reasonable foreseeability. Ct said damage was forseeable
here, but it was too remote.

v. Hypo: suppose both the fisherman and seafood restaurants were able to recover, would that
be allowing double recovery?
1. No- because they are two different profit margins.
e. Evra Corp. v. Swiss Bank Corp.: P chartered the ship at a cheap price. Prices went up and
owners were anxious to get out of the K. P paid by wiring the money through D bank. P was a
little late on one of the payments and owners tried to rescind the K. Went to arbitration did not
allow rescission not enough notice. After arbitration, P was on notice that timely payment was
extremely important to boat owner. If they didnt- owners were going to rescind K. P is late
again in payment, but at this time it is BC of the D bank. D bank messed up the wire transfer was negligent in losing the fax. This gave the ship owner the ability to rescind the K. P kept
trying to tender the payment, but ship owner refused to take it. P sues D bank in NEGLIGENCE.
i. Swiss Bank, the D, did not know the consequences if they lost a wire transfer order.
ii. Hadley v. Baxendale rule: Consequential damages are generally not available, however,
they can be awarded if it is forseeable to the D that consequential damages will be suffered
by the P.
1. Why not apply this rule here? The bank didnt know how bad it would be for its client
if it didnt pay the money on time so they had no foreseeability, so they cant get
consequential damages.
a. BC Ps sued for negligence. We will not see Hadley rule applied in negligence
cases b/c Hadley rule is a K rule.
b. We did not get to a Kual level here..
c. But court still finds the Hadley rule helpful b/c it is analogous to the courts
proximate cause rule for torts.
i. When d is not put on notice, it is not reasonably forseeable that this kind of
loss would be sustained.
E. ECONOMIC HARM, CERTAINTY, AND SUBSTANTIVE LIMITS
a. Economic harm rule: separate but closely related to proximate cause rule. Here, P cannot
recover for purely economic harm; can only recover economic harm if P also suffers physical or
psychological injury to person or property.
i. Example: someone negligently contaminates Malibu with chemicals. Pepperdine law school
has to be shut down; Professor Cupp would lose his job and we would all be inconvenienced
and would suffer costs (maybe have to commute farther, not as good of an education, etc).
Courts will not allow us to recover. You could put that in proximate cause language that is
too far removed to compensate not only the businesses that have to undergo clean up of
facilities but also people who have economic consequences from having their jobs displaced.
This is going to allow huge liability and courts will not allow this.
1. Bottom Line: just going to look at whether there was something beyond purely
economic harm.
2. It is easy to manage and serves the same kind of policy purpose that the broader
proximate cause rule serves.
3. If I were physically injured (got a type of lymphoma) then I could go after the
pollutant under the economic harm rule b/c I am more directly impacted. I could
probably even get my wage losses.
4. Torts law focuses on protection from physical harm primarily, and K law focuses on
economic loss.
b. In products liability cases what about lost profits when there is damage only the
property/product itself?
i. Should lost profit damages be allowed under tort law if there is only damage to the product
itself?
ii. Example: if you have a brief you need to file with the court tomorrow that you have on your
laptop and your computer crashes b/c of a defect - only harm is to the product itself; it
didnt blow up in my face. Should you be able to recover any lost profits b/c you lost yoru
document that you were supposed to file b/c of the computer?
iii. Courts have taken THREE APPROACHES:
1. No tort liability if a product causes only economic harm (which includes cases in
which there is damage only to the product itself). This is the MAJORITY APPROACH.
2. Tort liability applies even if the harm is only to the product itself MINORITY
APPROACH
3. Tort liability applies where there is only harm to the product itself, but ONLY if there
was a significant danger of physical injury. MINORITY APPROACH.
iv. Remember- K claims still viable if your laptop breaks down.

c. Substantive Limitations on awarding damages:

i. Relatively rare. This is a category where courts are saying sometimes we think its best to
ignore what the law is to get to what is fair with regard to damages, and specifically in the
context of limiting damages.
ii. Brunswick Corp v. Pueblo Bowl-O-Mat: P owned several bowling centers and sued D
Brunswick claiming that it was in violation of an antitrust act. Bowling rapidly expanded in
popularity but then the market tumbled. Brunswick made a lot of money- they had a lot of
uncollectable debts when the crisis started. So they began operating bowling alleys that
would have gone bankrupt otherwise. Ps claim we are moving toward a monopoly here
and Ps also claim they are damaged BC there would have been less competition if bowling
alleys would have been allowed to just show down instead of Brunswick taking over and
keeping them open.
1. SCOTUS says the whole idea of antitrust laws is to protect competition. We want to
preserve competition.
2. Court says okay, you might be able to prove that Brunswick has developed
monopoly power but with regard to your damages, we dont feel like its right to
award treble damages where the end result is creating more competition. It is not
substantively what we want to do with remedies.
3. Few examples where courts might consider policy-based restrictions on damages:
a. Where monopoly conduct might actually increase competition (Brunswick)
b. Illegal search and seizure where evidence of crime found
c. Awarding back pay to illegal aliens wrongfully reported to INS by their
employer
i. Remedy available but there may be a good policy argument for not allowing
it.
d. Reasonable Certainty Rule:
i. Courts are usually more demanding of certainty in cases involving economic harm than in
cases involving personal injury.
1. BC it is hard to quantify how much pain is worth; whereas economic harm is easier
to quantify.
ii. Courts will also often be more demanding of certainty in consequential damages situations
than with other damages.
iii. Bigelow v. RKO Radio Pictures: Petitioners allege they have lost earnings of 120k BC of a
conspiracy for other theaters to show films prior to when other theaters can run them. The
big chain theaters are keeping the little independent theaters from getting the first runs of
movies.
1. Jury awards verdict. Supreme Court says damages are not too uncertain.
2. Two types of Uncertainty:
a. Whether Ds misconduct caused harm?
b. Then the P also has to prove how much harm was caused.
3. Uncertainty regarding general causation:
a. Dissent in this case: uncertainty whether any harm at all was caused to the
little theaters. Even if they hadnt entered into a conspiracy, it is still the Big
guys against the little guys. Would it be so shocking, absent a conspiracy, if
the big guys cut deals? If you are a movie producer isnt is possible you want
your movies run in big theaters first?
4. Majority doesnt have a problem with issue of causation, but instead focuses on
uncertainty with regard to damages.
5. Court uses two main approaches:
a. Time Comparison Approach: P puts on evidence of how much it made before
wrong vs. how much it made after wrong. D will try to rebut it by showing
other factors may have accounted for diminished performance.
i. it will be up to the trier of fact to decide whose story to believe.
b. Similar entity Comparison Approach: P puts on evidence of how much it made
vs. how much a similar entity not affected by the misconduct made. D counters
by finding differences between P and the supposedly similar entity.
iv. Absolute precision is impossible, so it is a question of how much uncertainty we are going to
allow.
v. A reasonable level of certainty is required regarding amount of damages
vi. If Ds misconduct caused the uncertainty, courts may tolerate greater uncertainty.
vii. Lost profits for new businesses:

1. Shrinking minority: no lost profits awarded for new businesses BC their profits are so
uncertain.
a. 50% of new businesses fail within 12 months.
2. Majority: consider each lost profits claim on a case by case basis regarding certainty.
viii. Valuing Personal Injury:
1. General vs. Special damages
a. When one suffers personal injury in tort there are these two types of damages.
b. General damages are non-economic damages; special damages are out of
pocket losses.
c. Special challenges with certainty in pain and suffering awards.
2. Debus v. Grand Union Stores: P shopping at a D store when a boxes fell on her. D
employee was messing with boxes at the time. D appealing b/c in the closing
arguments, Ps attorney used the per diem argument.
a. Split of authority concerning Per Diem arguments.
b. D says Ps attorney shouldnt have been allowed to use per diem approach b/c
it was too prejudicial.
c. P had injuries causing 20% disability. P is likely to stay in pain for the rest of
her life. She has a life expectancy of 35 years at the time of the accident. 30
dollars/day for the pain and suffering, mental anguish, and loss of enjoyment of
life.
d. D said this should not be allowed; too prejudicial. It is also uncertain. If you
are going to allow it though, at least give a special cautionary instruction.
e. S. Ct. says they are going to allow per diem arguments & not going to require
special cautionary instruction.
f. P lawyer risks losing credibility if they overreach with the per diem argument.
g. Basic measure of tort general damages is that they must be fair and
reasonable under the circumstances. This is a very imprecise standard.
h. Melvin Bellai: the king of torts he gave himself that title and popularized
this theory.
i. Per Diem Argument:
i. Several states allow them, several do not. No clear majority. Third group
allows them but only with a cautionary jury instruction. Should they be
allowed?
1. Maybe it makes the lump sum make sense to the jury
2. We might experience pain differently over time
3. If you have chronic pain and face the same pain every day, it is more
expected to its not like a shock of new pain when you first get it.
4. If per diem argument leads to a large recovery maybe thats a fair
recovery.
5. If they are ridiculously high the Defense attorney can point this out.
6. Ds can use per diem arguments also, but using low numbers instead
of high numbers.
ii. Arguments against it:
1. Give an illusion of certainty in an area that is really entirely subjective.
2. Misleading
3. Every number is just pulled out of a hat.
4. Tolerance for pain increases all the time. If we are in constant pain it
feels less bad for us.
a. Problem= if Ds attorney points that out it may seem heartless.
ix. Informing jury of how much P is seeking in General Damages
1. Most jx, including CA, hold that it is okay to tell the jury how much P is seeking in
general damages.
a. Reason you may not want to: jury might think you are greedy.
b. Sometimes you want to give an amount so it can be better understood (hot
coffee case).
c. But, on the other hand, maybe youll do better by letting the jury stretch for
itself.
x. The Golden Rule argument: most jurisdictions reject allowing P to make the golden rule
argument, which is to ask jurors how much they would want to be awarded if they had
suffered the Ps injury.
1. We want jurors to be objective not subjective.

xi. Cost to hire someone to suffer the injury argument: courts do not allow Ps argue that pain
and suffering should equal the cost D would have to pay someone to volunteer to suffer the
injury, b/c there is no market for that.
F. WRONGFUL DEATH AND SURVIVAL
a. SURVIVAL
i. Ps own tort action that survives Ps death.
ii. Damages usually include:
1. Decedents own pain and suffering before death (even if it is very short)
2. Decedents lost wages before death (not after)
3. Medical expenses
4. Funeral expenses
iii. We are looking to the ESTATE, however the decedent sets that up.
iv. Unlike wrongful death, the death does not need to be caused by or related to the tort in
order for the action to apply.
1. Example: I dont need to be suing over what killed me.
v. Governed by Statute.
b. WRONGFUL DEATH
i. Governed by Statute.
ii. This is the action brought by the decedents close relatives for their own losses caused by
the Ds killing of the decedent.
iii. Often includes:
1. Loss of expected financial support
2. Loss of inheritance (larger inheritance they would have received had decedent lived
to normal life expectancy)
3. Monetary value of services and companionship (not all jurisdictions allow for this, but
a majority do).
4. In a minority of jurisdictions, emotional distress.
iv. Emotional distress vs. Loss of companionship = Most jx do not allow recovery for emotional
distress, but most do allow recovery for loss of society and companionship.
1. Loss of society and companionship = something concrete in your life that has been
taken away.
2. Emotional distress= something that has been added to your life now BC something
was taken away from you.
a. Broad thought: what might be going on is fear of letting the genie out of the
bottle. Emotional distress damages can make lawsuits worth a lot more. The
biggest element of damages is usually non-economic damages. Courts may be
concerned this will just put the tort system too broadly open. If limited to loss
of companionship damages, will likely take grief into account.
i. But sometimes they dont take grief into account.
v. Sense among scholars that there are three classes of decedents that have created tough
results in wrongful death claims that have pushed courts toward being more likely to allow
damages for grief/or broader damages for loss of companionship:
1. Children
2. Retired persons
3. Adults without dependents
vi. What do wrongful death damages really compensate? Better off having non-economic
damages for wrongful death or is there another reason that we traditionally limit wrongful
death to economic loss damages?
1. Cant bring the person back- so all you can do is give them money. That is the best
we can do.
2. But can you argue that this system hurts people instead of helping them?
a. Does it interfere with the normal grief process in a shallow way?
3. What about human dignity?
a. Argument that it is an affront to human dignity that the system gives u money
as a sort of compensation for the death of someone.
TORT
a.
b.
c.
d.

REFORM
Biggest target or tort reform statutes is Remedies. Could just be called remedies reform
Trying to make statutes to keep remedies from being too generous with Ps in tort lawsuits.
Virtually every state has tort reform.
Most common types of tort reform:

i.
ii.
iii.
iv.
v.

Limits on noneconomic damages (pain and suffering, etc).

Abolition or weakening of the collateral source rule
Limits on punitive damages often seen as a windfall to the Ps.
recovery of attorneys fees for prevailing party
abolition or limitation of joint and several liability.
1. CA says u can use J & S liability for special damages but cannot for your general
damages (pain/ suffering damages).
vi. Periodic payments of judgments; and
2. Cheaper to pay things over a # of years than paying everything right now if you are
the D. structured settlement
vii. Limiting the amount a Ps lawyer can take in attorneys fees.
e. Common challenges to tort reform statutes:
i. Violation of substantive due process (5th and 14th amendments)
1. State constitution cannot give less protections than federal constitution, but of course
it can give more protections.
2. Legislation about economic interests challenged as being unfair, the courts tend to
ask only if the state statute is rationally related to a legitimate state interest.
b. Usually will be upheld as constitutional.
ii. Violation of equal protection (14th amendment)
1. Saying Im guaranteed EP under the laws and you are treating me differently.
2. Same rational relationship is applied.
3. BC there is some rational relationship b/w statute & legitimate state interest, it will
often be upheld.
iii. Violates state right to trial by jury (if state constitution has this).
1. Not all states have a right to trial by jury; federal constitution does but only for
criminal matters
2. If jury says I should get 500k & statute says you are capped at 250k- not really
allowing jury to ascertain my damages.
3. This kind of challenge has often been successful.
iv. State separation of powers clauses
1. Idea that legislature is invading the judicial sphere.
2. Plenty of statutes have been knocked down on this ground though.
v. State open court provisions
1. A lot of these challenges are successful.
2. State constitutions sometimes provide that everyone has equal access to the courts.
Challenger argues I dont get full access to the courts if you are saying some of my
legitimate damages are not going to be allowed.
f. Arbino v. Johnson & Johnson: shows struggle between legislatures creating tort reform statutes
and them often being declared unconstitutional under state or federal constitutions.
i. consider whether there is something of a turf struggle on some level where courts have had
control over tort remedies for years; legislatures come in and make changes; pick up a tone
of skepticism about whether the rationales given by the legislatures for needing tort reform
are really legitimate.
ii. P claims she suffered blood clots from Ds birth control patch.
iii. Issue: whether Ohios tort reform statute limiting noneconomic damages violates the Ohio
constitution.
iv. Also asked to decide similar issues about limitations on punitive damages and limitations on
collateral source rule.
v. See above for the different categories and how this court approached each issue.
g. Debate:
i. Belief that tort recovery had gotten out of hand. (in the number of judgments and also in the
amount of money awarded)
ii. Statistical gameplay: When Ps lawyers are talking about jury verdicts and how big tort
litigation is they talk about median verdicts. Insurance companies talk about Mean Verdicts.
1. The reason for this: the outliers, especially on the high end in tort litigation are often
huge so that will pull the mean up higher and will make it look like the tort system
even more expensive. Insurance company looks at this.
2. Ps lawyer want the numbers to look as small as possible- so looking at median knocks
out the outliers.
G. CIVIL RIGHTS AND DIGNITARY HARMS

a. What should be your measure of damages if constitutional rights are damages, particularly if it
doesnt cause you out of pocket loss?
b. How much should we pay for violations against dignity?
c. Leyka v. City of Chicago: Strip search case. P brought suit claiming the city of Chicago violated
her civil rights when Chicago police officers subjected her to a strip search after her arrest for a
misdemeanor offense. no evidence that the woman was taunted. P claims she suffers great
distress and now she cant go out alone at night b/c of her fear. Jury awards her 50k Note: she
had no physical harm done to her.
i. Challenge: that the award was too high. Court ultimately agrees.
ii. Facts that matter in a case like this:
1. Whether she was actually physically harmed
2. What have people in similar situations been awarded in the past
3. How invasive was the search
4. Aggravating circumstances of the search
5. Basically looking at how much indicia of authenticity we have, but even in
the absence of that, what facts are relevant to how deep a violation of her
dignity it was?
a. There is no precise formula.
b. The damages might be different today than they would be then. Levels of
offensiveness change.
c. Seems similar to trying to figure out noneconomic harm damage amounts in
torts.
d. Carey v. Piphus; P was a high school freshman. Principal saw P with what he thought was a
marijuana cigarette. Suspended him for 20 days without giving P an opportunity to be heard.
Argument that president violated Ps procedural due process rights. P seeks damages but offers
no evidence on what he suffered; seeks 3k in damages and seeks an injunction deleting
suspension from record.
i. SCOTUS said that P is not entitled to damages in this case.
ii. In a constitutional case, there are no presumed damages. A claim for dignitary loss is based
on a constitutional violation which does not include presumed damages. You need to
actually put on evidence for your damages.
iii. Court said P must prove that the constitutional deprivation caused the Ps harm must show
he would not have been suspended had he been given a hearing.
H. TAXES AND INTEREST
a. How are we going to deal with whether judgment should be taxed? Should we discount to
present value?
b. Pre-judgment Interest and Post-Judgment interest
i. Pre-judgment interest:
1. Should interest be paid for the time P had to wait prior to getting a judgment?
2. Recoverable for ascertainable money damages, meaning certain by calculation.
3. Under common law, often limited to Ks cases.
4. Modernly, many courts allow it in torts cases as well, but not all courts.
a. b/c non-economic damages are difficult to know prejudgment what those are
going to be (in torts cases)
ii. Post-Judgment Interest
1. Should there be interest paid on time waiting to collect recovery?
2. More readily recoverable than prejudgment interest, BC it is more readily
ascertainable
c. Simple Interest vs. compound Interest
i. Most states do not allow compounding interest
ii. Important to look closely at statutes on interest questions.
d. TAXATION OF DAMAGES
i. Three major issues:
1. Is the award taxable at all?
2. What are measurement issues for taxes for future lost earnings?
3. Jury instructions- what are we going to tell the jury about taxation of damages?
ii. Congress said a few things:
1. We are going to start taxing punitive damages
2. We are going to start taxing non-economic tort damages if they are not parasitic
(related to) personal injury.

a. Negligent infliction of emotional distress; defamation; dignitary torts

3. K damages are taxable there is no debate over this.
iii. Measurement issues for taxes for future lost earnings:
1. Key issue: do we determine them by before tax income or after tax income.
2. The government would like to go on gross; the individual would like to go on net.
3. Ps would like to get gross income awarded; Ds would prefer if they only had to pay
net income
4. Majority approach: to award GROSS earnings
a. Rationale: provides a benefit to the P consistent with the tax benefit that
congress showed intent to provide by exempting personal injury awards from
taxes; uncertainty in calculating future tax rates; allowing gross income to be
awarded is an offset for having to pay contingency fees and really makes P
whole; P is going to pay the tax anyhow and helps the government in that way.
5. Minority approach: award based upon net earnings (after tax income)
iv. Jury instructions with regard to taxation:
1. A lot of litigation over what to tell the jury.
2. If Ps are not going to be taxed on an award, they dont want the jury to know that b/c
they are afraid the jury will discount the award
3. If they are going to be taxed, they want the jury to know that in hopes the jury will
inflate the award.
4. Courts have 5 different approaches:
a. Court doesnt say anything about taxes in the instructions
b. Instruct that the award is not subject to income tax; or that a portion of it
wont.
c. Instruct award is not subject to income tax AND tell jury not to add or subtract
to award BC of income tax.
d. Instruct jury to award net income after taxes.
e. Trial judge has discretion as to whether or not to offer a jury instruction.
I.

DETERMINING PRESENT VALUE

a. Courts typically discount future damage awards to present value.
b. Ps want a LOW discount percentage, and Ds want a HIGH discount percentage.
c. Balancing inflation and future value discounting in choosing discount rate:
i. Courts require a safe and relatively conservative rate to be used to avoid too much risk for P.
Often 2%-5%.
ii. 2 factors that push in opposite directions in trying to figure out whether we should discount
what we are giving to the P:
1. Some say we should discount the Ps future damages (present value of money).
2. But on the opposite side of the equation is future inflation: Ps money is going to be
worth less in the future than it is onw b/c weve traditionally had inflation.
a. Hopefully investments pay out at a higher rate than inflation.
d. THREE JURISDICTIONAL APPROACHES:
i. Total offset approach: Assumes that inflation will offset future value discounting, and thus
does no discounting. Many courts follow this approach, which is the most simple.
ii. Real Interest Rate approach: instead of trying to predict future interest rates, assumes that
over time, interest rates will generally exceed inflation by 1-3% and thus discounts by that
much.
iii. Balancing Approach: undertakes to predict both future inflation & future interest rates and
balance them out.

J.

PUNITIVE DAMAGES
a. We are not focused on putting the P back in her rightful position.
b. PD are not a form of compensatory damages, instead they are intended to PUNISH AND DETER.
c. Focus is on the D, rather than on the P.
i. This is exactly what we try to do with criminal law, so these PD have been talked about as
being quasi-criminal.
d. Exxon Shipping Co v. Baker: Supertanker Exxon Valdez ran aground spilling millions of gallons of
crude oil. The ships captain was a relapsing alcoholic. Evidence he drank before coming on
board. Captain did not supervise the turn and they didnt make the turn causing the ship to spill
oil. Case goes up to the S. Ct. but this is not a constitutional law case. This case arises from
maritime law.

i. EXXON RULE: In PD based on federal law, a 1:1 ratio will be used to determine punitive
damages, at least where Ds misconduct is on the lower end of misconduct (no purpose to
injure, etc).
1. This is the ratio between punitive damages and compensatory damages. Court
thinks it is important that PD should be awarded at a level equal to compensatory
damages.
a. Thought this was a good approach BC otherwise PD are far too unpredictable.
e. Punitive damages and Economic Analysis of the cost of Harm
i. There are cases where PD are awarded b/c it would be cheaper to pay for the lawsuits than
to pay for an alternative design that would be for expensive for the product.
f. Tort Reform and PD
i. More common to see a state come up with a CAP on PD. Sometimes they have an absolute
dollar figure or they will have a multiple of compensatory damages.
1. As long as multipliers are below constitutional maximum, states can do that.
ii. Sometimes vocabulary is enacted in jurisdictions that make it so we only want award PD in
really bad cases.
1. If claim is based on recklessness rather than intentional misconduct (must find that
the Ds conduct is DESPICABLE before awarding PD) = Daffy Duck concept.
g. More on PD
i. How bad must D be? - In CA: Daffy Duck rule applies. Requires D act despicable in
recklessness cases.
ii. Ds wealth:
1. Juries usually given evidence of Ds wealth & instructed to consider it when deciding
how much in PD is appropriate.
2. Minority of states do not allow such evidence; and even smaller minority require it.
3. Some jurisdictions require bifurcated trials for PD.
iii. Vicarious Liability:
1. For a corporation to be liable in PD for the acts of its employees, about the states
require high officials be involved in the conduct
2. The other apply respondiat superior, PD apply so long as within the course and
scope of employment ( conduct that furthers some interest of the corporation does
not have to further the overall interest)
iv. Actual harm requirement
1. Many states, including CA, require at least some compensatory damages to have PD
awarded.
v. Constitutional Limits on PD
1. 5th and 14th amendments substantive and procedural due process concerns: is the
PD award fair? And was the amount decided upon in a fair way?
2. BMW v. Gore: Gore was a dentist who bought a new BMW for 40k. 9 months later, a
detailer told him much of the car had been repainted. Gore called BMW and
discovered they did this about 1,000 times before repaint cars that get damaged
and pass them off as new. Gore sued and was awarded 4k in compensatory
damages.Jury then multiplied Gores out of pocket losses (4k) with the 1,000 other
times BMW had done this and awarded 4 million in PD. Court reversed the PD BC they
were not proportionate to BMWs harm to GORE.
a. Even when award dropped to 2 million, the court ruled that a 500:1 ratio
between compensatory damages and punitive damages was on its face
unconstitutional.
vi. Three constitutional guideposts to address PD (rule from BMW v. Gore) Courts should
consider these when awarding PD to preserve Ds substantive and procedural due process:
1. The degree of reprehensibility of Ds conduct
a. Intentional acts are worth more than negligence
b. Deliberate falsification is worth more than omissions
c. If D is a repeat offender, worth more.
2. The disparity b/t the harm suffered by P and the PD award; and
a. Physical harm (punch in the face) should be worth more than economic harm
(BMW v. Gore)
b. In general, the larger the compensatory award, the lower the ratio (ie: a 4k
award may be allowed a 20:1 ratio for 80k in punitive; but a 4mil award, to
make it constitutionally fair, would keep a low ratio such as 1:1)

3. The difference b/t the PD award and the civil penalties, if any, authorized to punish
such conduct.
vii. State Farm Mutual Auto Insurance Co. v. Campbell Campbell killed someone after trying to
pass six vans on the highway. Jury found him 100 percent at fault and awarded 186k. state
Farm refused to pay over the policy limits (25k pp). Campbell sued State Farm alleging bad
faith, refusal to settle, fraud, and intentional infliction of emotional distress. State farm had
very shady dealings; meant to screw over their customers. Jury awarded 2.6 million in
compensatory damages and 145 million in PD (reduced by court to 1 million and 25 million
respectively).
1. Wealth of D cannot justify crazy amount; Conduct that occurred in another state
when that conduct may be legal in that other state cannot be punished.
2. Conclusion: PD award of 145 million is unreasonable and not proportionate to the
wrong committed.
viii. Phillip Morris USA v. Williams Williams died shortly after being diagnosed with lung cancer
after smoking for a lifetime. His estate sued for fraud, claiming D falsely and systematically
undermined the cancer risks of tobacco to the public. Court concluded Ds conduct was
extremely reprehensible and intentionally inflicted substantial risk of serious illness or death
on thousands of people in Oregon. Jury awarded 21k in economic damages; 800k in noneconomic damages; and 79 million in PD.
1. Evidence of harm to others: in determining PD, under procedural due process, the
jury cannot consider harm inflicted on nonparties except to show reprehensibility.
a. So, damages cannot be awarded based on harm to other smokers who are not
the P. (i.e: like BMW above with 4k multiplied by 1,000 people harmed = not
allowed)
b. However, jury may consider the harm to others when determining the
reprehensible D is.
h. Punitive Damages based on breach of K:
i. Not typically allowed unless the breach of K also involves a tort.
ii. Formosa Plastics Corp. USA v. Presidio Engineers and Contractors, Inc. P sued for breach of K
but also for the tort of fraud.
1. If you have a tort attached to it, you can also get PD, but usually not with only breach
of K.
iii. Types of torts most often connected to breach of K:
1. Fraud
2. Conversion
3. Negligence
a. But courts dont usually allow neg. in context of BoK b/c negligence would
swallow up breach of K.
4. Tortious interference with K
a. Normally we dont mind when competitors interfere with Ks; but if we have
conduct that violates the rules of the game; if its egregious; such that tort is
actionable.
5. Bad faith breach of K
a. Violates implied covenant of good faith and fair dealing
b. In a few situations courts will allow tort action if party does not fulfill Kual
obligations of implied covenant of good faith and fair dealing
c. These kinds of claims are limited though; usually in insurance Ks
d. Usually allow 1st party claims where insured herself says insurance co. treated
her really badly in violation of implied covenant of good faith and fair dealing
(for refusing to settle a claim; or not giving coverage).
INJUNCTIONS
a. Look at it like this: a leap from an analysis of legal remedies to an analysis of equitable
remedies.
b. Equity subject to more discretion to the court: holistic sense of what is fair as opposed to
concrete rule of law.
A. PREVENTATIVE INJUNCTIONS
a. can be issued both at the trial stage and pre-trial stage. Could be either a preliminary
injunction or a permanent injunction in which moving party is trying to prevent the D from
doing something inappropriate in the future.

b. Two major issues:

i. Ripeness: analyzes whether a potential problem has developed to the point that the
courts are willing to deal with it. P has the burden of proving that an issue is ripe.
1. Two types of ripeness: Must be both constitutionally and remedially ripe in
order for it to be adjudicated.
a. Constitutional:
i. Part of the case or controversy requirement of Article III of the
Constitution.
ii. Limits the courts jurisdiction to cases in which there is a
concrete dispute between parties with adverse interests.
Prohibits advisory opinions, legal advice, etc.
1. Policy reasons: efficiency, dont get good law by
addressing hypotheticals
2. Hypo: Jones fears that Smith will start burning leaves in
backyard in violation of an ordinance no ripeness yet.
We need to know why he would fear this before a court
would do anything.
3. If Smith tells Jones incorrectly that he has the right to
burn leaves in the backyard; but assume also Smith has
taken no steps to assert his rights: we are moving along
the continuum but likely still have problem with ripeness.
4. What if Smith says he is going to burn the leaves in 30
days? Moving further along the continuum.
b. Remedial:
i. Focuses on the immediacy of potential harm, rather than the
concreteness of the dispute.
ii. Under remedial ripeness, if there is no likelihood of immediate
harm the courts will not issue an immediate preventative
injunction.
iii. However, the courts may still provide declaratory relief or issue a
permanent injunction after trial even when the threat of harm is
not immediate.
ii. Mootness:
1. Arises at the other end of the time continuum from ripeness.
2. Example: Jones only has 1 pile of leaves to burn and will be able to burn them
all in one day. He says I think someday I might burn these leaves; 30 days
from now Im going to burn these leaves. At some point it will be ripe enough.
Court can step in and enjoin. Lets say there is not an injunction sought or
issued at that point. 30 days comes to an end and Jones burns all leaves at
once. The next day, smith says I want to enjoin him from burning those leaves
that point is MOOT. The damage has already been done.
a. Also two types of Mootness: Constitutional and Remedial.
i. Constitutional: Applies when a dispute has ended, or when Ps
grievance has been resolved so that there is no longer any
dispute for the court to decide.
ii. Remedial: applies where D credibly claims to have ceased the
unlawful activity, thereby arguably eliminating the need for
injunctive relief.
c. Three basic requirements for preventative Injunction:
i. Proof of irreparable harm (legal remedy inadequate); and
ii. Ds potential conduct is unlawful
iii. D intends to do the unlawful act.
d. Nicholson v. Connecticut Half-way House, Inc. - Proposal of a half-way in a residential
neighborhood. Sought to enjoin this as a nuisance. Building of the house here was lawful
within the zoning requirements.
i. Problem: home hasnt yet been opened. Cant show that any wrongful or unlawful
conduct has taken place.
ii. The d wins. The injunction trying to shut down the Ds house fails.
e. Almerbotti v. Bush: Iranian nationals being held in Guantanamo Bay. Afraid they were going
to be transferred somewhere where they were going to be harmed. Allegedly prison guards

mentioned they were going to be sent somewhere; NY times speculating that this was being
considered by the Bush administration.
i. Court said there is no evidence that the D intends to do the unlawful act, indeed there
is positive evidence that D does not intend to do this unlawful act. Injunction not
allowed.
f. Ps must typically prove preventative Injunction is NECESSARY in one of three ways:
i. The D has clearly stated that he intends to do the unlawful act; or
ii. The D has committed these types of acts in the past; or
iii. The D has undertaken sufficient preparations necessary to doing the act itself.
g. Scope of injunctive relief: Must only be as broad as needed to address the harm presented.
h. Marshall v. Goodyear tire and rubber co: Sued for age discrimination. Goodyear- just a
problem with one store manager not a nationwide corporate policy problem.The court
agreed: no solid evidence of nationwide practice of discrimination by Goodyear, but
nonetheless issued a nationwide injunction.
i. Court of appeals: scope too broad; needs to be limited to the store where problem
took place
ii. Problem raised by this case is analogous to the ripeness rule: wont enjoin more
broadly than appropriate; trying to keep injunctions from being thrown out too freely.
i. United States v. W.T. Grant Co: Three different boards that Hancock is a member of who are
competitors. US govt says this violates federal antitrust provisions and seeks an injunction.
Govt brings suit and then Hancock resigns from all three boards. Do we have remedial
mootness? He claims to have ceased the bad behavior, can we believe him?
i. SCOTUS says the issue Is moot- trial court is the finder of fact and looked into
hancocks credibility and so the SCOTUS did not second guess the trial court in
deciding it was moot.
ii. Ct says if it were in trial courts shoes it might have decided differently, but still give
deference to trial court.
iii. Court says needs to be a cognizable danger of behavior being repeated vs. mere
possibility of being repeated.
iv. Argument made that courts can be somewhat result-oriented with regard to
determining if ripeness/mootness is met. If they dont want to hear a controversy
they will say it is moot; if they want to hear a controversy they will.
j. Three Factors the court gives for determining whether mootness applies:
i. Whether the Ds expressed intent to comply with the law is made in good faith
ii. Whether the voluntary stopping of illegal conduct is effective; and
iii. Whether the character of the past violations was willful or not.
B. REPARATIVE INJUNCTIONS
a. Nicholson v. Connecticut Half-way house, Inc.
i. For preventative injunctions we are looking at preventing a harm from ever taking
place.
ii. For Reparative injunctions, designed to repair or prevent the future harmful effects of
past acts.
iii. Ripeness is rare in reparative injunctions. The bad things already happened.
iv. Mootness is going to be the bigger issue.
v. Note 2 pg. 297: structural injunctions: designed to prevent or repair future harm by
institutional structures declared to be illegal. Example: desegregation in schools.
b. Forster v. Boss: Ps are the buyers of property and the Ds are the sellers of the property.
Sellers promised buyers would get a boat permit, but the sellers already had an existing
permit (acted fraudulently and intentionally lied about this). Also swimming dock existed that
was promised to be torn down and it wasnt.
i. Buyers seek injunction and damages
1. Injunction: make sure we get the boat permit.
ii. Court says: need to choose between injunction and damages. If they got both, they
would not be in their rightful position, they would be in DOUBLE their rightful position.
iii. But Ps were allowed to keep the punitive damages BC PD are meant to punish and
deter, not meant to compensate.
c. Winston Research Corp. v. Minnesota Mining and Manufacturing Co: Mincom developed tape
recorder, and then Winston developed a similar one. Mincom sues over this trade secret
claim- saying that two former Mincom employees who now work for Winston stole trade
secrets to develop this.Would info have been revealed anyway? Court says within a short

time, this would have been revealed anyway b/c Mincom was going to come out with
advertising it, demonstrating it, having it at trade shows. P seeks a permanent injunction that
says that Winston should NEVER be able to use this technology. Winston says there shouldnt
be an injunction at all b/c there has been public disclosure. Court issued an injunction for two
years.
i. permanent injunction here court issued a permanent injunction that only lasted
two years. How can this be?
1. Permanent just means FINAL. Final ruling on the issue- the matter has been
fully adjudicated.
ii. This is the form of a reparative inunction b/c Winston has already done the bad deed.
iii. Rule: Look at someone who is skilled in the art, has no inside information to develop
the same thing working with a finished project.
1. Trying to put Mincom in the fairest position possible.
iv. Court trying to repair future effects of harm through an injunction
v. Courts less likely to issue reparative injunctions than preventive injunctions b/c
reparative are messier.
C. PERMANENT INJUNCTIONS
a. A final order of a court that a person or entity refrain from or take action(s) until completed.
b. Distinguished from a preliminary injunction or a temporary restraining order, which we will
address later.
c. Irreparable Harm Requirement for Permanent Injunctions:
i. Courts at least pay lip service to rule that there be irreparable harm before issuing a
permanent injunction.
ii. Must show legal remedies (usually damages) are insufficient
1. Example: money damages will not be enough. Will not get me to justice.
iii. Courts may be less strict with irreparable harm requirement in permanent than in
preliminary injunctions and TROS.
iv. 8 justifications for why courts require irreparable harm (pg. 44 of case materials).
d. Pardee v. Camden Lumber Co. Is irreparable harm a good rule?
i. Courts tending to be more creative on irreparable harm in permanent injunction cases.
ii. Courts have not been so willing to say if there is a way to monetize then you dont get
an injunction. Courts have been opening their arms up to permanent injunctions more
even if there could be a way to monetize.
e. Brook v. James A. Cullimore & Co: Cullimore brings a REPLEVIN action to get the chattel.
Valued the chattel at 2,500. Wanted to get chattel back, but D wanted to just write a check
for the value. P said no- I want the chattel. Cullimore wants specific performance of getting
the chattel turned over. This was affirmed- chattel had to be turned over.
i. Replevin is a legal action rather than an action in equity.
ii. Courts treat equitable vs. legal cases differently
iii. If this had been pleaded as an injunction, courts would have at least looked to
irreparable harm. But BC its replevin, the court didnt do that analysis.
iv. Typically we dont see injunctions with personal property.
v. Reason for wanting the chattel back: P values this chattel at more than 2,500.
f. Some types of Irreparable Harm cases:
i. Unique items
1. The sale of family heirlooms
2. Do pets fit into this as well?
ii. Repeated acts that require multiple lawsuits to enforce rights
1. Example: I decide Im going to punch you everyday
iii. Insolvency of D
1. If D is insolvent, they have nothing to lose. Money damages not adequate
when D is insolvent
iv. Measurement difficulties.
D. SPECIFIC PERFORMANCE
a. Specific performance is a type of injunction that comes up in Ks cases. It is an equitable
remedy. Usually in K breaches, specific performance is not available b/c damages are usually
considered an adequate remedy.
b. Courts will order specific performance of a K if four conditions exist:
i. Substantive Merit P has to have winning argument on whether there was a breach

c.

d.

e.

f.

g.
h.
i.

ii. Irreparable Harm- prerequisite to all injunctions and other equitable relief. For some
special reason, awarding damages is not sufficient.
iii. Awarding specific performance must be Practical
iv. No successful affirmative defenses.
Campbell Soup Co. v. Wentz: Campbells Ked to buy special carrots. Brothers decided not to
sell them to Campbells BC they wanted more money. BC carrots were virtually unattainable,
compensating them is not adequate. Court ordered specific performance. Court denied
injunction b/c K was unconscionable.
Specific performance may be appropriate even in cases wherein the object of the Ks is not
otherwise unique if it is difficult or impossible to cover BC of:
i. Shortages; or
ii. Time constraints;
iii. Or the sheer size of the K
1. Here, carrots are not unique. However, there is a shortage in the Campbells
case and BC of that, damages are not adequate and that is why the court finds
irreparable harm (even though K is unconscionable).
2. One reason why Campbells wanted specific performance is they were going to
be limited in damages they could recover b/c there was a liquidated damage
clause in the K.
Economic Analysis of Specific Performance rules
i. Might see economics advocates say that Ds conduct was an efficient breach. Lets
not focus on fair, focus on economic efficiency.
ii. Whether economy was best served by breaching the K.
Should courts attribute moral force to Ks?
i. The more we lean on morality, the more likely we are to give specific performance.
ii. Why should we NOT give moral force? Generates more wealth to society if we just
promote economic efficiency.
iii. Courts tend to include morality in their analysis, even in Ks cases.
iv. Note: many economists would say specific performance should be denied where
transaction costs are high (voluntarily agreeing on a price) but permitted when
transaction costs are low.
1. This is BC when cost is low, the parties can deal with each other. This means it
can be pretty quickly determined what the market would lead to. Will force
parties to come to a deal.
2. Court in Campbells case said market value is at least 90 dollars/ton.
3. Specific performance is usually sought when market is distorted. But many
economists would say dont give specific performance here. Parties arent
going to agree with each other and will not likely come to a deal with each
other.
a. But this is the opposite of what courts actually do. Usually when
transaction costs are high courts are likely to award specific
performance BC damages are not going to be adequate.
Awarding Specific Performance must be PRACTICAL: this is where undue burden and hardship
comes in.
No successful affirmative defense: example: like Latches.
Van Wagner Advertising Corp. v. S & M Enterprises: Billboard case. Specific performance
demanded. Billboard leased for 3 years, faces an exit ramp, and visible to vehicles entering
Manhattan from the tunnel.
i. Trial court denies specific performance and high court affirms but at least gives
damages.
ii. Shows courts dont always find damages inadequate even if item is unique.
Advertising space outside midtown tunnel was quite unique.
iii. Why did the court say No to specific performance?
1. Court wonders how unique this space really is.
2. What would be the ramifications if they allowed specific performance? There is
a major building project that is going to cost a lot of money. Court balances
and says we are not going to demand specific performance when it would be
so catastrophic to one party.
iv. In equity, courts will often balance the impact on the parties in trying to do what is
holistically the fair thing. If there is going to be a little bit of harm to one party and A

E.

LOT of harm to the other party (the D), courts may rely on this to say it is an undue
burden/hardship to have specific performance.
v. Also in this case maybe money damages were not that hard to measure.
j. Whitlock v. Hilander Foods, Inc. D wanted to expand grocery store. Wanted to use Ps
adjoining land. P gave permission but then realized foundation was going on Ps property.
Once P brought this to Ds attention, they decided to negotiate for a lease. Cost 1.5 million.
Footings went 18 inches to Ps property- this did not interfere with Ps life. Also- evidence that
previous wall had footings in the exact same place underground and P probably didnt even
know they were there. P seeking a total of 70k. D offers to pay 10k to settle all of the claims.
D stopped having workers go over on Ps land, they just worked on fence from their side of it,
but they didnt take the footings out. P files lawsuit seeking a reparative injunction court
said this is not an intentional misconduct on part of the D. Balance the equities, footings are
not a big deal to the P and tearing down fence would be a huge deal to D, so all P can do is
get damages, not an injunction.
i. RULE ON INTENTIONAL MISCONDUCT: Court says if D acted intentionally in trespass, it
would not balance equities and would award specific performance. Normally court will
balance equities to determine if there is an undue burden/hardship in ordering specific
performance.
1. Courts often repeat this rule that they wont balance equities in intentional
misconduct and award specific performance , but courts sometimes apply it
differently. Need to figure out what Is intentional.
2. A lot of specific performance cases are intensely fact specific. Looks at moral
standing; money involved; harm to the sides; the social value of the respected
uses.
UNDUE BURDEN on the COURT (this is part of specific performance needing to be practical)
a. Will also look to burden on a court to enforce specific performance in deciding whether to
award SP. If it is too impractical to be the nanny of the two parties, court might use that as a
basis for only awarding damages.
b. Co-Operative Insurance society Ltc. B. Argyll Stores: Grocery store decides to close BC its not
cost effective to stay open. Clause in K saying they needed to stay open.
i. Had SP been awarded, court will still be responsible today for making sure business
was still going forward.
ii. Too burdensome and impractical for the court to award SP.

F. INSOLVENCY, PRIOR RESTRAINTS, AND PERSONAL SERVICES

a. If D is insolvent, is that an adequate grounds for issuing an injunction?
b. Should we ever suppress speech prior to a trial?
c. Willing v. Mazzocone: Woman protesting in front of law office. Insolvency issue here: want to
sue her anyways b/c she is hurting their business. All they are left with is an injunction.
Should an injunction be issued if P is arguing that damages are inadequate b/c they wont be
paid b/c person is too poor?
i. Punitive damages have more effect on rich people.
ii. RULE: most jurisdictions disagree with the Willing case, and hold that it is appropriate
to consider Ds solvency when deciding whether damages are an adequate remedy.
d. Hypo: D cuts down trees on someone elses land and sells them. Also, the D is poor. Rather
than seeking damages, P seeks injunction ordering D to turn over a few of their remaining
assets.
i. If the P is suing saying you dont have money, so Im going to try to get an injunction,
is it relevant in the question of whether the court should issue the injunction if D has
credit cards they arent paying; mortgage late; etc.
1. In this situation, P is a creditor. Need to make a decision which creditor is in
line first to get at the assets of the poor person.
2. You do not get any special front of the line treatment if you are a P in a tort or K
action. You need to get in line with the other creditors.
ii. What if, instead, the P seeks a reparative injunction (saying you need to plant a new
generation of trees on my property), if there are several creditors coming after D for a
limited assets, should court consider those other creditors in granting the injunction?
1. Court would probably be hesitant to award injunction here.
e. Injunctions as Prior Restraints on Speech:

i. Generally speaking, courts are extremely hesitant to enjoin speech before it has been
adjudicated by a full jury trial to be unprotected, BC of concern for protecting free
expression.
ii. A few exceptions exist, such as speech threatening national security:
1. Classic example: WWII and we have time and departure of route transport
ships during the war. Can have prior restraint here BC the harm is so great if
the speech were allowed.
iii. Prior restraints are made by the government. Considered a state actor when a court
makes a rule.
iv. Example in Willing: better to limit to damages not an injunction b/c of the fear or prior
restraint on speech
v. Now we have other protections under the 1st amendment: actual malice rule for
speech involving public figures with defamation (NY Times v. Sullivan).
vi. Cant generally stop you from making the speech until the issue has been fully
litigated.
vii. If a trier of fact has found that speech is unlawful, after being fully adjudicated; then
an injunction can be issued.
f. Collateral Bar Rule:
i. Most common justification for rule against prior restraints.
ii. An injunction barring protected speech must be obeyed. The unconstitutionality of
the injunction is not a defense to a prosecution for contempt.
g. Would average person rather litigate an action for injunction and find out whether their
speech was protected before they spoke or would they rather have a chance to say it and risk
damages and possibly jail in some circumstances?
i. Most people would rather litigate an action for injunction
ii. Is it significant that punitive damages are assessed by jury for prior restraint &
injunctions are issued by judge?
1. Judges more elitist; well-educated; white; old.
2. But also juries are more willing to award punitive damages than judges.
h. Multiplicity with lawsuits:
i. In Willing case- since D was mentally ill, might have needed to bring multiplicity of
lawsuits b/c she may not have stopped with first damages action.
ii. Need for multiplicity of lawsuits has been mentioned by courts for the basis of
imposing an injunction.
i. Sometimes damages may be inadequate b/c they are small. The smaller damages awards
are, the less likely they are to deter future misconduct. Courts may consider that in deciding
that injunction would be appropriate in this situation b/c damages are not adequate.
j. Irreparable harm does not necessarily mean serious harm.
i. Ex: pinching you on the arm every day while you are walking to school.
ii. Get further with injunctions b/c if you dont stop you will be in contempt.
1. This ex can still be irreparable harm looking at something that damages cant
repair/wont stop it.
k. Injunctions for patents
i. Courts take distinctive approach in patent litigation if patent is found to be valid,
they will grant injunctions most of the time.
ii. Ebay Inc. v. Mercer exchange, LLC - M is saying that ebay infringed on patent
business method patent. With the explosion of the internet: became increasingly
common for businesses like P in this case to collect patents that werent being used
which someone might want to go in the market and use later. Want to use my patent
to exclude you from doing this practice unless you pay me a license that we mutually
agree to. P sought injunction forcing Ebay to stop using the business method.
1. Special requirements for permanent injunction in Patent cases: The P MUST
PROVE (applicable only to patent cases governed by federal law):
a. P has suffered irreparable harm
b. Legal remedies, such as damages, are inadequate to compensate for
the injury.
c. Balance of hardships favors the P
d. And advancement of the public interest
i. These are looked at as requirements not factors.
ii. SCOTUS wants to make it more difficult to get injunctions in
patent cases.

iii. Now it seems if you are seeing P in patent case where P

competes in market, injunction will usually be granted.
iv. If licensing, injunction will probably not be granted.
G. PRELIMINARY INJUNCTIONS AND TROs
a. TRO is early on the timeline- hardest to get b/c notice and opportunity to be heard is short.
b. Preliminary injunction courts are nervous b/c of point on timeline. Nervous to stop someone to
maybe later find out they shouldnt have.
c. Then comes the permanent injunction.
d. Winter v. Natural Resources Defense council, Inc.
i. Four Part Test for Preliminary Injunctions:
1. A strong likelihood of success on the merits
2. Possibility of irreparable harm to P if preliminary injunction is not granted
3. Balance of hardship favors the P;
4. Advancement of the public interest (in some cases)
ii. Is the Navy harming dolphins and whales by its active sonar?
iii. 9th circuit says: we are willing to issue a preliminary injunction against the Navy
iv. Supreme Court says NO. The 9th circuit did not weigh carefully enough the interest of
national security in having active sonar.
v. Keep in mind there are DIFFERENT IRREPARABLE HARM STANDARDS FOR PERMANENT AND
PRELIMINARY INJUNCTIONS:
1. Preliminary injunctions: Must show irreparable harm between the time they seek the
injunction and the time the matter goes to trial
2. Permanent injunctions: any kind of irreparable harm applies; timeline doesnt matter.
vi. In this case, court said party had to satisfy all four to qualify for a preliminary injunction.
vii. Typically, in common law courts, these are viewed as factors that may be weighed variably
against each other.
e. Maintaining the Status Quo:
viii. Sometimes the jurisdictions will say, confusingly, the objective of preliminary injunctions is
to maintain the status quo.
ix. The problem is that it is difficult to say what the status quo is.
1. Example: Matter of Providence Journal: wanted an injunction to prevent the
publication material that was allegedly a violation of privacy; court said status quo
was editors right to publish anything they wanted
a. But court could have also said status quo was to continue to protect privacy.
f. Requiring a Bond:
i. Common practice for courts to require Ps to post a bond as prerequisite for issuance of
preliminary injunction.
ii. Put their money where their mouth is, basically.
iii. If it later turns out that the injunction was inappropriate, the D may be able to recover the
bond.
iv. In a few states, liability is not limited by the bond. But this is a small minority..
v. Not all jurisdictions have bonds, just a consideration in deciding whether to issue an
injunction.
vi. Cayne-Delany Co. v. Capital Development Board: Ks to replace plumbing in state prison;
Coyne- Delany was the subcontractor; Provided valves that malfunctioned several times;
during second round of bidding the government required K with Coyne-Delany competitor
(left them out of the bidding process). Coyne-Delany secured a TRO to keep the Board from
opening bids on the second round- violation of their civil rights.
1. Trial Court required a bond of 5,000.
2. Turns out there was no civil rights violation for C- Board seek damages for prolonged
bidding.
3. If they had been able to do the bidding on time, would have been able to secure a K at
a lower price.
4. Alternatively, Coyne doesnt want to pay anything, but at the least, should not pay so
much.
5. FRCP 65(c): requires P who gets a preliminary injunction to post a bond for the
payment of such costs and damages as may be incurred or suffered by any party who
is found to have been wrongfully enjoined or restrained
a. Most cases hold that a prevailing D is entitled to damages on the injunction
bond unless there is a good reason for not requiring P to pay.

b. Court agrees with this approach

6. Basic question: Who bears the risk of error at the TRO and preliminary injunction
stage?
c. Two types of error that a judge might make (note: not a mistake of fault, but
lack of evidence):
i. Erroneous Denial of Injunction:
1. P limited to a damages remedy for the time they asked for seeking the
injunction & time of trial.
ii. Erroneous Granting of an injunction:
1. D may suffer substantial harm. P has not violated anything. So is this
Ds tough luck?? Or is it the courts fault for making a mistake D
would also be out of luck here? Or is it Ps fault for asking the court to
decide the matter before a full trial? Bonding is the compromise in
this sort of dilemma. Ps are usually only responsible up to the limit of
the bond.
g. TROs
i. Designed to prevent irreparable harm that will occur even before a preliminary injunction
hearing can be held.
ii. Can be very hard to get can be hard to get all of the facts and evidence prepared.
iii. Have to show a STRONG PROBABILITY of irreparable harm.
1. Time window is time between TRO and the preliminary injunction.
iv. If a party is seeking a TRO they have to go through the same 4 part test for preliminary
injunction, but AMPLIFY every requirement
v. Majority will still treat the 4 part test as factors balancing stronger ones against weaker
ones.
2. A strong likelihood of success on the merits
3. Possibility of irreparable harm to P if preliminary injunction is not granted
4. Balance of hardship favors the P;
5. Advancement of the public interest (in some cases)
h. Carroll v. President and Comissioner of Princess Anne -White Supremacist group held a rally and
called for its continuation the next day. City and county officials received a restraining order for
10 days and later an injunction for 10 months to prevent future rallies. TRO was administered ex
parte. P: On appeal, the court affirmed the 10 day order but reversed the 10 month order finding
it unreasonable and arbitrary to assume that a clear and present danger of civil disturbance
would persist for 10 months.
i. I: whether and by what processes, and to what extent the authorities of the local
government may restrict petitioners in their rallies and public meetings
ii. A: Case is not moot as the group wants to continue their activities. 10 day order must be
set aside due to its being issued ex parte w/o notice to petitioner and w/o effort to invite
them.
1. No indication in the record as to why petitioners were not served notice later that
same day they were served the TRO and they were present the night before.
a. Participation of both sides is necessary in an adversarial system to narrowly
tailor any order to the precise needs of the case.
iii. Holding: Reversed
iv. FRCP- requires that notice be attempted but does not have to be achieved.
i. Sampson v. Murray - R was a probationary employee who may have been fired due to reports
from previous employment. This would have required more elaborate procedural protections,
which were not provided. D.C. issue TRO for 10 days to prevent firing until appeal to the Civil
Service Commission. At the next hearing, judge extended TRO until government produced
Sanders (the official who fired R). Government refused to produce Sanders and appealed the
order prohibiting it from firing R. Appellate affirmed.
i. must make a showing of irreparable injury sufficient in kind and degree to override these
factors cutting against the general availability of preliminary injunctions in government
personnel cases.
ii. Must consider TRO that continue beyond the permissible time as preliminary injunctions.
iii. Court of appeals intimated that either loss of earnigns or damage to reputation might afford
a basis for finding of irreparable injury and provide a basis for temporary injunctive reliefSCOTUS disagrees.
1. Temporary loss of income, ultimately to be recovered, does not usually constitute
irreparable harm

2. Loss of reputation additionally could be corrected through the administrative

determination and either way falls far short of the type of irreparable injury necessary
to predicate the issuance of a temporary injunction.
iv. Reversed
v. Douglas Dissent: concerned that stigma of a dismissal may persist after reinstatement and
impact future employment.
vi. Brennan Dissent: lack jx b/c no appealable order has been entered.
1. TRO are not appealable unless extraordinary circumstances exist
2. FRCP 52(a) requires filed findings of fact and conclusions of law for preliminary
injunctions none filed here- meaningful review Is impossible
3. Disagrees that back pay can never constitute irreparable harm
j. Some basic facts about TROS
i. Under FRCP 65: TROs w/o notice last only 14 days
ii. TROs w/ notice arent mentioned in the rule and the 14 day limit doesnt apply to them, at
least explicitly.
iii. The rule never defines a preliminary injunction or TRO
iv. It is a judge made rule that TROs are not appealable
v. In Sampson, the court issued a TRO w/o notice that lasted more than 14 days and the D
appealed
vi. Length of hearing can vary depending on what is being argued for can be short or long
vii. Usually judges want evidence based on declarations by witnesses rather than bringing in
the witnesses since these take more time usually.
viii. Most common way to enter evidence to case is by certifying declaration and attaching it as
an exhibit
ix. TRO motions do not require a formal hearing (often there is a formal hearing, but they may
be granted in judges chambers or by phone conversation)
x. Facts must be sufficiently developed to allow for an intelligent decision.
xi. FRCP 65 requires the reasoning to be laid out in writing after a TRO is granted.
H. SUITS AGAINST OFFICERS IN THEIR OFFICIAL CAPACITIES AND SUITS AGAINST OFFICERS
IN THEIR PERSONAL CAPACITIES
i. Edelman v. Jordan:
i. 11th amendment: makes state and federal government immune from federal liability in
federal courts. Builds on the common law concept of sovereign immunity.
ii. Dilemma: we dont want people taking the government to the cleaners, but at the same
time we want to provide some sort of remedy if government violates a constitutional right.
iii. GENERAL REMEDIES RULE IN IMMUNITY CASES: Injunctions are generally courts preferred
remedy in cases involving government immunity. Damages are generally viewed as more
dangerous to immunity and more intrusive on government.
iv. Harm inflicted by an immune D is considered irreparable.
v. Damages inadequate remedy here b/c you are not going to get damage; thus courts are
willing to say stop.
vi. Preference for injunctions in immunity cases: shows that courts favor prospective remedies
rather than retroactive remedies.
vii. Another reason: injunctions seem relatively cheap for the government.
1. They still have financial consequences, but they are ancillary. These are expenses that
a state might incidentally incur after an injunction is issued in order to comply.
viii. Federal government has a statute called the Federal Torts Claims act which specifies which
torts people can sue the government for. It waives even 11 th amendment immunity for
most tort claims, but maintains some categories of immunity.
1. Example: member of military may not sue government in a tort claim for being
negligently hurt in a training camp.
ix. Immunity generally: immunity seems to be a waning doctrine.
a. Harlow v. Fitzgerald: P was a whistleblower was a management analyst in the Department of
the Air Force. Talked about technical problems and huge cost overruns on the C-5A cargo plane.
This was considered an embarrassment by Nixon administration. Carried out reduction in force,
eliminating Fitzgeralds job. this case deals with situations when government officials are sued as
individuals to determine whether they may be personally immune or privileged from damages
lawsuits. These guys are being sued b/c individually these guys were jerks.
i. Absolute Immunity for some officials in some contexts:

1. Legislators, in their legislative functions why? We think our democracy will flourish
where people are not inhibited in their speech. The idea of the free marketplace of
ideas.
2. Judges and Prosecutors in their official functions why? Dont want to worry about
being subject to personal liability while trying a case.
3. President of US: - we dont want president to be sued; dont want them to be
embarrassed; dont want them to be cross-examined very often; do not want them
distracted from governmental duties.
4. Not necessarily an exhaustive list when policy demands it we will give absolute
immunity.
b. Qualified Immunity
i. This represents the norm for most executive officials engaged in discretionary functions.
ii. Discretionary functions vs. ministerial functions:
1. Discretionary: officers have to exercise discretion; necessarily influenced by
experiences, values, and emotions. We want to be especially protective of this area.
a. Policy based decisions are classic discretionary functions.
2. Ministerial function clear right or wrong way to do it.
a. Lower level jobs more likely to be MF
b. Generally no immunity for MF
iii. Protects from damages provided their conduct does not violate clearly established statutory
or constitutional rights of which a reasonable person would have known.
DECLARATORY JUDGMENTS
a. Primarily used as an alternative to an injunction like an injunction light.
b. A lot like injunctions but without the coercive power of contempt.
c. Judges may be more willing to issue DJ instead of injunction b/c it doesnt have the consequences
of an injunction.
d. Sought in challenges of constitutionality of a statute/patent infringement
e. Biggest issue that arises with DJ: Ripeness
f. Nashville, Chattanooga & St. Louis Railway v. Wallace: Question of whether the case was ripe
i.
SCOTUS said yes there was a case/controversy and declaratory relief actions are
constitutional.
ii.
What does P have to show to prevail in injunction vs. DJ
1. Railroad is seeking DJ; if seeking injunction need to in theory show irreparable harm;
would also need to prove ripeness for an injunction.
2. If P seeks DJ, the only issue they have to deal with is ripeness. Do not need to show
irreparable harm.
iii.
Injunction order would effectively say government stop collecting the tax from the railroad
iv.
DJ would just have simply a declaration. This tax is unconstitutional : This tax is
unconstitutional as applied to the railroad.
v.
What is going to happen if there is a DJ and someone ignores it vs. injunction and someone
ignores it?
1. If injunction is ignored this is a very big deal. The state is in contempt of court/
government official in contempt; gov. official may even go to jail.
2. If DJ is ignored the state is not in contempt; but P can get injunction enforcing the DJ.
g. A Declaration makes things clear Cardinal Chemical Co. v. Morton International:
i.
Want a DJ that patents are invalid.
ii.
Trial court: no infringement; patents are invalid
iii.
Circuit: agree there is on infringement but we refuse to issue declaratory judgment.
iv.
Sidenote: in patent cases all lawsuits are litigated in Federal court.
1. Patent law often complex, requires some scientific sophistication, there were often
splits between various federal jurisdictions so it was eventually decided to create one
patent court of appeals.
v.
Federal circuit reversed the DJ b/c it had a rule that the issue of patent validity is moot if
the court finds non-infringement.
vi.
Eventually, Federal circuit affirms finding of no infringement but reverses the finding of
declaratory judgment.
vii.
Both parties ask SCOTUS to rule that the Federal circuit acted in error in applying the per
se rule that issue of patent validity is moot (issuing declaratory judgment is moot) if there
is a finding of no infringement.
1. They want the court to declare whether patent is valid or not.

viii.

ix.

x.
h. DJs
i.
ii.
i. DJs
i.
j.

I.

DJs
i.

Why does P want a definitive ruling on whether patent is valid? Must have a declaration
on validity, worried if they dont when they sue again the other people are just going to
say the other courts said no infringement, you should do the same thing here; meanwhile
Ps will not have the benefit of due process of appellate court reviewing this. They want to
force the higher court to have to take on the issue.
Why does D want the declaration that the patent is NOT valid? dont want the risk that
BC it has not been definitely established, they dont want to make more investments in
their competing use and later have the rug pulled out from under them; also theyve
litigated this very intensely and it cost a lot of money.
SCOTUS holds: it is an abuse of discretion for federal circuit NOT to decide whether patent
was valid in this case. We need the declaratory judgment to benefit all of the parties
concerned with regard to patent litigation.
in patent litigation:
One of the most common areas of DJs
Lets the parties know where they stand regarding patent validity.
and Scarecrow Patents
In addition to other benefits DJs are useful in this way- situations in which one side gets a
patent, but threatens to sue rather than actually suing.
in Insurance Coverage Litigation
Typically arises when an insurance co. thinks it doesnt have to cover an insured against a
claim, but it is nervous about flat out denying coverage immediately.

RESTITUTION
a. Two aspects of Restitution:
i.
It is a substantive source of liability wholly independent of tort and K
ii.
Restitutionary remedies available for any tort or breach of K that transfers an unjust
enrichment from P to D.
1. If the D is found to have been unjustly enriched, the P is entitled to restitution of that
amount.
b. Two points of focus:
i.
How is restitution applied as a remedy in tort and K actions;
ii.
What is the special vocabulary of restitution (e.g. quasi-K, constructive trust, accounting,
etc)
c. Example: boat case, Neri restitution acted as a substantive form of liability to empower the guy
who breached the K to get part of his deposit back. Would have been unjust enrichment for the
seller to keep the entire deposit.
d. Quantum Merit- right to be paid reasonable value for services performed as if there was a valid
K.
e. Early on, theory of assumpsit- that P had conferred a benefit on the D and D impliedly promises
to pay. Legal fiction that is designed to avoid unjust enrichment. But courts did not like applying
this where the D himself was in the wrong.
f. Enter Substantive doctrine of restitution:
i.
Three groups of cases where Restitution is attractive to P
1. When there is no other cause of action
2. When Ds gains exceed Ps loss (so P gets more by collecting Ds gains) and
3. When D is insolvent and P can get a preference by seeking restitution of the specific
property that used to be his.
g. Olwell v. NYE & Nissen Co - P owned an egg packing machine. Asked D to store it for him. D
started using it w/o Ps knowledge. It was used for three years until the P happened to be at the
factory and heard it running. P offered to sell machine to D for 600 dollars; D countered with a 50
dollar offer.Trial Court calculates damages for $10/day for the 156 weeks used. Washington
supreme Court affirms
i.
Court holds: P has a right to elect restitution over damages where in tort, the D had
benefitted from the wrong, specifically when there is an unjust enrichment from the wrong.
ii.
This was a case where the damages to P were presumably less than Ds benefits.
iii.
You can use the concept of restitution to zero in on the unjust enrichment that the D
gained BC of its tortious conduct and get the amount of that unjust enrichment instead of
the lesser amount you would get if you focused on damages.
iv.
Thinking about what the P LOST? Might be nothing. Not a super clean way to think about
damages.
1. Maybe depreciation in value of the machine b/c more hours of use were put on it.

2. Rental value
3. Conversion = significant interference with ownership rights.
v.
From a law and economics perspective it may be efficient behavior to do the bad thing and
pay out the damages BC you still get something of value that was worthwhile.
1. But courts do not tend to see it this way. They are more focused on a rough sense of
justice between the parties.
vi.
But is restitution just allowing a windfall to the P? should money go to the state instead?
h. Quasi K is the basis for forcing the D to pay restitution. QC is based on the idea that the D has
impliedly paid for a benefit he has received, even though he did not expressly promise this. QC
is a legal fiction. Courts are trending away from this legal fiction.
i. Whiskey case Maier Brewing Co. v. Fleischmann Distilling Corp - Trademark infringement claim
had already established Black and White as whiskey. Other side was selling cheap beer. Harms
reputation may be confusion that the whiskey co. would be associated with this inferior cheap
beer product. Whiskey co. has taken time to build up their brand. Free-riding off of the Whiskey
brand/name
i.
Court awards something called an Accounting of Profits
ii.
Need to give the profits that you have wrongfully gained and give them to Whiskey co.
1. Accounting for Profits: This is where the law implies a duty to D to account for his
profits earned, so that the profits can then be awarded to the P where restitution is
appropriate.
j. Snepp v. United States - CIA agent signed agreement that he would get pre-publication clearance
before publishing anything that was classified. He published a book anyway without this. The
catch: the book did not contain any classified info. Suit to make him turn over profits from the
book.
i.
Constructive Trust
1. Introduction to Constructive Trust
a. This is another legal fiction which courts use to justify the restitution remedy.
b. The court imposes a trust on the identifiable benefit to D of his misconduct
c. D is made a constructive trustee of the property for the P, and D is personally
ordered to transfer title of property to the P.
ii.
All of these concepts are in a sense, fictional. Better to just called restitution, restitution.
k. Restitution for Ds Gains Exceeding Ps losses in K Actions
i.
If a deliberate breach of K results in profit to the defaulting promisor and the available
damage remedies affords inadequate protection to the pomisees contractual entitlement,
the promisee has a claim to restitution of the profit realized by the promisor as a result of
the breach RS 3d of Contractions section 39(1)
1. Pg 685- (c)- Inadequate remedy?
l. Apportioning Profits:
i.
Addresses problems that arise when a misappropriated asset is comingled with Ds assets
in a common enterprise, which then earns profits.
ii.
Should the P get all of the profits, or just part of them BC they are comingled? If the
answer is only part of them, how are the profits to be apportioned?
1. Two basic approaches:
a. No apportionment (award all profits) harsher on D to have greater deterrent
effect
b. Apportionment does not award profits from Ds own efforts. Not as friendly to
Ps.
2. Sheldon v. Metro-Goldwyn Pictures Corp.: In the play, love triangle story. Movie clearly
based on what is going on in the play. Evidence that when they made the movie they
were ripping off the play.Before stealing it they tried to buy it.
a. Case takes the apportionment approach.
iii.
Three Major Apportionment Methods in Restitution Cases:
1. Cost of hiring someone to perform the same service;
2. Proportion of sales attributable to the misappropriation; or
3. Factors of production (pro-rata approach)
iv.
Hamil America, Inc. v. GFI - Copied a floral pattern of P and sold it to JC Penny. Had used
high quality materials, but knock-off created by GFI used cheaper material. Court finds that
copying was deliberate.
1. How much of Ds overhead expenses can be deducted?
a. Gross profits (profits you take in) vs. net profits (profits attributable to
misconduct)

b. Sheldon 2-step Approach: - to determine what overhead expenses can be

deducted.
i. Determine what overhead expenses are implicated by wrongful product or
activity
1. Look for sufficient nexus
ii. Give the D the burden of establishing a fair approach to determining the
wrongful amount of overhead attributable to wrongful product/ activity
and subtract that amount from the gross profit.
2. In summary: Look at which expenses are actually overhead for
this infringement (closely related enough) and D then has
burden of proving the amount of overhead attributable to
wrongful product/activity.
3. This case says- even if it is a willful infringement, overhead can
be deducted under two step approach, but need to look at Ds
evidence especially strictly.
v.
9th circuit- implies that when infringement is willful, not going to deduct overhead at all.
vi.
The more culpable the conduct, the less likely the courts will deduct overhead.
m. Rescission another restitutionary remedy that is related to Breach of K.
i.
This is the law undoing a transaction/K and restoring each party to what they gave to the
other party as part of performance of the transaction.
ii.
It is a do-over. Make it as if the K never existed.
iii.
Mobil Oil Exploration and Producing Southeast, Inc. v. United States - About 2 oil
companies who spent 156 billion dollars to the federal government to pay for the rights of
oil exploration leases. Ks incorporate by reference a statute that sets forth environmental
standards. Congress created a new environmental protection statute that called for
tougher standards for environmental protections. Oil companies bring action seeking
rescission of K saying that creation of new statute changing the rules was a
substantial/material/total breach of K and they should be able to undue K.
1. SCOTUS: it doesnt matter if you argue the oil companies wouldnt have been
able to develop anyway, BC they arent seeking damages, they are seeking
rescission.
iv.
Primary Grounds for rescission:
1. Fraud; - some cases say even innocent misrepresentation is enough; others say it
has to be intentional or at least negligent.
2. Substantial/material/total breach of K goes beyond merely being incidental.
Some say it has to defeat the entire purpose of the K; others dont go that far.
3. Mutual mistake of fact both parties are mistaken and mistake is significant.
4. Unilateral mistake of fact known to the other side; - if one party is mistaken in a
material way
5. Duress. if one party gets the other party to agree to K through duress, that party
gets to rescind.
v.
Rescission where K has been partially performed:
1. Both parties have to return benefit they received from other party when K is
rescinded.
J.

SUBROGATION
a. Subrogation means substituting one person for another. The party pursuing subrogation stands
in the shoes of someone else, and asserts that persons rights as if they were the person.
b. In Re Mesa: Nevada case example: Tax liens are subordinate to mortgages.
i.
Core of the case: Subrogation is a form of restitution that allows Ms to have same position
as the Belmonts.
c. 5 Requirements for Subrogation:
ii.
Party seeking subrogation made the payment to protect his or her own interest;
iii.
The party seeking subrogation did not act as a volunteer
iv.
3rd party, rather than party seeking sub., must have been primarily responsible for paying
the claim or debt.
v.
The claim or debt at issue must have been paid in full.
vi.
Subrogation would not work any injustice to the rights of the junior lienholder.
d. Subrogation and Quasi-K
i. Quasi-K would be an option in subrogation cases, but sub. may provide advantages over
other creditors.

e. Another case example: Note 3 on pg. 736-- key issue: whether P had sufficiently legitimate
reason for paying in Boards place to allow P to stand in Boards place in subrogation action?
i.
Courts usually fairly liberally find that there was a volunteer.
ii.
Did you have a clean enough/legitimate enough interest to step in? This is usually the
struggle.
f. Rule: If a junior lien holder pays off a Sr. lien to protect her own interest, no courts call this
acting as a volunteer. This form of subrogation is always allowed.
i.
Example: When B gets 1st mortgage from C, and then B gets a 2nd mortgage from A. B
defaults on 1st mortgage. 1st mortgage has priority over the 2nd in recovery.
1. C wants to foreclose. A could lose his investment if property is foreclosed. In this
case, A may decide it is in As best interest to pay some of the payments to C in order
to prevent a foreclosure and be able to continue maintain the original investment.
a. THIS IS NOT A VOLUNTEER SITUATION - can seek subrogation if A pay the
money for C.
K. EQUITABLE LIENS
a. A Lien is a charge against property that makes the property stand as security for debt owed.
i.
Example: car loans are set up with a lien on the car. Car serves as collateral for the loan.
ii.
Another kind of lien: a home mortgage. If I dont pay, bank can force the sale of my
house.
b. An equitable lien is a money judgment secured by a lien on specific property.
i.
It creates a lien that is real, but created by court to avoid unjust enrichment rather than
created by the parties (regular liens are created by the parties).
c. Equitable liens Require that funds be traceable to the property that the lien is against.
i.
Example: funds have to be traceable to the house.
d. Difference Between Equitable Lien and Constructive Trust
i.
With a constructive trust, the property completely belongs to the P. With an equitable lien,
only the dollar amount owed is to be taken from sale of the property.
1. If values are rising, constructive trust with a percentage is a better idea.
2. If you think you are in a depreciation market, you want to go with equitable lien.
ii.
Jux are split as to whether they will allow Ps to make an election b/w an equitable lien or
constructive trust.
ACTION TO RECOVER SPECIFIC PROPERTY:
a. Replevin: a legal cause of action for the physical return of a chattel plus detention damages.
Can get:
i.
Actual return of chattel
ii.
Damages for loss of use
iii.
Diminution in value
iv.
Consequential damages in recovering the chattel.
3. If P wanted to get full value of chattel would have that option under tort of conversion.
b. Ejectment: cause of action for recovery of land. Leads to a judgment for the return of the
wrongfully taken land, and also allows option of:
i.
Damages for use of the land during the period of Ds wrongful possession, or
ii.
Restitution for the value of the lands use.
c. Unlawful Detainer: Cause of action for permission to forcibly enter land and remove the
occupant.
i.
If dont have unlawful detainer judgment and forcibly removes a tenant = can get in a lot
of trouble
CONTEMPT
a. Ancillary remedy that helps judges to enforce remedies.
b. International Union, United Mine Workers v. Bagwell. There is a strike Huge fines against this
union.
i.
Three Kinds of Contempt
1. Criminal contempt
a. Is a punishment for the violation of a courts order. It is based on a past event,
and is not conditional on future compliance.
b. Most complicated- comes with the most baggage.
c. It is prosecuted the same way a criminal action is prosecuted.
d. D gets all protections he would get in any other criminal trial

2.

3.

4.

5.

e. Constitutions double jeopardy clause prohibits prosecuting both for contempt

and for underlying criminal act that contempt is based on.
f. It is unconstitutional to sentence to more than 6 months in jail. Substantial
criminal fines can be imposed without jury trial, and the upper limit is
undefined. Depending on facts, at some point may be so high that a jury trial is
required.
g. Jury trial right is decided on a case by case determination.
i. Look at seriousness of fine in light of Ds financial resources
h. D cannot challenge validity of injunction in a prosecution for contempt If a
judge enjoins you you cant say Im not going to obey injunction BC it is
unconstitutional. Can challenge it as unconstitutional, but must obet it in the
meantime.
i. States decision to prosecute, not the individuals. thus fine are to be paid to
govt not to opposing litigant
j. Jail time is an option with criminal contempt
Compensatory civil contempt; and
a. Like an action for damages or restitution, but it is based on a violation of a
courts order. Intended to compensate P for Ds violation of an injunction.
b. Courts have held that parties who have been damaged by failure of another
party to file an injunction can either focus on damages OR on an unjust
enrichment concept.
c. Most jurisdictions do not require a jury trial for this since it is tied to an
injunction which does not involve a jury
i. CA and a few other jurisdictions reject compensatory civil contempt
ii. If you are in the majority that allows this kind of action , it is just an
option for P.
d. Courts usually use clear and convincing evidence standard as proposed to
preponderance of evidence standard. makes it a little harder for Ps to win.
Civil contempt rules:
a. No constitutional right to a jury trial
b. No collateral bar rule with compensatory civil contempt- so D can challenge
validity of underlying injunction in contempt hearing
c. No jail time available to a judge just damages or restitution.
d. Prosecuted by Ps lawyer rather than by the state.
Coercive civil contempt
e. Purpose is to force the D to comply with the courts order. Unlike criminal
contempt, it is directed toward influencing future misconduct rather than
punishing past misconduct.
f. Prosecuted by Ps lawyer rather than state
g. Takes form of conditional fines: three steps:
i. Court issues the injunction
ii. Court threatens penalties; and
iii. If there are further violations, court imposes the threatened penalties
h. Jail is also an option for the judge.
i. Note 12- pg. 782 coercive jail time case.
j. If conditional penalties in civil coercive contempt, three steps
i. Court issues inunction
ii. Court threatens penalties
iii. If there are further violations the court imposes the threatened penalties.
Additional rules for civil coercive contempt
a. If a party is in federal court and a federal judge orders this type of contemptmaximum time allowable in jail is 18 months.
b. Fines go to the state rather than to the P.
c. The collateral bar rule does not apply, D can challenge underlying injunction in
contempt hearing or on appeal if they think underlying injunction is invalid.
d. Inability to comply with courts order is a defense. Have to prove that it really
is impossible.
e. Even after coercive contempt is finished, can still order criminal contempt.
f. Sanctions have to cease when compliance occurs or when its clear that
coercive effect is lost

c. Court looked at the fact that fines were a fixed amount, looks more like punishment rather than
coercion.
i.
Violation did not occur in courts presence or implicate courts ability to maintain order. If
something is done in court judge may have more need for civil coercive contempt. But
here, these were bad things happening outside of courtroom
ii.
Injunction broad and contempt lasted over several months.
iii.
Fines in this case were very large over 60 million. Sounds more punitive than coercive.
6. Court concluded this looks more like a criminal contempt matter than civil coercive
contempt matter.
d. Anyanwu v. anyanwu - Custody issue.- some sort of ceremony in Nigeria before civil ceremony in
US. Got divorced. Husband put in contempt when he failed to produce the children. he
continued to appeal for three years. One of the children dies b/c of malnutrition. No evidence
that he even asked for the kids to be returned
i.
Court says: need to prove you have taken every step you can take to get the kids back.
ii.
Idea of Perpetual Coercion
1. What do we do if we have someone that we put in jail/put a fine on to coerce and at
some point in becomes clear they are not being coerced, either BC they cant comply
or for moral/other reasons they say they wont comply?
2. Usually 18 months in contempt some judges let people go earlier.
iii.
Court concludes we need to appoint a Guardien ad litem for the child and investigate if the
dad is really doing everything he can do, then we will decide whether or not we will keep in
in jail.
e. Policy question: is it appropriate to end a jail term if party in contempt has been in jail for some
time and shows no evidence of complying? Or should we just leave them in there and let them
rot? goes against public policy BC then the person would just be silent while in jail until they
inevitably will be released.
K. MORE ON THE COLLATERAL BAR RULE
a. Rule designed to discourage refusal to comply
b. Have to follow injunction, even if its wrong, while it is in place.
c. Cant challenge validity of injunction by refusing to comply with injunction
d. Walker case Organizing peaceful protest/parade..Get ex-parte TRO hearing in front of a judgejudge says he is going to issue injunction b/c there is not a permit that has been issued.
Unconstitutional injunction prohibiting a lawful assembly. Ds were told permits could only be
issued by a committee. But- no records of anyone else having to get permits in this way. Permit
that city of Birmingham had about parades- it was vague and later held to be unconstitutional.
Ds are convicted of criminal contempt after they hold the marches/parade despite the
injunction. They get thrown in jail- 5 days in jail and 50 dollar fine. Ds say this is an
unconstitutional statute- and the judge says I dont care. A judge told you that you needed to do
something, so you had to do it.
i. Supreme Court says King cant argue the constitutionality of the statute in fighting criminal
contempt.
1. Idea behind this rule - forces people to go through proper procedures to appeal
constitutionality.
2. The rule is that there is the CB rule in MOST states. But not in CA in CA one can
challenge the validity of a statute in a contempt proceeding.
e. Illustration: someone at party gets drunk and says he is a judge on SCOTUS, and says he must
be served more alcohol immediately. You will not be in trouble saying no, BC judge has no
jurisdiction to do this. It is okay to ignore this.
f. Illustration: CA judge orders that George Zimmerman must come to CA to face trial for the
murder, and the killing happened in FL. CA judge thinks FL court got it wrong. No subject
matter jurisdiction here. It would be okay for Zimmerman NOT to come to CA as ordered. And
could challenge contempt proceeding if that happened.
g. U.S v Shipp Case- pg. 802: Shipp was sheriff. Black male sentenced to death for raping a white
woman. Lower court issued stay of execution while petition was being decided. Law
enforcement wanted to execute criminal quickly. During stay of execution, a lynch mob comes
forward and hung the accused man. Shipp helped the lynch mob. Shipp could have been
charged with murder, but TN didnt want to prosecute him. Fedl govt prosecutes Shipp for
contempt of the stay of execution order. (stay was probably unlawful BC appeal was frivolous).
Here, collateral bar rule upholds the authority of the courts, even when they are wrong, and as a
result we can convict sheriff that would have gotten away otherwise.

EQUITABLE DEFENSES
a. No precise meaning sometimes courts apply equitable defenses to legal causes of action.
b. Traditionally meant those affirmative defenses available only in equity courts.
c. Remember- all of these are affirmative defenses. This is the P asserting that Ive met my prima
facie elements normally to win, but the D said I CAN DO SOMETHING. Even if you have your
elements met, I STILL win BC X.
i. Typically a shifting of the burden of proof. P has burden of proving prima facie elements.
With an affirmative defense, the D is then taking on the burden of proof.
d. Unconscionability
ii. An unconscionable K will not be enforced in equity
iii. If K is legal instead of illegal, but unconscionable, Court might enforce a damages remedy
while rejecting an equitable remedy
iv. No definite test. But common examples of unconscionabiltiy:
1. One sided K (like Campells)
2. Adhesion Ks with disparity in bargaining power- dont have much choice; 1 party so
more powerful.
3. Unfair terms
v. Sales of good 2-302: courts will refuse to enforce unconscionable Ks or terms of Ks that are
unconscionable.
vi. Ex: Campbell soup case.
1. Liquidated damages provision; very one sided K between a very sophisticated party
and a non-sophisticated party.
e. Unclean Hands and In Pari Delecto
i. In Pari Delecto = both are at fault
ii. Based on the desire to deter misconduct.
iii. Doesnt feel fair to courts to assist a wrongdoer in many circumstances
iv. Unclean hands = equitable defense
v. In pari delecto= available as a defense in law and equity actions.
vi. Some basics for in pari delecto and unclean hands:
1. Ps misconduct must be directly related to the subject of the litigation for the defense
to apply
2. The misconduct must be directed toward the D for the defense to apply
3. It is not required that the misconduct actually harm the D in order for the defense to
apply
4. The defense may not apply if the Ps misconduct is significantly less serious than the
Ds misconduct
vii. Pinter case April 14 - P investor who puts up money in a project set up by D. Project turns
out to be worthless. P regrets his investment. P and other investors sue D for rescission
put us back in situation we would be if K never existed (give us our money back)
1. Court holds that transaction did not qualify as a private placement exempt from SEC
registration. D in this kid was supposed to register with SEC and he didnt. Things
looking bad for the D.
5. D tried to say In Pari Delecto tPs are equally at fault for failing to register.
a. COA also says no. SCOTUS reversed and remanded- more info was necessary.
b. Key issue: whether P had roughly the same amount of fault as D? Notion of
equality of blame is talked about more in In Pari Delecto cases than in unclean
hands. Where P only has slightly unclean hands compared to D, likely not going
to find for the Ds affirmative defense.
i. If fairly even defenses might apply.
f. Equitable Estoppel:
i. Act involving knowing misrepresentation of material facts;
ii. Reasonable reliance by the other party;
iii. Injury; and
iv. Actors knowledge of reliance
1. Getty case example: P owns agricultural/landscaping business. To try to make things
work well with neighbor, D gives P several options for what P would like near its
property. P chooses a fairway. P lobbies with government to get plan approved, but
later P claims trespass and nuisance for getting golf balls on his land. D claims
equitable estoppel. Claim of trespass not allowed.

a. Even though in this case there was not an affirmative statement by the P
misleading the D, there was clear conduct on part of the P that can constitute
an act that involved misrepresentation.
b. Reasonable reliance- D went ahead and built golf course at great expense
c. Injury- trouble with golf course if Ps trespass claim goes forward
d. P knew D was changing its conduct and building golf course in reliance.

g. Waiver
i. An intentional, voluntary, and understanding relinquishment of a known right.
1. Case example:
a. Waiver and Equitable Estoppel: Both involve letting another party go forward
with something without stopping them, and then not being able to stop them.
i. Waiver at one end of the spectrum focus is on the actor. Look at the
party making the waiver in terms of enforcing it.
1. Equitable estoppel at the other end: focus on the other partys
reliance.
b. When looking at waiver, we are not zeroing in on reliance.
c. You could have a situation where equitable estoppel applies but waiver does
not BC the actor has led other party to believe it has given up a right, but other
party has not actually intended to give up a right.
d. More likely to find waiver where Ds conduct is highly intentional.
e. Actor does not always need to have strong intent: failure to raise an affirmative
defense to a complaint, is a waiver.
f. Defense may be waived, as well as a Ps claim. Waiver is broad.
h. Latches:
i. Unreasonable delay by P;
ii. Prejudice caused to D
1. This concept is closely related to Statute of Limitations.
2. May only use laches as a defense in equity claims.
3. Often there is an inverse relationship between delay and prejudice
a. If delay is longer, courts might not need as much prejudice to D to find laches
b. Also, if prejudice is stronger, courts might not need as much delay.
4. What courts are looking for in equity is justice
5. Three Common types of Prejudice:
a. Detrimental reliance by D
b. Lost evidence or witnesses
c. Fluxtuating values if the thing is in dispute
6. Common Reasons for delay:
a. Pursuit of other remedies
b. Procrastination
c. Not knowing about claim
7. Laches less important than they used to be now that states have Statute of
Limitations
i. Statute of Limitations
i. Legal remedies
ii. Policies Behind Statutes of Limitations
1. Protecting against stale claims
2. Give the potential D peace of mind at some point that hes not going to be sued
3. Suspicion that many older claims are fabricated
a. Why do we care about giving bad guys a peace of mind?
i. Maybe there is a good moral reason to let people feel they arent going to
get sued BC a lot of people getting sued shouldnt be held liable anyway
ii. Economic reason to give peace of mind: when a corporation has to
prepare documents for a shareholder/when corporation prepares
disclosure documents one of the categories of disclosure is lawsuits filed
against it/lawsuits that may be filed that are significant threats. This is
significant to investors. Maybe less willing to invest if lawsuits may be
filed. Getting people willing to take chances/willing to invest in things
when they can at some point say they dont have to worry about lawsuit.
j. Vocabulary Terms dealing with SOL:
i. Commencement: refers to beginning of a lawsuit.
1. Lawsuit commences from the time it is filed.

2. Lawsuit commences from the time it is served.

a. CA uses the filing approach.
ii. Accrual of Claim: Term of art that refers to the time when the P first has the right to file a
lawsuit. In most cases this is an easy concept.
1. BUt sometimes P doesnt know they are injured (Sponge example during surgery)
2. May also not know who injured you. Example: hit and run case.
iii. Running of Statute: Refers to the expiration of the statutory time for bringing a claim.
1. Different states have different SOLs
2. Different claims have different SOLs
iv. Tolling; and
3. Stopping of SOL either temporarily or permanently.
a. Most common reasons for tolling:
i. Filing or service of a complaint- that tolls SOL permanently.
ii. D not being a resident of the state (regardless of whether this condition
existed when claim accrued)
iii. P is a minor or insane (only if this condition existed at time claim accrued)
iv. P is imprisoned (only if this condition existed at time claim accrued).
4. Tolling Due to Fraudulent Concealment: In addition to the discovery rule, many juxs
also hold that the statute of limitation is tolled if D fraudulently concealed Ps injury
or Ds cause of Ps injury.
a. Case example: if someone were injured b/c car crashed back in 2005 didnt
bring lawsuit; was acting reasonably; didnt know anything about a defect; if a
jurisdiction has a discovery rule then you dont need the fraudulent
concealment rule. Fraudulent concealment rule has been rejected by some
jurisdictions, but will allow discovery rule in cases of fraud.
v. Discovery and reasonable diligence
1. Discovery rule to ascertain the accrual date when it is not clear.
a. This rule says: Accrual begins when P knew or reasonably should have known
all of the relevant facts needed to file her claim.
2. Things a P might need to know before it is fair to start running the SOL:
a. That she was injured
b. That Ds misconduct caused her injury.
k. Continuing Violations Rule: where violations are continuing, P may only recover for the period of
the injury that accrued within the statute of limitations period.
i. Case example: Ps are dairy farmers who bought silo from D. Claimed in 1974 the Ds made
fraudulent claims with regard to whether grain would be free of oxygen. Ps didnt bring
lawsuit until 1993. Ps want damages for all of the Ds conspiracy going back to 1974, even
though most of that time period was well beyond 4 year SOL.
CLASS ACTIONS
a. More money available to Ps than Ps are going to realistically collect what do you do with the
extra money?
b. Way to bring claims together in one lawsuit. The formation of the class is often challenged.
c. Dealing with why people want to get into class actions and why this is a desirable vehicle toward
remedies.
d. Case: Pharmaceutical Company allowing doctors to overbill insurance; medicine costing more
than it should. Told Doctors they could keep the difference between AWP price and the price
they actually pay based on these hidden discounts. Medicare insurers and patients overpaid.
Class action is brought. Settlement for 24 million, and they think 14 million will actually go
toward the claim.
i. Will require minimum proof of loss to get to this remedy - need to show settlement was fair
to the class.
ii. Cy- pres fund : distributions paid to a charity or charities when for some reason it is
considered not reasonably feasible to distribute some or all damages directly injured to Ps.
1. Allowed in at least two circumstances
a. When economically infeasible to distribute money to class members (cannot be
identified, damages too small)
b. When money remains from Ds payout after damages have been distributed to
Ps.
e. Incentives:
i. If u are P - if u a big claim you might not want to be in a class action.

f.

ii. But upside- class action- when you cant afford to bring the action on your own.
iii. For Ds will typically try to fight class litigation if they can without having to pay anyone
iv. If Ds fail to knock it out at procedural level have incentive to include as many Ps as they
can within class b/c they can deal with claims in a cheaper manner.
Fluid Class Recoveries: where money not necessarily awarded to the injured Ps but rather to
people in a class where there is a relationship with the wrongdoing.
i. Most likely scenario when this would be allowed: recovery to person who is in some sort of
related class even if they arent actually damaged is when court has already tried to pay
people who already were damaged and there is not enough money to do a redistribution,
court will get creative and try to find people who are somehow in the same class.