Remedies

Justice

Three theories of justice:

Normative

Identify a specific outcome as just - because we say so

Enough money to replace what was lost for compensation

Corrective Justice is another form of this category

Distributive - John Rawles

Purpose is to distribute resources equally, no justice exists until distribution is fair or equal

Procedural - H.L. Hart

DonÕt know right result or right distribution

Should have a fair process, then whatever the outcome is, itÕs just.

One Satisfaction Rule:

¹ is entitled to one recovery, which should be as full & complete as possible.

If ¹ is given more, itÕs excessive

Overview

The Question - What are your remedial choices and what is the scope?

A remedy is anything a court can do for a litigant who has been wronged or is about to be wronged.

Remedies give meaning to obligations imposed by the substantive law.

Five Families of Remedies

Compensatory Damages - sum of money designed to make plaintiff as well off as he would have been if he had never been wronged.

Theory - corrective justice/compensatory justice.

Substitutionary remedies: enough $ to go out into the marketplace and replace what ¹ lost.

- Look to ¹RP (plaintiff's rightful position)

If ¹ has been harmed, she is morally entitled to be put in the position she would have occupied before the harm. Anything less is unjust.

- $ restores ¹ to her Rightful Position.

assign dollar value to every item of harm. Itemize. If you cannot figure it out, give it to the jury.

Limiting Doctrines:

¥ offset benefits

¥ insurance

Equity = injunction: direct order from a court to litigants ordering them to do or to refrain from doing some specific thing. It's all about obedience.

Failure to obey is enforced by contempt - both and offense and a sanction.

Basically, it can be whatever it takes to make Æ obey.

- court may impose escalating punishments until Æ obeys

- court may impose fixed punishment for past disobedience

Equitable defenses

unclean hands, estoppel

Restitution - restores to ¹ all that Æ gained at ¹'s expense

both a claim/theory of liability and a remedy

look for unjust enrichment

this doctrine questions whether anything is more important than efficiency

Take from Æ whatever Æ made:

If Æ made a profit from ¹'s property, ¹ gets more from restitution than compensation.

Efficient breach remedied by this - could pay compensation and still make a profit; restitution is sometimes inefficient, but more fair.

Insolvent Æ, therefore judgement proof, ¹ suing in restitution gets first dibs before other creditors - this is a huge advantage.

Punitive Damages - $ awarded to punish and deter

Punishes egregious, despicable conduct (whatever the jury can be inflamed to think is despicable)

Not criminal because the state is not the ¹

Can add up to more than other choices

Congress has been lobbied to restrict punitive damages under excessive fine amendment (Amend 8)

- this fails because the remedy is not a fine

Declaratory Remedies - a normative statement of liability available by statute in every state, and by the Feds: the court says who is right and who is wrong

often not persuasive, no answer to the "so what" question; these are only effective for people who care and people who plan things

Irreparable Injury Rule

Equity will not act if there is an adequate remedy at law; equity will act only to prevent injury that is irreparable.

- an expression of preference, not choice

Laycock:

1) Whenever choice matters, you can find some traditional language to justify the equitable remedy. Because,

2) in our contemporary American merged (law & equity) legal system, what really affects choice are practical, contemporary concerns.

Other rules that express the preference for monetary relief:

Rule Against Prior Restraints: common in cases involving speech; speech will not be limited, pay $ for the wrong.

Equity will not enjoin a crime: fear of government by injunction; let juries enforce the criminal law.

Adequacy

Ask - what is the nature of this particular injury that might make this an inadequate remedy

Remedies are adequate if you can go into the marketplace and replace what was lost

- when goods are fungible and $ can replace them , damages are calculated to give ¹ what was lost

- but ¹ would rather have an injunction; Æ should go buy it and give it to ¹

Transaction costs borne by one who goes out into the marketplace and procure the goods

- traditional remedy shifts transaction costs onto the ¹ victim

Practitioner's Rules, not the traditional language

The Remedy must be complete, practical and as efficient as that which equity could provide

- if it is not, ¹ ought to have injunctive relief

Basically - ¹ is entitled to the most complete, practical, efficient remedy

For Analysis: Ask - is the compensatory damages remedy ÒadequateÓ? If so, it must be given; if not, equity is available.

Compensatory Damages

Ask Yourself: What do we value more than our theories of justice?

Question for compensatory damages: what do we value more than corrective justice?

Push rules and general principles for how serious we are about them.

There are many right answers - when reaching them, creativity is more important than knowledge.

Compensatory Damages are about restoring ¹RP

¥ Value as the measure of Rightful Position (property)

¥ Reliance or expectancy of Rightful Position (K)

¥ Limits on ¹RP: consequential or special damages (Æ arguments)

- Consequential or Special Damages generally unavailable

¥ Limiting Doctrines exist

¥ Typically routine formulas, with exceptions:

- integral part

- special purpose

* argue the non-routine

Arguments for restoring ¹RP

traditional: ¹ should not be made to suffer because of wrongdoing, and if we restore ¹ to his RP, he will not suffer. To do less would leave part of the harm un-remedied; to do more would confer a windfall gain.

economic: purpose of the law is to maximize the value of conflicting activities.

encourages profitable activity - can violate the law if you can pay for the damage it causes. The function of compensatory damages is to force law violators to take account of the harm they inflict.

Preference in the system:

general approaches are culturally biased in favor of the majority culture

Æ's argue the court to come back to the general rules

¹'s must be careful, respectful and creative

Determine Value of Loss:

¥ Replacement: We assess the value of something lost by the cost of replacing the exact thing lost in a functioning market.

Conception of value depends on the marketplace; "go and replace what was lost."

¥ Efficiency: Having given enough to replace the exact thing they lost, we assume they can spend it however they want.

The Goal = to make the wrongdoer consider their actions carefully and calculate the cost of the wrong-doing.

¥ Corrective Justice: The thing lost should be replaced because the goal is to restore the ¹ to their previous position.

¥ When value is the measure, courts generally focus on the value of what ¹ lost, not on the cost of repair or placement.

FORMULAS:

Substitutionary Remedies: replace the exact thing ¹ lost

Diminution: difference between value before and after that damage (because you still have the damaged property and can sell it)

Breach of warranty: difference between value as warranted/promised and as delivered

Breach of K to sell goods:

- property - difference between K price and market price of property promised

- benefit of bargain - what would have had if K had been performed as promised

Takings: pay for land, but not incidental, consequential or replacement damages

Crops: value of the crops at harvest

¹ is entitled to be made whole, but Æ is usually entitled to have ¹ made whole in the least expensive way.

Remedies Analysis Tip: Ask about alternatives. Start with the general rule and then explore the alternatives. There are a lot of ways to get to the right numbers; there are few wrong ones.

Robin Tidbit: When faced with property loss, start with the general rule and look to exceptions. Often different ways of conceptualizing will not always yield the same result.

United States v. Hatahley (10th, 1958, 11) The General Rule. Preference for losses measurable to the majority culture. Preference for less speculation and more general measures.

Facts: Government liable for damages for trespass; they rounded up and sold Navajo Indians' horses and burros that grazed on public lands without permits. District court awarded $186,000. Case remanded based on "wrong" method of valuing loss.

Horses and burro's actual worth $395.00 per animal

P&S $3500.00 per family

Consequential $28,000.00

Diminution in value $7950.00

App Ct Holding: The fundamental principle of damages is to restore the injured party as nearly as possible to the position she would have been in but for the wrong.

¹'s were entitled to:

- the market value, or replacement cost, of their horses and burros as of the time of taking plus;

- the use value of the animals during the interim between the taking and the time they, acting prudently, could have replaced the animals.

App Ct values efficiency more than corrective justice

¥ Replacement Value - how to figure it out? go to the livestock market

However, these horses are genetically distinct and you cannot establish a market price - they are traded by barter and $ cannot compensate for them

- App Ct wants the general rule applied

¥ General Rule for Pain and Suffering (P&S) - unless there is personal harm, P&S damages are not awarded

¥ Diminution - court said to use lost profits

Special Purpose Property:

- property of non-profits, charitable or religious organizations.

- not generally an active market from which the diminution in market value may be determined

¥ replacement or restoration costs have also been allowed as a measure of damages in other contexts where diminution in market value is unavailable or unsatisfactory as a measure of damages

¥ where expenditures to restore or to replace to pre-damage condition are used as the measure of damages

Integral Part Rule:

- ¹ entitled to replacement cost of integral part of the structure that will be abandoned if the part is not replaced

- no depreciation/discount; you get the value of the new part

- not overcompensation because you must buy it to continue

- alternative is to abandon a more valuable structure

Used Consumer Goods: unsettled, no functioning market

cars are commodities, family Bible's are not

Jalopy Hypo: can the student find an exception to the general rule?

"Lemon Effect" of used consumer goods:

cannot command same market price as replacement

people assume the worst and will not pay

no functioning market place exists

so - need a remedy that is more compensatory

but - puts ¹ in better position than if had sold it before the accident

Income Earning Property:

Helen B. Moran (2d, 1947, 23) Exception: Income Earning Property

lost barge

General Rule: If a total loss, get diminished value or replacement, whichever is less

However, if have these two elements, can ask for an alternate figure that may be a lot more than other remedies

- there was no replacement market in this case

- income earning property was lost

Alternatives = cost of repair or value of barge at time of collision

¹ showed they were entitled to:

¥ capitalized net earnings:

- lost income stream from income earning properties

- multiply by remaining useful life

- present value phenomena - if get it all at once, can earn interest.

- be sure to divide capital earning by interest rate.

¥ open market value; but this did not exist here

¥ repair; which costs more than the value because it was totalled

Æ had job of arguing why ¹ showings were not appropriate

government wanted to pay for the repair

United States v. Fifty Acres of Land (US, 1984, 19) Special Purpose Property

landfill takings case

General Rule in Takings: ¹ gets value of what was lost

Alternatives to general rule, departures from substitutionary justice

Special Purpose Property: subject to special rules.

- entitled to replacement measure or

- cost of repair

not quite a windfall, but is something more than ¹RP (they get more years of use out of the property once replaced/repaired than they may have had)

Trinity Church (Mass., 1989, 26) Special Purpose Property

historic landmark with active congregation

to repair - take apart and rebuild; unless repaired, will suffer great depreciation in the future

General Rule of measuring property damages:

diminution in market value

they get cost of repair; reasonable and necessary

argue one should depreciate

General Discussion of K Remedies (ad nauseam) "A Broken Promise"; what does it mean to return ¹ to her Rightful Position

Measure of ¹RP in K cases:

¥ Expectancy: same position would have occupied if promise had been performed

Benefit of the Bargain

¹ gets $ value of position she would have occupied

Value = value of performance

preference for efficiency and normative values

¥ Reliance: same position ¹ occupied before promise was made

Value = whatever ¹ put forth, out of pocket

generally smaller than expectancy; only used where cannot prove expectancy

¥ Restitution: return ¹ to position Æ now occupies

consider when Æ greatly benefitted by wrongdoing

Unjust Enrichment

General Rule: ¹RP = expectancy

¹ will seek whichever yields the most $

ask for reliance when you cannot prove expectancy

Law & Economics (note 6, 47) Posner

expectancy is the most efficient

true measure of what people value is their expectation

Law should encourage efficiency because resources will be put the their best use

Breach is efficient if you can pay compensation and still make profit

normative argument (notes 4&5, 45-7)

Law protects expectancies because promises are sacred, not optional

this gives true effect to a broken promise

deterrent because will remedy ¹ as if Æ did not break promise

expectancy is unjustified, try Reliance (note 2, 44-5) Atiyah

society is moving away from executory K's and allows people to change their minds (airline and hotel reservations, for example); we are no longer protecting expectancies

Tort v. K - Remedies law tries to keep these separate

Tort damages are nebulous and larger than K damages

we want to avoid nebulousness in business; keep K damages down

Expectancy damages are only recoverable in K, not Tort

Reliance available in Tort

general damages in Tort are P&S

Reliance v. Expectancy

Texaco v. Pennzoil (Tex. App., 1987, 68)

view Getty as a wealthy bride

Pennzoil = suitor no. 1

Texaco = suitor no. 2

P thinks G has agreed to wed

One week later, G shows up on the arm of T

they merge

P feels aggrieved and sues T for tortious interference with K

treat this as a Tort or a K case?

in Tort, Reliance is the preferred measure, not expectancy

Æ wants reliance because reliance is usually the smaller measure

P's attorney argued K case, expectancy, and how to measure expectancy

Tort imbedded in commercial bargain is entitled to K remedies

expected oil: go to geological marketplace and find/produce barrels of oil

billions of $$'s

stock to represent the barrels of oil

mere millions of $$'s

T ignored the Remedies case because they acted like they could not lose

BIG MISTAKE - jury thought they could, and did. $10BIL worth.

Neri v. Retail Marine (NY, 1972, 37) lost volume seller

boat sale and return case

Facts:

K price = $12, 587.40

deposit = $4250.00

Neri breaches and asks for deposit back

Marine had boat when Neri repudiated

4 months late Marine sells boat to another for K price

Marine argues lost profit b/c breach = $2579.00 plus expenses = $674.00

1) Neri, the ¹ and wrongdoer, sues for refund under UCC: buyers right to refund ¤ 2-718

buyer entitled to restitution of amount by which payment exceeds:

liquidated damages, if they exist in the K, or

20% value of buyer's total performance or $500, whichever is less

subject to offset: pay seller's damage out of refund

2) Marine claimed $3253.00 damages - lost profit and incidental

Court reversed CtApp and awarded:

¹ entitled to [$4250.00 minus $500 = $3750] less offset to Æ in amount of $3253.

This was because they considered UCC ¤ 2-708 and the lower courts did not:

Therefore, Seller (S) entitled to its "profit (including reasonable overhead) . . . together with any incidental damages . . . , due allowance for coasts reasonably incurred and due credit for payments or proceeds of resale."

Question: what do we mean by "Rightful Position"?

position ¹ would have occupied if she had never made the K? (reliance)

Retail Marine's expenses

position ¹ would have occupied had K been performed? (expectancy)

Retail Marine's lost profits

or restore Æ to position Æ occupied before K? (restitution)

Neri's deposit

Chatlos Systems v. NCR Corp. (US, 1982, 48) Warranty

cash register case

sales price = $46,020.00

"performs like system worth $207,826.50". Warranted for this amount.

value as delivered = $6,000.00

Remedy = breach of warranty: value of goods as warranted ($207,826.50) minus value as delivered ($6,000.00) equals $201,826.50.

Generally, ¹ gets expectancy. But, here, this cannot be a reasonable expectation.

FMV should be price paid? Limits expectancy to K price.

- However, will not reverse lower court unless factual determinations are clearly erroneous - and they weren't. So the enormous judgment stands.

Consequential, or Special, Damages

General Rule: not recoverable unless foreseeable

general damages = those that almost always accompany the theory of liability pled. General damage formulas and idea of corrective justice should meet in routine cases.

tort = P&S

K = lost benefit of the bargain

Assume you can go out into the marketplace and replace what was lost

Special Damages: When you need to go beyond the general damage formulas in order to reach corrective justice.

Consequential Damages: - Non-Routine

QUESTION; Who should bear the cost of non-routine damages?

Certain damages could, but not always, occur "proximately related to the theory of liability"

tort = medical expenses

K = incidental expenses

FORESEEABILITY - Collin thinks this line of reasoning is a game to avoid the question of whether itÕs ÒfairÓ to compensate for specific kinds of damage.

Characterization as one or the other serves a purpose:

consequential subjected to more scrutiny/proof

general are pretty much assumed

¥ Courts like to exclude consequential damages

Hadley v. Baxendale General Rule

General damages arise naturally. Other damages are not recoverable unless the loss was reasonably to be supposed to be within the contemplation of the parties at the time of the contract.

No compensation is allowed for unusual situations unless the parties thought about it at the time.

Question to ponder: The burden of the loss of anything unusual is put on the plaintiff. IS THIS A FAIR ALLOCATION OF RISK?

Buck v. Morrow followed Hadley

Facts: landlord/tenant case. Tenant pleaded general and special damages for breach of lease.

Lease: Pasture lease, $125/yr for 5 yrs. Provision to allow landlord to sell after two years. Duty to compensate for any and all losses occasioned by the sale.

Losses Claimed: $225 for an extra hand to round them up after forced to let them loose on the commons, lost 15 @ $15/head, and new pasture was more expensive.

Tenant's Rightful Position: property to lease for the unexpired term

General Damages =

¥ FMV of pasture for unexpired term (minus) what he would have paid for his existing lease for the unexpired term = Compensation

¥ Might need to reduce to present value

Consequential or Special = compensate for extra hand and lost cattle?

Court says yes, itÕs enough that the landlord understood how hard it would be on the tenant to push him out of the lease.

¥ Framed as General Damages

Hadley Perspective: if the parties had anticipated that there would be a shortage of pasture? Or that heÕd have to graze on the open range? That heÕd have to pay more?

Who should bear the loss? It might depend on more facts, on whoÕs the better loss avoider.

Example of when you cannot get consequential damages:

Lost money

an additional general damage for failure to pay money is interest.

Virtually never get consequential or special damages, like failed business ventures.

DoesnÕt matter what the parties knew or could foresee because it is easily ascertainable

General Rule: You get enough money to go back into the market to replace what you lost. For money, itÕs a very fungible market to replace or ÒcoverÓ for what you lost = the very amount of money plus interest - not money you could have generated in stock purchase, for example.

¥ Any departure invites too much speculation, $ investments are too hard to predict and too easy to look back and see what happened.

¥ potential spiral of loss - lots of unusual circumstances that nobody would have been able to calculate the risk of loss.

QUESTION - What if ¹ canÕt cover before judgment? Ask for special ruling, doesnÕt happen often, but if you can show special facts, might work.

Statutory and Common-law limitations on Compensation to ¹Õs RP

K limits on damages (Contract provisions which limit compensation)

Liquidated damages Clause - specifies in advance sums payable as damages for a breach

Reasons for liquidated damages:

Avoid expensive litigation

Account for frequently occurrences (like hurricanes) which cause breach

Overliquidated - sum specified is overcompensatory, indicates that its a penalty (economic duress) not compensation, and one party is using it as a threat. IT WONÕT BE ENFORCED

- If liquidated damages clause is reasonable approximation of the either the anticipated or actual damages, it will be enforced.

- Ease of calculation of damages. The more difficult it is to prove the damages, the more reasonable an estimated liquidated damages clause will look.

Underliquidated - Could be used as an alternative to a warranty. Product is cheap and damages could be huge (like burglar alarm)

- When people agree to an under compensatory liquidated damages clause think they have other remedies. K often contains a clause limiting remedy to the liquidated damages.

- Issue: should court rewrite the K? UCC ¤2-719 says yes, puts a floor under parties for remedies. ¤2-718 is all you get though, has to be unconscionable.

Limitation of Remedies Clause Limits ¹'s remedial choices.

UCC Response

¥ Do the remedies available under the clause Òfail of their essential purposeÓ

¥ If they do, full range of traditional remedial options becomes available because of UCC commitment to provide at least minimum adequate remedies even if parties have agreed to impose more risk of loss on one party.

ISSUES:

- Exclusion of consequential damages; do we revive consequential damages as well when we conclude that the remedy provided fails of itÕs essential purpose? YES, but minority of states that say if something else in K to provide remedy, then canÕt have c.d.

- Should court get involved in rewriting contracts. Presently do if itÕs to provide minimal adequate remedies and avoid inequities.

Avoidable consequences doctrine (Collin thinks calling it duty to mitigate is misleading) If the plaintiff is in a position to avoid losses, they should do so.

Rule: Æ need not pay for avoidable (by ¹) consequences of wrongdoing. If Æ can show avoidability, then damages will be offset by the amount avoidable.

¥ ¹ is required to use reasonable diligence to avoid damages from wrongdoing.

¥ ¹ is only required to choose between reasonable courses of conduct. Æ canÕt complain that ¹Õs choice was wrong as long as it was reasonable

Examples:

- Wrongful discharge cases - does ¹ need to leave the geographic region, change profession in order to mitigate damages, or take an inferior job? NO. Personal injury- lose weight, undergo corrective surgery? NO

- Financial inability to mitigate - spending money in order to mitigate damages? If ¹ unable, wonÕt be held liable for losses that could have been avoided if they had mitigated.

SUMMARY; Groves - ¹ cannot recover for damages incurred when there were reasonable alternatives available and they did not take them.

Offsetting benefits rule If ¹ has received benefits because of the wrongdoing, they must be deducted from the damages.

Example: $ value of benefits for full performance reduced by savings on ¹Õs part for not having to perform.

Collateral source rule - if injured party receives compensation from a source wholly independent of the tortfeaser, such a payment should not be deducted from the damages which the ¹ would ordinarily receive from the tortfeaser.

¥ Have to refund benefits to insurance company if you receive benefits from another source. Good section in Remedies book.

¥ Reasons for RULE:

- DonÕt want to discourage people from buying insurance, which is loss avoiding behavior.

- Not a double recovery out of the pocket of the Æ, itÕs due to a separate K based on foresight of the ¹.

PROXIMATE CAUSE: Limiting Compensation

Traditional proximate cause black letter rule is not very helpful in predicting what damages will be compensated. Mainly labels for courts to use that donÕt mean much:

Compensated losses v. Uncompensated losses

Direct Indirect

Proximate Remote

Foreseeable Unforeseeable

Question: Why are some losses compensated and some not?

¥ Not every case has a Proximate Cause problem

¥ Only an issue when wrongful act has potentially unlimited constellation of consequences.

¥ Becoming a more common problem as our economy becomes more commercial - Collateral claims, third parties and consequential damages makes commercialism unstable, hard to predict costs of behavior.

¥ K doctrines are deliberately undercompensatory in order to secure another goals such as commercial expansion and growth.

¥ Tort damages - present the most potential for proximate cause problems. Too many categories of plaintiffÕs with potential damages from harm. Can be almost infinite, See Pruitt, p 114

Social policy approaches judges use to justify invoking the proximate cause limitation:

Bankruptcy (fear of this motivates courts. Is bankruptcy court the forum in which some of these fights should be fought?). Courts will limit damage to avoid bankruptcy.

If a company declares bankruptcy, then the tort might be washed out, if that doesnÕt happen, the amount of money left over will be divided among ALL the creditors. Structured settlement is a good alternative.

Best loss avoider (which party was best able to avoid the loss/pay for the loss). Limits damages if ¹ was the best loss avoider.

Learned Hand (social utility) Cost of accident> Cost of prevention = cut off for damages.

Efficiency; important to pay the full cost of doing wrongdoing. Accurate and most efficient use of resources.

Pruitt v. Allied Chemical Corp. (E.D.Va., 1981, 110)

Allied dumped Kepone in the sewage system after they knew how dangerous it was and were told to stop producing it. Criminal charges were successful and Æ paid large fines for violation of environmental laws.

Perceived Need to Limit Liability: Social utility. But efficiency is a good argument to bring everybody.

Economic harm rule - tort ¹ may not recover damages unless they sustain physical injury to person or property. If applied here nobody would recover because the only physical injury was to the seafood, which was not owned until caught and it dies before it was caught. Judge refused to apply this rule.

Alternate Approaches:

Direct - Fish--->anyone who gets wet, A, G, H, I. Not likely to have insurance or have any alternative to fish from the bay.

Foreseeable - Everyone in the picture was foreseeable, doesnÕt help much in eliminating anyone

Proximate - Just a label that says they will be compensated.

Holding: CLASSES A, G, H & I can recover. No other classes are able to recover. They are indirect losses, even though they are foreseeable and not remote.

Rationale: Only people right on the water get to recover. If they bought their fish, they donÕt get anything.

Tax Issues

IRC 61 - Gross Income means all income from whatever source derived

IRC 104(a)(2) - Gross Income does not include any damage sums received Òon account of injuries or sicknessÓ

Implications of 104:

¹ is overcompensated because that sum in any other form could have been taxed

¹ is put in a better position than would have occupied

Congress - policy position, tax benefit

Interest

General Rule:

Prejudgment interest will only be awarded when damages are ascertainable before trial, they are reducible to a sum certain before trial.

- K cases can pass this test

- Prejudgment interest is rarely available

Post judgement interest - preserves ¹RP in light of the marketplace; otherwise Æ is taking an interest free loan from the ¹

- Almost always available

- if ¹, make sure your judgment is entered by the county clerk so interest can start accruing immediately.

- Post judgement interest rate is not the market rate, but the legal rate set by state statute.

Legal Rate has recently been far below the market rate.

Lower rate gives Æ a good reason to Òborrow money from the ¹Ó - delay paying because itÕs cheap interest.

- No compounding of interest on judgments with two exceptions

Established course of conduct between ¹ and Æ

Federal judgements may allow compounding interest by statute

- Rule of 72Õs

Method of determining the # of years to compound in order to double amount

sum/72=# years to double the principle

- Jury Information - Traditional rule

- Juries will not receive information (instructions or evidence) regarding taxability of awards received by a ¹.

- Juries may not be informed that interest on money invested by ¹ is taxable under IRC 61

Taxable Earnings In Federal Case

Leopold case - federal juries must only consider after tax earnings

Discounting to Present Value

General Rule: When a lump sum is awarded for future earnings most courtÕs will discount to present value

This principle can warp the theory of compensatory damages

Principle behind discounting -

¥ if ¹ is compensated for lost wages w/o reducing/discounting to present value, ¹ is being overcompensated.

¥ Can presently earn interest on money ¹ wouldnÕt have had until the future.

¥ some believe that any lump sum award (even for pain and suffering) should be discounted to itÕs present value.

Discounting Process - Reducing the lump sum by the amount of interest it could earn.

Present value calculation table - CB 1086.

The higher a sum could be expected to earn, the more deeply that sum needs to be discounted.

Interest rates are very significant in the discounting formula - see page 222.

Discounting presumes an inflationary economy

Alternative: Have Æ make periodic payments to ¹.

Jones V. Laughlin Steel (Cb 213) formula for discounting (note 2, 221)

Æ argue that lost wages should be diminished by state and federal income taxes

should only consider after tax wages and benefits

EQUITY

Overview

Principle remedy in Equity is the Injunction

Injunction = order from court to Æ personally

negative = preventive; not to do something

affirmative = reparative; to do something

Law courts had special writs of power to command behavior. 3 survive today:

mandamus - court to another court or public or corporate official

to perform official ministerial duty

Limits:

not available against private individual

duty must be clear and non-discretionary

not available if ¹ has other remedy

prohibition - court to inferior court and the parties

not to exceed jurisdiction or abuse authority

important for prosecution; a substitute for interlocutory appeals

habeas corpus - court order to someone who is holding someone else

to produce the body; bring the person before the court and justify custody

use - obtain review of criminal conviction and child custody

3 Types of Injunction

Preventive = prevent harm to ¹ by forbidding future wrongdoing before it occurs

keeps ¹ in RP. If successful, ¹ will never experience harm

substitutes threat of contempt for other consequences, like compensation

better at keeping ¹ in RP

worse for Æ because as long as have option to pay, can choose unlawful action

Reparative = order Æ to undo wrongdoing that has occurred

both like and unlike compensation

like: address wrongdoing that has occurred

unlike: not trying to assess $ value of ¹ harm; makes Æ undo wrong

may require $, but that is not the order

avoid future harmful consequences to ¹ from past wrongdoing

can also get compensation

one prospective, one retrospective

Æ argument = reparative injunction only addresses those harms that cannot be paid for - that is what compensation is for.

Structural = combines above in order to reform an institution or organization

comes mainly form anti-trust cases

used in public education and prisons

Injunctions require obedience, disobedience is punishable by contempt

Irreparable Injury Rule = may have none of these orders unless remedy at law is inadequate

injunctions are least preferred remedy of the law

if there is any reason to subordinate the remedy/injunction, it will be subordinated

Enforced by Contempt

distinct tactical advantage; the "big hammer" behind equity

refers to act of and sanction for disobedience

Direct - disobedience in courtroom or in judge's presence

may be punished summarily

due process waived by contemnor

Indirect - disobedience out of presence of judge

entitled to notice and hearing, at top of docket

hearing = order to show cause why Æ should not be held in contempt; Æ provides reasons

no jury

3 "flavors" of contempt:

Criminal - willful intentional violation of court order

no collateral attack on that judgement

collateral bar rule = even if underlying rule is unconstitutional, you must obey it until it has gone through a process to overturn it in the orderly course of judicial review

punishment = fixed sentence or fine

Civil - ¹ prosecutes this remedial proceeding herself

sanctions look like compensation: attorneys fees

usually no trial

Civil/Coercive - penalties are civil, but may include imprisonment

punishment = fine/imprisonment conditional upon obedience

Æ holds keys to own prison

Judges are to use the least possible power that is effective

Preventive Injunctions

Orders Æ not to do act in future; Æ conduct still inchoate (like criminal attempt)

risk: may intervene in Æ conduct that is lawful

to avoid: be sure claim is ripe (sufficiently real to allow law to intercede) for the remedy

Scope:

Marshall v. Goodyear (5th, 1977, 236)

General Principle: appropriate breadth of order must be determined by reference to the wrongdoing

order of ADEA compliance to entire chain too broad

- one person's actions cast bad light on entire company and placed them under threat of contempt, not just ordinary remedy for Act violation; this is not acceptable

- but good tactical move for ¹: do not have to file new suit, just have to get past show cause hearing and get to be at top of docket

NLRB v. Express Publishing (US, 1941, 239) Standard Doctrinal Answer

"A federal court has broad power to restrain acts which are of the same type or class as unlawful acts which the court has found to have been committed or whose commission in the future, unless enjoined, may fairly be anticipated from the defendant's conduct in the past." (emphasis added)

Determined by reference to the wrongdoing found or threatened

Shifts focus from ¹ position to Æ wrong

Ripeness:

Limit on/requirement in preventive injunctions

Since against future conduct, must restrain realistic threat of harm

Standard:

¥ real or substantial threat ¹ will be harmed in the future

can be eventual, even if not imminent - as long as show substantial certainty harm will occur and facts are sufficiently developed for a reliable decision (note 13, 236)

¥ potential is not enough, ¹ must show sufficiently realistic threat

¹ himself must be threatened with injury

Ripeness limits reach of equity and power of courts in equity. Because remedy is tailored by chancellor, scope is left largely to discretion of judge. We need some check on this. Ripeness is it.

Humble Oil v. Harang  (E.D.La, 1966, 229) [injunction denied]

facts:

¹ wants Æ ordered not to destroy documents in conspiracy case

there are many consequences for destroying documents, but the available remedies will not help ¹ much if the documents have been destroyed

affidavit produced based on belief wrongdoing will occur

"irresistible temptation" - by issuing the injunction, court says this is not a trustworthy Æ incapable of adhering to the right decision and resist temptation

may affect Æ reputation

gives ¹ significant tactical advantage

slippery slope - every ¹ will seek preventive injunction for discovery issues and substitute equity for civil procedure

¹ must show:

potential irreparable injury

real danger the acts to be enjoined will occur

there is no other remedy available

under these circumstances, the court should exercise its discretion

3 reasons for ripeness, require sufficient threat to ¹:

protect Æ potentially lawful conduct

protect Æ reputation for integrity

limit power of equity court to define/control punishment for law violations

City of LA v. Lyons (US, 1983, 236) LAPD chokehold

¹ sought injunction against Æ to stop chokehold practice

- however, ¹ must show future injury to ¹ personally

- should be able to draft injunction broadly enough to include a class of people similarly situated to him, but he still has to show it would happen to him

No injunction because unripe.

Nicholson v. Connecticut Half-way House  (Conn., 1966, 246)

anticipatory nuisance; preventive injunction against the nuisance

if land use is sufficiently dangerous/disruptive, it may be a nuisance and court may order its operation stopped

no injunctions allowed for fear and apprehension; the necessity for the injunction must be demonstrated clearly

must be reasonable certain, not merely possible

Æ has interest in reputation

if harm does occur, the law can take care of it

¹ argues Æ house will lower property value

court says this is not enough; besides, there is not enough evidence the house will have a predictable effect.

There are no fixed attributes, like with dump and mortuary cases

Termination/Mootness

When should an injunction end? without a date, they go on forever.

Æ wants termination, ¹ wants continuation for tactical reasons

Æ free to begin again

¹ keeps tactical advantage, the hovering "hammer"

US v. W.T. Grant Co. (US, 1953, 242) antitrust case

General Principle - party moving to terminate must show:

there exists no danger of recurrent violation

heavy burden

court must consider effectiveness of discontinuance

court must consider character of past violation

voluntary cessation - a common source of mootness; variation on ripeness

¹'s win more of these than they do ripeness because past violations hurt Æ's credibility

Reparative Injunctions

Court orders to Æ to undo harm the wrongdoing has caused and/or take positive steps to avoid future harm

- the distinction between these and preventive injunctions is that of preventing some or all of the harmful consequences of an ac