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A. Basic principles/theory
a. Remedies as the litigators toolbox: overly simplistic?
b. Purposes and goals of the la ! hat it is trying to accomplish "individual #ustice$ corrective #ustice$ economic
incentives$ etc.?%
c. &hould remedies alays #ust be an 'afterthought( or are they instructive on substantive rights?
d. )o do the disparate remedies come together in terms of common themes?
i. *onceptions of due process$ ho they are reflected in remedial scheme
+. ,rom plaintiffs perspective
-. .imits in terms of protecting /P rights of /s in terms of hat they are entitled to ! hat are
limits on the courts in terms of hat they can ta0e from /s from the rongdoers
e. Remedies as a bridge beteen public la and private la
B. Restoring P to his rightful position
a. 1he stated goal of compensatory damages
b. 2ssues:
i. Precise calculation of compensatory damages
ii. 1he compensatory standard itself
Carey v. Piphus
Facts: P$ )& student suspended on suspicion of possession of drugs. Principal suspended /o
hearing/investigation$ P sued for violation of procedural /P. 3ever established hether
student as properly suspended$ but some reason to believe that the suspension as correct
Analysis &ubstantive re4uirements of procedural /P "in terms of the suspension% are very lo !
as a matter of con la this case is not that illustrative$ but issue is ho you value
violation of P/P
Array of possible remedies: stems from nominal compensatory in#unctive
nominal 1R5
6 7hat ill the court contemplate in determining damages?
8 2s there an inherent value in the deprivation of a constitutional right such that
you dont have to prove a specific in#ury or loss in order to #ustify damages?
'Presumed damages:( court calls it an oddity in tort la "defamation%
virtual certainty of harm " emotional distress% but difficult to prove
6 3ominal damages: even though e need actual harm/in#ury for compensatory$ it is
the case that you could get nominal damages of 9+ ! ont please client in every
instance$ but ill vindicate his right
8 2s this orthless to a client? 2n many instances the predicate for getting
punitive damages might include nominal damages as ell "may turn out to be
very lucrative in the end%
6 1R5: put the student bac0 in school
2s this orthless to a client? 2n many instances the predicate for getting punitive
damages might include nominal damages as ell "may turn out to be very lucrative in
the end%
6 Payment once harm has occurred
6 Protection from imminent harm
U.S. v. Hatahley
Facts: Agents of government came in against orders$ too0 horses oned by P83ative Americans
and sold them to glue factory
Proc!"ral #istory: /ispute beteen district court and appellate court over ho e should evaluate the
:odern Remedies ,;<$ pp. +
Analysis 2ssue +: precise calculation of compensatory damages
6 Appellate court: says /* pulled numbers out of the air= ants individuali>ed
determination of damages
6 ,ederal 1ort *laims Act: no #ury
8 Raises 4uestions: if a #ury came bac0 ith a lump sum$ it ould be much
more difficult to scrutini>e the aard
6 7hy does it matter?
8 7ithout precision$ aards might be a indfall to some Ps hile it ould
stop short of restoring others
8 .ends legitimacy to the system$ even if it is indulging a fiction= it ill get us
further in most cases than if e give up at the outset
*ompensatory standard itself
*. ?alue as measure of rightful position
a. '*ommon sense( concept
b. @asy cases: e measure value of hat as lost or destroyed ! the value re4uired to put one bac0 in rightful
i. *alculations: value before damage and value after damage has ta0en place$ price P paid or price P as
ii. Problem: you need a ell8functioning mar0et in order to determine value
+. 2s replacement cost the best ay to determine value? 1he idea is that one can be given money to
replace the item based on price
U.S. v. Fifty Acres of Land $%&'()
Facts: A.&. condemned landfill as part of flood control pro#ect. 2n order to replace the condemned
landfill$ the city ac4uired a ne site$ developed into larger$ better facility.
Proc!"ral #istory: Bury found that ,:? of condemned property as 9--CD$ and reasonable cost of substitute
facility as 9E-FD. /istrict *ourt entered #udgment for 9--CD.
*ourt of Appeals reversed/remanded$ holding that citys loss as the amount of money
reasonably spent to create a functionally equivalent facility
Analysis: Bust compensation normally G mar0et value of property at the time of the ta0ing$ unless
it is too hard to determine
6 2n this case: value readily ascertainable
,ear of indfall ! if ne facility is superior and more valuable$ any increase in 4uality
of the facility is a indfall
6 *t of App 'solution(: discount for cost of substitute facility to account for its
superior 4uality 155 AB&1RA*1
6 5b#ective measure
7hen ta0ing occurs$ party is entitled to ,:? of a property provided it is reasonably
ascertained$ not the cost of buying a better replacement
Disposition: Budgment of *t of App G reversed
c. 3arroness of ta0ings clause and #ust compensation #urisprudence:
i. /efinition of loss is less generous to victims that hat e see in insurance mar0ets
ii. 2nsurance: replacement value of goods$ rather than used value
iii. Fifty Acres: has the city really been put bac0 into its rightful position if it is only given the cheaper cost
of the original landfill?
Trinity Church v. John Hancock Mutual Life nsurance Co. $Mass. %&'*)
Facts: *hurch as a national historic landmar0$ hich as structurally damaged during the
construction of neighboring property onerHs building. 1he damage to church ould have
re4uired disassembly and reconstruction. Before church filed its action$ neighboring
property onerHs representative agreed to aive assertion of a statute of limitations defense.
*hurch filed its action three days before neighboring property onerHs final aiver expired.
Proc!"ral #istory: Plaintiff church filed an action against defendants$ neighboring property oner and others$
:odern Remedies ,;<$ pp. -
for excavation8related damages. 1he &uperior *ourt ":assachusetts% denied neighboring
property onerHs motion for a directed verdict but directed verdicts for the other defendants.
1he superior court also entered #udgment for church against neighboring property oner.
*hurch and neighboring property oner appealed.
Analysis *hurch as entitled to be compensated for the reasonable costs of restoring church to
the condition it as in prior to the excavation$ as churchHs method of damage
assessment$ based upon a percentage of reconstruction cost$ as consistent ith the
depreciated8cost8of8reconstruction standard applicable to special purpose property
2ssue of present value:
6 &hould court reduce aard of future damages to their present value? 3o ! the fact
that repairs ill not be done until some time in the future does not compel the
conclusion that 1rinity is see0ing recovery for future damages
6 /amage has been done presently
6 An in#ured party is not re4uired to perform repairs in order to recover for
diminution in mar0et value of its property
Disposition Affirmed.
d. 1iming
i. 5verhelmingly courts find that used value of goods ill be sufficient as opposed to full value of
replacement goods
ii. But$ fixed rules for timing 4uestions
+. *ontract cases: determine value at date of breach
-. Property damage cases: value at time of rong
!ecatur Count A"#Services$ nc. v. %oun" $In!. %&'%)
Facts: I contracted //ecatur in summer of +JEK to aerially apply insecticide to field. &praying
as done negligently and crop groth as retarded. I harvested beans and stored them in
his on bind. )eld beans for sale until after the planting period the folloing year$ sold for
amount ranging from 9L.LK/bushel to 9+;.FL/bushel. &toring until the next year as his
usual procedure.
Proc!"ral #istory: 1rial #udge found that difference beteen potential/actual yield as F<- bushels$ and that I
as entitled to 9+;/bushel for lost portion of the crop. @vidence introduced indicating
4uality of crop prior to damage$ 4uality of Is farmland$ yield for comparable crops in the
*ourt of Appeals affirmed.
Analysis /amages are computed at the time of harvest$ hen a mar0et value first exists ! to the
extent that P elected not to sell his harvest at the time hen it as first mar0etable$ he
as speculating that it would have greater market value at a later date
6 Ris0 inherent in Ps speculation cannot be charged to /
6 1he lost beans could have been replaced from the mar0et place at the time of
6 7hatever the mar0et value as at time of harvest G Ps damages
Disposition Reversed and remanded to redetermine damages.
/. Reliance M expectancy as measures of rightful position
a. 7hat is the difference beteen reliance and expectancy in theory and practice?
&eri v. 'etail Marine Corp. $NY %&*+)
Facts: Ps contracted to purchase ne boat of specific model from /= made deposit of 9<; on the
9+-D boat. .ater increased deposit to 9<$-C; in consideration of /s dealers agreement to
arrange for immediate delivery from manufacturer$ on basis of 'firm sale$( rather than <8K
ee0s later.
K days after signing contract$ Ps layer sent / a letter rescinding D because P as about to
have surgery and ouldnt be able to ma0e payments. Boat had already been ordered and
delivered to /. / refused to issue refund.
:odern Remedies ,;<$ pp. F
Proc!"ral #istory: P sued to have refund issued. / counterclaimed$ alleging Ps breach of D. / on &/B.
*ourt has to assess damages.
N/ sold the same boat < months later to another buyer for same price offered to Ps. Ps
argue that /s loss on D as recouped$ hile / argues that but for Ps default$ it ould
have sold - boats and earned - profits instead of one. / proved profit$ and costs for
storage$ up0eep$ etc. for period that the boat remained unsold.
Analysis Ooverned by A**
,o- !o rlianc an! .pctancy !a/a0s !i1r02
6 Rlianc: ability to cover costs that / expended thin0ing the sale ould happen.
/ had 9KE< for storage$ up0eep$ and finance charges of boat
6 E.pctancy: recovery of profit$ hich ould have been 9-CEJ
Applying A** code: buyer is entitled to restitution$ but recovery is offset to the extent
that seller establishes a right to recovery damages as ell
Disposition Ps are entitled to restitution for deposit$ less an offset to D for amount comprised of lost
profit and incidental damages
b. 7hy enforce expectancy damages?
i. 7ant to prevent parties from bac0ing out of Ds
ii. *redit economy: as soon as youve made a promise$ that has a present value to the parties= therefore$
even though you dont expect the D to come to fruition until the future$ there is a present value to the
parties so that they can rely on it and start organi>ing
iii. 1heory of efficient breach: argument for enforcing expectancy damages
+. Iou can brea0 D and ma0e enough to compensate the expectancy loss of the other party in the
D and benefit as ell
-. 2t ould ma0e sure that you erent going to brea0 a D unless the profit as rather high
iv. Ds are more than economic exchanges and involve some sort of moral #udgment$ and e dont ant
people to brea0 their promises
Chatlos Syste(s$ nc. v. &ational Cash 'e"ister $3
Facts: /8&eller made representations about computer system "in terms of capabilities%. P as
promised a 9-;;D machine for 9<KD$ hich seemed li0e a great bargain.
Proc!"ral #istory: /ist *t found / liable for breach of arranty and conse4uential damages of 9KFD. /
appealed$ liability #udgment as affirmed but court set aside aard of conse4uential
damages$ and remanded for recalculation of damages for breach of arranty.
5n remand$ applied 'benefit of the bargain( formula of 3B version of A** statute$
determined damages of 9-;+D. / appeals.
Analysis P as not promised a specific computer model$ but a system /specified capabilities
*orrect measure of damages under 3B statute: difference beteen ,:? of goods
accepted and the value they ould have had if they had been as arranted
6 Aard may also include benefit of D price$ hich$ for hatever reason 4uoted$
as particularly favorable for the customer
6 @vidence of D price may be relevant to issue of ,:?$ but it is not controlling
Disposition Affirmed
Dissnt ,ocus of statute is upon 'goods accepted$( not other hypothetical goods hich may
perform e4uivalent functions ! :? of goods delivered$ not the value of the goods to a
particular purchaser or for a particular purpose
*annot permit :? based on systems holly unrelated to the goods sold
Buyer may not receive more than it bargained for ! may not obtain the value of a
superior computer system hich it did not purchase even though such a system can
perform all of the functions the inferior system as designed to serve
S(ith v. )olles $%''&) 4 E5PECTANCY DAMAGES IN TORT
Facts: P agreed to buy <D shares of mining stoc0 from /$ for 9+.C;/share. P alleged that / made
false/fraudulent representations$ that stoc0 and mining property ere orthless$ but that /
:odern Remedies ,;<$ pp. <
had represented that shares ould have been orth at least 9+; each. Alleges that he
suffered 9<;D in damages.
Analysis 1rial court had instructed the #ury that measure of recovery should be difference
beteen D price and ,:?$ if property had been as represented$ or in the case that
property/stoc0 is totally orthless$ then its value is hat it ould have been orth if it
had been as represented by //as may be shon in evidence
Co"rt: t# 6"stion #r is -#at P lost 7y 7in0 !ci1! into t# p"rc#as8 not
-#at P (i"ht have "ained
6 3ot expectancy ! not a breach of D
6 Oist of the action as that P as fraudulently induced by / to purchase stoc0 on
faith of false/fraudulent reps
6 2f / did commit fraud$ then he is liable for damages that proximately resulted from
the fraud
6 .iability does not include expected fruits of unreali>ed speculation
Disposition Reversed and remanded.
c. /istinction beteen tort and contract:
i. @xpectancy damages recoverable only in contract
ii. 2s the distinction tenable?
+. Argument: in D$ youre see0ing to recover an expectancy that is itself a product of hat / has
promised. 2n torts$ this is not so. NN)oever ! this idea collapses hen the tort is a fraud$
because hen the tort is a fraud it seems that there is no difference beteen hat one should
theoretically recover based on hether it as a claim based on D or torts
-. A lot of state la has collapsed the distinction hen it comes to fraud: Ps can recover the value
of hat they ere promised regardless of hether they sue in fraud or D
iii. .ocating the rong: in D scenario$ there is nothing rong ith promise but ith the breach. But for the
breach$ the D ould have gone forard and P ould have gotten expectancy. 7hereas in tort$ if you
locate the rong and reverse the rong then the measure of recovery ould instead be as though there
ere never any interaction beteen the parties
@. *onse4uential damages
)uck v. Morro* $T.. Ci1. App. %'&3)
Facts: : leased pasture to Buc0 for term of C years$ ith provision that after the second year$ if :
as going to sell the land$ he should compensate B for any/all losses occasioned by the
sale. 2t as understood that the land as being leased by B to gra>e cattle. After - years$
the land as sold and B as dispossessed.
Alleged that he tried to find another pasture but couldnt$ so he had to gra>e on the
commons for C months$ and he had to hire an extra hand "9+.C;/day% to loo0 after the cattle
there and round them all up. Also said that he used reasonable diligence in trying to 0eep
them from straying off$ but +C ere lost "valued at 9+C/each%. Also evidence of price for
pasturing the cattle in the pasture that as eventually procured.
Proc!"ral #istory: 1rial court said measure of damages G difference beteen D price and rental value of
pasture for the unexpired term.
Analysis P /ay also rco1r as special da(a"es s"c# .tra .pns an! !a/a08 as ar t#
natural and pro+i(ate result of the ,reach
*onfining damages to difference in D price assumes that P can immediately go into the
mar0et and obtain similar property
Whatever special damage naturally/proximately resulted to from sale of land and
termination of the lease ! whatever may reasonably be supposed to have entered into
the contemplation of the parties at the time of the " ! should recover
6 2f P can prove the damages ere foreseeable$ he should recover
a. Oeneral vs. special damages:
i. @arly cases:
+. Oeneral: defined as damages that necessarily result from the violation complained of$ or
damage that the la implies or presumes
:odern Remedies ,;<$ pp. C
-. &pecial damages: damages that 'proximately resulted$ but do not alays immediately result(
from violation complained of
F. 1o say that some damage alays/necessarily resulted seemed fictional$ and standards ere
reformulated in terms of foreseeability and natural conse4uences$ hile retaining the overtones
of inevitability and necessity "embodied in the Restatement%
<. @x.: pain and suffering ! general$ medical damages ! special "idea is that PM& is so universally
foreseeable as to be general but that medical expenses are not%
ii. *onse4uential damages as more or less synonymous ith special
iii. Alternative definition: special damages are ones that are reduced to a sum certain before trial ! ex.
medical expenses$ lost ages "hile PM& are then general damages%
+. ,lips the usual pre#udices
-. &pecial damages G real$ provable
F. Oeneral damages G suspect$ speculative
iv. Alternative definition: general damages should refer to the value of hat P lost from initial impact of /s
rongdoing "ex. value of property destroyed%$ hereas conse4uential damages should refer to everything
that happens to P as a conse4uence of this initial loss
v. Laycoc9: essentially$ these distinctions do not ma0e much sense
b. Oeneral hostility toard aarding conse4uential damages:
i. :ore remote$ speculative$ not easily foreseeable
ii. Perhaps P should have exercised more care
iii. )o much should P have contemplated?
iv. /ont ant to let the scope get too big$ or simple D cases ill be extended to include far8flung claims for
damages "trials ithin trials%
Meinrath v. Sin"er Co. $SDNY %&':)
Facts: P8mar0ets/distributes computers$ etc. in @urope. ,iled suit to recover payment of bonus
compensation allegedly due under agreement of purchase and sale$ entered into among him
and /.
*laim for conse4uential damages$ consisting of losses of invested capital suffered as result
of li4uidation of companies in hich he had an interest$ and decline in net orth of another
company in hich he had an interest$ hich he attributes to the losses suffered by the other
companies. @ssence of the claim is that at the time / signed agreement "and even before%$
it had a special aareness of the companies financial plight and their dire need for funds$
hich created an obligation to ma0e timely payments of bonus compensation.
Analysis 2n essence P is trying to parlay /s 0noledge of his/companies financial predicament
into a claim that / as re4uired to provide them /necessary financial capital by
ma0ing prompt payment of all amounts due under the Agreement
6 Agreement contains no such implicit/explicit underta0ings
/ is not liable for conse4uential damages for failure of Ps other business ventures$
unrelated to the D
6 @ssential claim is for payment ithheld although due ! conse4uential damages
stemming from the claim are not compensable
6 7here breach of D consists only of failure to pay money$ remedy is limited to
principal oed plus damages in the form of interest
6 Policy of having an easy and certain measure of damages "any exceptions are
here there as failure to provide a uni4ue article%= or else every D dispute ould
become enormously complex$ /theories of unreali>ed profits/opportunities
v. Potential ex ante solution? P could insert punitive damages clause
vi. *ounterarguments:
+. 7illiston: example of a transaction is hen a seller may be ruined financially because buyer
refused to pay. 1his conse4uence is both proximate and natural
:odern Remedies ,;<$ pp. K
-. @xception: suits against insurers for bad faith refusal to settle. P can sue not only for interest but
also for conse4uential damages$ emotional distress$ and punitive damages. Bad faith cases arise
under tort rather than D la
Te+aco v. Penn-oil Co. $T.. App. %&'*)
Facts: *ase involving 1exacos tortuous interference /D beteen Penn>oil and Oetty entities. P
and O had made a deal involving purchase of Oetty 5il stoc0 "each buying a portion%$
providing for division of O5s assets$ if Oetty 1rust and Penn>oil ere unable to agree on
restructuring of O5. Bury found that 1 0noingly interfered /agreement$ and Penn
suffered damages of 9E.CF billion. 1 filed motion for remittitur.
Analysis 1ortious interference /existing D: P is not limited to damages recoverable in D action$
but entitled to damages alloed under more liberal rules of tort G pecuniary loss P
conse4uential damages for hich interference is a legal cause
Bury based aard of damages on replacement cost model
6 Because of 1s interference$ P as deprived of right to ac4uire portion of Os
6 *ost to find e4uivalent reserves
6 /amages G difference beteen cost of finding e4uivalent reserves$ and cost of
ac4uiring Os reserves
Ancertainty in calculating damages is tolerated hen difficulty is attributable to /s
Disposition Remittitur denied.
,. .imitation of remedy clauses
a. .egitimate business purposes:
i. Pric concssion rason: if the buyer is agreeing on a limitation$ it has been built into the price$ and it
allos for more consumers to get more things at better prices
ii. ;"yr<s l1l o= car: ill directly affect the condition of the good= if a particular good re4uires the
buyer to ta0e special care "ex. up0eep$ or if there is fire ris0$ then to ma0e a good decision about here
to put the good%$ then it might be more efficient to say that the seller can limit the remedies$ and that
might induce the buyer to exercise a higher degree of care
iii. ;"yr<s ins"ranc: ris0s might vary from customer to customer$ but buyer is the one ho is going to be
able to get the right amount of insurance "seller ould have to tailor insurance to each individual
iv. Transaction costs: idea that nothing is fail safe$ so there ill be a certain number of brea0dons.
.itigation in every single instance ould raise transaction costs ! system8ide$ it is more efficient for
sellers to disclaim liability for conse4uential damages
b. /angers of alloing them:
i. 2ncentive of seller to ta0e care: if the seller is able to limit its liability$ then there is the orry that it ill
not bear the full costs of its mista0es$ decreasing incentive to get it right
+. 7hat might be mediating this 0ind of danger? *ompetitive pressure ! if seller is ma0ing a
faulty product$ buyers can go elsehere
ii. 1oo easy to exaggerate in every situation to say that the buyer is the one ho ill have better
information that ill allo him to ta0e better care$ get insurance$ etc.
iii. &eller gets aay ith exploitation because of asymmetry of information
iv. 7orry about abuse: unconscionability$ here bargaining poer is une4ual$ unsophisticated parties$
disparities in economic strength
.reaney v. Trecker Corp. v. Master /n"ravin" Co. $N> %&'*)
Facts: P purchased machine from /. @lements of limitation in sale agreement: D excluded
conse4uential damages$ limited liability to repair/replacement of the machine. 1urned out
that machine malfunctioned all the time$ inoperable for -C8C;Q of time. 1estimony
introduced estimating lost profits on customer orders unfilled because of inoperability of
the machine.
:odern Remedies ,;<$ pp. E
Proc!"ral #istory: *ourt instructed #ury that it could aard conse4uential damages notithstanding D
exclusion if it found that / failed to ma0e the machine as arranted. B/P$ Appellate /iv
affirmed on the basis that #ury verdict meant that limited remedy of repair/replacement had
failed of its essential purpose.
Analysis *ourt tal0s about - broad principles that it is trying to reconcile in this case:
6 ,reedom of D beteen the parties ! ris08allocation
6 :inimum ade4uate remedy
6 NReconciling: idea that if there is total freedom of D$ shouldnt parties be able to
agree that there ill be no minimum ade4uate remedy?
*ourts that have considered the validity of exclusion clause in context of R/R arranty:
to vies
6 7holly integrated: failure of the limited remedy of R/R necessarily causes the
invalidation of the exclusion of conse4uential damages
6 2ndependent: if arranty fails to fulfill its purpose$ validity of exclusion depends
on specific circumstances and probable intention f the parties
8 *ourt sides here: policy reason of ensuring stability of routine business
transactions$ idea that for many sellers$ immunity from */s may be
indispensable to pricing structure
8 .oo0 to circumstances of transaction ! exclusion can be inconsistent
/intent and reasonable expectations of the parties: ex. if seller rongfully
repudiates repair arranty
Disposition Reversed$ remanded. ,acts do not #ustify invalidation of exclusion$ a ris0 allocation agreed
to by both parties "no contention that / did not ma0e service calls hen re4uested$ /
testified that most problems ere fault of Ps employees%
O. .i4uidated damages
Ashcraft 0 1erel v. Coady $D.C. Cir. +::%)
Facts: *oady as fired from the la firm because of misconduct= had to pay li4uidated damages
to the la firm. 1rying to steal clients and get into firm computer system$ conspired /an
associate ho he didnt tell the firm had left. :anaging partner in the Boston office. ./
clause: each year$ the damages increased by 9C;$;;;$ so that that hen *oady left$ it as up
to 9<;;$;;;. 2ncreasing damages #ustified to reflect *s increasing value to the firm.
Partner testified that business lost as a result of his termination as 9+8+.C:. Bury B//$ P
breached D and had to pay li4uidated damages to the firm.
Analysis .i4uidated damages clause: for 9<;;$;;; ! hat does this approximate?
6 .oss of business? Probably not ! opinion says that the firm lost about 9+:89+.C:
6 Replacement costs? &ounds 0ind of high
6 /amage to reputation that is hard to 4uantify?
6 *osts of impending litigation?
N*ourt is putting emphasis on desire to say that damages clause as to be
representative of true costs
6 Points to the fact that the damages ere to increase over time$ as indicative of the
fact that the damages ere not a penalty
6 A** R-8E+L "#oady is a common8la case not involving sale of goods$ but its
similar basic principle%
8 .i4uidated damages cant be penalty
8 5n in amount hich is reasonable in light of the anticipated or actual harm
caused by the breach
8 /ifficulties of proof of loss
8 2nconvenience or nonfeasibility of otherise obtaining an ade4uate remedy
*ourt is trying so hard to ma0e sense of it because the proper purpose of ./ is to 351
to have to prove the harm in a court of la and barring this$ pure penalty clauses are
Disposition Affirmed.
a. Reasons not to enforce ./*s
i. Ooal of D enforcement is compensation
:odern Remedies ,;<$ pp. L
ii. Promote efficient breach "penalty clauses deter this by adding to the cost of breach above damage for
hich one might have to compensate by ta0ing the socially more productive deal%
iii. /anger of abuse/oppression
iv. Diasdado v. Diasdado "*A *ourt of Appeals case= handout%: li4uidated damages clause that as part of a
marriage settlement court refuses to enforce as against public policy
b. Anderli4uidated damages clause
&orthern L 1as Co. v. /ner"y Cooperative$ nc. $Ill. App. Ct. %&'()
Facts: 32O promised to buy naptha from @*2 over +; year period$ to convert into natural gas. A&
eased price controls on natural gas$ because cheaper to buy from drillers and pipeline cos.
32O stopped buying and @*2 sued based on difference beteen D price and mar0et price of
naptha$ plus conse4uential damages.
Proc!"ral #istory: *ourt held that ./* gave non8breaching party the choice of recovering either actual or
li4uidated damages. @*2 chose actual and #ury aarded 9F;C:. 32O argues that ./*
provides exclusive measure of damages.
Analysis @*2s argument that because it did not ma0e demand for ./$ it has option of see0ing
actual damages: if non8defaulting party does not ish to demand ./ amount$ he ont
be forced to$ but it doesnt create the right to see0 greater measure of damages than
those bargained for
A** R-8E+J: @*2 says under this section$ ./* does not provide exclusive measure of
damages unless it is expressly agreed to be exclusive and is labeled as such
6 *ourt: R-8E+J governs limitations of remedies$ R-8E+L governs ./*s. An ./* is
not a limitation on a remedy$ therefore is not sub#ect to R-8E+J
Disposition Reverse court order stri0ing li4uidated damages defense.
). ?ictims incentives
a. *ooter M Porat: 'anti8insurance(
i. Anti8insurance for losses
+. @xample: A is buying transmission from B
-. 3ormally: A buys$ B arranties$ but B cant 0eep trac0 of ho A treats the transmission
F. Anti8insurance: add F
party$ ho buys Bs liability. 2f transmission brea0s$ then B ill have to
pay F
<. 2deal situation: here parties level of effort/care is unverifiable$ not directly observable
C. ?ersus insurance: insurance tends to spread ris0$ here as anti8insurance ma0es each party
liable for full ris0= produces incentives for everyone to act to the best of their ability
a. :aximi>es efficiency ithin the contract
b. Affects situations here buyer ill be able to affect the ris0 that a product ill
ii. Anti8insurance for gains
+. &ituations here there is a free8rider effect
-. @x.: layers$ here one has incentive to not or0 as hard
iii. 7hy arent li4uidated damages sufficient?
+. Buyer has no incentive to help the seller ith performance if he is going to get the damages in
any case
-. @x.: construction contracts ! hen you are on the receiving end$ there are a variety of things
that you can do "ex. ma0ing arrangements ith other parties%$ to ma0e sure that all
arrangements come to fruition$ that could either assist builder in performance of contract$ or
stymie him
iv. ?ictim reporting problem: if 2 stand to gain nothing$ there is no incentive to report to the third party
"could combat this by instituting delayed compensation or a fee for reporting%
v. *riti4ue:
:odern Remedies ,;<$ pp. J
+. )o does the anti8insurer ma0e a profit? Anclear ho you ould arrive at correct pricing !
unli0e insurance$ hich has substantial data as to fre4uency/nature of accidents= dont have this
level of pricing data and ould lose 9
-. 1ransaction costs
F. :ight lead parties to ta0e too much care? 1hen they ouldnt derive the ideal amount of
<. Perhaps people already have their on incentives to exercise a certain amount of care? @x.:
people arent loo0ing to ma0e their cars brea0 ! they buy them because they ant to drive them
"this is 4uestioning the economic incentives argument%
C. 1he rubric of cases they discuss is too small ! they build on the assumption that the theory only
holds true in cases here the good is only a small percentage of someones ealth$ but for a
9C; product? 1hen the transaction costs ould be prohibitive
b. &cott M 1riantis: embedded options
i. *ompensation regime for breach of D is a relatively recent import from tort la= prior to this$ a lot of the
different schemes eve seen /regards to remedies for breach
ii. Propose that e move from compensatory model to vieing breach as purchasing a valuable option
iii. 1hic08mar0et: you can buy anything at anytime$ full mar0et ! everyone has the same information
+. 2f you are a farmer and need corn in K months$ contract to buy. &eller has a choice$ can either
ait K months$ or insure themselves and get their on contract for prevailing price. Remedy
should be mar0et damages or no one ill use this option "?%
-. *ommercial contract specific performance ill still or0 really ell because it ill provide
incentives for parties to negotiate options ahead of time
F. :erchant8consumer: authors are ary of potential abuse of consumers$ should be protected by
getting a free option
<. &trong presumption against li4uidated damages in the case la ! seen as a signal that there as
une4ual bargaining poer. Authors say no$ there is a very important ris0 that is being protected
hereSfluctuation in valuation of services from buyers perspective
iv. Restaurant reservations$ airplane tic0ets: not compensating for loss$ but that the valuation of hat has
been contracted for differs
v. Parties might rationally decide to go into these 0inds of arrangements$ so it doesnt ma0e sense that our
system sees li4uidated damages as an alarm
vi. ?ery strongly rooted in freedom of D perspective
vii. *riti4ue:
+. Article is premised on the notion that damages in general should be based on a model of
economic efficiency ! ignores many other values: i.e.$ the breach of a D is a wrong= the fact that
the regime of compensatory damages has stayed around shos that it resonates ith other
-. 2nstead of loo0ing at breach ex8ante$ hat about ex8post? 7e expect to be compensated for a
loss ! e arent thin0 about ho to allocate ris0s bac0 and forth$ but instead ho are e going
to be made hole?
F. 3ot #ust a matter of sitting #udges don and giving them a la and economics primer ! still
must be a commitment to loo0ing at breach as a rong
2. .itigating P2 and /eath
&orfolk and 2estern '' v. Ayers $+::3)
Facts: P developed asbestosis
Analysis *ould damages be given for fear of developing cancer?
6 Ies$ as long as P could prove that his fear as genuine and serious
6 Asbestosis is a physical condition here about +;Q of patients actually develop
cancer ! this statistic led to a #urisdictional split
:odern Remedies ,;<$ pp. +;
a. 2nsurance theory of pain and suffering damages
i. Argument that e should abolish PM& damages altogether
ii. &o long as la allos you to recover for economic damages$ thats as far as it should go
iii. .oo0ing at hat people ould pay if there as no tort compensation at all and individuals had to insure
against tortuous in#ury at their on expense
iv. 2f people ould buy it on their on$ perhaps its inefficient for the system to provide it
v. 7hy ouldnt people ant to buy the insurance?
+. @conomic intuition: trying to e4uali>e marginal utility of a dollar pre8 and post8in#ury
-. Iou ould prefer 9C: today$ as opposed to getting 9C: hen you are in#ured and the money
ould be of less use$ so you dont ant to spend the dollar no for the chance of getting a less
valuable dollar
vi. *riti4ue:
+. Atility might actually be higher
-. Assumes valuation ould be same for the victim pre8 and post8in#ury: once youre in#ured$ the
utility curve changes completely
F. :ight actually increase utility: ex. brea0ing your leg$ so you cant hi0e and play sports$ but
maybe you needed something to slo your life don
<. Iou might need money more because once youre in#ured$ there are additional expenses and
services that you ould ant to purchase "ex. upgrade facilities in your home%
vii. *roley M )anson:
+. Re#ect empirical claim that consumers do not insure against PM&
-. @x: life insurance on children$ accident insurance$ uninsured motorist coverage$ flight insurance
F. Another purpose: deterrence ! if e arent ta0ing full costs into consideration$ e arent giving
parties the proper incentive to exercise care
b. Posner: statistical value of a life
i. 7ould loo0 at premiums that ere accepted to incur small elements of ris0
ii. 1here is factoring in of statistical value of life: ex. administrative agencies
iii. Tuestion: are e using the right calculations?
c. Bilateral ris0
i. @x.: driving
ii. Anyone could be either P or / on any given day
iii. 1herefore$ there should be #oint incentive to limit damages
iv. But ! medical malpractice: for the most part$ its not the case that you are e4ually li0ely to be a P or / in
:: case
d. ,irst generation statutory reform:
i. *ap on recovery is not revealed to the #ury
ii. Bury deliberates$ ma0e ruling$ and #udge ad#usts it accordingly
/therid"e v. Medical Center Hospitals
Facts: 7ilson underent surgery at hospital$ surgery as negligent. 7 is no braindamaged$
paraly>ed$ heelchair8bound$ cannot care for herself or children. At time of trail$ had
expended more than 9F;;D for treatment= ill incur expenses for remainder of life$ /.@ at
FJ.J years.
Proc!"ral #istory: Bury returned verdict for 9-.EC:$ trial court applied statutory recovery limit and reduced
verdict to 9EC;D. P appeals.
Analysis Ps argument that cap denies right to trial by #ury:
6 Bury has fact8finding function= #udge applies the la ! trial court applies remedys
limitation only after #ury has fulfilled its fact8finding function remedy is a
matter of la
6 *ap does not infringe upon the right of #ury trial because section does not apply
until after #ury has completed its assigned function in the process
:odern Remedies ,;<$ pp. ++
6 Bury trial guarantee does not secure rights that do not exist at common la ! *.
has never recogni>ed a right to full recovery in tort
Ps argument that cap violates constitutional guarantee of /P: deprived of opportunity
to be hear$ creating conclusive presumption that no Ps damages exceed 9EC;D: court
says no ! section merely affects parameters of remedy available after merits of claim
have been decided
Disposition Affirmed.
S(ith v. !epart(ent of nsurance $Fla. %&'*)
Facts: ,. statute set 9<C;D limit on noneconomic damages$ defined as damages 'to compensate
for pain and suffering$ inconvenience$ physical impairment$ mental anguish$ disfigurement$
loss of capacity for en#oyment of life$ and other nonpecuniary damages.( P argues that it is
a violation of ,. constitutional right of access to the courts for redress of in#ury.
Analysis Arbitrary cap$ denies constitutional right of access to the courts$ and right to #ury trial
6 3o constitutional redress of grievances if legislature ma0es a random cap
6 3o reason hy legislature shouldnt cap at 9+; or 9+$ if it is merely a cap
6 /issents policy8based argument of ensuring affordable insurance coverage for all
as rational basis: fails to reali>e that e are dealing /a constitutional right hich
not be restricted simply because the legislature deems it rational to do so
6 3o evidence of 'overpoering necessity( for abolishing the right$ and no
alternative method of meeting the necessity can be shon
Disposition B/P
e. Per diem damage calculations
!e,us v. 1rand Union Stores $?t. %&&3)
Facts: P as in#ured hen shopping at /s store. &uffered in#uries resulting in -;Q permanent
disability. Bury aarded P 9FC;D in damages. P suggested that #ury thin0 about Ps in#ury
in terms of daily pain and suffering$ then determine hat amount ould be appropriate
compensation for each day of suffering.
Proc!"ral #istory: / appeals arguing that per diem arguments ere unduly pre#udicial and should have been
disalloed by trial court.
Analysis *ircuit split /regard to P/ arguments:
6 Against: allos #uries to calculate damages based on counsels argument and not
facts submitted in evidence$ creates illusion of certainty regard to consistency$
duration$ etc. of pain$ #ury ill be too easily misled by Ps argument
6 Allo: ade4uate safeguards exist in the adversarial system to overcome ob#ections=
amounts must be reasonable or suffer attac0 from /s counsel= #uries are alloed
to dra inferences from evidence before them$ and extent of damages attributable
to PM& are permissible inference
*ourt: nothing inherently improper about per diem arguments if they are made under
ordinary supervision and control of trial court
6 Bury can benefit by guidance offered by counsel as to ho they can e4uate pain
ith damages
6 /o not need to be accompanied by specific instructions
Disposition Affirmed= no error.
Dissnt Better approach is to permit counsel to argue the appropriateness of using a per diem
calculation techni4ue$ but to prohibit any suggestion of specific monetary amounts
/ifficulty is that remar0s regarding numbers/dollar amounts ill appear to be evidence$
rather than #ust argument
i. *riticisms of per diem calculations:
+. Pain doesnt or0 that ay: calculating by day and multiplying out creates an illusion of
-. Pain is not uniform ! individuals can ad#ust$ may go don over time
F. :ight lead to inflated #udgment? 9+;/day can end up being more than 9FC;$;;; lump sum
<. Present discounting value problem
:odern Remedies ,;<$ pp. +-
C. Argument that only things in evidence can be used to calculate damages$ and putting up
numbers isnt correct
ii. Reponses to criticisms:
+. Buries always dra inferences ! this is no different
-. Adversarial context: /s counsel gets to put in their on damages number to counteract
F. Per diem argument is #ust a suggestion$ not an instruction "ordinary supervision of the trial court
to help #ury distinguish beteen evidence and argument of counsel%
iii. 7hat is the measuring stic0? *an P put forard a lump sum?
+. :a#ority of #urisdictions allo it
-. :inority: 3B$ PA
f. &tatistical issues
i. :ean vs. median ! riters sympathetic to Ps cite median verdicts$ hile those sympathetic to /s cite
mean verdicts
ii. :edians better reflect the experience of most plaintiff= half of all Ps get less than the median
iii. :eans reflect hat insurers have to pay ! possible for insurers to lose money hile most Ps recover
little$ if a minority of very large #udgment exhausts the premiums collected
g. &plit among state supreme courts over constitutionality of damage caps: captured by $theridge versus %mith
i. 1heories: .aycoc0 ! open court and #ury trial claims have been the most successful theories
ii. 1ypes of caps: caps on PM& are far more li0ely to be upheld than caps on total recovery
iii. @ntire body of la has developed under state constitutions$ immune to revie by A& &* ! no serious
claims that damage caps on state8la claims violate federal constitution
h. :atter of perspective:
i. .egislators: have some vie of the big picture$ but dont see individual cases and cant legislate for them
ii. Burors: see individual cases and have no vie of big picture$ no sense of comparable cases
iii. 5nly actors ho have the hole perspective G #udges
i. ?aluing pain and suffering ! - traditional theories
i. *orrective #ustice: P should receive full value of his in#uries$ so that he is placed as nearly as may be$ in
the position he ould have occupied if he had never been in#ured "N,airness to P%
ii. *lassical economic model: P should receive full value of his in#uries$ so that / ill internali>e the costs
and have the optimal incentive to avoid in#uring others "N2ncentives to /%
iii. &ame result ! damages should e4ual full value of harm to P?
iv. Problem: damage aards for PM& may ell undercompensate victims seriously crippled by accidents$
and in death cases$ even more so ! most people ould not voluntarily exchange comfort/lives for any
some of money
&. :easures of loss:
i. 'Appropriate compensation(: little guidance to the #ury
ii. ':a0e hole( measure: amount that #uror ould need if he as in Ps position ! consistently disalloed
in court
iii. '&elling price( measure: amount that you the #uror ould demand to suffer these in#uries "to accept in a
voluntary transactions%
iv. NN7hy arent these measures appropriate?
+. 3o robust mar0et in pain/suffering
-. ?alues are relative: single mother ould ta0e money if it meant being able to support her
k. /amage scheduling:
i. ,ixed matrix of value based on degree of harm "ex. or0ers compensation%
ii. &ample of past verdicts: paradigmatic in#ury scenarios= place the current case somehere along the
iii. &et specific caps on PM&$ etc.= maybe have floors/ceiling that are flexible
+. @x.: 'carve8outs( for most severe in#uries$ egregious conduct
iv. *riticisms:
:odern Remedies ,;<$ pp. +F
+. .a/fact debate? ?iolation of reexamination clause?
-. 7ould undercut reforms that provided for remedies for certain harms here there as no
compensatory element per se "ex. rongful death%
F. 2s it a false consistence? Argument that #ury trials provide for an 'individuali>ed #ustice$( and
any damages assessed on aggregate basis ta0es aay this due process right?
<. Asing a prior #ury verdict as a benchmar0 ! doesnt it contradict the reasoning that #ury verdicts
are erratic and unpredictable?
l. 7rongful death
i. Brought on behalf of and for benefit of survivors
ii. )istorically$ statutory as opposed to commonla claims= traced bac0 to +J
+. 1raditionally$ protected only pecuniary interests= economic damages only
-. 3ot mental anguish/emotional distress
F. Almost all #urisdictions provide measure of compensation for financial support lost by death
"ould re4uire dependence relationship%$ funeral expenses
<. .ed to very harsh results in certain cases: retired persons$ young children$ or0ing adult /no
dependents "'unproductive( members of society%= houseives
iii. *ourts came up /variety of means to broaden recovery
+. '&ervices(: pecuniary value on services provided that arent valued in the mar0et
"house0eeping$ home repair$ driving$ etc. guidance/training of children%. :a#ority allos
-. '&ociety(: companionship$ consortium
iv. @ither broadened definition of pecuniary loss$ or got rid of pecuniary loss restriction in statute
v. *ould recovery for lost love/affection$ but not mental anguish/grief ! anomaly due to the fact that it as
a statutory claim
+. :inority: allo recovery for mental anguish/grief
a. 2s it eird that you can get recovery for mental anguish/grief in
constitutional/dignitary harms but not for rongful death?
b. Probably attributable to historical anomaly of statutory nature
B. /ignitary M constitutional harms
Levka v. City of Chica"o $*
Cir. %&'()
Facts: P claims that as a result of being strip searched$ she became a 'prisoner in her on home.(
*onflicting testimony as to hether she as actually able to leave the house or not$ etc.
Bury aarded damages of 9C;$;;;$ compensation for emotional trauma and distress$
mental/physical suffering$ anguish$ fear$ humiliation$ embarrassment. 3o damages for lost
earnings/earning capacity.
Analysis &5R: to determine hether aard is excessive$ must defer to #udgment of #ury unless
the aard is 'monstrously excessive( or 'so large as to shoc0 the conscience of the
,actor to consider: hether aard is out of line compared to other aards in similar
6 *ourt ta0es inventory of unconstitutional strip search cases brought against city of
*hicago by omen
6 *ases here verdict as U 9F;$;;; G aggravating circumstances ere present
"cavity search$ hostile matrons%
Disposition Because there ere no aggravating circumstances present$ aard of 9C;$;;; in this case is
grossly excessive$ must be reduced. 'eft with the distinct impression from all the evidence
that the &ury was in fact assessing punitive rather than compensatory.
Remittitur of 9-C$;;;.
a. Result of #arey P 'evka
i. P must sho actual$ compensable harm
ii. ?ictim ho is 'strong( and is able to continue on ith life isnt going to get a high valuation of
measures "duty of / to ta0e care ! does 'evka apply this to Ps$ or is this going too far?%
:odern Remedies ,;<$ pp. +<
b. *omparative verdict revie "'evka%:
i. Anli0e damage schedules$ less informational demands
ii. F circuits and 3I use this in many instances
iii. /s counsel: can loo0 up cases in databases= put in motion for ne trial on remittitur
Me(phis v. Stachura $%&'@)
Facts: P8teacher= shoed sex ed films and pictures of his ife during her pregnancy. Parents
shoed up at meeting and argued that he should not be alloed to teach$ and P as
suspended /pay. 3otified P that he as undergoing administrative evaluation= reinstated
the next fall after filing suit.
Proc!"ral #istory: Bury as given instructions that it could aard compensatory$ punitives. Also$ could aard
damages based on the value/importance of the constitutional right that as violated
"instructed that they could ta0e into account the significance of the right$ its place in history$
governmental system$ etc.%. &* granted cert on the 4uestion of hether *ourt of App erred
in affirming in light of the /*s instructions regarding damages for violations of
constitutional rights.
Analysis Ander #arey$ the abstract value of a constitutional right cannot form the basis of R+JLF
damages ! there$ the issue as due process$ hich is a fundamental right$ but court
nevertheless held that no compensatory aard could be given for a violation of the
right /o proof of actual in#ury
6 *larification: P tried to argue that because the right violated here as substantive
D as opposed to procedural$ it as different than #arey ! court says no such
'to8tier( valuation
Also tries to curb application of presumed damages
6 P/ are substitute for ordinary compensatory damages$ not a supplement
6 7hen P see0s compensation for in#ury that as li0ely to have occurred but
difficult to established$ then P/ are appropriate
6 )ere no rough substitute for */ as re4uired$ since #ury as authori>ed to
compensate P for monetary/nonmonetary harms caused by /s conduct
Disposition Reversed.
D. Right to #ury trial
a. 7hy fundamental?
i. 3ot related to number of trials "barely any cases actually reach trial%
ii. 3ot really due to 'buffer( issue li0e in criminal "beteen / and #udge%
iii. )istorical distrust of authority?
+. Royal charters for colonies provided for #uries
-. Bular0 against tyranny of 0ings #udges
b. - main clauses:
i. Preservation clause
ii. Reexamination clause
c. )o do you identify an issue falling /in E
Chauffeurs Local &o. 345 v. Terry $%&&:)
Facts: Ps sued employer for breach of collective bargaining agreement$ sued union for breach of
duty to fairly represent them in the grievance proceedings. /istrict *t held that Ps ere
entitled to #ury trial. *t of App affirmed.
Analysis 1o determine hether a particular action ill resolve legal rights$ court examines both
nature of issues involved and the remedy sought
: compare statutory action to +L
century action brought in courts of @ngland prior to
merger of .M@
6 :ore li0e action by trust beneficiary against trustee for B of ,/? "@%
6 5r$ more li0e attorney malpractice? ".%
6 *ourt: both .M@= line is not clear
: examine remedy sought and determine hether it is ./@ in nature
6 *ourt ants to rely on this prong in its analysis
:odern Remedies ,;<$ pp. +C
6 Remedy sought is legal ! doesnt have any of the attributes that must be present
for court to characteri>e damages as e4uitable
8 3ot restitutionary
8 3ot incidental/intertined /in#unctive relief
Disposition Remedy of bac0pay sought is legal in nature ! considering both parts of E
Am in4uiry$ Ps
are entitled to #ury trial.
A. Restitution$ generally:
a. Anderac0noledged$ often fu>>y usage
b. - categories:
i. /isgorgement: /s conse4uential gain= honing in on /s conscious rongdoing$ as opposed to loo0ing at
Ps harm suffered
ii. Reversing transactions
c. 7hen ill restitution be attractive to P?
i. 7hen there is no other cause of action= restitution as underlying substantive claim
+. (eri v. )etail *arine "pp. CKC%: P asserts that he conferred benefit on /$ and though P did
breach$ damages ere less than amount of deposit
ii. 7here /s gain U Ps loss "ant to bring suit see0ing highest recovery possible%
iii. 7hen P is not interested in damages$ but in reversing a transaction
iv. 7here / is insolvent "trying to get preference in ban0ruptcy proceeding%
d. Remedial constructs
i. Tuasi8contract: implying promise to pay for a certain benefit
ii. Accounting for profits: imposing duty on one party to account for benefit
iii. *onstructive trust: impose trust on some identifiable benefit
e. 2ssues:
i. 7hat does it mean to say P can recover for /s benefit?
ii. 7hy ould e allo someone to recover something greater than her loss?
iii. )o do e measure gain to /?
f. Are restitutionary damages a re#ection of the economic vie of the la?
i. 7ant to put resources into highest use
ii. Posner: encourage voluntary transactions= dont bypass the mar0et
g. ?arious conse4uences of /s rongful acts
i. / doesnt profit$ so P can only sue for damages
ii. Ps loss e4ual to /s gain "ex. rental value%: aard for compensatory damages and restitution for un#ust
enrichment ould be the same
iii. /s gain exceeds Ps loss: P should recover /s profits= must decide hy / should pay damages and hy
P should be the one ho receives them "criminali>e$ fine?%
B. /isgorging profits
a. /isgorgement: nearly alays referring to aard of profits that exceeds the mar0et value of hat as ta0en from P
"li0e +lwell%
b. Tuasi8contract/un#ust enrichment
6l*ell v. &ye 0 &issen Co. $Aas#8 %&(@)
Facts: P oned egg8ashing machine$ as planning on having it in storage. / used Ps egg
asher /o Ps 0noledge$ for F years. P offered to sell machine to / for 9K;;= / counter
offered 9C;$ no sale ent through$ and P sued.
Proc!"ral #istory: 1rial court B/P in the amount of 9+;/ee0 for period covered by &5..
Analysis &aving in labor cost hich / derived from its use of Ps machine constituted a benefit
6 7hile / benefited from use of machine$ P thereby incurred a loss: very essence of
nature of property is the right to its exclusive use ! ithout it$ no beneficial right
:odern Remedies ,;<$ pp. +K
6 1heory of A@ is applicable in such a case
6 2f / as consciously tortuous in ac4uiring the benefit$ he is also deprived of any
profit derived from his subse4uent dealing ith it
Disposition Affirmed.
c. An#ust enrichment/ill8gotten gains
Maier )re*in" Co. v. Fleisch(ann !istillin" Corp. $&
Cir. %&@')
Facts: / began to bre cheap beer under trademar0 that P had for distilling his0ey. Ps
trademar0 as ell established /consumers.
Proc!"ral #istory: /ist *t aarded damages by accounting of /s profits accrued from the sale of beer under
the name 'Blac0 M 7hite.( /s appeal$ arguing that Ps shoed no in#ury$ no diversion of
sales$ no palming off/fraudulent conduct.
Analysis 2ssue: is accounting of profits the appropriate remedy? Ander statute$ P only has to
prove /s sales$ / must prove all elements of cost/deduction claimed. 2n assessing
damages$ court has discretion according to circumstances of the case
1o vie as to basis for aarding accounting of profits:
6 :a#ority: accounting of profits by /s as method of shifting B5P as to damages for
lost/potentially lost sales from P /
6 :inority: more recent trend ! basis accounting on e4uitable concepts of restitution
and A@
8 1hese courts have re4uired competition beteen the parties
8 *ourt: does not necessarily follo that #ust because there is no direct
competition$ an accounting of profits can serve no reasonable end
.egislative intent: ma0ing infringement and piracy unprofitable
6 7hat is loss to P? Reputation
6 Restitution measure as an accounting of ill8gotten gains
7hy not #ust in#unction? 3ot enough of a deterrent$ leads to 'serial infringer(
6 A#r t#r is co/ptition: acco"ntin0 7as! on rational o= rt"rnin0
!i1rt! pro=its
6 No co/ptition: acco"ntin0 7as! on UE rational
Disposition Affirmed.
d. *onstructive trusts and accounting for profits
i. *onstructive trust: legal fiction= a remedy hereby assets are moved from the party currently using them
to the 'true oner(
ii. 7hy not punitive damages? 1oo speculative: might be too high/lo= either under8 or over8deterrence of
disputed activity
Snepp v. U.S. $%&':)
Facts: /8@mployee of *2A$ signed contract that if he ever rote anything$ *2A ould prescreen$
and not divulge classified information. 7rote a boo0$ did not it to the *2A to previe.
Proc!"ral #istory: /ist *t found that P had breached his agreement by publishing ithout submitting it for
revie. @n#oined future breaches of /s agreement and imposed a constructive trust on /s
*t of App upheld in#unction but held that the record did not support imposition of a
constructive trust$ because / had a +
Am right to publish unclassified information$ and
governments concession that the boo0 did not divulge any classified intelligence. .imited
recovery to nominal damages and to possibility of punitives if government could prove
tortious conduct.
Analysis *t of Apps decision denies government an appropriate remedy for /s rong$ leaving
no deterrence for breaches of security
*onstructive trust: protects both government and / from unarranted ris0 ! trust
remedy simply re4uires / to disgorge benefits of his faithlessness
VN7hat has government been deprived of ! right to screen? 1his seems #ust
:odern Remedies ,;<$ pp. +E
procedural$ more #arey8li0e "in hich case only nominal damages are arranted%W
7hy not punitive damages?
6 1oo speculative
6 7ould re4uire government to divulge classified information at trial
Disposition Reverse *t of App decision.
e. Products liability ! restitution may not be available
i. 2dea that manufacturer should have to disgorge savings from cutting safety costs "5lell 'savings(8type
ii. /octrinal obstacle: manufacturers profits do not seem to have been ta0en from consumers in any
obvious sense
iii. 5ften /s are careless$ but not conscious rongdoer
iv. 3o cases raise the possibility
*. Rescission M the benefits re4uirement
a. Rescission$ generally:
i. Rescission: cancels the transaction and reverses all benefits that have been exchanged pursuant to the
ii. As opposed to enforcing the transaction and aarding specific performance or expectancy damages
iii. Rightful position: conceived of differently ! rather than speculating about hat might have been$ simply
undo the transaction and restore everyone to their original positions
b. Ps options:
i. P gets to choose hether to rescind or sue for damages: P might choose rescission because of its
simplicity "no need to litigate the value of anything% or because of personal preferences not reflected in
mar0et values "ex. homebuyer that is more troubled by termites than the average person%$ or because she
has lost confidence in / and the transaction
ii. 7hen values have changed: P can choose rescission if she ould lose money from performance$ or
choose expectancy if she ould ma0e money from the performance
iii. P cannot affirm the profitable parts of a D and rescind the losing parts ! must rescind the entire D or
entirety of some identifiably separate exchange /in the D
Mutual )enefit Life nsurance Co. v. JM' /lectronics Corp. $+! Cir. %&'')
Facts: B:R bought life insurance for its oner$ but didnt disclose that he as a smo0er. .ife
insurance company therefore issued a policy at the non8smo0ers premium rate$ but later
found out about the misrepresentation.
Proc!"ral #istory: 1rial court #udge granted :s motion for &/B$ dismissed B:Rs counterclaim for proceeds of
the policy$ and ordered rescission of insurance policy and return of B:Rs premium
payments$ /interest.
Analysis B:R argued that :B. should #ust pay out hat a smo0er ould get
6 *ourt: no basis in la. :utual as induced to issue non8smo0er discounted
premium policy to B:R precisely as a result of misrepresentations. :aybe :B.
ouldnt have issued the policy
6 :ateriality of misrepresentations: the in4uiry is not made so that #ury can rerite
the terms of the insurance to conform to nely disclosed facts$ but to ma0e certain
that the ris0 insured as the ris0 covered by the policy agreed upon
6 Public policy argument: aarding payment ould reard those ho ma0e
misrepresentations= ould have everything to gain and nothing to lose fro ma0ing
material misrepresentations
Disposition Affirmed.
c. 7hy allo rescission?
i. Pros
+. /eterrence8based: ithout rescission$ people ould have everything to gain and nothing to lose
by misrepresenting
:odern Remedies ,;<$ pp. +L
-. 7e should resolve uncertainty against the rongdoer: ant to 0eep possibility open that :B.
ouldnt have offered insurance policy at all
ii. *ons
+. After8the8fact reallocation of ris0
-. 2s insurance company better e4uipped/suited to bear the ris0?
F. /oes this give :B. a indfall?
d. ?ieed as a mild remedy:
i. 1hough$ if property values changed drastically$ it ould be stronger
ii. Raises T: should rescission be alloed as a matter of course$ or only in certain categories?
+. ,raud
-. /uress
F. &ubstantial breach
<. :ista0e "unilateral and not relied8upon= mutual mista0e%
e. .imit: there needs to be a transaction that can actually be reversed: ex.: @nron ! disaffected &) ould have no
claim against @nron because they didnt transact "merely bought off the exchange%
f. &ecurities fraud context: debate about hat the las mean
i. Ps can claim rescission$ but sub#ect to /s right to prove that Ps losses ere brought about by something
other than fraud
ii. Before$ P did not have to sho specific causation
Farash v. Sykes !atatronics$ nc. $NY %&'3)
Facts: P claims: P and / entered into agreement for / to lease building oned by P. P as to
ma0e expedited renovation/modifications$ but / never signed a D and never occupied the
building. P brought suit: "+% to enforce oral lease for term longer than one year$ "-% recover
for value of or0 performed by P in reliance on statements by/at the re4uest of /$ "F% claim
that Ps contracted by exchanging promises "renovation in exchange for occupying building%
Analysis +
and F
*/A: barred by &5,
*/A: not barred by &5, because P is merely trying to recover for efforts that ere
to his detriment and thereby placed him in a orse off position
6 &ee0s to recover for value of or0 performed by P in reliance on statements by
and at the re4uest of /
6 Bust because / did not benefit$ doesnt invalidate the */A
Recovery should be permitted under a theory of 4uasi contract "D implied by la%
6 Restatement: in#ured party ho has not conferred a benefit may not obtain
restitution$ but he/she may have an action in damages$ including one for recovery
based on reliance
6 /oes not ant to get tied up on semantics: doesnt matter if it is called 'acting in
reliance( or 'restitution( ! regardless$ a promisee ho partially performs at
promisors re4uest should be alloed to recover fair/reasonable value of
performance tendered
Disposition P has */A.
Dissnt 1his is merely an end8run around the &5,
6 -
*/A is e4uivalent to the F
= therefore also barred by &5,
6 :a#ority misconstrues the la because there is only recovery in circumstances of
6 Ps renovations ere merely preparatory to performance of alleged oral contract$
that is unenforceable under &5,
d. Problem of invalid D: hat other options for recovery?
i. Promissory estoppel: here there is no contract "as in this case%
ii. ,ictional benefit: if P performed$ there is a benefit$ even if / didnt directly benefit
Is t#r an n=orca7l B2
Is t#r a nonC=ictional 7n=it2 Ies 3o
Ies P may sue on the D P may sue in restitution
3o P may sue on the D Farash "if recovery here is in
:odern Remedies ,;<$ pp. +J
restitution$ benefit re4uirement must
be either fictionali>ed or abandoned%
/. Restitution M contract: ne frontiers or dead ends?
)oo(er v. Muir $Cal. Ct. App. %&33) 4 LOSING B A,ERE T,E ;ENEFIT CANNOT ;E RETURNED
Facts: : as general contractor$ B as sub$ on a D to build hydro plant. B as to build one dam
for pro#ect$ and : as to supply B /materials/e4uipment. /elays and cost overruns from
the beginning$ hich each side blamed on the other. ,inally$ /Bs dam JCQ complete$ he
abandoned the or0.
D price: 9FFFD
B: received 9F+FD in progress payments$ and ould have been entitled to another 9-;D if
he finished the #ob.
B: spend 9CE+D building as much as he did$ not counting any aste that as his on fault.
7ould have cost another 9-JD to finish the #ob$ ma0ing a total construction cost of 9K;;D.
Analysis )ere$ Bs expectance as negative ! if D as fully performed$ he ould have lost
*ourt: B could rescind the D and sue for the value of the benefit he had conferred on :
! the value of a nearly finished dam$ measured by the cost of building it
6 'Boomer rule(: not loo0ing to D price$ but costs sun0 so far
6 Recovery: 9-CLD$ difference beteen hat he had spent and hat he had already
NN7hy should :uir have to pay 9CE+D for a benefit he as promised for less than
9FFFD? 1raditional contract la says that D price is supposed to account for ris0$ i.e.
D allocated to B the ris0 that the or0 might cost more than expected
6 P see0ing restitution rescinds the D and sues in 4uantum meruit$ the common
count for value of services rendered : cannot rely on D price because the D
has been rescinded
8 NN)o helpful/fair is this?
Disposition Bury found Boomers ithdraal as #ustified by :uirs material breach in failing to
deliver materials. Bs recovery G "amount spent% ! "amount already paid% G 9-CLD.
/arthinfo v. Hydrosphere 'esource Consultants
Facts: ) and @ entered into series of Ds to develop softare. ) developed softare and provided
technical support$ @ produced manuals and pac0aging$ handled mar0eting. @ paid royalties
and consulting fees to ).
) claimed royalties on a ne product$ derived from earlier products described in the D. @
denied that it oed any royalty on such products$ and refused to pay any royalties accrued
after a certain date$ even on the original products$ until dispute as resolved.
Proc!"ral #istory: 1rial court held that @ oed no royalties on derivative products$ but that its refusal to pay
the royalties that it did oe as a substantial breach. Both sides sought to rescind Ds.
Analysis @ ithholding royalties as leverage in the other dispute ! as the conduct sufficiently
culpable to support disgorgement?
Rescission and restitution
6 Rescission as arranted: @s breach as substantial$ and damages ould be
inade4uate "due to nature of Ds and depth of disputes beteen parties%= and
opinion of the court that the parties ouldnt be able to #ust resume their
relationship in a productive manner
6 Restitution on both sides ! contract is being unmade$ so restoration of benefits
received under the D should follo
8 )o much of /s profits can P recover? )ere$ court has e4uitable discretion
! the more culpable /s behavior$ and more direct the connection beteen
profit/rongdoing$ more li0ely that P can recover all of /s profits
8 NN*ourt seems to be importing into contract la the la of intentional torts
"supercompensatory measure%
8 )o much should / be alloed to 0eep/P be alloed to disgorge? )ere$ @
did contribute to profits ith its pac0aging$ mar0eting$ etc. ! that contribution
:odern Remedies ,;<$ pp. -;
should be accounted for and ithheld from disgorgement. Apportion/nt
7as! on 1al" a!!! 7y ac# party
Disposition Remanded for determination of value added$ so that @ only disgorges profits attributable to
) "recalculation of rongful profits%.
1lendale Federal )ank$ FS) v. U.S. ! hat the boo0 means on pp. K<K8E hen it says that the trial court made the
mista0e of counting the 89EJL: tice?
Facts: &M. crisis ! government insurance funds did not have enough 9 to pay off depositors in
insolvent &M.s/thrifts. 2nstead$ began arranging for insolvent thrifts to be ac4uired by
healthy thrifts. 1o induce healthy thrifts to do this$ made promises$ including granting
special accounting treatment. 2f healthy ac4uired insolvent$ it ould get to add the
insolvents negative net orth as a 'positive( asset on its balance sheet "'goodill(
provision%. .ater statute banned inclusion of goodill.
P had positive net orth of 9CFK:$ ac4uired Broard$ /negative net orth of 9EJL:. P
survived by instituting a number of drastic measures$ also had to pay higher interest rates$
as on a list of 'undercapitali>ed institutions.(
Proc!"ral #istory: 1rial court found reliance damages of 9FL+:$ mostly in extra interest P paid as a result of
impaired capital. Also aarded 9C-L: in restitution ! idea as that P had conferred a
benefit of 9EJL: by assuming Broards liabilities "minus some fees$ and 9-LL: in
benefits to P$ principally profits from Bs recovery%. Oovernment appealed$ P cross8
Analysis P as not entitled to expectancy damages ! problems of proof hen proof of @/
fails$ la profits restitution as a fall8bac0 position for the in#ured party
6 Ps ac4uiring B did not result in government saving the dollar value of Bs net
6 Pro7l/ ill"strat! 7y t#is cas: granting restitution based on assumption that
non8breaching party is entitled to supposed gains received by breaching party$
hen those gains are both speculative and indeterminate
8 DRlianc !a/a0s pro1i! =ir/r an! /or rational 7asis
Disposition ?acate trial court aard of damages$ remand for determination of total reliance damages to
hich P may be entitled.
A. 5vervie
a. Purpose of P/s
i. /eterrence "4uery ! is this the same as punishment? Posner argues that you can thin0 about deterrence
as an aspect of punishment= there may be instances here you ant to deter but not punish%
+. /amages aards are often substantial$ and /s in these proceedings are not afforded the same
procedural protections as in criminal cases 8 raises concerns about the manner "imprecise?% in
hich P/s are administered
ii. Punish: further a stateHs legitimate interests in punishing unlaful conduct
iii. 2ncentive: prospect of punitive damages enables layers to ta0e these cases$ hereas they might not if
the prospect of recovering a lot asnHt apparent
iv. Posners economic rationale for P/s:
+. /amages are sometimes undercompensatory
-. 3ot all torts are detected: aard of punitive damages serves the additional purpose of limiting
the defendantHs ability to profit from its fraud by escaping detection and "private% prosecution
F. *riminal #ustice system is overloaded: P/s give us a civil alternative
b. *riti4ue of P/s:
i. *reates indfall for P: e punish /$ but that doesnHt mean P should necessarily receive the benefit
ii. Potential for /Hs ill8gotten gains to differ from PHs in#uries= may be
overcompensatory in order to sufficiently deter
:odern Remedies ,;<$ pp. -+
iii. 2n insurance$ there is potential for damage aard to drive up cost of premiums$ hich are passed on to
others "hence$ controversy about hether punitive damages should be insurable= in most states they are
iv. &tandards are phrased ambiguously= #uries donHt 0no ho to calculate damages presents the problem
of giving proper notice to putative /= if standards are vague$ there ont be efficient deterrence "could
lead to overdeterrence= not 0noing standard may lead / to be overly cautious%
v. 5ver0ill/multiple punishments problem: / has possibility of huge aards give to each P ho comes
+. 7hen court decides hether it ill remit aard it loo0s at hether there ill be more Ps
coming forard in the future. 1here is debate about hether appellate courts can ta0e #udicial
notice of this if it asnHt introduced into evidence
-. / ill ant to bring in the aard to sho that it has already paid punitive damages$ but also
ouldnt ant to bring in the aard because this implies that /Hs conduct as deserving of
F. /ominant approach: possibility of additional aards is someho considered in
setting/revieing amount
<. OA: 'first comer( statute ! / only has to pay punitive damages once "raises problem of needing
to be the first P to bring suit%
C. Argument in favor of certifying class? Problematic in individual causation problems
vi. 1a0ing into account /s ealth: if goal is deterrence$ can figure out hat figure ould deter "ex. hat
percentage of total ealth?% ! counterargument is that costs ill end up getting passed on to consumers
,. *ommon la and statutory
a. ,irst arose in cases of dignitary torts
b. :ain concern: insufficiency of compensatory damages to deter rongful conduct
1ri(sha* v. Ford Motor Co. $Cal. Ct. App. %&'%)
Facts: P Orimsha$ a passenger in a Pinto$ suffered burns hen a car rear8ended the Pinto causing
the car to erupt in flames. P as aarded 9-$C+K$;;; million in compensatory damages and
9+-C million in punitives. P as re4uired to remit all but 9F.C million of the punitive aard
as a condition of the denial of /Hs motion for ne trial.
Analysis 2nstructions on malice$ even assuming them to have been erroneous because the ord
XpossibleX as used instead of Xprobable$X didnHt constitute pre#udicial error
2n deciding hether an aard is excessive as a matter of la or so grossly
disproportionate as to raise the presumption of passion/pre#udice:
6 /egree of reprehensibility of /s conduct: conduct of ,ord management as
reprehensible in the extreme ! conscious and callous disregard of public safety in
order to maximi>e corporate profits
6 7ealth of /
6 Amount of compensatory damages
6 Amount hich ould serve as a deterrent effect on li0e conduct by / and others
ho may be so inclined: points out that government regulations are inade4uate
deterrents= P/s compensate for shortcomings
6 Ratio of punitives to compensatory: << times ! court found it excessive as a matter
of la$ after ta0ing into account all the other factors
Disposition *ourt affirmed the #udgment$ the conditional ne trial order$ and the order denying /Hs
motion for #udgment notithstanding the verdict. 7eighing factors in assessing P/ aard:
trial court reduction as ithin reason
c. *ost8benefit analyses in products liability:
i. 2n -rimshaw$ / 0ne ho much it ould cost to ma0e the car safer$ but disregarded it to ma0e a higher
:odern Remedies ,;<$ pp. --
ii. 2t is in societys interest for companies to ma0e these calculations$ but P. cases demonstrate disincentive
for them to do so ! they can be introduced into evidence and ma0e the companies loo0 bad if measures
ere not adopted
iii. /ifference in measures: P ould not have paid 9+-C: to suffer the damages. 2n theory$ compensation
has the aim of putting P bac0 in his rightful position "the 'indifference curve(%. But as soon as you enter
idea of serious in#ury and death$
you can argue that this is the rong calculus
d. 2nstructing #uries
i. 7hat evidentiary standard should be used?
ii. 2ntent standard: malice$ fraud$ oppression$ illfulS: terms are not precise$ but perhaps are not meant to
be ! is this the best courts can do?
e. &tate immunity from punitive damages
i. *annot get P/s from state
ii. ,arnes v. -orman: case under A/A$ issue of hether punitive damages could be aarded against a
municipality. :a#ority rationale held that A/A enforcement as through &pending *lause "no program
that receives federal funds can discriminate%. Oovernment ithholding of funds is a contractual situation
! because you cannot get punitive damages in a D$ you cannot get them here
#. Punitive damages M constitutional overlay
1ore v. )M2
Facts: P bought B:7= bought it presuming it as ne. 1urned out that paint #ob as defective$
but B:7 had policy that if value of car as decreased by less than certain percentage$ they
ould not disclose to purchaser$ but mar0et it as ne. P too0 car to paint shop$ here he
as told that the car had been repainted. Actual damages: 9<$;;;= original amount of
punitive damages given by the #ury: 9<:. *alculation: average harm to value of the harm$
multiplied number of cars sold ith this type of undisclosed defect "+< of them sold in A.%.
*oncern that there as evidence brought in based on nationide conduct "extraterritorial
Analysis &* sets out F guideposts:
6 /egree of reprehensibility
8 :ost important indicia
8 1ype of harm: economic vs. physical harm
8 7hether B:7 made any false statements or concealed evidence ! malice$
tric0ery and deceit: court finds no
8 Repeated nature of the rongful conduct: no indication that B:7 persisted in
course of conduct after it had been ad#udged unlaful on even one occassion
8 ,inancial vulnerability of the target
6 Ratio of compensatory to punitive damages
8 7hether there is a reasonable relationship beteen punitive damages aard
and harm li0ely to result from /s conduct$ as ell as the harm that actually
8 *ontroversy: proportionality$ but proportional to what?
8 *ompensatory to punitive G compensatory as the proxy for indicator of harm
8 )ere ! ratio is 'breathta0ing( "though$ no mathematical bright.line%
6 &anctions for comparable misconduct: in A.$ violation G 9-$;;;. ,act that the
multi8million dollar penalty prompted a change in policy sheds no light on
4uestion of hether a lesser deterrent ould have ade4uately protected interests of
A. consumers
Disposition Reversed and remanded.
State Far( v. Ca(p,ell
Facts: 5ffer to settle e4ualed limit of insurance policy "9-CD% ! often$ Ps ill agree to settle at
maximum settlement insurance policy$ and / has every reason to accept$ but insurance
company has interest in not automatically accepting every offer to settle at the maximum of
policy limitation "interests of insured and insurer are different%. &tate ,arm too0 it to trial$
here P as found totally liable$ and #udgment far exceeded the settlement offer/insurance
policy maximum. Bad faith failure to settle. But$ ended up coming through and paying the
:odern Remedies ,;<$ pp. -F
#udgment. 7hat is the harm? 1he +L month period of uncertainty for *ampbells$ hen
they ere told they should 'sell their house=( pain and suffering.
Proc!"ral #istory: 5riginal #ury aard: 9+<C: in punitives$ 9-.K: in compensatory. 1rial court remitted to
9-C: and 9+:$ respectively.
Analysis *ase as incorrectly used as a platform on hich to expose/punish perceived
deficiencies of &,s operations throughout the country "national scheme to meet
corporate fiscal goals by capping payouts on claims company8ide%$ rather than
conduct directed at Ps specifically
&tate does not have legitimate concern in imposing P/s to punish / for unlaful
activity outside that courts #urisdictions
*ourt declines to impose strict ratio of compensatory to punitives: but in practic8 =-
a-ar!s .c!in0 a sin0lC!i0it ratio 7t-n p"niti1 an! co/pnsatory
!a/a0s8 to a si0ni=icant !0r8 -ill satis=y !" procss
*ompensatory damages in this case ere substantial ! the harm as essentially the
economic harm in the +L month period$ the distress/humiliation suffered$ hich as all
compensated in compensatory damages "hich courts says contain this punitive
7ealth of / cannot #ustify an otherise unconstitutional damage aard ! /s ealth
had little to do /the actual harm suffered by Ps
*ivil penalties in4uiry: relevant A1 statute imposes a 9+;D fine= obviously darfed by
9+<C: punitive damages aard
Disposition Reversed and remanded.
a. *onstitutional 'guideposts$( after -ore and %tate Farm
i. Ratio analysis:
+. -ore: no precise mathematical formula
-. %tate Farm: rarely ever is an aard exceeding a single8digit ratio beteen P and * damages
a. 2n instances here there is only a small amount of harm "compensatory damages%$ a
larger ratio to punitive damages may be appropriate "in dignitary torts%= hoever$
here compensatory damage aard is high$ the punitive damage aard should be
loer to comport /due process
b. 1here might already be punitive elements in the compensatory aard
ii. &anctions for comparable misconduct for both civil and criminal fines
+. After -ore$ every P came in and argued that the act in 4uestion could entail criminal charges$
and the 'loss of liberty( entitled them to use a large value to calculate the sanction for
comparable misconduct
-. %tate Farm clamps don on this: true$ if there are criminal penalties for /s behavior$ then that
has ramifications for reprehensibility analysis$ but the idea that you can use criminal penalties
in determining dollar amounts doesnt hold up because the civil defendant isnt afforded the
same type of protections as criminal defendants
b. Relevant constitutional interest:
i. 2s the /P analysis substantive or procedural? &hould &* be alloed to invade the state sphere?
ii. -ore: substantive /P right comes up
iii. Ouideposts as intended to provide putative /s ith some 0ind of notice ! as to types of conduct that
ould sub#ect one to punitive damages$ as ell as severity of punitives
c. &cope of evidence: hat is alloed to come in$ after %tate Farm and -ore?
Mathias v. Accor $*
Cir.8 +::3)
Facts: Ps ere guests in hotels oned by /. Rooms ere infested /bedbugs. @xtermination
service recommended that every room be sprayed$ but motel refused. Rented out rooms
that ere indicated not to be rented out until treated$ failed to arn guests about the bugs.
Proc!"ral #istory: Bury B/Ps$ 9+LKD punitive damages$ 9CD compensatory. / appeals.
Analysis Precepts that should govern aards=
:odern Remedies ,;<$ pp. -<
6 Punitive damages should be proportional to the rongfulness of the /s actions
6 &anctions should be based on the rong done rather than on the status of the /
6 / should have reasonable notice of the sanction for unlaful acts$ so that he can
ma0e a rational determination of ho to act= and so there have to be reasonably
clear standards for determining the amount of punitive damages for particular
1his is much more similar to a dignitary harm to the extent that the compensatory
damages might be pretty lo$ hereas egregious nature of the conduct might be very
high "li0e the 'spitting the in face( case$ as opposed to an oil spill%
/ filed motion in limine to exclude evidence concerning the issue of bedbugs in the
other rooms in the motel ! court refused to grant the motion
7ould have been helpful if parties had presented evidence of statutory penalties for
offense$ but lac0 thereof does not invalidate the aard
Aard of P/s as not excessive$ although court ac0noledges that the final amount
chosen by the #ury as arbitrary
Disposition Affirmed.
d. 7ealth of /: in *athias$ Posner says that it is relevant$ but more in terms of Ps ability to bring a case$ get his day
in court "here$ to individual Ps ere facing a comparatively ealthier / ho had a bunch of resources to put
behind its defense and 0eep people from suing "refers to motions filed$ etc. as 'frivolous%%
e. Reexamination clause:
i. #ooper /ndustries: hen punitive damages are ruled as being unconstitutionally excessive$ federal courts
are revieing #ury aards de novo
+. Argument that as made that punitive damages might be different from compensatory damages
! not 'facts( in the same ay that */ are$ that they involve moral considerations$ etc.$ such that
there is no idea that federal court is getting in the ay of #ury fact8finding
-. 2ssue of hether it as #ust a matter of federal procedure$ or if it ould apply in state courts !
for the latter$ it ould have to be a constitutional rule
a. &tate courts: interpret as a constitutional rule$ so they are engaged in loo0ing at them
de novo hen they are ruled as constitutionally excessive
b. :ove from common la to constitutional argument: ma0es a different for standard of
revie "abuse of discretion vs. de novo standard ma0es a differenceY%
c. *hanges balance beteen #udges and #uries$ as ell as appellate vs. trial court
d. Oinsburg: brings this out in dissent ! in #ooper /ndustries$ is upset that P/ aard is
less of a fact than pain and suffering$ and the idea that appellate courts can no step in
and instead of simply offering up remittitur$ no can #ust remit aards and not give
the option of a ne trial
D. &plit8recovery schemes:
a. ?arious state approaches:
i. OA: only applies to products liability cases= after deduction of attorneys fees and costs of litigation$
ECQ of P/ recovery goes into state treasury. 5nly one P/ aard per P. act/omission
ii. AD: C;Q of P/ aard must be placed in states general fund
iii. 2.: trial court has discretion to apportion P/ aard beteen P$ Ps attorney$ and 2. /ept of )uman
iv. 23: ECQ of P/ aard must be put into violent crime victims compensation fund
v. 2A: #ury ansers special interrogatories ! if it finds that /s conduct as specifically directed at P$ P gets
+;;Q of P/ recovery. 2f not$ then ECQ goes to state civil reparations trust fund
vi. :&: P receives C;Q of P/ aard after attorneys fees$ remaining C;Q goes to tort victims
compensation fund$ ith -KQ of that going to legal services for lo8income persons fund
vii. 5R: <;Q of P/s go to prevailing party
viii. A1: after deduction of fees$ C;Q of aards in excess of 9-;D go to state general fund
ix. *A: ECQ of P/ recovery goes to state 'general fund$( also has a single recovery limitation
+. 7hy is this part of a split8recovery bill? 2s there any reason for them to go hand in hand
:odern Remedies ,;<$ pp. -C
-. 2f this is a revenue raising scheme$ you ant it to be once to get the largest aard "possibly%
F. Pitched as something that ill raise revenue ! potentially in conflict ith the idea of tort
reforms as trying to 'rein in( excessive #ury verdicts?
b. - approaches to attorneys fees
i. 1a0en from total aard$ before state ta0es its share
ii. 1a0en from amount left over after state ta0es its share
iii. N*A scheme: attorneys get normal contingency fee "from Ps -CQ%$ plus -CQ of ECQ put into public
trust essentially collects from the entirety of the aard "attempt to bypass the ta0ing issue ! recovery
is split from the outset= that ay$ P technically never had a 'right( to the portion allocated to the public
c. /ifficulty of 0noing ho much money ill be collected
i. Punitive damages arent holly predictable ! remittitur$ appeals$ etc.$ aard vs. ho much has actually
been paid out
ii. )ard to ma0e it part of budgetary process as short8term budgetary enhancement$ hen lasuits have an
unpredictable timeline
iii. Pic0ing up punitive damages as 'final #udgments( ! but$ litigation is #ust the tip of the iceberg
settlement before trial "0noing that you ill only get a portion of your punitive damages= settle to 'cut
out( the state from the picture%= also beteen #ury verdict and end of the appeals process
+. &ecret settlements
-. &ettlements for similar dollar amounts but$ it matters to the / that its not labeled 'punitive(
"for reasons of reputation$ etc.%
F. *ollusive/'sham( settlements: first8comer advantage$ /s have an interest in having a relatively
benign case be the first "might or0 ith plaintiffs counsel%
d. 2nforming the #ury
i. Perhaps shouldnt be informed because #uror ho 0nos that 9 ill go to the state$ then he might feel
more inclined to inflate the #udgment "that it ill benefit him$ as long as #ury is going to punish the
company anyayS%
ii. Any states that have considered the issue have prohibited telling the #uries
!ardin"er v. )lue Cross $O#io +::+)
Facts: P8decedent suffered from cancer= had great success using a certain 0ind of treatment$ but
after approving several rounds of treatment$ / ended up denying coverage for it$ and
although she eventually decided to actually pay for the treatment$ by then it as too late.
Proc!"ral #istory: 1rial court B/P$ 9<J: in P/s.
Analysis Punitive damages revie:
6 Ander &upreme *ourt #urisprudence: no reduction needed
6 5) state common la: excessiveness violation
8 .oo0ing at past aards ! ant the aard to be high because the court feels
li0e the rong is particularly reprehensible$ but loo0s to prior verdicts$ and
decides that punitive damages should be double the highest aard
*ondition on the remittitur: 9-;: ould go to cancer research foundation
Disposition Remittitur= 9-;: goes to cancer research foundation.
Dissnt :ight be good policy$ but any state that has considered it has left it to the legislature
$. *ourts remedial authority ! criti4ue of Dardinger
a. 3o right for court to do so
b. &hould be left up to the legislature$ not proper for the courts
c. :a0es the #udge a 4uasi8head of foundation= too arbitrary for #udge to decide ! no institutional chec0s on #udges
poer to allocate the money "should it be sent to the #ury$ or should e re4uire briefing by the parties?%
d. Ps are blindsided by this allocation ! no notice that such a scheme ill be put into place= no chance to brief the
:odern Remedies ,;<$ pp. -K
F. Punitive damages in contract
a. 2n addition to statutory civil fines
b. 1raditional rule: no punitive damages in contract
c. .oo0ing at a case /an independent tort$ hy have the independent tort re4uirement? /oes it or0 out as a
practical matter? &mattering of data shos that it seems punitive damages can often or0 their ay into
d. /istinction beteen torts and contracts: source of duty
i. 1ort: by la
ii. *ontract: by contract$ express or implied
iii. 3ature of remedy sought by P
iv. N7hen does a contract case get pushed into tort territory? Formosa ! emphasis on when / decided not
to perform ! intent at the time representations ere made
For(osa Plastics Corp. v. Presidio /n"ineers 0 Contractors$ nc. $T.. %&&')
Facts: ,ormosa as engaged in a large8scale$ 9+.CB construction expansion pro#ect$ ith 9K;;D
bid for a contract. Presidio received invitation to bid on part of the pro#ect$ hich as
accompanied by certain representations about the foundation #ob "J; day completion
schedule%. Pro#ect ended up ta0ing L months to complete= Presidio incurred substantial
Analysis Breach:
6 Presidio asnt able to schedule concrete delivery hen it as supposed to be able
6 ,ormosa scheduled mutually exclusive contractors to be in the same place at the
same time
1ort: fraudulent misrepresentation
6 Presidio as to be able to set its on schedule and ,ormosa as to deliver on
6 Pro#ect as to be completed in J; days
6 Presidio alleged that ,ormosa enticed contractors to ma0e lo bids by ma0ing
misrepresentations in the bid pac0age regarding scheduling$ delivery of materials$
responsibility for delay damages ",ormosa indeed admitted that it had secretly set
up its on delivery schedule in order to save money%
In!pn!nt tort r"l: DDNot8 pp. *@(: For(osa #ol!s t#at t#r /"st 7 an
in!pn!nt tort8 an! t#r /"st 7 tort !a/a0s8 7"t t# !a/a0s n! not 7
in!pn!nt =ro/ t# !a/a0s ca"s! 7y t# 7rac#
6 '.egal duty not to fraudulently procure a contract is separate and independent
from the duties established by the contract itself( tort damages are not
precluded simply because a fraudulent representation causes only economic loss
Contract cas 0ts p"s#! into tort trritory: based on ,ormosas intent at time
representations ere made
6 &eemed to be a calculated effort$ scheming ! employees testify to substantiate the
idea that it as not the case that ,ormosa made the contract and then decided not
to perform
6 Profit motive: ,ormosa made the representations in order to induce Presidio to
enter into the contract at a lo bid price ",ormosa as going to be responsible for
things ithin its control$ but Presidio as supposed to be in responsible for factors
outside control of the parties. ,ormosa knew that there ere going to be delays$
and use its superior bargaining poer to ma0e Ps finish the or0 or else go aay
and settle for some lo amount%
Disposition Affirmed "Presidio chose higher tort recovery$ 9E;;D$ court affirmed #ury finding of fraud
and 9+;: damage aard%.
e. 7hat is the purpose being served$ if you dont have to have additional damages for a claim in tort? /ont ant
'repac0aged contract claims(
i. 7hat ould be a better rule for hen e ant to apply torts?
ii. Above cases use the 'independent tort re4uirement(
:odern Remedies ,;<$ pp. -E
iii. .oo0 at distinction beteen opportunistic breach and efficient breach? &ounds good in theory$ but
difficult in practice "and ould #uries actually treat them differently?%
iv. /ifficult to tell at hat point / decided not to perform its obligations under the D
v. )old firm to the rule of no punitive damages in Ds$ but reali>ing that you ill encounter torts and
contracts together$ strictly construe the independence rule?
vi. 1ort damages serving as hoo0 for bad faith contract claims?
-. &tatutory damages and civil penalties
a. *ivil penalties payable to the government: F categories
i. *riminal prosecution in disguise: argument is that this should trigger criminal procedural protections
+. Almost a null set
-. 2f legislature calls something a civil fine$ ill not decide that this is a criminal prosecution and
give / attendant rights "&upreme *ourt has been pretty clear%
b. 3ot a criminal prosecution$ but it is punishment: might trigger some 0ind of procedural protections
i. ,or a hile$ seemed to implicate the double #eopardy clause "though very narroly defined$ if not
ii. @xcessive fines clause implicated: goes bac0 to discussion of applicability of the clause to civil penalties
assessed beteen private parties ! not applicable$ but court left 4uestion in situation here funds ere
going to the state
c. 3ot a criminal prosecution/punishment$ but solely remedial: ordinary civil procedure/administrative schemes
seem to suffice
i. 'Remedial( can be defined in a number of ays: preventative$ enforcement costsSetc.
d. 3otes/issues:
i. Penalties seriously undermine protections of criminal procedure ! substantial fines are imposed /o
ii. *ourt generally upholds such penalties on the ground that they are remedial$ not punitive
iii. *ourts current position seems to be that civil penalties are civil and remedial because *ongress says so
iv. *ourt seems to have given up on the civil/criminal line$ but has imposed modest limits on the si>e of
civil fines under the @xcessive ,ines clause
v. /ouble8#eopardy cases: here /s claim is that the civil penalty is punishment for purposes of the /B
*lause$ so government cannot impose a second punishment in a criminal prosecution
e. &tatutory damages collected by private parties
i. Private litigants recovering statutory damages
ii. @x. '1ruth in lending act($ copyright infringement$ Privacy Act
iii. Area in hich statutory damages are proliferating ! e need to have a sense as to hether they are
punishment$ remedial in purpose= up for grabs hether the hole apparatus of %tate Farm or ,*W
should apply in situations here statutory penalty seems too large
f. )o do you argue that statutory damages are different from punitive damages?
i. @x.: litigant ho is able to get damages for every day
ii. 3otice: there is arguably a lot more notice that you ill incur a fine
+. Arguably$ doesnt bring in same due process claims as a result
-. *ounterargument: yes$ you may 0no that you ill be fined$ but do you 0no that it could be a
huge amount?
iii. 2f statute is ell8drafted$ then you might be able to more effectively structure the limits of the fine !
legislature can set caps$ for example
g. 7hy have statutory damages to begin ith?
i. Areas in hich harm/damages are difficult to 4uantify
ii. @nforcement incentive to give to private litigants ! private attorneys general role
A. 2n#unctions vs. damages
:odern Remedies ,;<$ pp. -L
a. *ourts are more ary of in#unctive relief ! hy?
i. :onitoring problem: burden on the court
ii. 1iming of intervention: in#unction is preventive "ex ante%= concern that there might be a huge cost
imposed on / if you are granting in#unctions based on too little evidence$ to some extent speculative
iii. .arger intrusion on /s interests ! restraint on action$ burden on liberty
iv. Right to #ury trial for cases at la$ but not at e4uity: therefore$ hen remedies are substitutable$ granting
in#unctive relief as a ay to bypass #ury trial might be problematic possibility
B. @conomic analysis of in#unction vs. damages ! property rules vs. liability rules
a. Property rule: in#unctive relief
,. .iability rule: damage relief
c. 7hich do e favor for specific rights? /epends on the transaction costs involved
i. Property rules:
0. 2f transaction costs are lo$ you ant to force people into voluntary mar0et transactions ith
one another "property rule% ! everything ould be protected and the costs ould be more
accurate hen they are a result of bargaining "as opposed to #ury8determined damages%
1. 7here transaction costs are high: if parties cant come together and bargain after the fact$ court
must be very sure that it gives this entitlement to the right party
a. /anger that it ill go to the lo8value user
b. 2n#unctions are very strong protection ! sort of the 'final ord$( and if transaction
costs are high and parties cant/ont come together$ then they are stuc0
ii. .iability rules: forgo the ideal of parties coming together$ but at least you ill avoid the possibility of
allocating right to the lo8value user
d. 7hen ill transaction costs be high?
i. Bilateral monopoly: hen only one party has the good$ or hen only one party desires the good
ii. 7hen there are many parties involved "especially hen there are many parties on one side% ! collective
action problems$ hold out$ etcS
iii. @fficient breach theory is based on premise that transaction costs ill be high ! dont ant to have
in#unctive relief getting in the ay or efficient violations
iv. 5ur conception of transaction costs is critical ! too easy to say that economists favor property or liability
e. :ore radical theory: 'Remedies and the Psychology of 5nership(
i. Authors tested idea that there is an endoment effect ! hen you are endoed ith something$ you start
to value it more
ii. 5nce 2 on something$ 2 dont ant to give it up ! selling price ill be higher than price that 2 ould
offer to buy the same thing
iii. /oes this explain things fully?
iv. 7hat is the impact of our conception of property on our conceptions of remedies
v. 7e should live in a orld here everything is governed by liability rules because that ould encourage
voluntary transactions and trade
*. &ubstitution/specific relief
a. 2rreplaceable losses/irreparable in#ury rule ! question: hat ma0es a legal remedy ina!6"at2
i. /efinition
0. @4uity ill not act if there is an ade4uate remedy at la
1. @4uity ill act only to prevent in#ury that is irreparable at la
ii. 1ypical application: if money damages ould be ade4uate$ then in#ury is not irreparable
iii. .aycoc0: '/eath of the 22R( issue of 'ade4uacy(
0. .egal remedy is ade4uate only if it is as complete$ practical$ and efficient as the e4uitable
remedy "prevailing definition%= legal remedy almost never meets this standard
1. 5nce the definition as in place$ 22R did not embody much preference for legal remedies
2. *ourts do not deny specific relief merely because they #udge the legal remedy ade4uate ! 22R
almost never bars specific relief$ because substitutionary measures are almost never ade4uate
:odern Remedies ,;<$ pp. -J
3. At the stage of permanent relief$ any litigant /a plausible need for specific relief can satisfy the
irreparable in#ury rule
Pardee v. Ca(den Lu(,er Co. $A. ?a. %&%%)
Facts: P sued to en#oin / from cutting don timber on Ps land.
Proc!"ral #istory: 2n#unction dissolved= P appeals.
Analysis: Iss": evaluating the available remedies ! are they sufficient to vindicate the right
of an oner of property to 0eep it in the condition he desires?
.egal remedies inade4uate in this case because it ould allo someone to cut don
someone elses timber as long as he could pay the damages
/amages as compensation is ade4uate in all instances in hich property that is
in#ured/destroyed may be substantially replaced /money recovered as its value
Disposition: 2f personal property has a value peculiar to its oner$ or 'price of affection$( e4uity
ill vindicate and uphold the right to possession "ex. trees intact vs. lumber !
totally different 0inds of property%. *lear case of trespass by cutting of timber
should alays be en#oined.
Nots: Una/7i0"o"s c#oic 7t-n iss"in0 an inE"nction or r6"irin0 !a/a0s i=
trs ar c"t
D/onstrats t#at t# irrpara7l inE"ry r"l is li/it!
1imber as thought of as something$ though connected to the land$ asnt seem as
a0in to property in terms of having a uni4ueness value
*ourt doesnt seriously entertain that it ould be e4uivalent to allo the trees to be
cut don and then bring a suit in la for money damages
7hen is money an ade4uate remedy? 7e are no in this territory$ as opposed to
#ust as0ing 'hen can you bring an action in la?( 2ts the more relevant 4uestion
to modern litigation "not so much the la/e4uity distinction%
Continental Airlines$ nc. v. ntra )rokers$ nc. $&
Cir. %&&()
Facts: *ontinental published coupon boo0s /no8sale provision$ but told 2ntra that it ouldnt
enforce it. .ater changed position and told 2ntra$ hich refused to comply. 3o evidence of
harm/benefit as a result$ also no evidence of expenses by 2ntra in reliance on old policy.
Proc!"ral #istory: /istrict court granted &/B to *ontinental= permanent in#unction against 2ntra not to sell
Analysis: /id *ontinental have an ade4uate legal remedy? *ontinental said yes$ losses from
passengers use of coupons sold
?ery hard to determine hether * as harmed. @conomic analysis$ accounting
might be necessarily ! but doesnt mean that *ontinental as not harmed
/ifficulty and expense of establishing economic harm supports argument that
damages ould be inade4uate remedy cuts in favor of e4uitable relief
*ontinental is entitled to ma0e business decisions ! loss as of poer over
Disposition: 2n#unction affirmed.
Nots: 7hat is the entitlement that is being protected? Right to control ones business
1his is not exactly hat as meant by the traditional irreparable in#ury rule ! could
*ontinental go and do something totally foolish$ but still have its control protected?
,ol!in0 on to so/ s/7lanc o= irrpara7l !a/a0s r"l 7y sayin0 t#at it<s
!i==ic"lt to !tr/in t# /ony a/o"nt
Ca(p,ell Soup Co. v. 2ent- $3! Cir. %&(')
Facts: *ampbell contracted /7ent> to buy carrots at specified price. 5nce D came due$ mar0et
price had shot up= 7ent> sold to someone else$ ho resold the carrots on open mar0et$
*ampbell as a purchaser. &uspected that middleman as selling contract carrots$ sought
in#unction and specific performance of D.
Proc!"ral #istory: 1rial court denied e4uitable relief$ on ground that P had failed to establish that carrots are
uni4ue goods.
Analysis: @4uitable relief is proper
*ampbell had contracted ell in advance$ anticipating that it ould need the
:odern Remedies ,;<$ pp. F;
carrots$ had a reputation that as built in part upon uniform appearance
Disposition: Reversed.
Nots: /efendants: could have breached$ sold$ paid damages$ and still come out on top
.i4uidated damages clause: suggests that parties had in mind that there might be a
shortage in the goods= also$ that there might be incidental damages that are not
easily 4uantifiable
Do - -ant to nco"ra0 pro=ita7l 7rac#s in ti/s o= s#orta0 or /ar9t
/ might have anted to try and force *ampbells into negotiation?
.ong term contracts ith different variables$ re4uiring efforts and inputs on both
sides ! efficient breach might be attractive$ not only limited to sales situations
7an 2a"ner Advertisin" Corp. v. S0M /nterprises $NY %&(@)
Facts: P had lease for advertising space on building= P built a sign and leased it to another company.
/ cancelled the lease /P ! breached contract.
Proc!"ral #istory: 1rial court denied specific performance= aarded money damages. P argues for &P$ / says
that money damages are ade4uate but amount as improper.
Analysis: Ps argument that space as 'uni4ue( in terms of location for specific advertising !
'uni4ueness( is not a magic door to &P
/ifference beteen physical difference and economic interchangeability
Point at hich breach is redressable by &P doesnt lie in inherent physical
uni4ueness$ but in uncertainty of valuing it
'/ifficulty of proving damages /reasonable certainty(
?alue of commercial billboard space is not speculative
Oranting &P in this case ould also harm / disproportionately compared to ho
much it ould benefit P
Disposition: Affirmed &P part of verdict$ ad#usted damages through expiration of Ps lease.
Nots: 7hy are damages ade4uate here?
1he location is arguably uni4ue ! big captive audience of people stuc0 in traffic
@4uitable relief ould impose disproportionate burden on the defaulting landlord
7hat is the issue? )ardship on / is a separate issue from hether damages are
ade4uate ! added consideration$ or it the case that courts arent thin0ing about
hether you could feasibly get damages relief$ substitutability on the mar0et$ or is
there something going onSthat e ant to give stronger protection to a particular
entitlement or goodSor is there another substantive policy consideration "i.e. here$
undue hardship on a /%
,. Burdens on / or the court
i. Andue hardship/balancing the e4uities: embodiment of economic approach to la ! if a rong is too
expensive to correct$ then / can pay damages instead
0. )igh transaction costs
1. Bilateral monopoly
2. 3ot enough for / to sho that the in#unction costs him a little more than it saves P ! must
impose hardship greatly disproportionate to the benefits
3. /efense is unavailable if /s conduct is too culpable
Ariola v. &i"ro $Ill. %&F&)
Facts: /s ere putting an addition onto their house. Ps allege that /s encroached onto Ps
property. Ps had a drainage system that encroached onto /s property$ but it as ruled that
they had an easement by AP. /s put up a drainage system /o Ps 0noledge$ ended up
causing rotting and damage.
Proc!"ral #istory: 1rial court aarded Ps damages only for installation of drainage system as good as one
destroyed by /s$ denied damages for in#ury/deterioration of their building.
Analysis: Remedy of mandatory in#unction: here encroachment as intentional$ courts have
refused to balance the e4uities$ and have issued :2 /o regard to relative
convenience/hardship involved
:odern Remedies ,;<$ pp. F+
:andatory in#unction can also be granted in order to protect an easement
1rial courts determination that Ps claim re: easement as barred by laches as
/o merit
/s ere consistently on notice that they ould be encroaching
Disposition: Reversed and remanded= directions to grant the mandatory in#unction$ and aard all
damages resulting directly from defendants intentional trespass
Nots: 7hat could be recovered here?
6 ?alue of land ta0en
6 Ander intentional trespass$ liability for all the damage done "trial court limited
damage aard to replacement of drainage system%
6 Are damages an ade4uate remedy in this case?
8 2ntentional trespass
8 2dea is that in#unction ould lead to further negotiation by the parties
*oase theorem: initial allocation of rights doesnt matter because parties ill get
together and reach a bargain that ill be most efficient use of the resource
6 Assumption: lo transaction costs
N,arnsorth study: pic0ed cases here transaction costs ere very lo$ but actually$ not
much negotiation after #udges decision ho do you explain this?
6 Acrimony built up in encroachment/nuisance cases= parties are in such a state over
everything that even if it is in their interest to negotiate$ they dont feel inclined to
6 '@ndoment effect( might be at or0 here= people less li0ely to negotiate
inunctions "property right as non8fungible%$ hile they ill negotiate damages
hile cases are on appeal
Co#operative nsurance Society Ltd. v. Ar"yll Stores 8Holdin"s9 Ltd. $,L %&&*)
Facts: &afeay decided that number of stores ere not longer profitable$ so decided to close them.
2t as a breach of covenant in their lease$ hich contained positive obligation to 0eep the
premises open for retail trade during usual hours of business.
Proc!"ral #istory: .oer court assessed damages= *ourt of Appeal reversed$ ordering that the covenant be
specifically peformed.
Analysis: 2ssue: should the store be ordered to continue operating as at a loss?
Disposition: Restore order of trial #udge
Nots: 2ssue of supervision
6 Andue hardship on the court= unduly complex for the court to supervise
Punishment for contempt: court calls it 4uasi8criminal
6 As a result$ court feels the need to 'tread lightly( in aarding the in#unction
7hy ould you ant an in#unction in this case?
6 5ther stores ! &afeay dre people into the shopping center
6 At least anted a transition= displeased ith the decision to simply breach and pac0
up/close store
6 *ourt discusses concern that forcing the business to stay hen it doesnt ant to
ill discourage it from running the store properly$ and its not the courts role to
ma0e sure that this happens
ii. 7hat ill say a court /respect to granting damage/in#unctive relief? 1a0e8aay point of Ariola and
0. 7hether money damages are ade4uate
1. Andue hardship$ either for / or court
2. .oo0ing into character/content of /s action$ either at level of intent$ or presence of misconduct
in some respect
a. @x.: Ariola$ here / intentionally encroached on Ps property
b. /oes this mean that in#unction should be granted?
c. 7hat are advantages to giving in#unctive relief in this situation? /ont have to put a
number on the infraction= give the poer to the individual property oner ! protecting
that entitlement to land at a higher level than simple punitive damages "#ury/court8
determined amount%
:odern Remedies ,;<$ pp. F-
3. *ourts ta0e on more burdens in terms of supervision here sta0es are high enough and legal
remedies are shon to be ea0 enough ! loo0 at case and contrast damages ith in#unctive
a. 7hats a sta0e/hats the nature of the entitlement? Ariola case G property right=
Argyll G contract right
b. @xplains hy in#unctive relief as granted in Ariola even though it as an
encroachment of several inches ! seems irrational$ but the sta0es might be perceived as
being higher because it is a property right
c. &ubstantive or procedural policy reasons
2illin" v. Ma--ocone $Pa. %&*')
Facts: / ore sandich board and demonstrated in front of Ps la office$ believed that Ps had
defrauded her. Ps filed suit in e4uity see0ing to en#oin her.
Proc!"ral #istory: 1rial court granted in#unction$ &uperior *t. essentially affirmed "modified the order%.
Analysis: ,ree speech issue
3ot permissible to en#oin someone from spea0ing/protesting$ even if that speech is
,act that / is indigent doesnt matter ! doesnt mean that there is no ade4uate
remedy at la
2n deciding hether a remedy is ade4uate$ it is the remedy itself$ not its possible
lac0 of success$ that is determining factor
Disposition: Reversed
Nots: 2s a legal remedy as complete/practical/efficient as an e4uitable remedy in this case?
7hy is it that damages are not enough?
6 1rial court: / as indigent
6 )ard to prove the monetary effect of libel
6 Possibility of repeat conduct
6 N5ne thing that you can get /in#unction is ide remedial coverage$ and into the
6 2rreparable harm might not mean serious harm$ but could tell us that there is the
problem of repeat conduct here there ould only be a small damages aard each
time$ and hich ould not be orth it to litigate on each occurrence
*ourt reverses granting of in#unction because in#unctions are often preventative$ prior
restraint difference beteen damages and in#unction in this situation
6 /amages: punish individuals for statements made$ damages caused
6 2n#unction: prior restraint$ future speech of / is restrained "regardless of the fact
that statement has found to be false on the merits%
d. #ochran v. 4ory:
i. Bohnny *ochran case here &* has #ust granted cert. *ochran had been representing 1ory in .A policy
shoot8out case= became disaffected /*ochrans representation. 1ory sent letter saying that if *ochran
paid 9+;:$ he ould go public= after publicity of 5B trial$ resurfaced ma0ing demands again. 1ory
mobili>ed a bunch of people "not other *ochran clients%$ transported them$ gave them food$ had them
protest saying *ochran as a croo0. *ochran sued for defamation ! court issued in#unction saying that
1ory and anyone associated /him could not pic0et. *A Appeals court affirmed. 2ssue: hether
permanent in#unction in a libel action against an admitted public figure violates first amendment
ii. R"l: G6"ity -ill not nEoin a li7lH
A(erican )roadcastin" Cos. 7. 2olf $NY %&'%)
Facts: / as a sportscaster for P= agreed to negotiate for extension hen his D ran up$ also agreed
to a right8of8first refusal clause$ but then signed a D /*B&. P sued$ see0ing &P for right8of8
first refusal clause and in#unction against / broadcasting for *B&.
Proc!"ral #istory: *t. of Appeals held that / had violated negotiation clause$ but not right8of8first8refusal
clause because he signed /*B& before beginning of J; day period.
Analysis: *ourts generally refuse to order individual to perform a D for personal services
:odern Remedies ,;<$ pp. FF
"difficulties of supervising%
@xceptions: here there is an existing D$ and services are uni4ue or extraordinary
Oeneral #udicial disfavor of anticompetitive covenants in employment Ds "public
policy favoring full and robust competition%
AB*s re4uest: must fail
3o existing agreement beteen parties= already expired
2n this situation$ in#unction ould unduly interfere /individuals livelihood$ inhibit
free competition$ here there is no in#ury to employer other than loss of
competitive edge
3ot saying that AB* asnt damaged ! can sue for monetary damages if
Disposition: Big issue: +F
Amendment= prohibitions on involuntary servitude$ slavery$ etcS
6 &ocietal aversion to forcing people to stay in contract
/. Reparative in#unctions
)ell v. South*ell $F
Cir. %&@*)
Facts: @lection to fill vacancy for Bustice of the Peace= one blac0 female candidate "P8Bell%$ along
/five hite male candidates$ including declared inner /8&outhell. 2f all 4ualified blac0s
ho didnt vote had been added to combined vote of &outhells opponents$ result couldnt
have been changed.
Allegations: voting lists and booths ere segregated according to race$ also allegations of
voter intimidation.
Proc!"ral #istory: Ps re4uested that *ourt declare that / as not the legally elected BoP$ that he be en#oined
from ta0ing office$ and ne election be called. 1rial court characteri>ed practices as
unconstitutional$ but held that federal court as poerless/should not exercise poer to set
aside a state election$ and that there as no ay to tell hether the result ould have been
different in absence of discrimination ! therefore$ no harm or in#ury as shon by the
Analysis: *ourt has expressly recogni>ed the poer of a federal court to void a state election
! 5amer v. #ampbell
3ot blac0s alone ho suffered$ but body politic as a hole= trial court assumed that
all hite voters ould vote for hite candidates$ and same for blac0s
Oeorgia authorities insistence that relief as properly denied b/c in#unction as
re4uested after election as over ! no such rule= there as no effective relief
available before the election
/isenfranchised voters tried to engage in self8help$ but to avail= and the suit as
filed ithin a fe days of election results
Disposition: Reversed and remanded for entry of order setting aside the election and re4uiring
the calling of a special election
a. 3o rule precluding the use of in#unction to ameliorate the harm of past violations "despite any special rules
governing elections%
Forster v. )oss $'
Cir. %&&@)
Facts: Arose out of sale of property. P G buyers$ / G sellers. 7hen /s agreed to sell property to
Ps$ they represented that Ps could obtain permit for boat doc0$ but /s didnt 0no that they
had a permit of their on that made it impossible for Ps to get a permit. /s didnt contest
fraud in this regard. Bury aarded compensatory/punitive damages.
/s also promised that they ould remove their sim doc0 and didnt. Bury aarded
compensatory damages for breach of D.
Proc!"ral #istory: 2ssue on appeal: damages ere not the only relief given to Ps ! they also got permanent
in#unction ordering /s to remove their sim doc0$ and got their boat8doc0 permit after all.
Analysis: /s argue that in#unction has made Ps hole ! they have their sim doc0 and boat
doc0 permit= therefore$ they got the property /exactly the characteristics that /s
promised them after allSgranting damages too double recovery?
:odern Remedies ,;<$ pp. F<
Ps are better off then if there had been no fraud/breach in the first place
Possible that Ps suffered some 0ind of damages because they had to ait F years for
complete fulfillment of terms of sale ! but$ case asnt tried on this theory$ no
evidence to sho ho these damages could be calculated
Ps argue for distinction beteen right not to be defrauded and 'littoral rights(
appurtenant to property ! in abstract it ma0es sense$ but still doesnt #ustify double
Disposition: *ase must be remanded$ here it ill be up to Ps to elect hat remedy they ant !
compensatory or in#unction. But they should be alloed to 0eep the 9+;$;;; aard
because /s conduct as abusive. 2f it is necessary under :issouri la for
compensatory damages to be aarded in order to support punitives$ then /istrict
*ourt must aard Ps compensatory damages of 9+ on their fraud claim.
Dornmann$ concurring: Ps have already elected a remedy ! they sought and
received an in#unction$ and the resulting doc0 permit. 7ould have /* determine if
Ps elected a remedy$ and that Ps are not alloed to receive and retain the doc0
permit as ell as the 9+-$-C;.
Nots: Pretty clear in this instance that there as double recovery
Punitive damages: ho do you argue for punitives in addition to compensatory
and/or in#unction? 7ays in hich a court can figure out the 'harm( done even if it
is not aarded in compensatory damages "ex.: using a 'virtual( compensatory
damage amount$ if compensatory damages had been aarded rather than the
in#unction$ or #ust determine a value of harm%
2n#unctive: property8li0e protection
/amages: contract8li0e protection
Punitives: almost criminal8li0e protection
,. .aycoc0$ 2n#unctions and the 22R
i. ,isss analysis: practical differences beteen various uses of in#unctions
0. Preventative: prevents a future harmful act
1. Reparative: prevents the future harmful effects of a past act
2. &tructural: long series of preventative/reparative in#unctions in a single case presenting a
complex fact situation ! each individual order is part of a continuing attac0 on a larger problem
"ex. school desegregation%
ii. N.aycoc0: ,iss ma0es too much of his categories all do the same thing$ serving the classic role of the
in#unction of preventing future harm
0. /istinction that ,iss is missing: ignores the difference beteen avoiding harm altogether and
compensating for harm actually suffered
1. *an create confusion in litigation
iii. .aycoc0s argument:
0. Reparative in#unction is only appropriate hen P ill suffer additional harm in the future
"damages can be aarded too ! let the harm happen$ but compensate but$ reverse is not
alays true= sometimes you need damages to compensate%
1. 5verlapping purposes served by reparative in#unctions and damages remain 4uite distinct
2inston 'esearch Corp. v. Minnesota Minin" 0 Manuf. Co. $&
Cir. %&@F)
Facts: /ivision of :::* developed improved precision tape recorder/reproducer. .ater$ 7inston
developed similar machine. : alleged that 7 machine as developed by former :
employees$ using confidential info that they had ac4uired. &ued for damages and in#unction.
Proc!"ral #istory: /istrict *t. found that employees based 7s development program on same approach as they
used in developing :s machine. ,ound that the approach as not a trade secret of :.
Particular embodiment of the general concepts in : machine as a trade secret$ and
employees had used them improperly in developing the 7 machine.
Oranted in#unction against disclosing any trade secrets for - years after #udgment$ but denied
damages. Both sides appealed : says in#unction should have been longer/permanent.
:odern Remedies ,;<$ pp. FC
Analysis: /ist. *t. premised its decision on determination that trade secrets ould have been
fully disclosed shortly ! record supports this finding
%hellmar rule versus #onmar rule ! 7s argument ould bar any in#unction at all
once there is public disclosure$ and :s argument ould re4uire in#unction in
perpetuity regardless= /* verdict as compromise
/*s approach as sound
Public policy argument: permanent in#unction ould subvert public interest in
alloing technical employees to ma0e full use of their 0noledge/s0ill in fostering
RM/$ hile no in#unction at all ould leave faithless employee unpunished
Appropriat inE"ncti1 prio! is t#at -#ic# co/ptitors -o"l! r6"ir after
pu,lic disclosure to !1lop a co/ptiti1 /ac#in
/amages issue: /* as right not to aard ! since 7 didnt sell any of its
machines$ there as no profit to be disgorged$ and evidence as to future profits as
highly speculative at best
1o8year in#unction deprived 7 of any benefit it might have gained from
advantages and shielded : from any potential harm from 7s competition
Disposition: Affirmed.
Nots: 3othing illegal about reverse8engineering after product is out for sale
7 comes in before the four years elapse and ta0es about +< months to get product
to possible sale
Permanent in#unction: contrast ith preliminary in#unction ! entered into as part of
the #udgment$ but does not mean that it is perpetual
Perpetual in#unction: goes on forever= : anted it$ and that ould mean that 7 is
forever banned
*ourt re#ects extremes$ comes up /- year in#unction compromise: trade secrets are
not perpetually protected= once on the mar0et competitors could develop the
product by R@
)ailey v. Proctor $%
Cir. %&(*)
Facts: :utual fund= organi>ed into debenture trust. Abusive capital structure ! uneven and
misleading distribution of ris0 and reard. 2f 1rust performs badly$ stoc0holders bear much
less ris0 than debenture holders$ but if it performs ell$ then stoc0holders get all of the
speculative profit. &) thus have incentive to ta0e ris0s /debenture holders money. 1rust
became insolvent$ and control group as caught in fraud/self8dealing. Receiver appointed at
re4uested of &@*. Baileys group bought out original control group and made the 1rust
solvent again.
Proc!"ral #istory: /* ordered receiver to li4uidate the trust. Bailey appealed$ arguing that 1rust as no longer
insolvent$ and those responsible for fraud ere no longer associated /the 1rust. Also
argued that court had no poer to order li4uidation in any event.
Analysis: *ourt of e4uity has inherent poer to appoint receiver to li4uidate
corporation/investment trust here fraud/mismanagement/abuse is present$
regardless of whether there is insolvency
2ssue: hether court loses the poer once there is intervening solvency and sitch8
out of offending parties
&olvency is not sufficient to defeat courts #urisdiction
1he main problem here isnt the personal honesty/integrity of Bailey and their
management$ but the structure of the trust itself
1he structure is the evil ! court asnt convinced that similar meltdon couldnt
happen again
:ay be fair/e4uitable to re4uire li4uidation of the company in the absence of an
acceptable plan of reorgani>ation
Disposition: Affirmed$ remanded.
Nots: :otivation of *ongress: rote the statute to protect investors because they might
not reali>e that they are trading above8mar0et interest rate for participation in a very
ris0y investment
2f there is already a statute in place$ hat is the court here trying to compensate for?
*ourt invo0es court of e4uitys inherent poer here there is
fraud/mismanagement in trust situations
:odern Remedies ,;<$ pp. FK
/id *ongress automatically say that presently8existing capital structures must be
li4uidated? Orandfather *lause= those that are presently existing dont have to
immediately li4uidate
2s the *ourt shoing its disagreement ith *ongress on this 4uestion$ in essence
saying that there can6t be a Orandfather *lause for this type of capital structure?
Propensity for / to do harm ! raises different 0inds of issues?
3ot very clear hat *ourt is acting on
@. Preventative in#unctions
a. Preventative$ not compensation for harm already suffered
,. /efinition: court order$ enforceable by sanctions for contempt of court$ directing / to do/refrain from doing some
particular thing
c. )ipeness rule: before in#unction is issued$ there must be a ripe threat of in&ury = P must sho that he personally
will be harmed by it
d. *ontempt:
i. *ivil contempt: remedial proceeding$ P prosecutes it himself= court grants compensation for any harm
suffered as a result of /s violation of in#unction
ii. *oercive civil contempt: court imposes conditional penalties to coerce / into obedience
Hu(,le 6il 0 'efinin" Co. v. Haran" $E.D. La. %&@@)
Facts: / entered into conspiracy ith Ps employee$ ho had access to information belonging to P.
@mployee ould tell / about Ps proposed operations/ac4uisitions so that / could then beat
P to it$ then ould have his agent/bro0er offer to sell leases/farmouts to P or others. /
ac4uired huge profits$ gained royalty interests. / used a corporation to conceal his role in
the transactions.
Proc!"ral #istory: P sought in#unction barring / from destroying documents relating to transactions entered
into by / or /s corporation$ that allegedly reflect his connection ith Ps ex8employee.
Analysis: 3ecessity of in#unction must be demonstrated clearly ! cannot be issued #ust to
allay parties fears ! must be issued only to prevent irreparable in#ury
P could be irreparably in#ured$ but thats true in every situation here proof of
claim rests on documentary evidence. 2f that as the test$ then there ould be
in#unctions in every case here one party has control of important docs
Party see0ing in#unction must establish +% potential irreparable in#ury$ plus -% real
danger that the acts to be en&oined will occur7 that there is no other remedy
available7 and that under the circumstances the court should exercise discretion to
afford unusual relief
3o proof of imminent threat here
/oesnt matter that it ould not place hardship to / "i.e. hed be doing hat he has
to do anyay%
Disposition: 2n#unction denied
Marshall v. 1oodyear Tire 0 'u,,er Co. $F
Cir. %&**)
Facts: / discharged :r. Reed$ P "&ec. of .abor% sought to en#oin further violations and recover
Reeds lost ages.
Proc!"ral #istory: /istrict *ourt found violation alleged and granted the relief$ including nationide in#unction
against further violations.
/ primarily ta0es issue ith the scope of the in#unction= claims that the single violation
found by court involved only the actions of one store manager$ and doesnt arrant such
broad in#unctive relief.
Analysis: @4ual Pay Act$ ,.&A$ and A/@A cases all establish that nationide/companyide
in#unction is only appropriate hen facts indicate company policy or practice in
violation of the statute
3ot present in this case
Disposition: Remand for further consideration of scope
e. &cope of in#unction:
:odern Remedies ,;<$ pp. FE
i. &hould bigger companies be more insulated from company8ide in#unctions "i.e. need more in#unctions
because they have$ for example$ more branches?%
ii. ,R*P KC"d%: concerns in#unctions against violating la ! says the order has to be specific and not #ust
reference the complaint or the la that forbids the en#oined act "cant #ust tell /: 'obey the la(%
iii. But$ the 'obey the la(8type clauses are common
U.S. v. 2.T. 1rant Co. $%&F3)
Facts: 2nterloc0ing corporate directorates= )ancoc0 served as director on /s three corporate
boards. After complaints ere filed under RL of the *layton Act$ ) resigned from some of
the boards.
Proc!"ral #istory: /s moved to dismiss actions as moot. /istrict #udge granted :&B$ concluding that there as
not the slightest threat that /s ill attempt any future activity in violation of RL if they have
violated it already.
Analysis: 2ssue: is the matter moot because / resigned?
/ is free to return to his old ays
Also$ there is a public interest in having the legality of practices settled
1o say that the case is moot means that / is entitled to dismissal as a matter of right
! courts have refused to grant /s such a poerful eapon against public la
NBut$ case may be moot if / can demonstrate that there is no reasonable
expectation that the rong ill be repeated ! heavy burdenY
1here must be some cogni>able danger of recurrent violation$ more than mere
possibility$ to 0eep the case alive
Disposition: Although the actions ere not moot$ no abuse of discretion has been demonstrated in trial
court6s refusal to grant in&unctive relief. Affirmed.
Dissnt $Do"0las8
Relevant issues havent been considered= /* ruling should not be entitled to
presumption of validity because it disposed of the case based on mootness$ hich
the court no concedes as erroneous
7e are concerned ith the proclivity of indulging in the practice of interloc0ing
&icholson v. Connecticut Half#*ay House$ nc. $Conn. %&@@)
Facts: Ps ere property oners on bloc0= / purchased one of the homes in the bloc0 to use as a
halfay house for parolees from *1 prison.
Proc!"ral #istory: 1rial court en#oined as a nuisance before it ent into operation. /s appeal.
Analysis: 1est for nuisance: evidence must sho that /s proposed use of property is
,actual grounds offered in support: depreciative effect on land values$ fears that
residents ill commit crimes in the neighborhood
Present fear rests on pure supposition ! speculative and intangible fear= no evidence
offered/alleged to prove any specific acts/pattern of behavior that ould arrant
drastic in#unctive relief
2R maybe granted only under demanding circumstances
Disposition: 2nsufficient shoing= reverse trial court.
,. Preliminary in#unctions
LA Me(orial Coliseu( Co((ission v. &ational Foot,all Lea"ue $&
Cir. %&':)
Proc!"ral #istory: /istrict *ourt granted preliminary in#unction prohibiting 3,. from invo0ing R<.F of
.eagues *onstitution/Bylas to prevent transfer of 3,. franchise to .A.
Analysis: Tra!itional 6"ita7l critria =or 0rantin0 prli/inary inE"nction: $%) stron0
li9li#oo! o= s"ccss on t# /rits8 $+) possi7ility o= irrpara7l inE"ry to P i=
PI is not 0rant!8 $3) 7alanc o= #ar!s#ips =a1orin0 P8 $() a!1anc/nt o=
p"7lic intrst $in crtain cass)
*ircuit: moving party can meet burden by demonstrating either "+% combination of
probable success on merits M possibility of irreparable in#ury or "-% that serious
:odern Remedies ,;<$ pp. FL
4uestions are raised and balance of hardships tips sharply in its favor
*ourt: no irreparable in#ury *oliseum alleged lost revenues due to failure to
ac4uire 3,. team ! monetary in#ury is not normally considered irreparable
"compensable by damage aard%
1rial court did not find balance of harms favoring P ! insufficient
Disposition: Reversed
Nots: 7hat is *oliseums strongest possible claim of irreparable in#ury? 3o ay to
purchase an 3,. team ith money$ so if they lose the chance to get the 5a0land
Raiders$ then there is no ay they can be later compensated for the damages that
ould be caused
2ntangibles argument ! e.g. something about the Raiders$ and practical argument
"above% that *oliseum couldnt get another team
7hat is different about the realm of preliminary in#unction such that the in#ury is
irreparable? Problem is at this point "at stage of P2%$ you dont 0no hether it is
going to be a viable legal claim on the merits
*ourt has to balance idea of potential irreparable in#ury to P /the ris0 of error ! the
idea of P2 both substantively and procedurally is going to hinge a lot on this ris0 of
/ivide out the harm that can still be prevented after trial as distinct from harm that
ill be suffered or inevitable before trial/hearing on the merits timing elements=
courts ill orry a lot about it at P2 stage
1hen$ apply the usual irreparable in#ury 0ind of concept ! assess things li0e severity
of the harm and various factors
"+% .i0elihood of success on the merits
"-% Possibility of irreparability in#ury to P if P2 is not granted: strong vie that if
you are going to be tal0ing about lost revenues/profits is that it isnt going to fit the
bill "ex. have other sports teams$ use them as predictor$ calculate damages from
Lakeshore Hills$ nc. v. Adco+ $Ill. App. Ct. %&':)
Facts: P sued to have / remove a pet blac0 bear from his property in the subdivision. &ection of
restrictive covenants as amended to exclude bears one year after / moved in.
Proc!"ral #istory: 1rial #udge ruled that bears presence violated covenant provision$ granted P2$ finding that
potentially dangerous situation existed.
Analysis: Ooes through < elements$ all come out in favor of P
Disposition: Affirmed grant of in#unction.
Nots: 2ssue of altering the status 4uo: in#unction here altered it$ but that doesnt re4uire
reversal. /oesnt add anything to the <8element analysis
Coyne#!elany Co. v. Capital !evelop(ent )oard
Facts: P got contract to replace plumbing fixtures in state prison. ?alves malfunctioned even after
replacement. 7hen / announced bidding specifications for -
phase of pro#ect$ it re4uired
all bidders to use Ps main competitor. P sued Board under *RA of +LE+$ obtained 1R5
against Boards opening bids. &tate as0ed that P be ordered to post 9C;D bond because 1R5
as causing delay that could be very costly.
Budge re4uired bond of 9CD only.
Proc!"ral #istory: *ourt reversed grant of preliminary in#unction because the decision giving P a claim as
reversed. P moved /* to aard damages for rongfully issued P2. Budge refused to aard.
Analysis: Rule KC"c% essentially tells the court to order applicant to pay rongfully en#oined
partys damages
:ost cases hold that prevailing / is entitled to damages on in#unction bond unless
there is a good reason for not re4uiring P to pay in the particular case ! court agrees
ith this ma#ority approach
Budge must have a good reason for departing: ex. that / failed to mitigate damages$
that P is indigent
5ne factor: intermediate state appellate court decisions are reversed ith some
fre4uency ! legitimate consideration$ especially here prevailing party is a state
:odern Remedies ,;<$ pp. FJ
agency that benefited from a change in the la of its state
Disposition: Remand for #udge to consider/eigh all relevant factors.
Nots: 7ho bears ris0 of error at P2 stage?
7orried about potential harm to /= P shouldnt have to fully compensate / for
rongfully issued in#unction$ because it asnt Ps rongdoing$ unless e thin0
that P as rong to bring the suit in the first place "not as li0ely%
2n#unction bond: compromise ! re4uire the posting of a bond$ set in advance
"re4uires ex ante anticipatory calculation of hat the potential harm/ris0 should be%=
most states$ only liable for the amount of the bond
.i0ely effect on litigation "especially plaintiff%: certain individuals ho ont be
able to put up the money might be discouraged from bringing the suit "ex. civil
rights Ps$ employees$ though #udge has some discretion%
Carroll v. President of Princess Anne $%&@')
Facts: /s G hite supremacist organi>ation= held public assembly near courthouse steps.
Authorities did not attempt to interfere /rally. 5nly a fe police ere present. :ade racist
speeches on a public address system. &aid it ould continue the next day.
Proc!"ral #istory: Residents of city and county applied for and obtained a R5 from court. @x parte ! no notice
given to /s= :/ procedure provides for it. Restrained rallies/meetings for +; days. Another
in#unction as issued after +; days$ extending restraint for +; months.
:/ *ourt of Appeals affirmed +; day order$ but reversed +; month order on the ground that
period of time as unreasonable and it as arbitrary to assume the clear/present danger of
civil disturbance/riot ould persist for +; months.
Analysis: +
Am issue: procedure provides for ex parte issuance$ but not here there is no
shoing that it is impossible to serve/notify opposing parties and give them an
opportunity to participate
Presumption against prior restraints of expression
3o #ustification in this case for not notifying /s
2mportance of adversary proceeding /both parties participating
5rder must be narro ! tailored as precisely as possible to exact needs of case
Disposition: Reversed.
Nots: 3o reason/explanation as to hy there as no notice ! under ,R*P KC$ 1R5 ould
be reversed
*ase constitutionali>es the rule that as inherent in ,R*P KC$ and rule that as in
place in most states because they had state la e4uivalents ! holding isnt really
1R5s arent appealable ! only ay court reaches a decision on this is because its
piggybac0ed on the 4uestion of the permanent in#unction
7hy might litigants dispense ith notice?
&ubstantive standard: < part test seems to collapse into one 4uestion ! is the free
speech resulting in an irreparable danger that must be precluded before notice can
be given?
Sa(pson v. Murray $%&*()
Facts: P as probationary employee employee /O&A$ advised in riting by Acting *ommissioner
that she ould be discharged. &he filed action see0ing to temporarily en#oin dismissal
pending pursuit of administrative appeal.
Proc!"ral #istory: /istrict *ourt granted 1R5$ and after adversary hearing$ extended order in favor of P until
Acting *ommissioner testified about reasons for Ps dismissal. /ivided *ourt of Appeals
Analysis: 2ssue: hether more limited procedural re4uirements applicable to probationary
employees ere satisfied by /s in this case
Asually can be dismissed by notifying in riting as to reasons for discharge$ but
more elaborate procedures are specified for terminating employee for conditions
arising before appointment

:odern Remedies ,;<$ pp. <;
Nots: 1R5s /o notice only last for +; days. Rule KC doesnt define preliminary
in#unction or 1R5
Rule that 1R5s are not appealable: #udge8made rule
)ere$ 1R5 as issued /notice$ lasted longer than +; days
&ubstantive standard: *ourt ta0es strong form saying that lost pay isnt irreparable
in#ury because it can be recovered later

O. &tructural in#unctions: school desegregation and institutional reform

a. :ain distinction beteen approaches to scope of in#unctive relief:
i. Rightful position: Winston
ii. @4uitable8discretion: more flexible$ free8heeling notion of doing complete e4uity ! ,ailey
,. 2ssue of #udicial activism: hat are the proper limits?
c. &cope of in#unction hen issued: school desegregation cases
i. /istinction beteen de #ure and de facto:
0. /e #ure: by la= deliberately caused by state authorities. ?iolates the *onstitution and must be
1. /e facto: segregation from all other causes except deliberate conduct of state authorities. Does
not violate *onstitution
ii. %wann v. #harlotte.*ecklenburg ,d. of $ducation: neutrally dran attendance >ones ould not achieve
truly nondiscriminatory assignment of children to school. Presumption against schools that are
substantially disproportionate in racial composition. /istrict *ourt has broad poer to fashion a remedy
that ill assure a unitary school system ! must achieve greatest possible degree of actual desegregation.
.ed to generation of busing to desegregate
0. ,air amount of rightful position rhetoric ! but$ used in expansionary manner$ has an e4uitable
discretion result= thus can say its more li0e ,ailey
1. &ometimes held out as a case in hich courts got over substantive barriers on the liability side
through the remedial end
iii. *illiken /: scope of the remedy is determined by the nature and extent of the constitutional violation. 2f
segregation occurred in /etroit school system only$ remedy must be limited to that= reversed /istrict
*ourt order to have surrounding suburban districts made parties
0. 3ot illing to expand remedial poers$ on theory that Zrightful position should be thought of
in terms of the /etroit &/ itself
1. &tating strong commitment to rightful position standard$ but as if courts meaning of rightful
position has changed slightly "example in the Winston paradigm% ! no more idespread arguing
about doing e4uity to alleviate all the effects of segregation
iv. *illiken //: court affirmed educational84uality remedies "ex. remedial training%= some argued that this
exceeded the scope$ but in#unction had a conse4uential damages feel to it
v. Dayton ,d. of $ducation v. ,rinkman: only if there has been a systemide impact may there be a
systemide remedy
0. 2ncremental segregated effect
1. )o can e measure hat the conse4uences/effects once e define the violation ! hat ould
things loo0 li0e absent de #ure segregation? 1he difference beteen the to is the incremental
segregated effect
2. *ourt does not ant to reach beyond effects that are directly related to the instance of the
Missouri v. Jenkins $%&&F)
P8school board M parents alleged /8state/surrounding school districts had
caused/perpetuated system of racial segregation of schools in Dansas *ity metropolitan area.
D* &/ as realigned as nominal defendant and certified as class$ present/future &/
students. Brought cross8claim against state for failure to eliminate vestiges of dual8school
:odern Remedies ,;<$ pp. <+
1rial: found that state and D* &/ ere liable for violation because they operated a
segregated school system. /ist *t issued remedial order$ goal of eliminating vestiges of
state imposed segregation= ordered range of 4uality education programs for all students.
/ist *t approved magnet school plan. Adopted an extensive long8range capital
improvements plan over 9C<;:$ combined /other costs "ex. salary assistance%$ annual
cost per pupil in D* &/ far exceeds other schools in the state.
Analysis: )ere$ there is no interdistrict violation ! proper response by the /* ould therefore
have been to eliminate to the extent practicable the vestiges of prior de #ure
segregation /in the %D
*onstitution is not violated by racial imbalance in the schools$ ithout more
/nterdistrict goal is beyond the scope of the intradistrict violation identified by the
/ist *t
/ist *t has created the magnet district in order to serve the interdistrict goal of
attracting nonminority students from surrounding school districts and redistributing
them ithin the D* &/ ! pursuing 'desegregative attractiveness( is beyond school
of broad remedial authority
3eed local autonomy for schools: 'vital national tradition$( restore state and local
authorities to control of school system
Disposition: Budgment of *ourt of Appeals is reversed
*ontinuing 'racial isolation( of schools after de #ure segregation has ended may
ell reflect voluntary housing choices or other private decisions
/ist *t has no basis in any real finding of intentional government action
Racial isolation itself is not a harm= only state8enforced segregation is
&tructural in#unction infringes on &tates discretionary authority over its on
program and budgets
&eparation of poers and federalism as to clear restraints on use of e4uity poer
/* as incorrect to retain #urisdiction over implementation/modification of
remedial decree ! should have terminated its involvement after issuing its remedy
7henever possible$ courts should implement/devise unified remedies in single
degrees= #udiciary shouldnt be in#ected into day8to8day management of institutions
and local policies
,ailed to target e4uitable remedies in the case specifically to cure the harm suffered
by victims ! raising test scores of an entire district is not sufficiently tailored to
restoring victims to position they ould occupy absent discrimination
$St1ns8 Gins7"r08
;ryr8 So"tr)
1est scores are relevant to the extent that they can help determine hether the
programs have cured a deficiency in student achievement
&alary increases can be #ustified as important element in remedying reduction in
systemide student achievement resulting from segregation in D*&/ "/o them$
4ualified employees ould leave%
3o contradiction beteen finding of no interdistrict segregative effect and findings
about hite flight
:a#ority misreads *illiken /$ improperly expanding limitations on permissible
remedies for prior segregation
Nots: :a#oritys test: but for the segregation$ ould the students be going to school
/issents approach: hether /s have shon right to relief from the in#unction !
ta0ing this vie$ slight burden shifting seem to have a much easier time tying
things li0e 'hite flight( to violation "not important hether this is a direct result of
the actual instances of de #ure segregation%= ider scope to remedial poer
2f this is necessary in Dansas *ity$ hy not everyhere? 2s there any idea about
here this remedy ends?
U.S. v. 7ir"inia
Facts: ?:2 case ! issue is sufficiency of the 7omens 2nstitute
Analysis: ?iolation in this case: categorical exclusion of omen from extraordinary
:odern Remedies ,;<$ pp. <-
educational opportunity afforded men
?A didnt eliminate policy ! left it untouched
&chools not comparable
Rightful position
Remedy doesnt offer any cure for opportunities/advantages ithheld from omen
ho ant a ?:2 education and can ma0e the grade ! doesnt match the
constitutional violation
?iolation is not the exclusion of omen$ but the maintenance of an all8mens school
/o providing any institution for omen
Remedy shouldnt necessarily re4uire admission of omen to ?:2 or creation of a
?:2 clone for omen
&ufficient remedy for to institutions offering same 4uality of education and same
overall caliber
Nots: 7hat is the standard? Are e restoring Ps to rightful position to the same extent as
hen e are discussing damages$ or is there an alternative articulation?
6 Proponents of broad e4uitable remedial discretion have not yet succeeded in
articulating a separate type of standard
6 &eems as though there is more controversy in this regard hen it comes to
in#unctions rather than damages ! hy? Because the decisions here are being made
by #udges$ not #uries
8 *ourts also retain #urisdiction "though 1homas suggests that courts #ust ma0e
narro in#unctions and get out of the business of ongoing #urisdiction and
8 Budge is going to have to articulate reasons and standard= #uries dont have to$
and 0eeps further scrutiny out of the decisions
d. Prison cases
Hutto v. Finney
Facts: At issue: punitive isolation ! number of prisoners held for indeterminate period of time in
empty$ indoless cells$ receive [+$;;; calories per day
Proc!"ral #istory: /istrict *t. found conditions unconstitutional$ as violating L
and +<
Am. 2nstead of
fashioning a detailed remedy of its on$ /* directed the /ept. of *orrections to start
improving conditions and filing reports on progress ! hen progress as unsatisfactory$
given a -
chance. .ater found substantial improvements$ removed its supervisory
*ourt of Appeals reversed /* decision to ithdra supervisory #urisdiction. /* held
another set of hearings$ finding that conditions had seriously deteriorated.
*ourt concluded that constitutional violations had not been cured ! entered order that placed
limits on number of men/cell$ re4uired that each have a bun0$ discontinuation of poor diet$
F; days max isolation sentence. *ourt of Appeals affirmed.
/s appeal portion of order that mandates F; day maximum isolation sentence$ arguing that
/* thus held that indeterminate sentences alays constitute */A punishment.
Analysis: /* didnt consider the length of sentence in a vacuum
/* had given /epartment repeated opportunities to remedy= based on the history of
the litigation$ court as #ustified in entering a comprehensive order to insure against
the ris0 of inade4uate compliance
2nterdependence of the conditions producing the overall violation ! the F; day limit
ill help correct the conditions
Disposition: Affirmed
Dissnt $R#n6"ist) 1he ma#ority decision doesnt comply /*illiken //
*ourt doesnt find that confinement under the conditions described becomes
unconstitutional on the F+
day ! needs other #ustifications$ otherise its #ust a
prophylactic order
3ot remedial ! doesnt restore victims
:odern Remedies ,;<$ pp. <F
/istinguishes beteen prison and school systems: students can receive special
instruction in later grades
3eed to let state and local authorities manage their on affairs
Nots *ourts intervention in this area ! ho can it be characteri>ed? :ore narroly8tailored
fact8specific remedy that the court is getting at: court has authority to address each
element contributing to the violation
6 '2nterdependence of the conditions producing the violation(
Le*is v. Casey
Facts: *lass action by A\ prisoners complaining that inade4uate la libraries and legal assistance
in state prisons interfered /their right of access to the court under ,ounds.
Proc!"ral #istory: /istrict *ourt made findings /respect to to incidences of ,ounds violation$ both involving
illiterate prisoners$ but entered an in#unction regulating details of la libraries in every
prison in the system.
Analysis: /octrine of standing ! role of courts to provide relief to claimants ho have/ill
imminently suffer actual harm
3ot the role of courts to shape institutions of government
Remedy must be limited by the rong
Actual in#ury to only one P: failure of prison to provide special services that he
ould have needed$ in light of his illiteracy$ to avoid dismissal of his case
Another P as 'unable to file a legal action(
1o instances are patently inade4uate basis for conclusion of systemide
violation/imposition of systemide relief
/* failed to give sufficient substantial deference to legitimate penological interests
asserted by prison authorities
,ailed to give authorities sufficient opportunity to propose their on remedy
1oo intrusive
$So"tr8 Gins7"r0)
1rial itself as overreaching ! abuse of discretion for /* to aggregate the discrete
problems in individual prisons and treat them as if they prevailed throughout the
Nots 2n some respects$ on the 4uestion of scope of the remedy$ court is basically unanimous !
not sufficient to #ustify system8ide relief
6 /oesnt matter hether it is brought as a class action ! still loo0ing to specific
instances of harm
6 *oncern raised over the appropriateness of prophylactic remedies: do the harms
suggest that harms are idespread or ill be unless the court intervenes?
6 &imilar to 5umble +il ! court ont issue in#unction against destroying evidence in
a case= same logic 4uestion of hether you ant to issue such a dramatic
Real fight: is there imminent harm in this area?
6 2s the concurrence in this case reconcilable ith the dissent in 8enkins? )o does
the prison situation relate to school desegregation?
8 2s it easier to isolate discrete violations of the la here? *ould argue that the
school segregation issue is more multifaceted$ more dynamics at or0. But$ in
5utto$ there is the idea of 'interdependence of the conditions producing the
6 )o might the remedies in the school context be different from the prison context?
Rehn4uist in 5utto says that school context is different because students can have
their positions improved$ ex. be given special instruction ! some 0ind of reparative
8 2s this possible in the prison context: could be forard loo0ing$ and affect
prisoners going forard$ but S?? :a#oritys concern?
). :odifying in#unctions
'ufo v. n(ates of Suffolk County Jail
Facts: P8inmates sued city/county/state officials claiming that they ere being held under
unconstitutional conditions hile they had not yet been convicted of the crimes charged
:odern Remedies ,;<$ pp. <<
against them
Proc!"ral #istory: +JEF ! *ourt held that conditions violated *= permanently en#oined /s from housing
inmates aaiting trial together in the same cell.
+JEE ! problems of *harles &t. Bail still unresolved= /* ordered /s to renovate another
existing facility as a substitute detention center. *t of Appeals agreed$ ordered that *&B be
closed unless plan as presented to create a constitutionally ade4uate facility for pretrial
*ourt entered into formal consent decree regarding #ail design$ but construction as delayed
and in the meantime population exceeded estimates. /s ere ordered to build a larger #ail.
/* granted a re4uest for modification to increase ne prisons capacity. /* refused to grant
a subse4uent re4uest to allo double bun0ing. )eld that separate cell for each detainee has
alays been important element of relief sought in the litigation.
*ourt of Appeals affirmed.
Analysis: &heriff moved for modification on the basis of ,R*P K;"b%
2mportant to be able to modify decrees$ especially /upsurge in institutional reform
litigation since ,rown
,A*1: modification of consent decree may be arranted hen changed factual
conditions ma0e compliance /the decree substantially more onerous= unforeseen
obstacles or enforcement of decree ould be detrimental to the public interest
5n remand$ /* should consider hether the upsurge in inmate population as
foreseen by /s
.A7: consent decree must be modified if one/more of obligations placed on parties
has become impermissible under federal la. :ay also be arranted hen
statutory/decisional la has changed to ma0e legal hat the decree as designed to
,ell: double8celling is not alays unconstitutional$ but it didnt cast doubt on
legality of single8celling$ and /s ere aare that ,ell as pending hen the signed
the decree but nonetheless agreed to build single celled #ail
*ant allo clarifications in the la to open doors to relitigation of every affected
consent decree ! ould undermine finality of result
*larification ould support modification if parties had based their agreement on
misunderstanding of governing la= on remand$ /s could try and establish that they
5nce moving party has met its burden$ *ourt should determine hether proposed
modification is suitably tailored to changed circumstance
Disposition: %wifts 'grievous rong( standard does not apply to re4uests to modify consent decrees
stemming from institutional reform litigation.
Adopt flexible standard$ under hich party see0ing modification must establish that a
significant change in facts/la arrants revision of the decree and that proposed
modification is suitably tailored to changed circumstances
?acate and remand
/s reliance on ,ell is misplaced= relied on that authority hen he sought
permission to double cell. 2ncrease in population should have been apparent$
reasonably foreseeable to continue
/s history of noncompliance provides added reason for insisting that they honor
their most recent commitments
Public interest in finality of court decrees
Particularly important to apply strict standard hen considering modification
re4uests that undermine the central purpose of the consent decree itself
/ont ant to frustrate the legitimate expectations of parties or core remedial goals
of decree
7ould affirm
Nots )ufo is clear that / can consent to provisions that go beyond Ps rightful position$
:odern Remedies ,;<$ pp. <C
and that is cannot relitigate the minimum constitutional remedy on a subse4uent
motion to modify
&chool desegregation cases: Dowell ! court held that decrees are not intended to
operate in perpetuity. Proper standard for modification: hether Board had
complied in good faith /desegregation decree$ hether vestiges of past
discrimination had been eliminated to the extent practicable
Nots 7hat ill the issue be on remand?
6 *hange in facts: hether the number of inmates changed
8 Part of the 4uestion: foreseeability
6 *hange in the la: parties understanding of constitutional standard at the time
",ell v. Wolfish9 ! decision as pending at the time the decree as issued
7hat is the scope of #udicial poer in this situation$ and ho can it be that it can
enforce an in#unction that goes beyond hat the *onstitution re4uires?
6 *onsent decrees are different to the extent that there is a strong contractual aspect to
them ! parties are trying to or0 out the best for both sides argument that *ourt
should give eight to parties decisions$ letting parties determine their on relief
6 &tevens: court$ stepping bac0 and loo0ing at here the parties are at that point$
arent necessarily going to 0no all the tradeoffs that they made "did they give
something up to get something in addition to the constitutional minimum?%
6 7hat is the #ustification for the extension of #udicial poer? /ependent on the idea
of agreement of the parties. 2nteresting$ because absent that$ you might have a court
that ould ant to carefully tailor the remedy$ to be more li0e the integrated
segregative effect in the school cases
P.RA: much more of a holesale undoing of some of these idespread consent decrees
and also litigated decrees that have been entered
6 @liminates prophylactic aspects
6 ,orbids consent decrees that grant relief that is more generous than the least
restrictive means of eliminating violations of the *onstitution
6 Also$ /s can repeatedly move to vacate ! to years after decree is entered and
annually thereafter= each motion re4uires Ps to prove once again that the decree is
still the minimum relief needed to eliminate an ongoing violation of the
6 Oeneration of decrees litigated/negotiated before #udges more inclined to intervene
can no be relitigated before #udges much less inclined to intervene$ /o any need
to sho a change in either fact or la
2. 2n#unctions and F
party rights
Hills v. 1autreau+ $%&*@)
Facts: 2ssue: racial segregation in public housing operated by *hicago )ousing Authority. After
prolonged efforts to implement a remedy /in *hicago$ *t of Appeal ordered consideration
of a metropolitan plan.
Analysis: 2ssue does )A/ have the authority to ta0e remedial action outside city limits of
/istinction beteen )A/ and &/s in *illiken is that )A/ has been found to have
violated the *onstitution
Anli0e in *illiken$ #udicial order directing relief beyond *hicago boundaries ill
not necessarily entail coercion of uninvolved governmental units$ because both
*)A and )A/ have authority to operate outside city limits
Relevant geographic area is *hicago housing mar0et$ not city limits
/oes order against )A/ impermissibly interfere /local governments/suburban
housing authorities not implicated in )A/s unconstitutional conduct? 3o !
)A/s statutory poers grant it sufficient poers= order ould have same effect
Nots: 2nterpretation of *illiken to bar
*ourt starts out 4uoting *illiken ! 'once a constitutional violation is found$ a federal
court is re4uired to tailor Zthe scope of the remedy to fit Zthe nature and extent of the
constitutional violation( narroly tailored approach
6 .ater$ 4uotes %wann$ saying 'once a right and violation have been shon$ the scope
:odern Remedies ,;<$ pp. <K
of a district courts e4uitable poer to remedy past rongs is broad$ for breadth and
flexibility are inherent in e4uitable remedies(
6 N&eems to have - different perspectives
*ulpability issue: )A/ as found to have violated the *onstitution= as opposed to &/
cases$ here &/s erent 'doing something rong(
6 *ourt is consistent in saying that its not about a balancing of hardships$ but an
inherent limitation on the remedial poer of the federal courts ! then tie it 4uite
specifically that you need to have a rongdoer
Oeographic issue ! is this case consistent /8enkins? /ifficult to claim that but for the
rong$ you necessarily
Affect on F
parties: court says that there ill be no effect on F
parties that ould be
any different from if )A/ had made this decision$ by using its statutory poers to
provide alternatives to racially segregated public housing system
6 3o violation of rights of suburban government
6 7here is the line beteen full remediation and coercion of innocent F
1eneral )uildin" Contractors Assn. v. PA $%&'+)
Facts: 1erms of agreement: Anion as to maintain lists of operating engineers$ classified according
to recent experience. &ignatory employers ere contractually obligated to hire only from
those lists$ and or0ers affiliated /the Anion ere barred from see0ing or0 /them
except through the Anion referral. 5ne of means of gaining access to lists as
apprenticeship program establish by Anion office and trade associations. Body of trustees !
appointed by Anion and trade associations.
Proc!"ral #istory: Ps ! PA and class of racial minorities ho are s0illed/see0 or0 in construction industry in
PA and /@. &ued under variety of federal statutes protecting civil rights. At issue: racial
discrimination in operation of exclusive hiring hall in union office$ and industry employees
doing business /in Anion #urisdiction.
/istrict *ourt found that hiring hall system as neutral on its face but had discriminatory
practices$ creating substantial racial disparities. ,ound that Ps failed to prove that
associations or contractors ere aare of discrimination$ and failed to sho intent to
discriminate by employers are a class.
But$ held that /ployrsITA violated statutes and could be ordered to help provide a
remedy. *t of Appeals affirmed. /s appeal.
Analysis: /ssue: whether party not sub&ect to liability for violating the law may nonetheless be
assessed proportionate share of costs of implementing a decree to assure
nondiscriminatory practices on part of another party which was properly en&oined

Nots: 7hy are the employers considered the 'innocent F
6 *ourt says that they had no ay to 0no of the discriminatory nature of the lists
created by unions because the #ust folloed the unions orders and used the lists.
7hen vieed as a class$ employers erent aare of the discrimination. But it
ould be difficult to prove that every single employer 0ne of it
6 @mployers might have violated 1itle ?22 but employees ould have had to exhaust
administrative remedies
Oiven 'innocence( of employers$ court is unanimous on the point that such parties can
only have smaller$ ancillary burdens placed on them ! cannot be assessed proportionate
share of burden
a. *ombining *ourts stated rules /factual results of cases$ la seems to be that innocent F
parties can be affected
substantially$ but not to the point of being restructured$ by orders to defendants ho violated the la. 2nnocent
third parties may also be sub#ected to minor and ancillary orders themselves
i. &choolchildren ho are involuntarily reassigned under the remedy approved in *illiken$ or the taxpayers
in 8enkins
0. &chool children: effect ould be substantial. ?ery li0ely that it ould be restructuring
1. 1axpayers: argument that it is unli0ely to be restructuring
:odern Remedies ,;<$ pp. <E
ii. &tateide education officials ho did not participate in local segregation but can be helpful in devising
remedies: officials could be held to a reporting re4uirement in the sense that they probably already hold
these duties. Assuming there as no restructuring necessary "ex. reallocation of resources%$ then they
should participate in remedies
iii. 1itle company holding assets beneficially oned by one of the defendants: burdening company might
burden others$ hose assets are also being held
iv. /evelopers engaged in construction pursuant to an allegedly illegal permit$ here rongdoing is
charged only against the officials ho issued the permit: developer is acting legally under an illegal
permit ! ould probably be affected substantially
v. &heriff in suit to en#oin an eviction$ here real parties in interest are ./1$ and the sheriff is routinely
executing a rit: sheriff appears to #ust be doing his #ob and folloing an order to execute a rit
A. 1he American Rule
a. 2f P has to pay his attorneys fees$ then isnt he undercompensated ! he hasnt been 'restored( to the position that
he ould have occupied but for the rong
b. American la: recovery of attorneys fees is an ancillary matter= separate from the merits
c. :otivations: fear of deterring litigation ! if you had pay your opponents legal fees$ Ps ouldnt litigate
d. 5ther countries: losers pay some/all of inners fees in every industrial democracy except for A& and Bapan
e. @xceptions to the American Rule:
i. &tatutory exceptions
ii. Bad faith litigation
iii. *ontempt8of8court
iv. *ontract: contractual provisions for reasonable attorneys fees
v. ,amily la: common to aard fees in divorce
vi. *ollateral litigation
vii. Private attorney general exception: for private litigants ho enforce public policy "state claims only%
viii. *ommon fund: hen case creates common fund in hich others ill share
B. ,ee shifting statutes
a. 5ne8ay fee shifting:
i. Aard attorneys fees to prevailing Ps but not to prevailing /s ! more and more statutes providing for
some variation of this solution
ii. :a0ing Ps hole /o discouraging them from suing
iii. :ost common and valuable hen it enables Ps of modest means to pursue claims /modest sta0es
iv. .itigants financial resources: obviously relevant to ho much he ill be deterred by the ris0 of liability
for the other sides attorneys fees ! repeat player li0e &ears can spread the occasional attorneys fee over
many cases$ hereas others are in court one/fe times$ and ris0 of paying &ears fees is all8or8nothing
b. 1o8ay fee shifting
i. 2f either P or / prevails$ other side ill have to pay their attorneys fees
ii. Advocated by tort reformers and other classes of repeat litigants
iii. 2dea is to deter ea0 claims
iv. At least it ill incentivi>e Ps to bring cases here otherise their damage recoveries ould not suffice !
give fuller recovery in the rightful position sense
City of 'iverside v. 'ivera $%&'@)
Facts: P8respondents sued city$ *hief of police$ F; police officers$ for alleged violations of +
$ <
Am rights$ hen cops used excessive force in brea0ing up a party that as found not to
have created a disturbance.
Proc!"ral #istory: Ps ere aarded 9FF$FC; in compensatory M punitive damages "on on some counts but not
:odern Remedies ,;<$ pp. <L
others%. Ps also sought attorneys fees and costs under R+JLL ! /ist *t aarded 9-<C$;;;.
/s appealed. *t of App affirmed.
Analysis: 2&&A@: hether aard of attorneys fees under <- A.&.*. R+JLL is per se
'unreasonable( if it exceeds the amount of damages recovered in the underlying civil
rights action
'American Rule(: absent express statutory authori>ation to the contrary$ each party to a
lasuit ordinarily shall bear its on attorneys fees "Alyeska%
6 <- A.&.*. R+JLL ! response to Alyeska: authori>ed district courts to aard
reasonable attorneys fees to prevailing parties in specified civil rights litigation
8 8ohnson: identifies +- factors to be considered in calculating reasonable
attorneys fees "time/labor re4uired$ novelty/difficulty of 4uestions$ s0ill
re4uisite to perform legal service properly$ preclusion of employment by
attorney due to acceptance of case$ customary fee$ hether fee is
fixed/contingent$ time limitations imposed by client/circumstances$ amount
involved and results obtained$ experience/rep/ability of attorneys$
'undesirability( of the case$ nature and length of professional relationship
/client$ aards in similar cases%
8 5ensley: reasonable fee G "number of hours reasonably expended% x
"reasonable hourly rate% 'lodestar$( ith ad#ustability of lodestar depending
on certain considerations
Re#ect proposition that fee aards should necessarily be proportionate to the amount of
6 *ivil rights action for damages is not #ust any private tort suit that only benefits the
plaintiffs ! Ps are see0ing to vindicate important civil/constitutional rights that
cannot be valued
6 &uccessful civil rights litigants are often securing important social benefits that are
not reflected in nominal/small damages aards
6 *ongressional intent: fees should not be reduced because the rights involved may
be nonpecuniary in nature= &enate Report specifically approves substantial fee
aards in cases here Ps sought no monetary damages fees not meant to be
conditioned upon/proportionate to aard of money damages
6 2ssue of attracting competent counsel: R+JLL enacted to enable Ps to enforce civil
rights las even here amount of damages at sta0e ould not otherise ma0e it
feasible for them to do so
Disposition: Affirmed
Dissnt: $;"r0r) 1a0es issue ith hourly rates$ says that the attorneys ere not nearly experienced
enough to command those fees
Dissnt $R#n6"ist8
;"r0r8 A#it8
,inding that attorneys 'reasonably( spent +$J;; hours to recover 9FF$FC; is clearly
Aards of reasonable attorneys fee means a fee that ould have been deemed
reasonable if billed to affluent Ps by their on attorneys
1he very 'reasonableness( of the hours expended by Ps attorney necessarily ill
depend to a large extent on the amount that may reasonably be expected to be recovered
if P prevails
*ivil rights nature of the case: this case doesnt share any 'special aspects( of certain
*R litigation
c. )o to measure reasonable compensation standard
i. ,ull compensation at reasonable mar0et rate
ii. - basic methods
+. .odestar G "number of hours reasonably expended% x "reasonable hourly rate%
a. Practically$ ho does a court ma0e the calculation?
b. *ontemporaneous time records: there ill be fighting over the details ! ex. did the
layer 0eep time as she was going?
c. *ourts dont feel li0e scrutini>ing time sheets is a good use of their time
d. ?icious cycle: attorneys 0no that courts ill ma0e rough estimates$ and go in ith
this in mind "might lead them to record time in a somehat inflationary manner%
:odern Remedies ,;<$ pp. <J
e. *riticisms/problems: diverges incentives for attorney and client= attorneys have
interest in running up the cloc0$ hen it is not in clients interest ! ex. 0eep or0ing at
it rather than settle for an amount that client ould be satisfied ith
f. ,lum and progeny: factors should be considered in calculating the hourly rate itself$
not as a fee multiplier after the fact
g. ,lum also held that fee aards should be based in mar0et rates$ even if layers or0
at less than mar0et rates
h. .itigation about fee aards for time spent in administrative proceedings/preliminaries
before trial: federal rule is that such time counts only if the proceeding as a
mandatory prere4uisite to the statutory claim for hich fees are authori>ed "exhausting
administrative remedies%
-. Proportionality: percentage of recovery "or$ contingent fee basis$ although percentages can
a. *riticisms/problems: in#unctive relief ! ho to value it?
iii. )ivera: disagreement as to ho much incentive is needed for appropriate claims to be brought forard
+. Brennan:
a. F
8party social benefit of the 'private attorney general=( R+JLL as meant to provide
an incentive for this 0ind of action
b. /efendants could run up the hours and Ps ould not be able to 0eep up ithout aard
of fees granted by R+JLL
-. Rehn4uist/Burger: concern is not so much ith /s running up the hours$ but ith plaintiffs
d. Prevailing party8re4uirement
i. 7hat about a partially prevailing party?
ii. 5ensley: unrelated claims should be treated as separate lasuits$ /fees only for hours spent on
successful claims ! but ho do you separate them out? @x.: did Ps in )ivera actually have -CK claims$
or one claim /a lot of factual detail?
iii. 7hat about cases in hich Ps trigger voluntary reform? *ourt refused to aard fees ! /o an
enforceable #udgment on the merits$ either litigated or a consent decree$ P is simply not a 'prevailing
party( eligible for fees "< dissenters thought P also prevails hen / surrenders before #udgment%
iv. &ettlement is enough$ but case la is unclear as to hether settlement has to be embodied in a consent
+. &upreme *ourt in ,uchanan: seemed to re4uire that it has to be embodied in a consent decree
-. J
*ircuit: enforceable settlement agreement ill suffice and support a fee aard
F. :ore common vie: court needs to at least retain #urisdiction over the settlement$ so that even
if it is not embodied in a consent decree$ it can still supervise
<. )oberson v. -uliani ! -
*ir case
v. Preliminary in#unction? *ircuit split J
*ir: successful P is a prevailing party$ vs. <
*. *ommon fund cases
a. *ommon fund rule:
i. .ump sum recovery that / pays$ that ill include undifferentiated amount that goes both to P"s% and
ii. /ont need fee8shifting statute
iii. A special case of restitution: layer/litigant ho paid the layer has conferred substantial benefit on all
the others$ and ould be un#ustly enriched if they ere alloed to retain the benefit /o paying the costs
of producing it
iv. 5r are P and layer 'volunteers$( ith the rest #ust incidental beneficiaries?
v. 7hy is this controversial?
+. 2mplying that you are conferring a benefit on other individuals$ here that can probably be
disputed "ex. securities litigation ! hen P prevails$ they get money from corporation$ and some
may ob#ect to this because this ould loer stoc0 prices%
:odern Remedies ,;<$ pp. C;
-. '*oupon( cases "here 'settlement( is$ ex. a discount on another of /s products%: plaintiff
class receives a non8cash benefit$ and really it #ust benefits the defendant$ so hen attorneys go
and claim huge fees$ it seems ludicrous
b. *ontingency enhancements:
i. Ris0 of nonpayment
ii. #ity of ,urlington v. Dague: &* flatly re#ected contingency enhancements= disguised as a ay of paying
. for cases he lost$ not paying . for ris0s of accepting cases he on
iii. But mar0et rates for fees payable on in the even of success are C;8+;;Q higher than noncontingent !
doesnt this ma0e Dague a departure from *ourts emphasis on mar0et rates?
iv. ,ederal courts have decided that Dague doesnt apply in common fund cases
n re Synthroid Marketin" Liti"ation $*
Cir. +::%)
Facts: *lass action over medication.
Proc!"ral #istory: *ourt approved -
proposed settlement$ and aarded attorneys fees from common funds
"for consumer class and insurance company class% at a level significantly belo hat
layers had re4uested. )ad as0ed for -JQ of consumers recovery and --Q of insurance
/istrict *t held that ob#ections ere insubstantial$ litigation as fairly complex but short$
ris0 of nonpayment as moderate$ and class counsel devoted a fair amount of time to the
case$ but not a great amount compared to the si>e of the settlement. ,olloed approach of
other #urisdictions$ concluding that fees in the range of K8+;Q and even loer are common
in megafund cases "9EC:89-;;: P%= larger fees in these context constitute a indfall.
Aarded +;Q from each fund.
Analysis: E
*ir. case la: in common8fund cases$ courts must do their best to aard counsel the
mar0et price for legal services$ in light of ris0 of nonpayment and normal rate of
compensation in the mar0et at the time
3o reason to have these numerical cutoffs
6 .eads to incoherent results: ex. aggregate fees ould be the same for 9<;: and
9+F-: settlement
6 3o layer ould ever negotiate a settlement of more than 9E<: and less than
5n remand$ /ist *t must estimate terms of the D that private Ps ould have negotiated
/their layers$ had bargaining occurred at the outset of the case "hen there as still a
ris0 of loss% ! must loo0 at it ex ante
6 Ouides:
8 Actual agreements: "?%
8 /ata from securities suits here large investors have chosen to hire counsel up
8 *lass8counsel auctions$ here #udges have entertained bids from different
attorneys see0ing the right to represent a class
Disposition: ?acated in part$ remanded.
Nots: Big recovery that is out there as part of settlement ! Ps counsel$ representing each of the
classes$ ants fees approved
:egafund rule: other #urisdictions: K8+;Q cap on megafunds "above 9EC:%
6 *ourt re#ects megafund idea and calls it insane because then no attorney ould
negotiate above the cap
Alternative: must do an ex ante terms of D that private Ps ould have negotiated /their
6 *riticism: not 'one mar0et(/generali>able benchmar0 out there
6 @x.: public interest 0ind of cases ! is there a 'mar0et value?(
6 @asterbroo0s response: 'chopped salad( list of factors /o rule of decision
7hat are some of the things that should be loo0ed to on remand? %ee above
c. *ompeting approaches to calculating fee aards in common fund rules: again$ beteen lodestar and percentage
of recovery
:odern Remedies ,;<$ pp. C+
i. &*: lodestar in federal fee8shifting cases
ii. @ach circuit in common fund cases and each state in all cases has had to choose
iii. Percentage of recovery has no relation to the or0 re4uired ! may produce fees that are absurdly small
or large
iv. %ynthroid: vies ex ante approach as a ay to avoid both problems of lodestar and arbitrariness of
pic0ing percentage of recovery after the fact
+. Auctions have their on problems: hat if there are too fe bidders? *omplexity of bids in
high8recovery cases$ severing of the attorney8client relationship
d. *lass8counsel auctions "cited to in %ynthroid%
i. ,irms submit 'bids$( but also ma0e predictions on hat can be accomplished in terms of recovery$ ill
have to substantiate that ith hat theyve gotten in previous cases
ii. Budge isnt to pic0 the loest bid$ but the 'best( bid
iii. /rabac0 to alays having these auctions: severs the attorney8client relationship because clients arent
alloed to choose their representation
+. Attenuated concern in the class action context$ but there is still the concern hen it comes to the
lead plaintiff
-. A real mar0et enthusiast could say that its not even a true mar0et$ because its essentially a
simulation$ therefore not a true mar0et signal
F. Practical concern: adds in a substantial upfront delay
e. Amendments to ,R*P Rule -F
i. -F"g%: as0s court to consider factors that go to the ability of the counsel see0ing to represent the class !
interests of the class= gives #udges broader authority
ii. Budges do have authori>ation to get involved /respect to ex ante fee agreements in auction8type setups
/. ,ee aards and ethical considerations
/vans v. Jeff !. $%&'@)
Facts: Ps ! handicapped children= /s ! governor and other public officials. *omplaint alleged
deficiencies in education and health services provided. *omplaint sought in#unctive relief
and costs/attorneys fees$ no damages.
Proc!"ral #istory: 5ne ee0 before trial$ /s presented Ps /ne settlement proposal$ offered virtually all the
in#unctive relief sought in the complaint. But the offer also included provision for aiver by
Ps of any claim to fees or costs. Parties conditioned aiver on approval by the /istrict
*ourt. Bohnson$ Ps 'next friend( "?% filed motion re4uesting /* to approve the settlement
except for the provision.
/* approved settlement and denied the motion
*t of App invalidated the fee aiver$ left rest of the settlement standing. Rational ! hen
attorneys fees are negotiated as part of a class action settlement$ conflict fre4uently exists
beteen class layers interest in compensation and class members interest in relief
Analysis: Rule -F"e% "re4uiring court approval of any settlement of a class action% does not give
the court poer to modify a proposed consent decree and order its acceptance over
either partys ob#ection
6 Tuestion ! did /* have a duty to re#ect the proposed settlement?
6 Bohnson: ethical duty as to serve his clients loyally ! no duty to see0 a statutory
fee aard= because the proposal to settle the merits as more favorable than the
probable outcome of the trial$ Bohnsons decision to recommend acceptance as
consistent /ethical standards
2&&A@: hether ,ees Act re4uires /* to disapprove a stipulation see0ing to settle a
civil rights class action under R-F hen the offered relief e4uals/exceeds probable
outcome at trial$ but is expressly conditioned on aiver of statutory eligibility for
attorneys fees
6 A general ban against negotiated aivers of attorneys fees in exchange for
settlement on the merits ould impede vindication of civil rights$ by reducing the
attractiveness of settlement
2&&A@: did /* abuse its discretion in this case by approving a settlement hich
:odern Remedies ,;<$ pp. C-
included a complete fee aiver?
6 3o
Disposition: Budgment of *t of App is reversed.
/ecision ill ma0e it more difficult for civil rights Ps to obtain legal assistance
*ongressional intent: authori>ed fee aards in order to encourage private actions$ that in
the long run provide effective public enforcement of the la
6 Provide economic incentives for layers to represent 'private attorneys general( to
protect the public interest
6 3ot #ust 'another remedy(
6 PR5P@R 2&&A@: hether permitting negotiated fee aivers is consistent
/*ongress goal of attracting competent counsel$ not hether they are inconsistent
ith the availability of fees as remedy for individual plaintiff
5nce fee aivers are permitted$ /s ill see0 them as a matter of course$ since it is a
logical ay to minimi>e liability ! this ould have the opposite effect of hat *ongress
anted$ so aivers should be prohibited
Budicial policy favoring settlement cannot possibly ta0e precedence over express
congressional policy to create incentives for layers to devote time to civil rights cases
Parties can negotiate the fee ! /s liability is not totally uncertain$ ris0 is not that great !
poer incentives still remain for /s to see0 settlement
7ould permit simultaneous negotiations of fees and merit claims
Class !isc"ssion
a. $vans: good decision?
i. 3arro reading: /* is not going to be re4uired to re#ect a settlement that re4uires a fee aiver
ii. Argument against: dissents argument that ma#oritys decision ill ma0e it harder for civil rights Ps to
secure counsel
+. As distinguished from 'putting P in his/her rightful position( ! loo0ing at attorneys fees as part
of the ma0e hole relief as part of damages
-. .oo0ing at legislative history: hen *ongress as setting up the statute specifically to have fee
shifting$ the incentive8based reasoning as at the core
F. Private attorneys8li0e general role being played
<. Public enforcement of these civil rights ! in the public interest
C. &eems to subordinate layers legitimate interest to clients legitimate interest
K. An#ust enrichment? *lient gets all benefits but does not have to pay for their conferral
iii. /efending ma#ority decision:
+. 1his ill vindicate civil rights cases
-. Parties could contract for the fee ! but$ hat if P only gets in#unction or other non8monetary
damages and cannot pay?
F. 7hat$ if anything$ might be a limitation on abilities to contract beforehand /clients? *lient
cant effectively limit its discretion to settle and delegate that to attorney$ because there is a
strong strain of ethics rules that says client is the one ho decides hether to settle
iv. %taten v. ,oeing #o.: J
*ir. decision
+. J
*ir re#ected class settlement that P and / negotiated$ and negotiated fee on basis of common
fund settlement "class action for race8based employment discrimination%
-. 9K.C: in cash to class$ plus in#unctive relief$ hich parties decided they ould put a value on.
3ot actual measures$ but intent ! precatory$ put value of 9F:$ plus 9<: to class counsel.
Adding up the amount G putative common fund
F. Argued that the 9<: represented -LQ of common fund$ and rote out settlement agreement$
too0 it to the court "court has to approve settlements under -F"e%%
<. *ourt held that it as permissible for counsel to simultaneously negotiate for class recovery and
their fees "citing $vans%
a. But$ after negotiating in the common fund area for the total sum$ attorneys must
petition the court
:odern Remedies ,;<$ pp. CF
b. Attorneys cant determine hat percentage they ill get ! fear of collusion among
class counsel
c. 1itle ?22 and racial discrimination statutes provided for fee8shifting$ but parties ent
another route$ and as a result presented no data regarding lodestar factor
b. &olutions?
i. /oesnt seem li0e there are very many good solutions among courts or academic observers to guard
against these abuses ! relying on honest attorneys sensiti>ing themselves to the problem? 5r$ strictly
enforce these ethical rules$ and that ill be the ay to solve the problem
ii. *ommon fund area: even more scope for abuse there ! not much has been done to figure out serious
iii. :ore #udicial revie ! dissent in $vans$ and J
*ir in %taten "very convinced that simultaneous
negotiation as o0ay$ but not for parties to agree amongst themselves ho much attorneys ould be
paid%= relying on e4uitable discretion of the court "har0ening bac0 to restitutionary idea%
c. Reverse auction situation
i. Parties can bring class8actions against product manufacturer on nation8ide basis$ both in federal court
and state courts
ii. A. case: problem is that there is an incentive for / to loo0 to settle on nation8ide basis and get out as
cheaply as possible
iii. 5ne legislative solution proposed: to say that all state cases could be involuntarily consolidated in
federal court and decided there$ so that there is no gamesplaying
iv. :ention that ?1 &* tried to get involved: ?1 Ps anted to collaterally attac0 settlement reached in A.
court$ on grounds that they ere not fully and ade4uately represented in A. settlement "under Rule -F% !
Ps prevailed
+. 7hat happens no$ after everything has settled$ attorneys have been paid
-. /s might be on the line for an additional amount
v. NN2mportant and big 4uestions in the la that have not been fully or0ed through
A. *lass actions$ generally:
Holland v. Steele $N.D. Gor0ia8 %&'%)
Facts: *ivil rights action$ court is considering Ps motion for class certification. P see0s to have
certified as a class all persons ho are or ill be detained in the /ade *ounty Bail in
1renton$ Oeorgia.
Analysis *lass actions are governed by ,R*P Rule -F: prere4uisites
6 1he class is so numerous that #oinder of all members is impracticable :@1
8 :ust be some evidence or a reasonable estimate of the number of purported
class members
8 Proper focus is not on numbers alone$ but on hether #oinder of all members
is practicable in vie of the numerosity of the class and all other factors
"smaller classes are o0ay here individuals are unidentifiable at time of
certification ! ex. prison populations$ class ill include present and future
6 1here are 4uestions of la or fact common to the class :@1
8 *ommon factual 4uestions as to acts$ omissions$ and policies of the defendant
in denying access to counsel to the inmates of the #ail
8 *ommon 4uestion of la raised by the P as to hether the practices of the /
constitutes a violation of the rights afforded under the K
Am of the
Anited &tates *onstitution$ OA state constitution
8 /oesnt re4uire that all fact situations be similar ! 4uestion of hether types
of facts/evidence are typical of the class
6 1he claims or defenses of the representative parties are typical of the claims or
defenses of the class :@1
8 ,ocus here is on the claim of the representative party$ not the class as a hole
:odern Remedies ,;<$ pp. C<
8 X1ypicalityX is met hen a Xclass representative "is% part of the class and
Xpossess"es% the same interest and suffer"s% the same in#uryH as the class
membersX ! doesnt have to be identical
6 1he representative parties ill fairly and ade4uately protect the interests of the
class :@1
8 1o critical factors: "+% Representative must have common interests ith the
unnamed members of the class= and "-% 2t must appear that the representative
ill vigorously prosecute the interests of the class through 4ualified counsel
6 5nce the re4uirements of subsection "a% are met$ the *ourt must also find that the
party opposing the class has acted or refused to act on grounds generally
applicable to the class$ thereby ma0ing appropriate final in#unctive relief or
corresponding declaratory relief ith respect to the class as a hole
8 Rule -F"b%"-% as intended primarily to facilitate civil rights class actions$
here the class representatives typically sought broad in#unctive or
declaratory relief against discriminatory practices "here$ P see0s 2// relief$
hich ould benefit the hole class%
8 /s argument that there is a distinction beteen detainees and sentencees and
therefore sentencees are not properly a part of P class: this case deals ith
access to counsel$ hich attaches to //& ali0e$ present no obstacle to
Disposition Ps motion to certify granted
B. ,luid class remedies
/isen v. Carlisle 0 Jac:uelin $+! Cir. %&*3) 4 /isen
Facts: Antitrust suit for treble damages. /s handled odd8lot transactions on 3I&@ "lot of less
than +;; shares%. P alleged that /s had monopoli>ed odd8lot trading and fixed
commissions at an excessive level. P sued on behalf of class of people ho traded odd lots
on the 3I&@.
Proc!"ral #istory: /istrict #udge initially denied class certification$ on grounds that P as unilling to pay for
class members to be notified$ and that Ps claim as so small compared to total claims of
the class that he could not ade4uately represent the class and individual 4uestions ould
probably predominate over common 4uestions.
$isen /: *t of App: 'death 0nell doctrine( G because P claimed only 9E; in individual
damages$ it as economically impossible for the case to proceed on his behalf individually.
&* later overturned 'death 0nell.(
$isen //: opinion on hether the case should proceed as class action ! re#ected emphasis on
ratio beteen Ps claim and claim of the class$ and though notice might be a problem$ the
court could hold hearings to determine hether it could devise some practical means to
decide the case on a class basis.
5n remand$ /* concluded that case could proceed on behalf of all people ho had
bought/sold an odd lot beteen C/+JK- and K/+JKK. /s appeal.
Analysis K: members of the class= -.-C: can be easily identified= reside in every state of A&
and most foreign countries. /amages are no estimated at 9+-;:
Action as 'hopelessly unmanageable( ! B. 1yler resorted to 'fluid recovery( to try
and salvage it
6 ,R *ourt basically thin0s it cant or0 in this case
6 As a class action this case is unmanageable
@ven if amended Rule -F could be read to permit this procedure$ the courts ould have
to re#ect it as an unconstitutional violation of the re4uirement of /P
Disposition As a class action$ the case is dismissed /o pre#udiced to continuance of claims asserted as
Ps alleged individual rights against /s.
a. )o it or0s: dont contact all possible class members ! determine huge recovery$ pay that into the
court$ hich later decides ho to compensate potential Ps /that money "advantage: one of the main
:odern Remedies ,;<$ pp. CC
re4uirements of class action under "b%"F% for money damages: must notify all potential Ps ! fluid
recovery ould relieve this burden on P%
b. )o can you #ust have a damages determination? &ubstitute 'class as a hole$( then send out as much
notice as practicable to biggest claimants$ have trial on the merits for those ho have been notified$ then
figure out ho to notify the rest in a ay that ill get as many class members as possible
c. $isen /: disapproved of fluid class recovery
i. ,*R: procedural innovation= to avoid expense of processing individual claims$ /* planned to
order /s to reduce their commissions belo the competitive level until all illegal overcharges
had been refunded by discounting
ii. *ourt recogni>ed that discounts ould not necessarily go to class members ho had paid the
overcharges$ and that there ould be no relationship beteen any class members earlier
damage and subse4uent discount
iii. *ourt nonetheless thought that some of the class members ho had paid overcharges ould
benefit from subse4uent discounts$ or that in any event$ class that received the discounts ould
be similar to class that paid the overcharges
iv. Oenerally not an issue anymore$ after the -
*ircuits sift re#ection
d. *onsumer context "as opposed to mass tort context%: hy can you move aay from the model of
individuated damages?
i. Practical idea that / has records
ii. 1his is an overcharge case: therefore there is a set amount= each person is affected in the same
4uantitative ay$ as opposed to tort context$ here harm can vary
iii. :ore going to be an issue ith distribution of damages as opposed to calculation
e. 2s $isen license to steal$ so long as / does so in small amounts?
i. Possible anser ".aycoc0%:its not a problem to begin ith ! its a aste of resources to spend
9+; on a 9F.J; claim$ period
ii. /oes it follo that small rongs should go unremedied? @ven from purely economic
perspective$ the balance of cost8benefit must also consider the additional violations that ould
result from a policy of not pursuing small violations
iii. Bustice may have an intrinsic value
iv. B. ,riendlys suggested response to the $isen problem: e dont care about @isens 9E;$ but e
do care about not creating a license to steal= therefore$ solution is in#unction against further
violations$ /fees for Ps attorney$ and if necessary$ civil fines collected by the government to
recover the profits of past rongdoing
0. *lass members ould not have to be notified
1. 7hat about /P clause? A fe cases re4uire notice in class actions for in#unctions$ vast
ma#ority does not
f. 2s the holding in $isen mandated/compelled by Rule -F? .oo0 to Rule -F"b%"F%: matters that are
pertinent to the finding as to hether you can have a class action: even the drafters explicitly
contemplated that a remedy might be denied in certain instances here it is in impractical could be
said to be consistent /holding in $isen
g. ,lipside ! any alternatives for Ps ho are in a similar situation?
i. 1heoretically possible for Ps to come forard individually$ but hen you are dealing /small
damage amounts$ practically unfeasible
ii. &tate consumer fraud statutes
iii. 2n#unction: under Rule -F"b%"-%
iv. Press AO to impose civil fines
h. 7orry /respect to class actions in those types of cases is that /s ould elcome those types of cases
because they ould li0e to be able to settle once and for all$ buy 'global peace( and get closure "brings
up concerns over collusion= /s getting together /plaintiffs counsel%
i. 2s the era of ,R behind us?
:odern Remedies ,;<$ pp. CK
i. &ome circuits have embraced the idea of ,R! early /* circuit case= alloed concept of ,R
such that they ould collect the money from the transit authority to compensate for the
overcharges$ and use those funds to 0eep the prices don "ould arguably benefit previous
users$ but ould benefit ne users as ell%
ii. &tatutes: *A allos for disgorgement of ill8gotten gains /a ,R mechanism
iii. &* unanimously affirmed $isen: held that Rule -F re4uired P to pay for individual notice to all
identifiable class members$ and forbade mini8hearing by district court. /id not reach fluid class
recovery issue
&. Anclaimed funds: recurring issue
i. ,und is usually created by settlement
ii. 3otices sent to all class members ho can be found$ inviting them to file claims$ but many cant
be found and others dont respond ! hat do you do /the leftover money?
0. &pend it for benefit of the class$ or a closely related class
1. @xpenditures that benefit people li0e the class or serve some interest related to the
theory of the class action
2. Bust do some unrelated public good chosen by class counsel or /
3. #y pres: Zas near$ trust doctrine for directing trust assets to beneficiary or purpose as
near as possible to settlors intent$ if it is no longer possible to serve the original
beneficiary or purpose. *ase la is all over the map in terms of how near it has to be=
controversial in the settlement context$ havent been very many inroads
;. @scheat: give money to the government: general rule is that unclaimed property
escheats to state here property is located or here oner is last 0non to have
*. *lass actions$ in#unctions and third parties
a. Affirmative action as a fluid class remedy
i. Argument in AA can be made that the 'cost( "especially /respect to hiring re4uirements%
ould fall on new non8minority applicants
ii. 5nly forcing rongdoers to pay for the rong? /oesnt explain AA ! leaves a 4uestion mar0
as to hat e mean hen e tal0 about individuali>ation or remedy
iii. AA alloed for a certain brea0 in the lin0age$ because there is the idea that e are tal0ing about
class8based harm$ that e are much more resistant to applying in other contexts
iv. 3umerical goals/4uotas as remedy for employment discrimination ! employers ho
discriminated against earlier minority #ob applicants ere ordered to prefer future minority #ob
applicants isnt this ,*R disapproved in $isen?
v. Reasons given for 'race8conscious class relief( ere substantially the same as those given for
,*R in other contexts: impractical to identify individual victims
0. 7hy is it o0ay in this context?
1. 5r$ does this mean e should rethin0 $isen?
2. *an the courts create an exception for discrimination cases? 5thers?
b. 3otes on partially identifiable victims
i. 5ameed: presents problem ! Ps are identifiable in the sense that e 0no they ere re#ected
and that discriminatory selection criteria ere used$ but not identifiable in the sense that e
0no they ould have been admitted to the apprentice program but for the discrimination
0. /ont 0no hat criteria union ould have used if it had not used the illegal criteria
1. Possible remedy: pro rata bac0 pay: determine ho much the group of discrimination
victims ould have earned but for discrimination. 1hen all class members ho had a
chance to be selected share in that aard
ii. 1oxic tort cases: often involve a class of Ps ho ere exposed to pollutant and have disease that
is caused by the pollutant but also have other causes ! often nearly certain that many of the Ps
:odern Remedies ,;<$ pp. CE
ould not have gotten the disease but for /s pollution$ but it can be impossible to tell hich
c. 1hird parties
Martin v. 2ilks $%&'&)
Facts: 7hite firefighters sued city and countys personnel board claiming that they ere passed up
for promotion in favor of less 4ualified blac0 firefighters. 1hey claimed that the *ity and
the Board ere ma0ing promotion decisions on the basis of race in reliance on certain
consent decrees$ and that these decisions constituted impermissible racial discrimination in
violation of the *onstitution and federal statutes.
Proc!"ral #istory: /*: hite firefighters ere precluded from challenging employment decisions ta0en
pursuant to the decrees$ even though they had not been parties to the proceedings in hich
the decrees ere entered. 1hat litigation had resulted in decrees providing for extensive
remedial schemes including hiring goals and goals for promotions of blac0s ithin the fire
7hite firefighters moved to intervene in the fairness proceedings$ and later filed for
in#unction against enforcement of consent decrees. Both re#ected$ and later affirmed on
/ifferent group of hite firefighters "current Ps% brought suit alleging violation of rights in
employment decisions. /istrict *t denied motions$ holding that promotion of blac0s as
re4uired by consent decrees ! city as not guilty of illegal racial discrimination because
they had to promote blac0s.
*ir reversed holding that hite firefighters ere not parties/privies to consent decrees$
therefore independent claims of discrimination ere not precluded. &* granted cert.
Analysis Principle of Anglo8American la: one is not bound by a #udgment in personam in a
litigation in hich he is not designated as a party or to hich he has not been made a party
by service of process everybody should have his day in court
*ourt doesnt agree that this is an impermissible collateral attac0 "it as argued that they
had an opportunity for timely intervention but didnt do it%
Boinder$ rather than 0noledge of the lasuit and opportunity to intervene$ is the method by
hich potential parties are sub#ected to #urisdiction of the court ! better to place burden on
litigating party to bring in other parties$ rather than putting duty on other parties to
intervene hen the ac4uire 0noledge of the lasuit
Disposition Affirm ++
*ir holding.
Dissnt $St1ns8
;rnnan8 Mars#all8
1he fact that one of the effects of a decree is to curtail the #ob opportunities of nonparties
does not mean that the nonparties have been deprived of legal rights or that they have
standing to appeal from that decree ithout becoming parties
/. &ettlement class actions
6rti- v. Fi,re,oard $%&&&)
Facts: /8insurance company$ involved in aves of asbestos litigation= fought on to fronts: +%
settling /victims$ and -% litigation /insurance company for funds to pay its tort claimants.
7hile the insurance litigation as going on$ / started issuing deferred settlement
obligations to Ps ho came forard.
/$ insurance company$ and Ps layers got together to try and put together a 'global
settlement "O&A%( Agreed on a 9+.C-CB settlement$ both insurance companies ould pay
in court8determined proportion. Ps counsel also insisted on '1rilateral &ettlement
Agreement( as a hedge against the possibility that the O&A ould fail ! insurers ould pay
9-B to / to defend against all the claims if the O&A didnt in court approval.
3e group of Ps sought class certification$ ith only right being that to sue / upon
development of asbestos8related in#ury in the future$ on basis of shared necessity to obtain
:odern Remedies ,;<$ pp. CL
insurance funds sufficient for compensation.
Proc!"ral #istory: /* granted provisional certification. But as part of the O&A$ claimants see0ing
compensation ould have to settle ith a trust established to process and pay class member
claims$ provided for A/R in case negotiations failed. /* approved the settlement.
5n appeal$ C
*ir affirmed as to class certification and ade4uacy of settlement. *ourt
approved certification on 'limited fund( rationale$ based on threat to the ability of other
members of the class to receive full payment for their in#uries from /s limited assets.
After court decided Alchem$ C
*ir had to reconsider$ but affirmed. &* granted cert.
Analysis .imited fund class action characteristics: #ustified ith reference to a XfundX ith a
definitely ascertained limit$ all of hich ould be distributed to satisfy all those ith
li4uidated claims based on a common theory of liability$ by an e4uitable$ pro rata
6 *ourt cautions against a liberal application of Rule -F"b%"+%"B%$ under
8 Rules @nabling Act "tension beteen the limited fund class actionHs pro rata
distribution in e4uity and the state la rights of individual tort victims at la%
8 E
Am: certification of a mandatory class folloed by settlement of its action
for money damages obviously implicates the &eventh Amendment #ury trial
rights of absent class members
8 /ue process of principle of not binding parties to in personam litigation to
hich they are not made a party "everyone should have his on day in court%
8 NNOeneral tension beteen representative suits and 'day in court( principle
2n sttl/ntConly class actions the procedural protections built into the Rule to
protect the rights of absent class members during litigation are never invo0ed in an
adversarial setting
6 &pecial attention needs to be paid to #ustifications given for certifying settlement8
only class
6 /*/*t of App 'uncritically( adopted figures agreed upon by the parties in defining
the limits of the fund and demonstrating its inade4uacy= instead of underta0ing
independent evaluation of potential insurance funds$ #ust accepted the 9-B
1rilateral Agreement figure as maximum that the insurance companies could be
re4uired to pay to tort victims
6 2ssue of e4uity among members of the class:
8 /id not include Ps ho settled // ith a reservation of rights to sue "ex.
upon development of asbestos8related in#ury%
8 ,airness of the distribution of the fund among class members: settlement as
*lass divided into holders of present and future claims re4uires division
into homogenous sub.classes under Rule -F"c%"<%"B%$ ith separate
representation to eliminate conflicting interests of counsel "they have
different interests ! presently in#ured ant money no$ hereas
exposure8only victims #ust ant a fund for the future%
*lass included those exposed to ,ibreboardHs asbestos products both
before and after +JCJ: policy /one insurance co. expired in +JCJ$
therefore this class had more valuable claims and therefore disparate
interests /other members of class
6 ,und as too small: / as essentially alloed to retain its entire net orth
Disposition Reversed and remanded.
Dissnt $>. ;ryr) )uge scale of asbestos litigation: trying these cases ould have immense transaction
Asbestos case: tort litigation$ case suited to the courts and not the legislature. 2t is a
problem of scale$ and hen the legislature doesnt do anything about it$ then #udges
can/should aggressively search for ays to avoid delay and denial of #ustice "and here$
district courts may ta0e advantage of experience that appellate courts do not have%
Alternative to class8action settlement is not a fair opportunity for each potential
plaintiff to have his or her on day in court: high litigation costs$ long delays$
limitation on amount of resources available for payment might mean that Ps dont
actually have a realistic alternative
*onditions are satisfied
6 2nade4uacy: valuation came about as a result of arms8length bargaining beteen /
:odern Remedies ,;<$ pp. CJ
and insurance companies
6 @4uitable treatment: dividing into subclasses has to be balanced against the
isdom of letting in additional counsel
6 7hole of inade4uate fund to be devoted to overhelming claims: basic purpose is
substantial satisfaction of claims$ not literal ! the rule can be relaxed somehat
Nots *ould you ever certify a mandatory settlement class under Rule -F"B%"+%"b% torts case
7hether punitive damages can be distinguishable from this frameor0
7hat happened:
6 :oney that is coming into the fund: ,ibreboard is going to have to contribute
9+;: to the fund$ but all but 9C;;$;;; is going to come from other insurance
6 &ettlement: ,$ *ontinental$ and Pacific are going to establish this trust of money$
process and pay asbestos rongful death and P2 claims out of it
6 7hat is at sta0e: , and its insurers are trying to buy 'global peace=( trying to
settle$ once and for all: pending claims and all future claims
8 2n the bac0grounds: separate litigation$ , against its insurers for hat their
exposure is ! hether or not insurers are going to be on the line for this
8 &ettlement amount that , has ith its insurers is contingent on these
proceedings$ ho much insurance companies are on the hoo0 for
Rule -F: re4uirements under -F"a% ! numerosity$ common 4uestions of la and fact$
typicality$ and ade4uate representation
6 -F"b%$ and you can bring under b8+$ b8-$ b8F
6 b8F: each individual can decide hether to opt out of the class obviously they
dont ant this because they ant the settlement to be mandatory$ if people are
alloed to opt out then 'global peace( is not possible
6 b8-: declaratory/in#unctive relief class action
6 b8+: "B%"+%"b%= idea of a limited fund
8 )istorical example: piece of land that you ill distribute$ or trust that needs to
be distributed
8 Reason for doing this is that if you let the first individual come forard and
ta0e his full share$ then you ill eventually run out giving out the +
ill impede others claims being satisfied
8 N*ourt: ta0es root of analysis loo0ing at the history under "B%"+%"b% comes
up /historical examples and tries to glean hat the court calls the 'defining
characteristics( of a limited fund
"B%"+%"b% limited fund analysis
6 2nsufficiency of funds
6 7hole fund is dedicated to claims at issue
6 *laimants are treated e4uitably among themselves:
Arguments on both sides: ma#ority/dissent differ on hether re4uirements are met
6 *ontroversy: total liability and total assets of the fund
8 7e dont 0no ho much total liability is: varying exposure$ and issue of
present/future claimants
8 Tuestion here is hether the upper limit of the fund could be set by the parties
themselves$ or it has to be set externally? 7orried about collusion beteen
Ps counsel and /
/issent isnt orried about this: interests of , and insurance companies
are actually adversarial ! no fear of collusion here$ and add in that that
hat you have to do to value that is that litigation is pending$ and in this
situation parties come together and discount against the ris0 of losing
6 7hole fund is dedicated to claims at issue:
8 :a#ority says it ont decide hether / has to put itself into insolvency.
1hey are hesitant about saying that the only ay you ill have a limited fund
is if / forces itself into ban0ruptcy. )inges more on the fact that in this case
there are so many other problems that it doesnt have to reach the conclusion
6 *laimants are treated e4uitably amongst themselves: to concerns ho many
people are coming to the table$ and once theyre there$ hat do the slices loo0
8 )ere$ there are subclasses:
Pre8 and post8+JCJ claims ith some of the claims much more valuable
:odern Remedies ,;<$ pp. K;
Presently in#ured and future possible in#uries
2nventory claims that are part of the fund and those outside the fund
NNProblem that the attorney handling the pending "current in#ury
claims$ the ones valued at tice as much% as also handling the
Olobal &ettlement Agreement and pending claims ere dependent on
Breyers response "dissent%: /* made numerous findings of fact as to
competency of the attorney and fairness hearing under Rule -F"e%
8 /issent:
/ecides that this is getting into the legal merits. Also ta0es a very
practical vie ! at some point there has to be limits on the 'subclassing(
a. Possible constitutional concerns in +rti<
i. E
Amendment issue: forcing individuals to be part of a class$ precluding their opt8out rights$
thus violating their right to a #ury trial?
0. Recall remittitur analysis about hether or not you can invade #ury determination
ii. /ue process: 'day in court( ideal
0. :a#ority perspective: dont ant your rights ad#udicated unless you are fairly
1. 3o opportunity to opt out
2. Related to *artin v. Wilkes ! court cites *artin in discussing this ideal
a. 2ssue: collateral attac0 on a previously agreed to consent decree
b. /isagreement: here is the responsibility ! for party sitting on the sideline to
intervene$ or for parties in the litigation to #oin parties
c. 2f hat is meant by the 'day in court( ideal is #ust hinging on adequacy of
representation$ then the issue of *artin is totally analogous "that legal rights
are eviscerated if they are precluding from filing suit based on consent
d. N/istinction: ade4uacy of representation is covered by Rule -F"a%$ but the
4uestion in *artin v. Wilkes has to do ith protection of rights of people ho
arent in the class
3. Broader disagreement in terms of #udiciarys role in procedural innovations: can courts
be the party effectuating 'global peace?(
a. /issents response ! illuminating a different vie of litigation: #udges have to
or0 'aggressively ithin the existing frameor0.( 3eed to thin0 about ho
the courts can actually use Rule -F in hat the ma#ority calls 'adventurous=(
dissent feels li0e the court should do #ust that$ or else parties ont have their
day in court
i. Broader dispute about the purpose of class actions: ma#oritys point
is that Rule -F text and history has to be narroly construed. 1a0ing
this analytical frameor0$ you ill not be encouraging procedural
@. *lass actions and civil penalties
a. &tatutory fines and punitive damages
b. 2ssues:
i. )o to conceptuali>e damages ! fines and penalties are often used interchangeable
ii. 7hether various categories of damages are insurable
iii. 7hat is at sta0e in terms of certifying as "B%"-% or "B%"F% class
c. arker:
i. Bac0ground:
0. P is see0ing punitive$ actual$ statutory damages$ attorneys fees$ in#unctive/declaratory
:odern Remedies ,;<$ pp. K+
1. ?iolation is for selling personal information to F
parties by cable company "no
explicit disclosure/consent%= sub#ected company to statutory fine
2. 7hat is the tist? P ants to certify a class$ hich could potentially reach up to +-
million subscribers$ and statutory fine as for 9+$;;; per violation "doesnt address
cap in class action context% essentially this class ould ban0rupt the company$ and
it couldnt have been hat the statute intended
3. Possible private attorneys general motivation: 9+$;;; enables individual ho might
not otherise have incentive to bring the suit to bring the action= also$ the fact that it is
not reflective of actual damages supports this
ii. "B%"-% class issue:
0. Arises here$ and a lot in 1itle ?22 employment claims
a. 1here is in#unctive/declaratory relief$ but 1itle ?22 has a remedy of bac0 pay
as ell
b. Predominantly declaratory relief but you ant to see0 money damages as ell
! can you bring this as a "B%"-% class?
i. C
*ir "Alison%: issue is hether monetary damages are incidental
monetary relief predominates over e4uitable relief Xunless it is
incidental to re4uested in#unctive or declaratory reliefX
ii. -
*ir ")obinson%: ad hoc analysis of relative importance of
remedies sought$ given circumstances and facts of the case
iii. *ourt: money damages are not incidental$ because they apply to the
entire claim
iii. 7hat is at sta0e for Ps and courts perspective
iv. *an e bring statutory fine #urisprudence into punitive damages case?
0. :a#ority hints that ,*W v. -ore could be imported into this context
1. 'awrys "on appeal to <
*ir%: copyright infringement case. 9+J: in statutory
damages$ though dispute as to actual damages. 2n copyright$ part of the reasoning
behind statutory damages is the theory that damages are very difficult to measure.
*ourt found that -ore guideposts did not apply
a. *ompensatory damages are very difficult to measure in this area$ so statutory
damages here are remedial as opposed to punitive$ so reasoning that got *ourt
involved in ,*W in the first place doesnt apply here
b. /ifference beteen restraining #ury aards versus a statute that the legislature
has crafted
2. *oncerns: ho ould you apply ,*Ws guideposts anyay? Also$ difficulty of
separating compensatory from punitive damages aard "legislature #ust sets up the
9+$;;; fine%
v. 3emans 'third ay(: certify as "B%"-% and limited statutory damages
0. 7hy should e bring in novel theory of &upreme *ourt excessiveness revie if its
not necessary?
1. *ongress needs to thin0 about hat happens hen statutory fines interact ith class
2. 2s the approach reconcilable ith the statute? 3eman concedes that it isn6t ! perhaps
its #ust up to *ongress to clean up its on mess
Parker v. Ti(e 2arner $+
Cir. +::3)
Facts: Ps subscribed to cable service$ brought action alleging violation of *able Act and state
consumer protection las$ for disclosing personal information to F
parties and not clearly
informing them of such disclosure$ as re4uired by the Act. &ought monetary relief
"statutory$ actual$ punitive damages$ attorneys fees%$ declaratory/in#unctive relief.
Proc!"ral #istory: :agistrate #udge recommended that /* grant in part /s motion to deny class certification
:odern Remedies ,;<$ pp. K-
on the ground that Ps monetary claim predominated over claim for in#unctive relief$ and on
the general basis that class action as not the superior means of ad#udicating the matter.
/* #udge entered order adopting recommendations to limit class certification to
in#unctive/declaratory claims under Rule -F"b%"-% and deny class certification under -F"b%
"F%$ on the grounds that bul0 of damages sought by P ere not incidental to the in#unctive
relief re4uested.
Analysis ,. &5R: abuse of discretion$ but appellate court is less deferential hen /* has
denied class status than hen it has certified$ so conclusions of la that
informed the denial are revieed de novo
O. /enial under -F"b%"-%: rule provides that action may be maintained as a class
action if$ in addition to the threshold re4uirements of numerosity$
commonality$ typicality$ and ade4uacy of representation$ Xthe party opposing
the class has acted or refused to act on grounds generally applicable to the
class$ thereby ma0ing appropriate final in#unctive relief or corresponding
declaratory relief ith respect to the class as a hole.X
a. Predominance issue: court cites -
*ir decision in )obinson
i. Ad hoc approach: re4uires /* to have detailed info about
the circumstances surrounding the certification issue$ have a
certification hearing before ruling on the issue "need class
discovery so that /* can get this info%
). /enial under -F"b%"F%: rule provides that certification is appropriate here
X4uestions of la or fact common to the members of the class predominate
over any 4uestions affecting only individual members$ and that a class action
is superior to other available methods for the fair and efficient ad#udication of
the controversy.X
a. *ourts conclusions ere assumptions$ rather than findings of fact
b. 3eed class discovery before you can rule on the superiority of class
c. *oncerns: due process$ si>e of the aard relative to harm suffered$
manageability of the class action
Disposition ?acated and remanded.
d. Amar/Reis "2%
i. 2ssue: are large civil fines for minor violations unconstitutional?
ii. *A statute: .abor *ode Private Attorneys Oeneral Act of -;;<
0. Provides for private right of action for any alleged .abor *ode violation
1. ,or violations here there is no specific statutory penalty$ la imposes ne penalties
of 9+;; per employee per pay period for initial violation and 9-;; for each subse4uent
2. :oney is distributed: -CQ to Ps$ ith remainder being divided up$ C;Q to state
treasury and -CQ to fund educating employees/employers about rights/responsibilities
under the labor code
3. @mployer /+;;; employees: fine for one8year non8compliance could be up to 9F
a. 2f this as a punitive damage$ it ould clearly be ruled unconstitutional
b. 3o cap on maximum fine
iii. .egal in4uiry: punitive or remedial?
0. &tatutes li0e *A legislation are not geared toard reasonable damages estimates
1. .oosely tied$ if at all$ to any actual harm to employees because they apply to technical
violations that cause no actual harm
a. /ras parallel to li4uidated damages la
b. 3ot good8faith ex ante estimates
2. /ont compensate government for a loss "ex. if government incurred costs enforcing
the statute%
a. /ont involve government action at all ! by nature$ as private attorneys
general suits
:odern Remedies ,;<$ pp. KF
3. Applying &upreme *ourt 'guideposts( of -ore
a. Reprehensibility: the statute leaves no discretion for ma0ing this sort of
b. Ratio: hatever the ratio$ a 9F: fine for statutory violation that causes little
if any harm ould probably fail the constitutional standard
c. Relative severity of other penalties that can be imposed for /s conduct ! this
prong is less clear
i. 2f you ere to bring a lasuit for this 0ind of violation$ it probably
ouldnt get very far
ii. 7hat happens hen there are no other sanctions for the violations in
4uestion? *ould argue that this is hy you need statutes li0e thisS
iii. But$ comparing the statute to sanctions for other employer
misconduct for hich there is sanction
e. Amar/Reis "22%
i. L
Am @xcessive ,ines clause:
0. 2ssue of hether the hole fine has to go to the government in order to trigger the
a. .oo0ing to split8recovery schemes for guidance:
i. &ome courts loo0 to destination of the funds: ex. hen it goes to
states general fund$ states interest is substantial enough to trigger
the clause
ii. 5thers loo0 to governments role in obtaining the aard: some
courts have held that clause is not implicated here suit is brought
by private Ps as opposed to government$ or here #udgment is
imposed by #ury rather than government agency
b. 7hen is the clause violated?
i. Austin: doesnt have to be criminal$ but it does have to be a fine$ and
a payment has to be punitive at least in part to be a fine "i.e. not
ii. 2s it excessive? Asually &* has #ust remanded that 4uestion to the
loer courts$ but there is notion of proportionality in terms of hat
is being punished
f. &tate constitutional provisions
i. 5ale v. *organ: *A &* relied on federal and state constitutional due process analysis to stri0e
unfairly oppressive civil fines
0. *A court considered fine against landlord ho used deprivation of utilities in an
attempt to evict tenant ! the fine as 9+;;/day$ and even though the rent in 4uestion
as [9L;;$ the fine as 9+E$F;;
1. *ourt found penalty unconstitutional because the duration as potentially unlimited$
no discretion as permitted the trier of fact$ penalty as more severe than those
imposed for more serious transgressions by .s against 1s$ and could create indfall for
an experienced 1 against an un0noing .
2. 1his probably gives room for state constitutional attac0 on the *A .abor *ode Private
AOs Act
2. *lass actions and punitive damages
n re Si(on $E.D. NY +::+)
Facts: .arge8scale tobacco litigation
Punitive damages non8opt8out class under Rule -F"b%"+%"B%$ of A.&. residents ho
smo0e/smo0ed /s cigarettes and ere diagnosed /a variety of illnesses. @xcludes those
:odern Remedies ,;<$ pp. K<
ho have obtained #udgments/settlements against /s$ against hom /s have obtained
#udgments$ people ho are members of another tobacco certified class$ persons ho should
have first reasonably reali>ed they had the disease prior to </J/+JJF$ and persons hose
diagnoses or reasonable basis for 0noledge predates their use of tobacco.
*lass it not see0ing compensatory damages.
Analysis Oeneral re4uirements for class certification under Rule -F"a%
6 3umerosity ! satisfied: members of class are believed to number in the millions=
ma0es #oinder of all class members impracticable
6 *ommonality ! satisfied: numerous common 4uestions of la and fact exist "ex.
harm caused by tobacco$ extent of /s 0noledge of tobacco hard$ extent of /s
alleged cover8up$ conspiracy$ etc.%
8 *lass is not see0ing compensatory relief ! therefore$ individual determinations
of fact are largely unnecessary$ and common 4uestions of la/fact strongly
predominate over any individual 4uestions hich may need to be resolved
8 Alchem ! distinguishable: it involved a settlement class and the court as
applying 'heightened( scrutiny to issues of commonality. Also$ involved
proposed class under Rule -F"b%"F%$ hich re4uires that common issues
predominate$ not #ust that commonality exist
8 2n the interest of maintaining commonality$ Ps have excluded both
secondhand smo0e and 'future harm( parties ! no need for subclassing for
these groups$ so the common issues shared by members of present class arent
'atered don(
6 1ypicality
8 Ps claims are typical of class members they represent ! similar legal and
factual assertions regarding /s behavior and cause of their smo0ing$ failing
to 4uit and cause of diseases
8 /ifferent diseases do not have any substantial bearing on typicality for
purposes of the trial
6 Ade4uacy of representation
8 Alchem = +rti< ! distinguishable: named Ps do not have any apparent conflict
/class members
3ature of class is litigation$ not settlement: in settlement8only class
actions$ procedural protections built into the Rule to protect rights of
absent class members during the litigation are never invo0ed in an
adversarial setting
2nstant case: litigation class$ therefore$ ill be sub#ected to full rigor of
the adversarial process
3o conflicts of interest that ere a concern in +rti<: there$ Ps attorneys
ho negotiated settlement also represented other claimants$ hose
payments depended on the success of the settlement
Oave class counsel incentive to reach any argument in the global
settlement negotiations that they thought might survive a Rule -F"e%
fairness hearing$ rather than best possible arrangement for the
substantially unidentified global settlement class
Also on conflicts beteen future harmed parties and presently in#ured
parties$ li0e in Alchem and +rti< "here focus for presently in#ured as a
generous immediate payment= hich as in opposition to interest of
future harm Ps in ensuring an ample$ inflation8protected fund for the
*lass does not suffer from +rti< problem of to sets of claimants /pre8
+JCJ$ fully insured exposure versus post8+JCJ exposure that as only
covered by the assets of the company then being rapidly depleted
*lass members might have claims of different values$ but those
differences are normal in large class action= do not re4uire division
into subclasses
Alchem and +rti< concern about not trapping class individuals ho might
have done better if they remained /in traditional court litigation ! this
case$ particularly because it relates to punitive rather than compensatory
damages$ does not present that conflict
:odern Remedies ,;<$ pp. KC
.imited punishment under Rule -F"b%"+%
6 .imited punishment theory class is appropriate ! if the action is successful$ /s
might be forced to pay a huge sum$ but this payment ill limit liability for future
6 Punitive damages ill be capped ! therefore$ Ps are forced to dra any damages
from a limited fund of resources
8 *reates potential first8in8time problem
8 2n these situations$ Rule -F"b%"+% action is appropriate
6 &pate of recent cases aarding punitive damages against tobacco manufacturers
*ourt8ordered distribution: good in this case$ especially because of the flas in state
AOs settlements /tobacco companies ! gave states hundreds of billions$ but it is
being spent in a variety of ays$ mostly not having to do /alleviating harm caused by
Bury trial by stages
6 &ectionali>ation is authori>ed under ,R*P Rule <-"b%
6 E
Am limitation: Reexamination *lause does not present a problem /respect to
separation before the same #ury= only prevents different #uries from deciding the
same issue
6 F stages:
8 "+% Before a #ury$ to ma0e class8ide determination of fraud/conspiracy
claims and estimated total compensatory claims. *ompensatory aards$ if
any$ for individual class representatives ill be determined. 2f #ury finds no
,/*$ no need for a -
8 "-% &ame #ury ill determine hether /s engaged in conduct arranting
punitives. 2f #ury finds that /s didnt$ then no need for a third stage
8 "F% Ased to present evidence of amount of harm suffered by the class to the
same #ury
6 Bury ill be as0ed to consider punitive damages for all harm caused by /s fraud
Disposition *lass certified.
Class !isc"ssion: 7hy didnt Ps try to certify a compensatory damages class?
6 5pt8out problem: under "b%"F%$ Ps can opt out. 2f the idea behind this suit is that
/s can buy their 'global peace$( then it lies in opposition to this goal. Oetting a
"B%"+%"b% /mandatory non8opt8out ill allo /s to get everything settled
8 *ourt calls this a 'indo of opportunity( for a variety of reasons: &5.
"indo closing for the presently in#ured%$ and allegedly less difficulty going
forard because there has been more full disclosure "tobacco companies are
admitting that they lied$ etc.%
6 7ould re4uire too much individual consideration= not ell suited to class action
"ould need too many subclasses%:
8 2dea that individual compensatory damages need to be determined on an
individual basis$ and this is contrasted ith punitive damages
7hat is the theory of a "B%"+%"b% class?
6 .imited punishment theory: stems from both ,*W v. -ore and %tate Farm !
through the federal excessiveness revie of punitive damages$ there is some /P
limit on the amount that the tobacco companies can be punished
6 .imited punishment theory essentially provides the #ustification for certifying
under "B%"+%"b% ! that ay e dont have to orry about opt8out problems. But it
probably only or0s that ell for punitive damages because only P/s have these
constitutional limits "thats hy no compensatory damages sought here%
6 V1obacco company argumentW +rti< seemed to indicate that innovation in class
action context is more appropriate under "B%"F%$ here there are op8out procedures
rather than in the mandatory class case
6 7hy dont /s ant punitive damage class certified in order to buy global peace
"differs from /s in $xxon.>alde<% ! feel that they ould have greater success in
individual suits= that many of the individual claims have no merit and they ould
be able to successfully defend
F stage trial process:
6 1heory: idea of 'virtual compensatory class( ! that you can put this forard in the
aggregate$ to loo0 at all this evidence to find the total amount of the harm
)o$ if at all$ is this situation distinguishable from +rti<?
:odern Remedies ,;<$ pp. KK
)o does ,*W/%tate Farm$ on punitive damages side$ come into play?
6 7hat about ratio of compensatory to punitives$ hen the compensatory damages
here are 'virtual(? Argument !0ey is actually to thin0 of ratio of punitive damages
to harm "not to compensatory damages% ! and compensatory damages
determination serves as a proxy for harm
6 :ultiple punishments: danger of multiple punishments ! by having a single non8
opt8out clause$ e ill prevent this problem "%tate Farm can be read broadly to
preclude multiple punitive damages%
Relating this to 5atahle? *ould argue that 5atahle is tied more specifically to
compensatory damages ! compensating P. )ere$ the focus is on /
2dea of 'entitlement(: %tate Farm ! Ps have no 'right(/entitlement to punitive
damages= the idea is deterrence/entitlement to society8type logic$ then hats the harm
of the 'late comer( problem? )o is the ad#udication of one individuals case going to
impair the rights of another "hich is the driving concern besides +rti<%?
3ot alloing the class to go forard: alloing individual cases to proceed might lead
to exhaustion of tobacco companys resources$ and leave many people ho are part of
this presently certified class /o any ability to recover damages
/oes possibility of cy pres relief vitiate part of +rti< limited fund theory that re4uires
that fund be completely devoted to the class and paid pro rata?
Punitive damages as categorically distinct from compensatory hen loo0ing at it vis8]8
vis right to #ury trial/E
amendment rights: #ooper /ndustries ! can do de novo revie
of punitive damages$ and the #ustification as that punitives have a 'moral( element as
opposed to the more 'factual( nature of compensatory$ so they are not being
'redetermined( on appeal "Oinsberg had a sharp dissent$ that its 0ind of a cra>y
distinction to dra%
:odern Remedies ,;<$ pp. KE