Remedies I

Class Notes

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AUGUST 3, 2015
Trial by Battle Intro to Remedies:
**Homework for tonight: 1st chapter of blue book/ pg. 119, 558-568 in red book
**Homework for next week: Ch. 2, pages 11-35 blue book/Ch. 2 in red book
**He pre-assigns cases to brief (will get at least 2 cases)
**Read the notes section. It is helpful.
**When briefing a case, look at the issues mentioned in the blue book
Grading:
2 exams
Mid-term: damages injunctions (35% of grade)
Final: comprehensive (65% of grade)
Extra credit for class participation applied after final grade (up to 5 points)
**Secretary email: abeasley@burr.com
Briefing a case summarizing the case in your own words (not reading the case) (how would you explain what happened
in the case to a 6-year old) its appropriate to quote important passages 6 case briefing rules:
(1) Brief means brief (SHORT probably less than 3 minutes)
(2) State the facts succinctly
(3) State the ruling of the lower court(s) succinctly
(4) State the holding of the final appeal ruling (the holding of the actual case youre briefing) usually in one sentence
(if possible)
(5) Explain any analysis by the final appeal ruling in your words (this is toughquote language for emphasis OR
because court states important rule)
(6) Be prepared to offer your own view of the correctness of the courts ruling (compare with other cases or real life
experience)
What is Remedies Class?
The Law of Remedies:
The law of remedies falls somewhere between substance and procedure
o An advanced procedure class that follows up on principles from torts and contracts
Remedies give meaning to obligations imposed by substantive law
o If there were no remedy, what would you have?
What if a tree falls in the forest and no one hears it? Does it really make a sound? That is what an
obligation imposed without a remedy is like
If no consequence, the obligation rings hollow
o The potential consequences of violations of civil obligations imposed by our legal system
Not a body of law in and of itself like contracts or torts
Example: owner and neighbor own adjoining tracts of land; owner learns that neighbor claims ownership of some
of owners land and plans to cut some of the timber

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Remedies law has nothing to do and doesnt care about who owns the land or who owns the right to cut
the timber
o Your tendency is to focus on the liability issue (above), but in this class you focus on what happens when
someone IS liable
o So, in this example, dont examine who owns the timer or the right of anyone to cut it but instead examine
the remedy available to the aggrieve party AND (in some cases) some defenses to those remedies
o Potential remedies: damages claim for trespass and conversion, injunction for cutting down timber,
declaratory judgment seeking declaration of rights of parties to timer, possible restitutionary remedy if
neighbor cuts timber and sells it for more than the fair market value
Remedies are very practical
o Most lawyers and law students spend most of their time worrying about liability
o Often the difference between winning and losing is in the remedy
Gore v. Bush US SC agreed that Florida method of counting violated the equal protection clause BUT disagreed
with the FL SCs remedy
o Essentially no remedy, giving George Bush the Presidency
o Very important example of the importance of remedies
o

CLASSES OF REMEDIES
Compensatory
o = damages
o Purpose of damages are to compensate P for the loss they suffered at the hands of the D
Punitive
o = damages
o Also damages calculus
Preventive
o = injunctions
Coercive
o = injunctions
o The court compels someone to do something
Declarative
o = Declaratory judgments
o Neither damages nor injunctions
o Orders declaring rights
Restitutionary
o Can be:
Orders compelling return of specific property
Judgments awarding $ from Ds gain (not Ps losses)
Ancillary
o = attorneys fees, interest, and costs
o = Collection
o Very important in the real world
o Being able to collect is the difference between winning and having a Pyrrhic Victory
o The availability of atty fees can be the difference in winning and losing
MODERN REMEDIES INTRODUCTION
o 2 forms: judgments and orders
o These are the two most common remedies
o Judgments are money
Entitle P to collect $ from the other party

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To enforce a judgment, the remedies are statutory

Orders are everything else
Direct D to refrain from wrongful conduct
Undo the consequences of wrongful conduct already committed
To enforce an order, the remedy is contempt

HISTORY OF LEGAL PROCESS

o Pre-1066 England (before the Battle of Hastings with William the Conqueror), the Saxons (populated
England/Ireland) had 2 methods of resolving disputes (dispute resolution):
1) compurgation = oath helper (swore that such and such was true)
o A defense used primarily in medieval law
o Establish innocence by taking an oath and getting 12 men to swear they believed the oath
Basically a popularity contest!
Easily corrupted (ex: if you have a lot of money, you can pay them off)
1) ordeal or trial by divine intervention
o A persons truthfulness was measured by whether a wound inflicted by the church healed the
process is as follows:
Heat an iron or water
Plunge arm up to elbow
Bind it (wrap cloth around it tightly)
Wait 3 days (keep it bound)
If infected, then guilty (or lying)
o If clean, then innocent (or truthful)
o After 1066, new and improved dispute resolution method of ordeal for non-criminal matters (usually involving
land) (brought over by William the Conqueror):
o Trial by Battle men with long staffs or swords fought to the death or until one quit
o If D still standing when the first star appeared, he won
o The Romans had used juries to extract information to make tax assessments
Jury comes from jurati and means body of sworn men
o Norman rulers use of the compurgation oath was imilar to early juries
o After William the Conqueror won the Battle of Hastings, the Saxon compurgation merged with the
Norman Jury
o In the 12th Century, King Henry IIs court (the Kingss Court) started using juries
o The Court permitted the D to purchase the privilege of having he matter decided by jury (this was called a
writ of right, or praecipe)
o Use of the jury became alternative to trial by battle or ordeal
o Jury trial in the US is part of our Constitution: 7th Amendment provides in suits in common law where the debt
or demand is more than $20, the right to trial by jury shall be preserved.
o What is a suit in common law? Thats the $75,000 question
US SC 1990: in a suit against a Union for inadequate representation in a labor dispute, is it a
common law or an equitable action?
Jury was sued by a member ofr inadequate representation
Question is whether this was a suit in common law (entitled to jury trial) OR was it an
equitable remedy?
Courts approach (2-fold approach):
Historically, was this type of case governed by the common law in 1791 (when the 17 th
Amendment was ratified)? If no answer, then
1) Type of remedy will govern if historical analysis is not directly on point

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If you cant tell from analyzing the question historically, you have to
look at the remedy
2) Look at the remedy to determine whether the P is seeking a legal remedy or an
equitable remedy
In this case, the remedy was back pay (damages)
In equity court, you could only obtain an order and not damages, so it
would lead you to think it should be a common law question
Therefore, the right to a jury trial exists because the remedy is damages
and damages are legal, not equitable remedy
Damages were typically a remedy at law (a common law remedy)
Award of money as compensation for loss
Injunction
Order to stop doing something
Restitution
Return of money/property
Allocation of benefit (gain)
Ancillary relief (attys fees, interest, etc.)
In suits at common law, generally speaking, damages were only remedy (NOT attys fees)

LEGAL DAMAGES V. EQUITABLE RELIEF

Can be very confusing because when the Civil Rights Act of 1964 made back pay a restitutionary remedy, not a
legal remedy, in order to avoid a right to jury trial
o This was supposed to protect the minorities
o Civil Rights Act Amendments of 1991 changed to allow for a jury trial
o Important to remember that a statute may specify
Beacon Hill, US 1959
Cannot deprive the D of right to jury trial by filing an equitable action
D can file counterclaim that is a common law remedy and seek a jury
Tull v. US, US 1987
Government suit for injunctive relief and civil penalty
D entitled to jury trial on issue of liability for civil penalty
IMPORTANT CONCEPT - OUR JURISPRUDENCE
Favors the common law remedy
o Ex: a basis for denying equitable relief is that an adequate remedy at law exists
Reluctant to find loss of right to a jury trial
o Absent specific historical tradition/precedent, injunctive relief
o Non-elite legal system is important (the jurors are NOT judges/lawyers)
Under rules of civil procedure, there is a certain period of time to request a jury BUT there is a rule that allows a
party to seek a jury trial by permission if they fail to do so as a matter of right
o Generally, if a party asks for a jury (after they failed to ask for it as a matter of right), most judges will
allow it (not all, of course)
JURY TRIAL IN TN
Net result is the same as under the US Constitution
TN Constitution Declaration of Rights, Article 1, Section 6: that the right of trial by jury shall remain inviolate,
and no religious or political test shall ever be required as a qualification for jurors
Right to trial by jury in TN as it existed at common law is protected by the TN Constitution

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No state constitutional right to jury trial for claims for proceedings established after adoption of the state
Constitution in 1796
Chancery and Circuit Courts in TN (courts of record):
o Circuit Court
Traditional common law court
Has always been place for jury trials
o General Sessions Court
Arm of Circuit Court
No jury trials
Jury trials available by de novo appeal to Circuit Court (that means you start all over again an
appeal in name only)
Despite equity court heritage, Chancery Courts in TN may have jury trials (by statute: TCA 21-1-103: either
party to a suit in chancery is entitled, upon application, to a jury to try and determine any material fact in dispute,
save in cases involving complicated accounting
o This section has been interpreted to extend the right to a trial by jury to cases of a purely equitable
nature
o So, in TN, theres no difference to right to jury trial based on common law or equitable claim it starts
out different but ends up the same (this is by act of the legislature and that act as interpreted by the courts)

Chauffeurs Local 391 v. Terry

US SC 1990
Is a suit against a Union for inadequate representation a common law or an equitable action?
Courts approach:
o Historically, was this type of case governed by the common law in 1791?
o Look at the remedy: is the pltf seeking a legal remedy or an equitable remedy?
Type of remedy will govern if historical analysis is not directly on point
The remedy in this case is back pay this sounds more like damages than an equitable remedy
Therefore, right to a jury trial exists because the remedy is damages
o Damages = legal, not an equitable remedy
UT v. Farrow (2001)
Tennessee Human Rights Act case against UT question is whether a party is entitled to a jury trial when brought
under this act? the court held they were entitled to a jury trial (how the court got there is interesting) BECAUSE
the statute establishing the TN Human Rights Act is silent on the matter
The court says its a jury trial right because it is NOT excluded by the statute
o Court reviewed history of jury trial right in TN:
1796 Constitution suits at common law
Rights created by statute after 1796 are up to the General Assembly
TCA 21-1-103 allows jury trials in Chancery Court, even in matters of equitable nature
Jury trial in all post 1796 created matters except in matters expressly excepted by the
code
o Expressly excepted by the code:
Administrative law matters
Workers comp
Contempt
Domestic abuse act
o THRA is silent, SO entitled to jury trial
TN jury trial right is more available than the federal right (but the federal right is fairly expansive

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Sneed v. Red Bank (2013)

Governmental Tort Liability Act against a city for violation of the TN Human Rights Act
Held: No right to a jury trial
Why? The GTLA specifically provides that there is no right to jury trial

AUGUST 10, 2015

Compensatory Damages
Basic Measure of Damages/Value
The single most important, most common remedy thought of in the real world this is the type of remedy most near and
dear to most lawyers hearts, esp if representing the Ps because thats how they get paid

US v. Hatahley

8 Navajo families lived for generations on open range land owned by the US government agents rounded up
their horses and burros and sold them to a glue factory no question: US government intentionally and
wrongfully took animals from Ps the lower court awarded $395 for each horse PLUS pain and suffering per
person of $3,500 PLUS damages for loss of use (one half of the diminution in value from 1952 until the hearing
in 1957)
The important thing to remember is the rightful position rule: to restore the injured party to as good a position as
they would have been in without the wrong this is the fundamental principle of compensatory damages and the
rule in the Hatahley case
The fundamental principle of damages is to restore the injured party as nearly as possible to the position he would
have been in but for the wrong (different wording from above)
To restore the injured party to as good a position as they would have been in without the wrong
Make them whole again

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Was every horse worth the exact same amount? Probably not right on its face, the $395 looks a little faulty in
reasoning, if nothing else the importance of this case gets a little lost if you drill down to the valuation methods
(well talk about this with other cases) he may have done this because it was difficult to put a market or
replacement value on these horses because there was not a market for them no evidence of any kind ever of
anyone ever buying a Navajo horse (no evidence of the value of the horses)
Proof: the appellate reversed and said the courts valuation was based on pure speculation (always must have
proof) (the Ps proof is speculative) but the P has the burden of proof in proving damages, so the P should come
forth of some value
So how do you prove the value of a Navajo burro? You would show the market value how would you show the
market value of the burro? 3 basic methods for proving value: (1) expert testimony, (2) price quotations in an
active market, or (3) the owner can give his/her opinion (the owners testimony is admissible as to the value of the
owners OWN property) if all else fails and there is no other method of proving value, you want to put the
owner on the stand to give his own opinion (p. 22, note 1)

****Rightful position rule: P is entitled to be made whole but in the least expensive way P is entitled to (a) the cost of
repair or (b) the diminution in fair market value, whichever is less.
General Valuation Rule: plaintiff is entitled to be made whole, but in the least expensive way
Plaintiff is entitled to the cost of repair or the diminution in fair market value (whichever is less).
***UNIVERSALLY ACCEPTED RULES (p. 18, note 8):
One satisfaction rule may recover under multiple theories, but only get one satisfaction
One collection rule a judgment against multiple Ds, if paid in full by one, releases them all

In re September 11th Litigation

Suit by owner of World Trade Center against airlines and others for negligence issue: what is the measure of
damages for the loss of the WTC?
Exception to rule: specialty property why did the specialty property not hold in this case? by the time the WTCs
were destroyed, they were clearly viable commercial property; in fact, Mr. Silverstein had just acquired them a
month earlier specialty property is usually reserved for churches, nonprofits, etc. that are valued higher by their
owners than the market would value them, especially considering that there isnt really a market for them
Lesser of 2 rule (in NY): P is entitled to the (1) diminution of the fair market value or (2) replacement cost,
whichever is less this rule applies, regardless of any contractual terms the P had with a third party
Ps also wanted damages for loss of use between time property destroyed and time property they wanted lost rent
no, because double recovery to recover diminution in value plus lost rent when might lost rent be recoverable
(loss of use?) during the time it might take to repair/replace rejected here
Note the best evidence argument: the negotiation of the sale price close to the date of injury
This is a good case for the lesser of 2 rule the words it uses for replacement cost are not the same as in TN
they key to this case is the lesser of 2 rule!
There are going to be circumstances where loss of use can be recovered, thoughwe will learn this later
Think of this example: A in car accident, B hits A with car and damages car car is taken in to get fixed what is
the measure of As recovery against B to the injury to As motor vehicle? Would be either: (1) diminution in fair
market value or (2) cost of repair, whichever is less but that doesnt make A whole because As car has been
damaged so what does the law do to make up for that? The court will award loss of use (which would be
probably the rental car cost) for the time necessary to repair the car (IF the cost of repair is awarded)
Lesser of 2 rule (when property NOT destroyed): P is entitled to (1) diminution of the fair market value or (2)
repair cost PLUS loss of use sometimes, whichever is less

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LESSER OF 2 RULE

Tennessee: P may recover the lesser of the (1) diminution of the propertys market value or (2) cost to
repair
NY court uses lesser of the (1) diminution of market value or (2) replacement cost
Diminution of fair market value is generally the measure of damages for damage to property

Loss of Market Value v. Repair Cost v. Replacement Value

What was the loss of market value?
What was the cost to repair?
What was the replacement cost?
Market Value
What is it?
How do you establish it?
How do you dispute it?
Repair Cost
What is it?
Incurred or estimated?
How prove? You have to prove it (it cant be a guess)

Replacement Cost
What is it?
How do you prove it?
How different than market value?
How different than repair cost?
You may be able to prove market value through replacement costso, even if not measure of recovery may be
some evidence of market value
What is normal?
Market value more or less than repair cost? Probably cost to repair but not always
Repair cost more or less than replacement cost?
Market value more or less than replacement cost?
D will always argue the P is only entitled to what is the lesser of the two
What about other damages?
Incidental damages cost of recovering, protecting property
Consequential damages value of loss of use of damaged or destroyed property another kind of consequential
damage is lost profits

Tennessee

Damage to Real Property

o The measure of damage to real property is the lesser of:
The reasonable cost of repairing the damage to the property; or
The difference between the fair market value before and after the damage
Measure of damages for personal property in TN: (1) if it can be restored to its function, value, and
appearance, then the cost of repair; (2) if it cant be restored to its function, value, and appearance, then the
difference in the market value of before and after the damage (Tennessee Pattern Jury Instructions (TPI) 14.40)
this is the general rule in TN and is a modification of the lesser of 2 rule

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Damage to personal property lost or destroyed: the fair market value (FMV) of such property at the time and
place of its loss or destruction (TPICIVIL 14.42 Personal PropertyLost or Destroyed) you can still think
about this as the diminution in market value since if its destroyed, then the value at the time of the destruction is
$0!
Damage to personal property NOT destroyed: the measure of damages for loss of use is the reasonable
compensation for being deprived of the use of the property during the time reasonably necessary for repair of the
damage caused by the incident you may consider the reasonable rental cost of an automobile for that period of
time (TPICIVIL 14.43 Loss of Use)
TPI is always the starting point when you get a case you start there and apply your facts and argue for your
client you can always argue that the TPI be articulated differently than it has in the past
o So, when damaged property, per TPI, damages is cost of repair, unless cannot be repaired; if cannot be
repaired, then difference in market value

Bickers v. Chrysler Credit

Chrysler repossessed Bickers truck Bickers paid up and regained possession then he sued for damage to the
truck while it was in Chryslers possession trial court awarded $250 damages (disregarded owners testimony
that FMV of truck was diminished by $1,500)
COA affirmed TPI 14.40 (if capable of being repaired, P gets cost of repair; if not, P gets difference in FMV)
Owner chose to put on proof only of diminution of FMV (not up to plaintiff to choose)

Tire Shredders, Inc. v. ERM

Shredding machine destroyed in fire TSI was in business of using the machine for profit the fair market value
(FMV) = $183,000 TSI wanted its lost profits too
General rule: TPI 14.40 lost profits are not recoverable when Ps personal property has been completely
destroyed and is not capable of being repaired
What in the facts made this case seemed appropriate for awarding lost profits? TSI bought this specific machine
for this specific contract, and they were unable to purchase a similar machine within a reasonable time so, TSI
argued that there should be an exception when the destroyed property is commercial property that cannot be
replaced within a reasonable period of time after the injury trial court allowed TSI to pursue this remedy jury
awarded $1,117,000 in lost profits plus $183,000 for the FMV of the machine
If personal property has been destroyed by and cannot be replaced within a reasonable period of time plaintiff
may recover damages for the loss of use of the property or for profits lost as a result of the destruction of the
property.
Exception: lost profits awarded when the destroyed property is commercial property that cannot be replaced
within a reasonable period of time after the injury

SPECIAL PURPOSE PROPERTY

Trinity Church v. John Hancock Mutual Life Insurance Company

Special purpose property the law is open to special rules in special circumstances
Trinity Church, Boston was damaged during construction of Copley Tower Trinity Church was built in 1877 and
suffered damage in 1980s from blasting for Copley Tower Ps counsel came up with special theory of damages
(the takedown theory)
Argument that it should be special purpose because theres no market for this church who would buy it besides
another church maybe? Theres therefore no market value! Therefore no diminution in market value there is also
no repair cost because no repair was made but you clearly have damage here
TAKEDOWN THEORY: church estimated the total takedown and reconstruction cost to be $1.7M settlement
of the building pre-blasting = 26% of takedown condition settlement after blasting = 65% of takedown
therefore, 39% of the total takedown and reconstruction cost was attributable to the negligence of the D

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We dont care about takedown theory but we do need to take away from these last 2 cases that we shouldnt be
stymied by the rules! Dont let the rules deter you because you can argue otherwise if you have the facts and a
logical explanation for how youll be able to recover damages, even in the face of a contrary rule, then go for it

EMINENT DOMAIN

Market value is the only measure in Federal eminent domain cases (when a property is condemned by some
public entity) when property condemned by Federal government, they have to pay reasonable compensation, the
measure of which is the market value of the property and thats ALL (at Federal level, no incidental or
consequential damages)
In Tennessee, if the state takes your property, the recoverable damages are:
o (1) the fair market value of the land actually taken PLUS...
o (2) the injury done to the residue of the tract the measure of FMV = the highest and best use (not its
actual use) (TCA 29-16-114)
Think of it in terms of the government taking a portion of your lot to widen the landyou want to be
compensated for, perhaps, the reduction in value to the remainder of your lot!

Level 3 v. Floyd

Floyd installing storm drain

Level 3 management discussed with Floyd management how storm drain installation might jeopardize Fiber Optic
Cable
Thereafter, Floyd damaged the cable
Level 3 contacted to see if cable was damaged (appeared at first not to be)
Level 3 reminded Floyd not to dig in the area
Trial court denies Floyds Summary Judgment motion b/c Level 3 may indeed be entitled to the $300,000 in
consequential damages (matter of proof).

Thomas & Betts v. Hosea Project Movers (Spodens case)

T&B hired Hosea to move plant from Boston to Monterrey, Mexico during one delivery, machine #2 was
damaged beyond repair damage occurred 9/6/02 T&B received estimates for replacement machines in October
2002 T&B never replaced the machine
Machine was an old aluminum diecast machine made in 1988 T&B valued the machine at $30K to get the
machine into Mexico before the damage occurred T&B argued that it was just book value and not market
value
$67K quote for 1986 model this is the most reasonable estimate of all that T&B received put several other
higher estimates of not similar machines
T&Bs expert gave a desktop appraisal saying the machine had a value of $200K no formal appraisal did
not know year of the machine did not survey the market or obtain other quotes agreed on cross that $75K
quote was of the same make die case machine expert said T&B had add ons worth another $20K
What was the best evidence of T&Bs damages? The D argued it was the quote of the nearly identical machine for
$6K T&B argued it was entitled to $200K for machine and another $1M for lost profits
Jury awarded T&B $87K ($67K plus $20K) T&B got nothing for lost profits because they didnt mitigate their
damages (they actually could have purchased the other machine but chose not to well talk about this later)

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MORE COMPENSATORY DAMAGES

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AUGUST 17, 2015

Nomenclature
Compensatory Damages are also known as
Special Damages
Incidental damages
Consequential damages
Ordinary damages
Direct damages
Indirect damages.
Watch Court usage because it is not uniform thus hard to teach.
Spodens Guidelines:
Compensatory Damages Include Incidental & Consequential Damages
Every type of damages other than punitive damages.
Academic Lingo
Reliance interest
Expectancy interest
Restitutionary interest
Direct or Ordinary damage is
The damage that would ordinarily be expected to flow from certain conduct
o

Ex: Cover damages are direct/ordinary damages. In a breach of contract for the sale of goods the wrong party can
cover. (Note how UCC 2-712 defines cover damages)
The buyer may cover by purchasing goods in substitution for those due from the seller
Buyer may recover the difference between the cost of cover and the contract price plus any incidental or
consequential damages.

INCIDENTAL DAMAGES include

the cost of effecting cover
o See why this is confusing?
Include additional finance charges

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Expenses in inspecting and testing the goods

Amounts paid for insurance
Expenses in the storage, care, and custody of damaged property.
o Ex: If a home is damaged by a wind storm, the storm rips the roof off include in your insurance or a tort claim
(helicopter over the house) cost of covering the house to prevent further damage. Damages that ordinarily
flows from the consequence of the act??? So confusing right?

Special damages
Tenn. Rule Civ. Pro. 9.07--When items of special damage are claimed, they shall be specifically stated.
Require that you state in your pleading items of special damages.
What are special damages?
o Attorney fees
o Prejudgment interest and front pay and back pay are NOT special damages
Note: See Turner v. Benson

CONSEQUENTIAL DAMAGES are

Damages arising as a consequence of the defendants conduct
Need to be DIRECT
Indirect damages generally not recoverable
Usually something more attenuated (closer to the injury) that incidental damages.
Lost profits are a classic example.
Note: Lost profits may be recoverable but the courts are inclined to look at them more specutively than other types of damages.
Various places that say lost profits are not recoverable.

TPI 14.45Damage to Real Property

The measure of damage to REAL PROPERTY is the LESSER OF
o

The reasonable COST OF REPAIRing the damage to the property or;

The DIFFERENCE between the FAIR MARKET VALUE of the premises immediately prior to and
immediately after the damage.

**Note: the TPI was created by a group of lawyers who want to make money by writing books. It is just a helpful starting place. If
you have a case where the TPI instructions are not in your favor ask the court to vary the pattern jury instructions
Ex: In the Tire Shredding Case they asked for a differentiation and the lawyers had case law available to back it up .

Damages for Breach of Real Estate contract

Seller is entitled to the difference between
the contract price and
the fair market value of the property at the time of the breach
Note: often, the seller is able to resell at same or greater priceso no damages.
So what other damages may the seller recover?
o Incidental damagescost of relisting the property., automatically ask are there any incidental damagespretty
much always recoverable!!! Only unlikely to recover are those you cannot prove with reasonable clarity.
o Consequential damages (big money) lost profits; lost revenue; less expenses etc
Requirement: within the reasonable contemplation of both parties at the time the K was made.
TPI says what the ordinary is, ASKcan we seek consequential or incidental damages???
In addition seller may recover special damages
Special damages must have been within the reasonable contemplation of both parties at the time the contract was
made.
o This concept came fromHadley v. Baxendale

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Plaintiff is entitled to recover for those consequences of breach that were within the contemplation
of the parties when they made the contract.

CASE: Turner v. Benson, Tenn. 1984

Facts: 7/31/80 Turner contract to sell house to Benson $75,000. Benson knew Turner operated a day care. Turner
planned to stop day care after he sold the house. 9/1/80 Turner contract to buy another house. 9/2/80 Benson failed to
close.12/16/81 Turner sold house $76,000.
Turners sought $30,000 in damages
o Note: No loss on the sale price
Trial court awarded $14,500 damages.
o Everything Turner wanted except lost profits.
**Note: Classic incidental damages
Turners have no ordinary damages
o No difference in contract price and fair market value of house at time of breach
Turner may have special damages other than lost profits relating to the day care these damages seem like
incidental damages.
o As used here special damages = Consequential damages
Lost profits re Day Care = Consequential damages
Everything else, incidental damages
Special incidental damages
o Interest
o Advertising (continue to incur expenses on advertising because they cant sell)
o Moving expenses (more moves than contemplated)
o Utilities
Including maintenance fees
o Realtors fee difference.
**Note: had they planned to continue to operate might be a different result no ordinary damages. P could sell the house for an
amount equal or greater to the contract price. Court called special damages we might call incidental or special damages loss of
profit; good example of run of the mill type of case.

Consequential Damages

Not awarded day care lost profits

Benson knew turner ran day care out of home
Turner had to give notice to clients
Rationale: turner planned to stop upon sale anyway.

Side Note: Generally, the proper measure of damages in a breach of a real estate transaction is the difference between the contract
price and the fair market value of the property at the time of the breach.
Special damages may be recovered where they are caused by the breach and they are made in reasonable contemplation of the parties
when the contract was made.
In the instant case, lost income from the day-care business did not stem from the breach, nor was it in reasonable contemplation of
the parties because Plaintiff planned to terminate the business.
On the other hand, the Defendants were aware that the Plaintiffs were relying on the proceeds of their sale to finance the purchase of
their new home. Therefore, all expenses stemming from the fact that the Plaintiffs were forced to own two homes at once were
recoverable. The advertising costs, moving expenses, plumbing expenses, utilities, and insurance were all related to the Plaintiffs
attempt to mitigate damages stemming from the breach. Therefore, they are a normal and foreseeable result of the breach and within
contemplation of the parties. The claim for the difference in the realtors commission had not merit because it involved a net gain to
the Ps.

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[Turner v. Benson] A vendor as against a breaching vendee in a real estate transaction is that the
vendor is entitled to the difference between the contract price and the fair market value of the property
at the time of the breach
a) [Turner v. Benson] in a real estate transaction special damages may be awarded if they are
within reasonable contemplation of the contract at its initiation and, if they are actually
sustained by reason of the vendees breach
b) [Hadley v. Baxendale] Damages are recoverable only if they were within the contemplation
of the parties at the time of the contract
c) [Florafax International, Inc., v. GTE Market Resources, Inc.] Damage must be proven with
reasonable certainty prohibition of speculation
d) Duty to mitigate damages may not be recovered to the extent that they could have been
avoided or minimized by reasonable efforts

CASE: Ferrell v. Elrod

CLASSIC CASE OF PROVING LOSS PROFIT
Facts: Tenant v. Landlord for failure to lease the premises to tenant. Signed lease agreement =$400 per mo. For 10 years.
Premises not ready for tenant ever. Tenant released other premises. Cost of substitute premises=$100 more per month.
Released 9 months after landlord breached.
Tenant sought:
o Increased rental cost
o Lost profits for the 9 months that tenant was unable to operate
Reliance and Expectancy damages
Ct. App. Affirmed awarded of both
o Lost profits not speculative
o Based on credible experience.
Ps subsequent experience at a different location was key. D breached a lease by failing to deliver possession of the premises to P a
beauty parlor operator. P found a new location and was successful, but was delayed in opening the new store. The court admitted
evidence of Ps later experience at the new shop and awarded damages for lost profits during the period of delay, stating that the
prompt public acceptance and success of complaints school demonstrates that an adequate supply of customers (students and patrons)
was available, thereby removing the speculative character of future business profits of a new business.

**Note: there is usually a new business argument--when someone plans to open a business and is delayed. If there is only
data after the operating of a new business that data can be speculativethere is no historical data that would justify lost
profits, but it will depend on the factseven though a new business can they operate with a profit after openingso it is
reasonable to believe that it would have operated at a profit at the beginning. DEPENDS ON THE FACTS OF THE
CASE.
For damages to be awarded they must not be too speculative. In the cases of a new business, which is delayed by
breach, the provability of damages might be dependent on business experience of owner, or if time has already past, it
could be based upon the actual profits made after delay.
Limitation of expectancy to those damages whose amount can be proven with Reasonable Certainty!!
CASE: Black v. Love & Amos Coal -- Tenn. Courts have treated claims of incidental damages & lost profits.
Facts: Black had contract w/ L&A for 143 cars of coal. L& A failed to deliver 122 cars. Black did not cover. Black sought
lost profits of $1.62 per ton=$9,150. Trial court awarded $0.33 lost profits = $2,013. D challenged the award of lost
profits. Supreme Court affirmed
While contract contemplated an active market, it also contemplated scarcity
o We were at war and coal was scarce
o Therefore, awarding lost profits was reasonablebut
Supreme court states:
o Plaintiffs calculation not reasonable
o Tax return showed historical loss
o Plaintiffs theory not rational

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o
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Plaintiffs creditability questionable.

Tenants claim was reasonable under the circumstances
Lost profit award affirmed.

**Note: There were no ORDINARY damages because P did not buy another 122 carts of coal to cover. So by not coveringshe
cannot recover any cover damages. Only profits shown were LOST profits but WWII was going on, so there was no coal to be
bought. The court believed that coal was scarceif it had not been within the reasonable contemplation of the parties might not
have recovered lost profits at all. The parties knew the lack of coal and the coals high priceso why did P not recover all of her lost
profits? Conflicting evidence There were no records of profit.

Lost Profits
Biggest problem in recovering lost profits is overreaching by plaintiff
o Ferrell v. Elrod
Do not think that means that lost profits arent reasonable
o Remember the Tire Shredders case
Good Summary Tenn Law
Tenn. Bar Journal, August 2008 Ross Pepper Good summary of Tenn. Cases.
CASE: Neri v. Retail Marine Corp. page. 28 in red book
Facts: Contract for the sale of goodsUCC governs (ALWAYS ask, Does the K include the sale of goods?). Neri
agreed to buy a new boat form retail marine for $12, 587,40. Neri paid a deposit of $4,250 for immediate delivery. Six
days later, Neris lawyer wrote Retail Marine we revoke and demanded that his deposit be returned. Retail refused and
resold the boat for the SAME price four months later. RMs profit on the Neri sale would have been $2,579. Neri sued for
his deposit and Retail filed a cross-complaint for lost profits (they would have sold 2 boats instead of one) and
consequential damages (storage costs incurred due to the delay in sale). RM incurred incidental expenses for storage,
upkeep, finance charges, and insurance of $674. Court issued both damages to Retail.
**Note: Does it matter why Mr. Neri could not buy the boat? NO. What was Neri suing for? The restitution of 4,250
(deposit)

Question to askHOW MUCH DAMAGE HAS THE COMPANY INCURRED?

o Answer to this question determines 1) how much of the deposit Retail gets to keep or 2) how much
more Neri has to pay.
Why could he receive the lost profit? He sold the boat to someone elsethey are a volume seller LOSS
VOLUME RULE CASE

Lost Volume Seller Rule

o Where you have a volume seller who can make a reasonable showing that he would have been able to
sell a large number of the same goods, the buyers breach depletes the sellers ales by 1.
o Under UCC 2-708 the lost volume seller recovers his profit on that sale, even if he is able to resell the
article.
o If student wants to sell her boat to another student and looses 2,000 loss profits can I recover under
this? NO!! Distinction between someone who can sell a large quantity unlimited supply
o What about specialty goods Vanderbilt painted boatdesigned for a specific purpose it wont be in an
unlimited quantity.
o The justification
If Im in the business of selling cars and I can sell all I can get, then I have been damaged
Allows a lost volume seller to recover his profit, even though he sold the goods for the same
amount.
**LOOK AT CASE IN BLUE BOOK SEE IF YOU CAN GO THROUGH EXAMPLES.
Reliance v. Expectancy - page. 31

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The 3 interests in contract remedies:

o Compensating only the reliance interests
o Compensating the expectancy interest
o Try to restore defendant to the position defendant occupied before the contract.
Reliance damages
o Can be thought of as your out of pocket damages
o If you are trying to put the seller in the position he would have been in if hed never entered into the contract
that is reliance.
o Common measure in tort cases.
o Includes everything plaintiff gave up in reliance on the contract.
Includes expenditures necessary to perform the contract, which can be called essential reliance.
All other reliance incidental reliance
Expectancy damages
o Measures what was expected had the contract been preformed
Plaintiff has a gross expectancy, measured by the full payment or performance she was promised
under the contract, and which she expected would cover the cost of her own payment or performance
plus a profit margin.
o Expectancy damages are measured by the benefit of the bargain (lost profit damages; cover damagesbenefit
of the bargain)
The value of the plaintiffs entitlement under the contract.

Note: He doesnt focus on these terms but terminology used in the next case.

Benefit of the Bargain

The general measure of damages in breach of contract cases is that the damages are measured by the benefit of the
bargain
The presumption is that you ought to live up to your promises
The simplest explanation of expectancy damages may be the widespread moral belief that people should keep their
promise
CASE: Chatlos Systems v. NCR
Facts: Breach of warranty case. Chatlos paid $46,020 for the computer system. Chatlos put on proof from an expert that a
computer system as warranted by NCR had a value of $207,826. NCR put on no proof other than that the purchase price
of the computer was $46,020. NCR represented that this computer could do much more than it really could. NCRs
warranty (promise) was really a misrepresentation. This computer could not perform as represented. A computer that
would perform as represented was worth $200,000+.
Rightful Position Rule: to restore the plaintiff to the position but for the wrong.
Difference between the fair market value of the goods accepted and the value they would have had if they had
been warranted.
Following UCC 2-714(2) the difference between the value of the goods accepted (6,000) and the value other
computer would have had if it had been as warranted (207,826,50) 201,826.50
Contract price is not necessarily the same price as market value.
Change circumstances
Think about this case as a tort caseSuing for Fraud
The Measure of recovery would not be the benefit of the bargain rule but what Chatlos paid in reliance on
statement made by NCR46,020.
Usually sue in torts because you can recover punitive damages TN consumer protection act (can recover 3
times your actual damages plus attorneys fees).
Tort Measure: Value represented Value delivered = damages
Contract Measure:

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CASE: Smith v. Bolles page. 39

Facts: Bolles bought stock in Mining Company for $1.50 per share that Smith said was worth $10.00 per share. Is
plaintiff entitled to his expectancy damages? $8.50 share or reliance damages his $1.50 per share.
The conventional wisdom is that you cant get expectancies in tort cases---You can only get what you lost in tort
cases
What did he lose? The shares times $1.50 per share
o Could he have sued for breach of contract and gotten his expectancy? He would at least have had the
opportunity to seek them.
The proper measure of damages for fraud in the sale of stock is the actual loss suffered due to the deception, not the
purported value of the stock. The action was not brought for breach of contract, thus no expectancy interest was lost.
Bolles was defrauded in the amount of the price paid for the stock and this was the correct measure of damages.
Compare Chatlos to Bolles
Tort v. Contract
Tort Compensate for loss by putting the party in the position they were before the loss
Contracts parties voluntarily enter into a transaction with certain expectations expressed in the contract itself.
Note: look for statutes
Securities fraud
Smith v. Bowles now covered by the securities act of 1934
Ten. Consumer protection act provides for treble damages in cases of willful misrepresentation.

AUGUST 24, 2015

Compensatory Damages (General)
Limitation of Remedy Provisions
Will likely ask a question on sentimental value (p. 27) the old rule is that you couldnt recover for sentimental value, but now some
sentimental value is allowed
Chatlos (last week) trial court found that the computer that was sold was worth $6K following UCC 2-714 (2), the difference
between the value of the goods accepted ($6K) and the value the computer would have had if it had been as warranted ($207K) =
$201k! problem is that NCR warranted goods far better than it delivered what proof did NCR use to testify to value? Purchase
price only and no experts thus, while purchase price was relevant, it was not controlling as value purchase price can be significant
evidence of value but its not controlling parties can put on other evidence of value in Chatlos, the other evidence was more
persuasive than the purchase price Ds who rely only on the purchase price sometimes cook their own goose do you think the
expectancy award is excessive? Is allowing expectancy recovery excessive? (ex. in book is a very valuable violin what if you bought
the violin for $4K, thinking it was a $100K violin, but then you find out it was a fake can the P recover your expectancy value?
does the price automatically put you on notice that its a fake? Too good to be true?) in Chatlos, the price was around $40K but court
found it was only worth $6K grossly misrepresented capability of computer system

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Meinrath v. Singer

Meinrath owed $300K by Singer Claimed that Singers failure to pay had caused him another $700K in business losses
Question: can Meinrath recover consequential damages for Singers failure to pay his debt?
o The rule in this case is called the Money Debt Rule: if what is at stake is money (a debt), then the consequential
damages are limited to interest (only reasonably contemplated consequential) so, limit to damages for failure to
pay a debt is interest on debt this comes from Hadley v. Baxendale (P is entitled to recover for those consequences
of breach that were within the contemplation of the parties when they made the contract the only damages that P
can recover in a suit for the failure to pay money are (1) the debt (2) plus interest this rule is fairly universal in the
US
This rule is basically a policy choice by the court as to how much to let juries decide to allow a P to recovery its sort of
nice to have some guidance as to the limitations because usually, we dont have any guidance
Money Debt Rule - $ was all that was contemplated by the contracting parties that is the only remedy if theres some
other kind of remedy that you may want, you better put it in the contract so, if its in the contract that there are other
remedies, generally, they will be allowed

Texaco v. Pennzoil (TORT CASE INTERFERENCE WITH K)

Facts: Getty agreed to sell 3/7s of their company stock to Pennzoil for $3.4B unstated in the opinion, but famous in the
press, was that agreement was a handshake! under the agreement, Pennzoil would receive 3/7s of Gettys assets if the
parties were unable to agree on a restructuring 3/7s of Gettys assets included 1.007 B barrels of proven oil reserves
Texaco persuaded Getty to renege and sell to Texaco is this tort or contract? this is a tort case (interference with
contract/inducement of breach of contract) the damages here are the pecuniary loss of the benefits of the contract +
consequential damages Pennzoils damages were $7.53B (Pennzoil put on an expert to show the value of the reserves that
they would have owned had Getty lived up to the contract like the lawyers for NCR, the lawyers for Texaco were satisfied
to merely attack the Ps proof on that issue (didnt introduce any valuation evidence of their own)) Gettys stock was worth
an estimated $500M so, how did they get $7.5B? the oil reserves! How did they prove that the reserves were worth $7B?
experts! this case was appealed to the US SC, and Texaco filed bankruptcy! Penzzoil also got $3B in punitive damages
(reduced to $1B) during the bankruptcy and before the US SC granted cert, the case was settled for $3B
o Usual measure of K damages: difference b/w the contract price and the market price (cover), plus incidental
damages (really none here), plus consequential damages (always limited by what defendant reasonably
cometemplated)
o K price for the stock was $3.4 billion
o The value of the oil was $7.53 billion
This case demonstrates how important the skill of an attorney is (to get the court to accept the value of the oil as damages)
Inducement of breach of contract this is a statutory tort in TN (TCA 47-50-109) unlawful for any personto induce
breach ofany lawful contract; and, the person soinducingshall be liable in treble the amount of damages resulting
fromthe breach of contract
In contract, the recovery is the expectancy (which can be quite high) then, under TCA, the amount would be treble!
Inducement of breach of contract elements:
(1) A legal contract
(2) Knowledge of that contract
(3) Intention to induce or procure breach of the contract
(4) Malice
(5) Breach of the contract
(6) The inducement must be the proximate cause of the breach of the contract
(7) Damages
Usual measure of contract damages = different between the contract price and the market price (or cover) + consequential
damages that D reasonably contemplated

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Contract price for the stock was $3.4B (cover); value of oil was $7.53B (sounds like consequential damages), so
consequential damages of $7.53B + value of the stock ($3.4B) would be a double recovery here (court used the consequential
damages about only because the oil was clearly what everyone was after

Buck v. Morrow

There was a contract between these 2 guys for one of them to be able to graze his cattle on the land the contract was
breached the first type of damages the court agreed to was general damages (these were the balance of the lease = 3 years
remaining on the lease) the P tried to also recover damages from lost cattle (died) plus extra expenses Spoden thinks the
extra expenses are more incidental damages and the lost cattle are consequential damages

LIMITATION OF REMEDY PROVISIONS

Specific types of damages that arise in various contexts one type of compensatory damage issue is limitation of remedy, another is
liquidated damages

Kearney & Trecker Corp. v. Master Engraving Co.

K&T sold engraving machine to Master Engraving limited warranty for 12 months or 4,000 hours purchase price of
$167,000 machine malfunctioned during the first operation and was only used for 25-50% of the time (seller took position
that limited use was simply because buyer didnt know how to use it and messed it up) limitation of remedy provision in
the contract: NO consequential damages!
The contract said no consequential damages and buyers remedy was limited to (a) either repair or replacement of the
defective part of the product or (b) at the sellers option, return of the product and refund of the purchase price (this is VERY
common) there was no claim that the seller didnt provide repair or services in a timely fashion
Trial court ignored the consequential damages limitation in the contract and held that K&T could recover consequential
damages buyer won at the trial court level, but the seller won on appeal
As long as repair/replacement option doesnt fail in its essential purpose, a limitation of remedy provision WILL be
enforceable!
How do you overcome the limitation of remedy provision in a breach of warranty case? UCC 2-719, you can limit remedies
by including the limitation in the contract you can exclude consequential damages if you want to recover consequential
damages, you have to prove that the limited remedy provision FAILS OF ITS ESSENTIAL PURPOSE, and then you can
rely on all of the other remedies set out in the UCC you could prove this by showing that the seller failed to repair or
replace the product within a reasonable time
o The limited remedy provision fails its essential purpose if, within a reasonable time, seller has not made the
machine able to perform to the contract
o If repair or replacement, then Seller has to repair or replace the machine within a reasonable time.
If theres a warranty, the buyer must have an available remedy (but the remedy can be limited) a limitation of the
remedy is ok

**KEY POINTS: (1) replacement and repair remedy fails of its essential purpose when seller is unable to repair or replace within a
reasonable time (2) what if the limitation of remedy said, no matter what, the seller has no liability whatsoever? If that is the case,
then the provision is unconscionable, even between sophisticated parties, as a matter of law

Contour Medical Tech. v. Flexcon

Contour makes special equipment used in medical testing electrode attaches to the body with adhesive tape
claim is that the tape doesnt adhere limited remedy provision: no consequential damages remedy
limited to repair or replacement
Flexcon argues that Contours limited remedy provision fails of its essential purpose the essential purpose
is to meet the parties agreement here, and in most cases, that means repair or replacement

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P presented no proof of failure of the remedy (repair or replacement) P only challenged the enforceability of
the limited remedy provision altogether we know that the UCC actually says the seller CAN have a limited
remedy provision the Ps argument that a limited remedy provision is unconscionable doesnt fly
A limited remedy provision can either be unconscionable or NOT if its not, it CAN fail in its essential
purpose, but that doesnt make it unconscionable! Keep this straight
Failure of essential purpose is the way to defeat a limited remedy provision
The essential purpose is whether the claimant was left without a remedy under the UCC, repair or
replacement is reasonable BUT, the seller must be able to repair or replace within a reasonable time
Limitation of damages provisions are per se unconscionable if they rule out damages for personal injury
If the buyer prevents the seller from being able to repair or replace, then the seller may prevail
o In Flexcon, buyer simply presented a legal challenge to the provision limited remedy provision that
limits to repair and replacement is NOT per se unlawful
There is ALWAYS a question on limited remedy provisions on either the midterm or the final
Failure of Essential Purpose:
o Buyer must show that remedy failed its essential purpose by sellers failure to repair or replace within
a reasonable time in order to show failure of essential purpose if it fails its essential purpose, all
remedies under the Code become available.

Baptist Memorial Hospital v. Argo

Baptist Hospital Owner

Argo General Contractor
Hanson Pipe material supplier hired by Argo
Sinkhole appeared in parking lot
Baptist sued Argo & Hanson
Argo cross-claimed against Hanson
Hanson argued: Remedy limited remedy to repair or replacement of the piping
Argo argued:
o Limited remedy provision did not apply to an indemnity claim
o Latency of the defect caused the remedy to fail of its essential purpose.
Limited Remedy Case
o Trial court held for Hanson
Limited remedy provision applied to indemnity claim
Latency of the defect did not cause the limited remedy provision to fail of its essential purpose
o Court of Appeals affirmed
o Limited Remedy Provision
If the product fails to conform to Hansons warranty, Argos exclusive remedies are:
Repair
Replacement
Refund of the purchase price
o Dont get hung up on the expiration date of the warranty. It is important, but not the only thing that
matters
o UCC 47-2-719 permits parties to modify or limit remedies
o Failure of Essential Purpose:
Failure of the purpose of the remedy in the K at hand
A refund is always an adequate remedy as an alternative to repair & replacement
o Latency:
Argo defect in the piping not discoverable during warranty period

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Court as b/w businesses, the limited remedy provision doesnt fail of its essential purpose
merely b/c the defect is latent.
TN Limited Remedy safe harbor
o The availability of a refund remedy will prevent a repair & replacement remedy from failing its essential
purpose.

**DONT CONFUSE LIMITATION OF REMEDY PROVISIONS WITH LIQUIDATED DAMAGES PROVISION

(NEXT WEEK)!!!!

LIQUIDATED DAMAGES

August 31, 2015

Damages for breach by either party may be liquidated (agreed upon) in the agreement they are liquidated in that they
are agreed upon (a fixed or determined amount sometimes through some formula just that its an agreed upon
method as opposed to leaving it to the jury or the court) generally speaking, are enforceable UNLESS theyre a penalty
Liquidated Damages: Agreed Damages
excessive liquidated damages unenforceable on grounds of public policy as a penalty (well, what does excessive
mean?) excessive liquidated damages is an unreasonable amount, determined by the anticipated loss at the
time the parties entered into the contract and the difficulty in proving loss if at the time of contracting, the
amount contemplated were a reasonable estimate of the potential damages AND the damages were likely to be
difficult to prove, then the liquidated damages will not be unreasonable and will be allowed
Issue is: is it a penalty or not? not a penalty if: (1) reasonable method of predicting loss AND (2) there is difficulty in
proving loss
Guiliano v. Cleo (1999) - This is a VERY important case!
Guiliano was the VP of marketing at Cleo Inc contract was a three-year term (1992 1995) annual salary was
$103K paragraph 7 of contract states that compensation ceases if voluntary termination or termination for cause
paragraph 9 states that if termination without cause, salary continues from the date of termination through end
of contract (10/31/95) Guiliano receives series of letters in Fall 1994 which relieved Guiliano of his duties as
VP of marketing the letters stated that he would remain an employee; the company would continue to honor its
obligations per the contract; he had no authority to bind, represent or speak for the company; he would be
working out of his home; and if he accepted other employment prior to the end of the contract, he would lose
benefits of the contract; and no longer authorized to use company credit cards; company would no longer answer
a telephone line for him Guiliano went for 3 months without receiving assignment and found other employment
at Wangs International for $110K per year (12/12/94) someone else had assumed Guilianos marketing
responsibilities Cleo stopped Guilianos salary when he took the other job
Guiliano did not actually suffer any damages because his new salary was higher than his old salary! Guiliano
actually covered his damages here because he gained employment after his contract was allegedly breached
Guiliano sued Cleo for breach of contract and wanted to enforce the liquidated damages provision (hoping to get
the balance of the contract per paragraph 9 of contract) Guiliano argued that it didnt matter if he had actual
damages or not Cleo argued that paragraph 9 was an unenforceable penalty the trial court awarded Guiliano
$90,125 in salary remaining under his employment contract PLUS pre-judgment interest
The intermediate appellate court affirmed the conclusion that Guiliano had been terminated but refused to
enforce paragraph 9 intermediate court agreed that paragraph 9 was a liquidated damages provision because it
called for payment of a sum certain in the event of a certain occasion but because there were no actual damages,
the liquidated damages provision imposed an unlawful penalty against Cleo
Guiliano appealed to TN SC on the issue of damages Cleo contended to the SC that $90,125 is a penalty
because: Guiliano had no actual damages, Guiliano obtained new employment before the contract expired with an
annual salary of $110K, thus it is grossly disproportional to any actual damages suffered by Guiliano (it would
only serve to punish Cleo for the termination its difficult to find a job when you dont have a job by taking

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the Wang job earlier than his contract expiration term and not being awarded the damages per the contract, hed
be penalized for trying to minimize his risk)
The TN SC reversed
First important point: the contract need not explicitly use the term liquidated damages to have a liquidated
damages provision (the contract did not label paragraph 9 as liquidated damages clause) (the court should look
at the substance of the provision and the intent of the parties when the contract was formed) (a cow is a cow
whether it is labeled cow or not)
Second important point: whats the point of having liquidated damages if the court ends up looking at the actual
damages anyway? The parties agreed to a method for determining the award in the event of a breach the
fundamental purpose of liquidated damages are to define the compensation when damages would be
indeterminable or difficult to prove if the provision is a reasonable estimate of the damages that would
occur from a breach, then the provision is normally enforceable while the normal damages analysis would not
see Guiliano as suffering actual damages since he was actually paid more by Wang than Cleo, there is some
danger/potential for injury that by the fact that while he is sitting in a job being paid, it may in fact hurt his
employability in the future it turns out in this particular case that damages would be easy to prove because he
got a job, but we didnt know that at the time of contracting, and thats the purpose of liquidated damages! the
point of liquidated damages is to recognize the validity of parties agreement to calculating damages a certain way
certainly Cleo cannot argue that the balance due in the contract is was an unreasonable estimate of Guilianos
damages! It was simply the amount he was entitled to be paid under the contract
Prospective approach (this is the RULE) (KNOW FOR MIDTERM/FINAL): if the liquidated sum is (1) a
reasonable prediction of potential damages AND (2) the damages are difficult (or easy) to ascertain at the time of
contract formation, then courts following the prospective approach will generally enforce the liquidated damages
provision
Retrospective approach (KNOW FOR MIDTERM/FINAL): undermines the certainty and other benefits
afforded by liquidated damages. Under this approach, the parties are allowed to fully litigate actual damages
following a breach of contract. If the non-breaching party fails to prove actual damages, then he or she is barred
from recovering the liquidated sum originally agreed upon in the contract.
o With this approach, courts not only analyze the estimation of damages at the time of contract formation,
but also address whether the stipulated sum reasonably relates to the amount of actual damages caused by
the breach.
When the parties agree to liquidated damages, the certainty of liquidated damages must be preferable to the
risk of proving actual damages in the event of a breach liquidated damages permit the parties to allocate
business and litigation risks and often serve as part of the contractual bargain
Issue: under the circumstances that existed at the time of contract formation, was the liquidated sum: (1) a
reasonable estimate of potential damages AND (2) were actual damages difficult to measure?
LIQUIDATED DAMAGES: if provision and circumstances indicate that the parties intended merely to
penalize for a breach of contract, then provision is unenforceable as against public policy
o Was the liquidated sum a reasonable estimate of potential damages and were actual damages
difficult to measure. If so, then the provision will be upheld.

In Re TWA (1998) NOT TN RULE, BUT A DIFFERENT APPROACH

TWA leased planes from Interface TWA agreed that the liquidated damages clause in Section 17 was valid and
enforceable Section 17 was very complicated and set out a formula for calculating the liquidated damages
Court: liquidated damage clause unenforceable as a penalty
NY law has the RULE OF DISPROPORTIONALITY: if liquidated damages are extremely disproportional to
actual damages, liquidated damages unenforceable as a penalty that TWA expressly agreed the clause was valid
was IRRELEVANT this is essentially opposite Guiliano v. Cleo decision
The purpose of the formula in the lease was to shift the risk from Interface to TWA that there would be a decrease
in the value of the planes that is exactly what happened!
By focusing on the actual damages, the court determined that the liquidated damages were excessive that is
exactly what Guiliano tells us NOT to do!
The court said that the damages were not difficult to estimate at the outset

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Both of these cases demonstrate that they could come out either way the rule is much easier to find that the
liquidated damages are a penalty
Analysis: in TWA, actual damages were ascertainable Interface put no proof on as to why it would have been
difficult to predict damages for breach of the lease Interface argued that the liquidated damages were necessary
to protect Interface from a declining value of aircraft in the event of an economic downturn

Northern Illinois Gas (1984)

Case demonstrates that parties may agree upon under-liquidated damages
P has $305M in actual damages contract contained a method of calculating damages in the event of default net
result of liquidated damages clause was $13M 2-718 governs (parties limited damages) the clause was
enforced
The trial court awarded actual damages, but the appellate court struck the trial courts order and awarded
liquidated damages
The point is that a liquidated damages provision acts as a lid on damages they have to use liquidated damages
if its called for in the contract this just highlights the fact that under-liquidated damages are ok (even if overliquidated damages are considered penalties)
Liquidated Damages (UCC)
Damages for breach may be liquidated in agreement but only at an amount which is reasonable in the light of:
o The anticipated or actual harm caused by the breach
o The difficulties of proof of loss
o The inconvenience or non-feasibility of otherwise obtaining an adequate remedy a term fixing
unreasonably large liquidated damages is void as a penalty TCA 47-2-718(1) you can squeeze all 3
cases into this rule the exam will be based on TN law (Guiliano v. Cleo and NOT TWA)

AVOIDABLE CONSEQUENCES (MITIGATION OF DAMAGES)

Basic rule: claimant must take reasonable action to avoid the consequences of a civil wrong by another logical
corollary to the no better position rule
Burden of proof is on the defendant to show that the P failed to mitigate their damages
TPI 14.52 Property DamageDuty to Mitigate: a person whose property has been damaged by the wrongful
act of another is bound to use reasonable care to avoid loss and to minimize damages; a party may not recover for
losses that could have been prevented by reasonable efforts or by expenditures that might reasonably have been
made

SJ Groves & Sons v. Warner (1978)

PA DOT hired American Bridge Company as the general contractor American Bridge Company hired Groves as
a subcontractor to do certain work Warner was the material supplier to Groves Trap Rock was an alternate
material supplier this is the classic setup of a construction project (normally have multiple subs with multiple
suppliers) the alternate model would be for an owner-managed job where the owner (PA DOT) would hire a
general contractor but would still enter into subcontracts with the subs directly
Warner acted in bad faith in over-committing its ability to make and deliver concrete therefore, the trial court
stripped Warner of the protection from the no-damages-for-delay clause in the material supply contract trial
court held that Groves should have mitigated their damages by hiring Trap Rock to finish or at least supplement
the job
Appellate court reversed held that subcontractors decision to go with Warner was reasonable and was not a
failure to mitigate altogether Warner cannot benefit from Grovess decision not to use Trap Rock there was no
question that Groves could have gone with Trap Rock after a certain point, so the issue was whether Warner
should have gone with Trap Rock
Rule: as long as youre taking reasonable measures to mitigate your damages, it doesnt matter what the outcome
is, at the time you made your decision, you made a reasonable choice it doesnt matter if the other decision

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would have been better as long as your decision was reasonable the P is not awarded damages for losses he
could have avoided by reasonable effort without risk of other substantial loss or injury the burden of proof
is on the defending party
AMC-Tenn v. Hillcrest (2004)
AMC = Pharmacy
Hillcrest = Nursing home
AMC agreed to provide pharmacy services in the nursing home
Issue: Whether the trial court erred in holding Hillcrest liable for the profits lost by the pharmacy from the failure
of private pay and/or Medicaid patients to remain customers of the pharmacy when Hillcrest, by federal and state
regulation, could not contract on behalf of those patients and could neither control the decisions of those patients
as to the source of their pharmaceuticals nor guarantee nor promise the pharmacy that the pharmacy would be the
source of those patients pharmaceuticals.
The well settled rule in this jurisdiction prohibits a plaintiff from recovering damages which, in the exercise of
reasonable effort and expense, could be prevented or diminished.
Employment Cases
Did P look for other employment? (b) present proof of lack of mitigation to reduce damages there is at least 1
case where the P had no proof of looking for work anywhere and did not get ANY damages (complete failure to
mitigate) you always want to counsel your clients to look for a job, make applications, etc. P doesnt actually
have to find a job but does have to make reasonable efforts
EEOC v. Ford case 9 female Ps sued for not being hired for traditional male jobs when jobs became
available, Ps one-by-one declined Court held D not liable for period where Ps failed to mitigate Ps failure to
mitigate was NOT REASONABLE just a demonstration of the need for mitigation
Ellerth defense discrimination case conceptually based on employees failure to take advantage of established
remedial process this is the employers defense this is an avoidable consequence theory the P has to show
that they took advantage of any reasonably available process by the employer to remedy any sort of
discrimination
Ford v. Nicks
o Pltf was an assistant professor at MTSU
o She won her case for discrimination
o Def argued that she failed to mitigate by not taking the job at Tenn Tech she didnt even look for similar
jobs at other schools
Waters v. Waters child support case involving the Dad in Memphis whose job had disappeared he was
making $135K and he could make $80 transferring to Atlanta after extensive job search, best offer in Memphis
was making $65K wanted to stay in Memphis so he could spend more time with his son court required him to
pay child support based on his prior salary court said not reasonable decision to not take job in Atlanta youre
required to take reasonable steps to mitigate his damages in this setting, the divorce setting, that reasonable duty
required taking a job in Atlanta
o Query: can you require a fired employee with a discrimination claim to look as far away as Atlanta?
Probably not
Lincoln General v. Detroit Diesel:
o Economic Loss Doctrine
o Basic Economic Loss Rule:
o Senators Rental, insured by Lincoln General purchased a bus manufactured by Prevost. The bus engine
made by Detroit Diesel. The bus caught fire due to an alleged engine defect.
o No personal injury or damage to any property other the bus itself.
o Lincoln General paid Senators Rental $405,250 for the fire damage pursuant to its insurance policy.
o Lincoln general urges an exception to permit recovery for unreasonably dangerous products that cause
damage to them during sudden, calamitous event.
**Concept of Avoidable Consequences

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Employment cases
Ellerth defense
Employees failure to take advantage of established remedial process

COLLATERAL SOURCE RULE

We are NOT expected to know the Oden case in the book

If an injured party received some compensation for his injuries from a source wholly independent of the
tortfeasor
o Such payment shouldnt be deducted from the damages the pltf collects from the tortfeasor
o Will only be reduced if payment made by a defendant.
When someone has invested years of insurance premiums to assure medical care, he/she gets the benefit of his/her
thrift
o Double recovery? No subrogation
o Insurance co. is entitled to subro it has right to be paid from plaintiffs recovery.
Doesnt apply to monies that pltf received from the tortfeasor
Admissibility:
o Important distinction is the source of the funds
o If wages from new employer, admissible
o If sale of disputed asset, also admissible
o PAYMENTS INTENDED TO BE COMPENSATORY ARE NOT ADMISSIBLE
(1998) TN ADOPTS COLLATERAL SOURCE RULE
Wrongful death case - Fye died in car accident
Erlanger Medical Center following receipt of $75k from Medicaid forgave balance of $673,120.08
Defendants argued that pltf cant seek $673,120.09 b/c Estate didnt incur the expense
Normal rule: the pltf received payments from a collateral source, other than the defendant, is not admissible in
evidence and doesnt reduce or mitigate the defendants liability.
Workers Comp. Disability Insurance
Any employer may set off any payment made to an employee under an employer funded disability plan for the
same injury; provided, that the disability plaint permits such an offset (TCA 50-6-114(b))

INDIRECT ECONOMIC HARM RULE

Pruitt v. Allied Chemical (1981)

o Chesapeake Bay Pollution Case
o Range of parties injured:
Wildlife
Commercial fisherman
Sport-fisherman
Dock owners
Neighboring businesses/restaurants
o Merhige draws line at commercial finsherman. Why?
o Have to draw the line between direct and indirect somewhere.
If direct, then you can win
If indirect, then you will lose

Lincoln General v. Detroit Diesel

Economic Loss Rule Case
o

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Scope of Liability

PERSONAL INJURY DAMAGES

When value cannot be measured in dollars how do you measure?

Phelps v. Magnavox
o Wrongful death case on how to assess damages: determining the amount of damage sin a personal injury
or death case is a matter peculiarly befitting a jury it requires no legal acumen but does require the
application of common knowledge, common experience, and common understanding the point is that
we leave to the common sense of 12 jurors the damages in a wrongful death case
o There is no certain yardstick or guide by which damages in such a case may be reached or reviewed, and
thats because there is no market to go to where such things (i.e. pain and suffering, the death of a loved
one, etc.) are bought and sold and their value can be reliably ascertained so, the policy of American
jurisprudence is to leave that in the common understanding of the community, as found in a juror there
is no marketplace because there are no buyers for the human miseries of pain, suffering, and death
o What are the proper measure of damages? What is it worth to the deceased to be removed from this life at
the age of 25, in the prime of his manhood? Its not an easy question to answer!
o This case helps highlight the difficulty in measuring the value of a life and the value of pain and suffering
TPI Civil 14.01 Personal InjuryPain and Suffering
o This is what the judge will charge the jury with when the P is alive but suffered personal injury (this is not
a death-type case)
o Ps shall be awarded the following elements of damage experienced in the past: physical pain and
suffering, mental or emotional pain and suffering, disfigurement, loss of the enjoyment of life this is
when a person lives but suffers personal injury
o Physical pain and suffering reasonable compensation for any physical pain and suffering, physical and
mental discomfort, suffered by the P, and the present cash value for pain and suffering likely to be
experienced in the future.
o Mental suffering includes anguish, grief, shame, or worry
o Permanent injury an injury that the P must live with for the rest of the Ps life that may result in
inconvenience or the loss of physical vigor it may be awarded whether or not it causes any pain or
inconvenience
o Disfigurement a specific type of permanent injury that impairs a persons beauty, symmetry, or
appearance
o Loss of enjoyment of life takes into account the loss of the normal enjoyments and pleasures in life in
the future as well as limitations of the persons lifestyle resulting from the injury
o There is no definite standard or method of calculating this injury or to fix reasonable compensation nor
is the opinion of any witness required as to the amount of such reasonable compensation (the judge wont
allow that sort of expert to testify!) the damages should be just and reasonable in the light of the
evidence
Debus v. Grand Union Stores
o Per diem Golden Rule argument the P suffered ____ amount every day, she has a life expectancy of
___ years and she is going to suffer this pain all the way until she dies and its worth that much each day
how much would YOU, the jury, take for this kind of suffering? (he did not ask not how much should the
PLAINTIFF get for this kind of suffering!!)
o Debus is hit by falling food cans, and the P argued for a per diem damage assessment by the jury the
court said ok the D can point out how unreasonable this is AND the jury was cautioned that what
lawyers say is not evidence
Beagle v. Vasso Beagle was injured while riding in a car driven by someone else trial court limited
Beagles counsels argument regarding pain and suffering the court said that per diem arguments are bad
and should never be allowed
o The point is that there are some limits to what you can actually argue in court!

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The Golden Rule is condemned in TN (TCA 20-9-304): the lawyer may argue the worth or
monetary value of pain and suffering to the jury, but the argument should conform to the evidence
(you probably avoid this proof by trying to make sure your argument conforms to the proof)
Perkins v. Sadler (1991)
o Example of rejection of the Golden Rule Ps counsel asked if any one of the jury would take $75K for
being involved in an accident the P avoided the Golden Rule (counsels remarks subsequent to the
objection indicate the use of you as a general term indicating the population in general) court said he
was not referring to the jury placing themselves in the position of the P but was referring to the
population, but Spoden disagreed with the outcome
o

WRONGFUL DEATH

The right of recovery in TN for wrongful death actions is strictly a creation of statute
TCA 2-5-106(a): the right of action shall pass to the persons surviving spouse and, in case there is no surviving
spouse, to the persons, children, or next of kin or to the persons personal representative, for the benefits of the
persons next of kin
o Person includes a fetus that was viable at the time of injury a fetus shall be considered viable if it had
achieved a stage of development wherein it could reasonably be expected to be capable of living outside
the uterus
TCA 20-5-113 (damages): the party suing shall have the right to recover for: (1) mental and physical suffering,
loss of time, and necessary expenses resulting to the deceased from the personal injuries, and (2) the damages
resulting to the parties for whose use and benefit the right of action survives (this has been interpreted to the
pecuniary value of a life) part 1 is the pain and suffering that the decedent had before they died, part 2 is what
the survivors suffer as a result of the persons death these are the two parts of the damages statute
o Damages for injuries sustained by the decedent include injuries from the time of injury to the time of
death, including physical and mental pain and suffering, medical expenses, funeral expense, and loss
wages and earning capacity
o The pecuniary value of the life of the deceased permits recovery of incidental damages suffered by the
decedents surviving spouse or next of kin among the factors to consider are the deceaseds age, life
expectancy, health, strength, capacity for labor, earning capacity, skills, and loss of consortium
Loss of consortium includes tangible services provided by that family member and companionship, affection,
love, attention, guidance, care, and in the case of a spouse, sexual relations consortium damages includes
recovery of such damages for the loss of ones child (the loss of a child may result in the same loss of consortium
as is caused by the loss of a parent)
o A Ps family cannot recover for their grief despite being able to recover for the loss of consortium
Dont forget that the pecuniary value of the life includes this loss of consortium element

Spencer v. A-1 Crane Service (1994)

Spencer killed in a construction accident trial judge granted directed verdict against A-1 Crane only issue for
the jury was damages jury awarded $1M in damages
Court asked to consider hedonic damages (value of life) KNOW WHAT THIS IS FOR EXAM: the value of
the pleasure, the satisfaction, or the utility that human beings derive from life, separate and apart from the labor or
earnings value of life the court refused no recovery in wrongful death for loss of enjoyment of life damages
are limited to pecuniary value of life
Why is it that you can recover for this damage if you live but your family cant recover for it if you die! so, in
wrongful death, the family can recover what the decedent suffered but not what the decedent missed!
**How to prove this stuff? Put on witnesses that tell the jury about the type of person the P was, have the survivors testify
about their relationship with the deceased, etc. there are things you can prove more easily (maybe put an expert witness
on): pecuniary value of the life for everything other than loss of consortium (ex: age, life expectancy, skills, earning
capacity, personal habits)
TN STATUTE

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Two types of damages in TN:

1. Economic Damages (no limit)
a. Medical expenses
b. Loss of earnings
c. Loss of income
d. Loss of use of property
e. Repair of property
f. Loss of employment
g. Loss of business
2. Non-economic (capped)
a. Pain and suffering
b. Emotional distress
c. Physical impairment
d. Disfigurement
e. Loss of Consortium
f. Injury to reputation
g. Humiliation
h. Loss of enjoyment of life.
Two caps:
1. Non-economic damages limited to $750,000
a. For all injuries based on a single act or omission or a series of acts or omissions
2. Catastrophic injury
a. Non-economic damages limited to $1,000,000
i. Spinal cord injury
ii. Amputation of two hands, two feet or one of each
iii. 3rd degree burns over 40%+ of body or face
iv. Wrongful death of a parent or child
Exceptions:
Caps dont apply to PI & Wrongful death actions, if def.:
o Had specific intent to inflict serious physical injury
o Intentionally falsified, destroyed or concealed records containing material evidence with the purpose of
wrongfully evading liability, or
o Was under the influence of alcohol, drugs or any other intoxicant.
Caps arent disclosed to the jury!!!
Other Limitations: look at pg. 74 in green book
Punitive Damages capped (pg. 75 in green book)
Limited to:
o 2 times compensatory damages
o $500,000
o Whichever is greater!
Exceptions: same as above!
Vicarious liability pg. 75
**Constitutional changes (pg. 75 in green book)

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SEPTEMBER 21, 2015

Compensatory Damages
Constitutional and Dignitary Harms
Constitutional Harms
Levka v. City of Chicago (1984)

It was Chicago city policy for all arrested to go through a strip search, and Levka was arrested and subjected to a
strip search during the strip search, the guards asked her to bend over and do a lot of strange things the
Chicago city policy was held unconstitutional, and jury verdict for $50K solely for emotional distress court
reviewed 9 similar/related cases in the other cases, there were many others where the jury awarded far less than
$50K with aggravating circumstances no aggravating circumstances here, so court remitted to $25K (or new
trial)
42 USC 1983 statute action every person who under color of any state law causes any person the deprivation
of any Constitutional rights shall be liable to the party injured this is the underlying claim here
If youre challenging a verdict or claiming its excessive, youre going to look for comparable cases, but its
probably not likely that they will involve the exact same law, jail, impact on women, etc. here, they had that
luxury so it was hard to argue with the comparison
Measure of damages difficult and unpredictable for example: Hampton v. Dillard compared to Elrod v. Walmart

Hampton v. Dillard security guard accused African American woman of shoplifting emptied her purse onto the
counter not arrested or expelled from store impassioned testimony of the humiliation caused in front of her children
jury verdict of $56K compensatory and $1.1M punitive upheld on appeal
Elrod v. Walmart on Christmas Eve, store manager mistakenly accused Elrod of harassing a female employee Elrod
got in a shouting match and bumped manager with shopping cart security detained and female employee said he was not
the man Elrod charged with battery and arrested bench trial awarded $3.5k in damages

Dignitary Harms

Similar to constitutional harms only reputation, humiliation are at stake

Dignitary torts: assault, false imprisonment, malicious prosecution, IIED, libel, slander, invasion of privacy,
batteries that are offensive by do no physical harm
One case where woman sued for being wrongly identified as participating in an orgy jury awarded $7M
compensatory reduced to $1.5K by appeal court
In employment cases, Ps are allowed to recover for humiliation and embarrassment (this is the wild card in an
employment case like pain and suffering in personal injury) this is the key to successful employment case for
the P ADEA case (age case) where $5M jury award not disturbed on appeal juries tend to like older folks
higher awards perhaps for age cases no medical proof REQUIRED
Humiliation and embarrassment also comes up in sexual harassment cases primary injury is to dignity
federal and state law allow recovery in federal court, this is capped at $300K (no cap in TN courts) (Title VII
amendments in 1991) (back pay not capped)
Humiliation and embarrassment is difficult to quantity, but is it really any harder to quantity than pain and
suffering?

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Remittitur
Procedure by which trial and appellate courts can reduce a jury verdict court grants new trial motion unless P
accepts remittitur (TCA 20-10-102)

In TN, the trial judge is deemed to be like a 13th juror

Webb v. Canada (2007)

Car wreck case jury found Canada solely liable awarded Webb $723K in damages Canada filed motion for
remittitur trial judge suggested remittitur of $125K judgment entered for $598K
Damages to Webb are solely within the province of the jury the trial judge has authority to suggest a remittitur if
he finds the verdict excessive (i.e. the 13th juror)
The statue says that the party whose favor the verdict was entered has power to accept remittitur and appeal under
protest OR a new trial will be awarded so, P has option to accept remittitur or there will be a new trial its a
real wild card to try out a new trial
P has 3 choices when the trial judge suggests a remittitur:
o Reject the remittitur (i.e. new trial)
o Accept remittitur
o Accept remittitur under protest
Mere silence does NOT equal acceptance the best practice is to file a separate written acceptance of the
remittitur (file a separate pleading stating what you are doing accepting, rejecting, etc.)
Its the practice to sign the order submitted to the court this is standard practice the Ps atty didnt do anything
additional but he did sign the order assessing the remittitur so, it wasnt clear here if the Ps atty accepted the
remittitur by signing the order the P was asserting that the P did NOT accept the remittitur so he was trying to
get a new trial apparently according to the judge that constituted accepting the remittitur
First, the jury renders its verdict (in TN state court, the lawyers prepare all the orders, judgments, etc.) the
parties will submit an order to the court, and simultaneously, the P will move for a remittitur the judge will
approve/deny the remittitur the lawyers are asked again to prepare the orders if a remittitur agreed (this is what
the court held to be that juristic act to constitute an acceptance of the remittitur)

Additurs
Additurs increase the verdict if inadequate allowed in TN via TCA 20-10-101 TN trial judge sits as a 13th juror no
additur in federal court system (only remedy for too low a verdict in federal court is a new trial) in todays world,
additurs are often legitimately considered/suggested by trial judges

Emotional Distress Damages (pg. 84)

Camper v. Minor in negligent infliction of emotional distress (NIED) cases, Ps claimed injury must be supported by
expert medical or scientific proof

Flax v. Daimler-Chrysler (2008)

NIED part only tonight

1998 Dodge Caravan case wreck 8 month old child in backseat in child safety seat Caravan was rear-ended
childs head was smashed in witness said he had a hole in his head the size of a golf ball he died the next
day mother and father brought a wrongful death action defective seats and failure to warn caused childs death
and mothers severe emotional distress P did not put on medical proof of her emotional distress
The Ps theory was that the mother had a claim for the childs death so her claim for emotional distress was NOT
a stand-alone claim P presented no expert proof of the mothers severe emotional injuries jury found for P

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$5M in compensatory for wrongful death of child and $2.5M compensatory for mothers NIED claim punitive
damages of $65.5M and $32.5M respectively reduced by the trial judge to $20M
The court of appeals held it WAS a stand-alone claim and it DOES require expert testimony! so, the P got
nothing for the NIED claim
Camper v. Minor established that expert poof must support a claim for NIED later cases excused the
necessity of expert proof if the emotional injury was one of many injuries caused by the tortfeasors action
so-called stand alone NIED claims were the only claims that required expert proof
Emotional distress damages not recoverable in contract action

Reputation Damages
Carey v. Piphus (1978)

Student deprived of hearing can he recover damages even though no actual damages? NO no presumed
damages for constitutional harm (nominal damages may be awarded)
Where there is no proof of any actual injury or harm, then there are no compensatory damages BECAUSE there
are NO presumed damages for constitutional harms! so, how valuable is a right if there is no remedy? Perhaps
there are other remedies available (i.e. injunctive relief would have been fair in this case in this case, the trial
court did let him go back to school)

Defamation
Purpose of defamation is to compensate P for damage to reputation may recover for (TPI 7.06): economic loss,
injury to reputation, emotional distress in TN, there are no presumed damages for defamation (the act of
being defamed doesnt entitle the P to damages they have to have some damages to be able to actually recover)

Myers v. Pickering Firm (1997)

I missed a LOT of info from the slides here
F/B sued MK and LSSM under the contract LSSM hired Pickering to review the construction project Pickering did a
report critical of MK Pickering proposed to LSSM to replace MK LSSM brought cross-claim against MK LSSM
hired Pickering for the contract management services over MK
MK alleges that Pickering said defamatory things about MK and MKs work in the report MK claims that Pickering said
these things to get the business from LSSM MK then sued Pickering for defamation due to the report and for
inducement of breach of contract
Trial court found that Pickering found not be liable for some of the publications of the report (privileged as to Lutheran
Services [privileged as to F/B and the bonding company) not privileged as to Omega
I missed a LOT of info from the slides here
Jury found on the liable count for MK against Pickering for the publication to Omega and others for $600K plus $100K
for punitive damages breakdown of jury award: $150K for emotional distress, $250K for pecuniary losses, $200K for
injuries to MKs reputation, and $100K for punitive damages

Actual Malice

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Remember that for public figures, actual malice is required!

Actual malice in a defamation case the publication contains a false statement of fact which was made with knowledge
that the statement was false or with reckless disregard as to whether it was true or not actual malice standard requires
actual knowledge of falsity or reckless disregard for the truth
Bad Faith in TN
ONLY in 1st party insurance cases
If ins. company refuses to pay a loss not in good faith
o May be liable up to 25% of the loss, plus the insureds expenses and attorneys fees
Insurer not automatically liable for bad faith penalty
o If insurer had a legitimate defense, even if invalid, no bad faith penalty
o Incentive for Insurance company not to just deny every claim.

SEPTEMBER 28, 2015

Suits Against Government Officials
Sovereign & Qualified Immunity

Conceptually, the sovereign in England and elsewhere could not be sued unless he consented and only to the
extent he consented in the US, there was no crown, there was a Federal system, and each state had some
sovereignty
In 1793, Chisholm v. Georgia held that a citizen of one state could sue another state there was total outrage (ex:
the Georgia House of Reps passed a bill declaring that any federal marshal attempting to enforce Chisholm would
be hanged) ultimately, it resulted in the passage of the 11th Amendment which REVERSED Chisholm SC has
extended the concept of sovereign immunity in the 11th Amendment to the states the 11th amendment has been
construed to be: the judicial power of the US shall not extend to any suit commenced against a state [for
damages]
Line between prospective and retrospective relief not self evident

Edelman v. Jordan (1974)

Jordan was a welfare recipient IL routinely failed to deliver its checks on time as required by Federal law trial
court ordered IL to obey the law in the future (prospective injunction). The coa affirmed. (get the facts in the
outline that he sent out to ur email) The supreme court said that the guys failure to receive money for welfare was
not damages but said that the distinction between damages or restitution which are not dmmgs does not matter, as
it was a suit for just damages, and the judicial pwr of the u.s. shall not be extended to suits brought against the
state for damages, unless the state consents. .(get this in the thing he sent you via email)* on midterm)*
The 11th amendment doesnt say that a citizen cannot sue their own state; it only says that a citizen cannot sue
another state but since the purpose of the 11th amendment was to embody the concept of sovereign immunity,
the SC over the past few years have created some hurdles for us in order to get relief (ex: ex parte Young fiction)
ex parte young fiction: the fiction is that you name the person instead of the state the fictional part is that the
suit is against a person and NOT the state (even though everyone knows its really against the state) the truth is
that the only remedy is injunctive relief therefore, a suit for prospective relief is against the state officer in his
official capacity, NOT against the state (Prof. Laycock kindly refers to the requirement that you name the
individual and sue them in their official capacity as silly). So this is one hurdle where u have to sue the state

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officer or the state. Midterm dealt with a guy suing his own state or another state; know if other state would have
to consent and if they could still sue*
So, the 11th amendment does not bar federal courts from issuing injunctions against a state (see above) in this
case, there really wasnt any question that Jordan could sue Edelman (really IL) for injunctive relief requiring it to
follow the law no one challenged Jordans ability to make that case (11th Amendment) the only issue, then,
was whether damages = monetary relief the court said that any monetary amount from a court from the coffers
of the sovereign is subject to sovereign immunity
The only relief that is allowed to be awarded is prospective only trial courts injunction in Edelman WAS
prospective, but since the money ordered to be paid was for past failures, it was considered restitution (i.e.
retrospective) the state didnt consent, so relief is not available (if states consent to retrospective relief, then and
only then is it allowed) (the destinction really doesnt matter though AS IT WAS a suit for dmmgs either way, and
the state didnt consent)
Rule (the law of remedies against governments and government officials): injunctions to comply with the law
in the future are permitted BUT compensation for past violations is forbidden (unless the sovereign consents and
only to the extent it consents)
The line between prospective and retrospective relief is not self-evident injunctions cost $$ (in Edelman, IL is
ordered to pay benefits ($) timely, which is not allowed) (KS city school desegregation case that cost $2B to
comply was allowed!)

Harlow v. Fitzgerald (1982)

Conspiracy suit against Nixon aides P employed by US, pointed out huge cost overruns on C5A project, and
was terminated
Executive officials are entitled to qualified immunity
We know that the sovereign cannot be sued in its own name without its consent we also know that sovereign can
be forced to obey in the future by injunction (BUT this immunity does not extend to individuals) sovereigns
have waived sovereign immunity by enacting narrowly tailored remedies
Governmental Tort Liability Acts contain this waiver under these acts, the sovereign can be sued, subject to
the limitations imposed therein the state waiver must be express and unambiguous state can waive by signing
an agreement (usually by entering into a contract)
o Even if the state enters into a contract, the general rule is that you cannot obtain specific performance of a
contract against the state (absent consent) (Congress and most states have consented to be sued for
damages for breach of contract).
o In this case it showed that an official might not be completely immune to suit, in this case the termination
of the guy was under qualified immunity where if an official makes a decision like the guy did here, he
will not be as easy to sue as a regular person.
o Know the scope of qualified immunity, it applies to the state government too, not just federal government.
So if u are retaliated against by the government for whistleblowing, like this guy in harlow, you may not
be o.k.

City of Lavergne v. Southern Silver (1993) KNOW PRINCIPLES OF CASE FOR EXAM

City obtained a temporary injunction against operations of an incinerator company later it was dissolved due to
lack of proof of nuisance incinerator company counterclaimed for damages for malicious prosecution
At trial, City relied on governmental immunity defense Southern Silver argued it was waived based on the
state constitution and a state statute (excellent opinion giving the legal basis for governmental immunity in TN)
But C.O.A. said it wasnt SO, the City of Lavergne was immune from suit as the lawyers for the city didnt waive
the immunity by failing to put sovereign immunity in their answer under the doctrine of sovereign
immunity, the city could not be sued for malicious prosecution as they did not expressly and unambiguity

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waive it.
Suits may be brought against the state in such manner and in such courts as the legislature may by law direct
(Article I, Section 17 of the TN Constitution) such suits shall not be brought unless legislative authority is
affirmatively given
Tennessee Governmental Tort Liability Act (TGTLA) is premised explicitly on the absolute immunity of
governmental entities TGTLA specifically excludes negligence from waiver of sovereign immunity
SO, the City of Lavergne was immune from suit also, the lawyers for the city didnt waive the immunity by
failing to put it in their answer under the doctrine of sovereign immunity, the city could not be sued for
malicious prosecution

TCA 29-20-205: immunity is removed for [negligent] injury unless the injury arises out of: (1) a discretionary function or
(2) false imprisonment, false arrest, malicious prosecution, intentional trespass, abuse of process, libel, slander, deceit,
interference with contract rights, infliction of mental anguish, invasion of right of privacy, or civil rights; (3-4) [relates to
something else]; (5) the institutionof any judicial or administrative proceeding, even if malicious or without probable
cause; (6) misrepresentation; (7) riots, mob violence, and civil disturbances; or (8) taxes
so immunity is NOT waived (cannot be sued) for any of these things
TCA 9-08-301: the claims commission determines cases against state for negligent acts of its employees in 20 defined
types of cases, and if u win u dont necessarily recover the damages u suffered, u share prorata with other people who
suffered injury from the state for that year from the pool that is allotted to the claims commission for that year. (p. 86-90
of our book)

Public Duty Doctrine

Stone v. NC Dept. of Labor (1998)

NC officials never conducted an OSHA inspection of the facility fire broke out and several employees died
it is not a tort for government to govern government has no liability for failing to prevent harm inflicted by
someone else, unless it undertook to specially protect a particular person or group

The public duty doctrine shields a public employee from suit for injuries caused by the employees breach of a duty
owed to the public at large
Historically, a state cannot be sued unless he consents and to the extent he consents, and this is consistent with the
public duty doctrine
In 1855, US SC held a sheriff not liable for failing to protect a kidnap victim sheriffs duty to keep the peace
was a public duty, for neglect of which he is amenable to the public, and punishable by indictment only the
public duty doctrine has been widely accepted by most state courts, including TN
Reasons for this:
o (1) juries and courts are ill-equipped to evaluate how community resources should be allocated to protect
individual members of the public;
o (2) severe depletion of those resources could result if every oversight by the police resulted in civil
liability;
o (3) the police would be insuring the personal safety of every member of the public or face a civil suit for
damages also, other mechanisms exist wherein individual officials may be held accountable for
dereliction of duty (i.e. internal disciplinary proceedings or formal criminal prosecutions)
In TN, private citizens cannot sure for the wrongful acts of public officials unless they have a special interest or
special injury not common to the public generally

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Dissent: the state legislature has laid out the grounds for which the state is and is not immune and didnt mention
the public duty doctrine so, since the state has acted, why would we think the doctrine still lives when the
legislature didnt include it in the law? the counter-argument here is that the legislature didnt exclude itcatch
22!

Ezell v. Cockrell (1995)

Mr. Hillis drove head on into Mr. and Mrs. Ezell, killing Mr. Ezell Ms. Ezell brought this suit against the police
chief for negligence (claiming that he knew or should have known) trial court dismissed the case based on the
public duty doctrine
Public duty doctrine not expressly listed as exception to the waiver of immunity in TGTLA court holds that the
TGTLA does not abolish the public duty doctrine
The sheriffs duty to protect the public from the drunken Mr. Hillis was to the public generally
TN SC affirms dismissal of suit holding that suit against the city for negligence of police was barred by the public
duty doctrine what do you think about the application of the doctrine in Ezell? Was the police chiefs action
mere negligence?

Federal Tort Claims Act no claim in tort based upon the exercise or performance of a discretionary function or duty,
whether or not the discretion was abused
Another case: Federal Home Loan Bank Board replaced the board of the Savings & Loan and imposed other requirements
on the S&L the S&L failed largest shareholder sued for damages suit barred because decision was discretionary
function of the FHLBB

Absolute Immunity
Stump v. Sparkman (US, 1978) (not in the book)
Mother sought to have court approve 15-year old daughter having tubal ligation court approved daughter sued the
judge (among others) when she discovered this had occurred trial court dismissed case holding Judge Stump absolutely
immune from suit 7th Circuit reversed and then SC reversed since 1872, SC judges have been absolutely immune
(different from qualified immunity) if judge acts in the clear absence of jurisdiction, then she loses the protection of
her absolute immunity clear absence means absolutely clear here, no IN case or statute clearly stated that Judge
Stump lacked jurisdiction mere procedural errors will not create liability if a judge is acting in his official capacity and
it is NOT absolutely clear that he has no jurisdiction on the matter, then he will be absolutely immune

Sanders v. Lanier (TN SC, 1998) (not in book)

P, a youth services officer sued Judge Lanier of Dyer County for sexual harassment proof of sexual harassment was
overwhelming Judge demoted her from her supervisory position in retaliation for rejecting his sexual advances trial
court dismissed her case citing absolute judicial immunity the Judge was her employer, and as an employer, hes subject
to the laws of the state of TN TN SC reversed

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This is a class quid pro quo sexual harassment judicial immunity not an issue! (Judge Lanier was acting in his capacity
as an employer, not in his judicial capacity, under TCA 4-21-102(4) the state can be liable as an employer for wrongful
discrimination qui pro quo sexual harassment is classic sex discrimination)
This type of question has been known to show up on an exam!!!

Van de Kamp v. Goldstein (2009)

Prosecutors are absolutely immune from damage suits for prosecutorial acts suit for injury caused by poor
training, etc. absolutely barred
P tried to argue that tasks were administrative but the administrative nature of the office here goes to the heart of
the prosecutorial function
Legislators are absolutely immune from any kind of suit, including criminal prosecution, damages, injunctions,
and declaratory judgments speech and debate clause of US Constitution

Immunity
Presidential Immunity
o The President is abosolutely immune from suits for damages for any actions taken in his official capacity
o Clinton v. Jones: Court said private litigation wouldnt significantly interfere with the presidents public
duties
Bivens v. 6 Agents

Very important Constitutional Law Case

Pltf was arrested wrongfully by the FBI
o Manacles in front of wife and kids
o Threatened arrest of entire family
o Searched whole apt.
o Strip searched @ the station
o NO warrant
o No charges ever filed
Sued for civil damages claiming 4th amendment rights violated
Trial Court dismissed complaint
COA affirmed
SC reversed
DEA agents argued that plaintiffs only remedy was at state law
o Argued no right to sue for violation of Fed. Const.
Held: Private citizen may sue for damages for violations of US Constitution (4th Amendment here)
Note 5 pg. 535 Congress waived sovereign immunity for the actions in Bivens in response to that case.

**The 4th Amendment protects citizens against:

Under Bivens, you can sue for damages for violating 4th Amendment
Warrantless searches and seizures
Court has created exception allows warrantless searches under limited circumstances

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Alexander v. Sandoval
Title VI of the Civil Rights Act of 1964
No person shall on the grounds of race, color, or national origin, be excluded from participation in, be
denied the benefits of, or be subjected to discrimination under any covered Title VI program.
Alabama administered its drivers license exam only in English
Trial court enjoined this, holding that it violated Title 6
COA affirmed
Issue: whether private right of action under the regulations enacted to implement Title 6.
Private right of action to enforce regulations?
o SC in Sandoval says NO
o There is a private right of action to enforce a UC Const. provision.
o Sandoval: only if statute provides for a private right of action to enforce a statute, then such right
exists
o SC: no private enforcement of regulations, unless Congress specifically authorizes it.

OCTOBER 5, 2015

Compensatory Damages
Time, Taxes, and the Value of Money
Income Taxes
Dixie Feed and Seed Co. v. Byrd
Def asked trial judge to charge the jury any recovery allowed Pltf would not be subject to the payment of
Federal Income Taxes
Trial court declined
COA affirmed
Rationale: would nullify the tax benefit conferred by Congress in expressly exempting damages for
personal injuries and would unduly complicate the trial of personal injury cases.
Norfolk & Western Railway v. Liepelt (1980)

Federal Employers Liability Act (FELA) this is a wrongful death case under FELA D asked for instruction to
jury to NOT include income taxes in their calculation of damages trial court refused instruction
Issues: whether or not the jury is to be told about the effect of income taxes
This is NOT the law in a wrongful death case in TN!!! (this is FELA law) in TN, the result is the opposite
Under FELA, WD damages = loss of the pecuniary benefit the survivors would have received (note: not the same
as TN state law) under the FELA, AFTER TAX income is the measure of damages
US SC reversed jury is to be instructed that the award is exempt from personal income taxes this is an FELA
case this would not be the result in TN remember: the measure of damages in TN is the pecuniary value of the
decedents life
In TN, the jury is NOT to be told about taxes

IRS Exemption (exempt from taxes) NOT TESTED ON THIS

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Physical Injury

Personal injuries or physical sickness are exempt from personal income tax

Emotional Distress

As you get into emotional distress injuries, its a little more fuzzy (its not a clear injury) emotional distress
shall NOT be treated as physical injury, except for the amount paid for medical care and therefore are NOT
exempt from income taxes EXCEPT to the extent that the client is paying for medical care for that distress
therefore, the amount the person paid for medical treatment for the emotional distress IS exempt from taxes but
the emotional distress part is NOT exempt
Sexual harassment mere emotional distress recovery is NOT exempt from personal income tax
humiliation and embarrassment are the most substantial items of recovery and are NOT exempt from income
tax UNLESS there is an act of physical trauma the IRS says: where there has been no act of physical trauma,
the allegation of emotional distress alone is insufficientthe act of sexual harassment must result in
psychological trauma sufficient to cause physical injury or sickness the Ps will try to squeeze all they can into
some psychological trauma sufficient to cause physical injury or sickness (usually, the P will have a doctor testify)
IRS advises damages for (i.e. sufficient to cause physical trauma in emotional distress case):
Lewd remarks taxable
Touched (no cuts/bruises) taxable
Touched (extreme [physical] pain, no cuts/bruises) taxable
Cut and bitten not taxable
Toughed (extreme pain, swelling) not taxable
Practical result: P never wants to pay income tax if you have a settlement, a wise Ps lawyer might set forth in
the settlement agreement how much is for what (to minimize taxation when showing the IRS that the income is
NOT taxable!) difficult question for employer is if IRS can hold employer responsible for tax if not property
withheld think all of this through in advance! this comes up ALL the time!

INTEREST TWO TYPES

1.) Prejudgment Interest
City of Milwaukee v. National Gypsum (1995)
o Admiralty case prejudgment interest denied to P note significant difference in date of sinking and
date of trial (15 years!) trial court denied prejudgment interest
o Issue is what is the standard for determining prejudgment interest in an admiralty case this is limited
application: admiralty court determines that common law arguments for denial (delay by the P for
good faith dispute, for example) do not apply in admiralty prejudgment interest awarded
o This is NOT the law in TN! (admiralty only)

Traditional common law rule: prejudgment interest awarded only when damages were liquidated (or
ascertainable) not recoverable in personal injury or wrongful death cases (because its not ascertainable
(applicable in TN too) no one knows the value of someones personal injury or wrongful death until the jury
awards it!) in pretty much any other type of case where the damage can be ascertained, you can seek
prejudgment interest, but unlike in admiralty, youre not necessarily always entitled to it

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o TCA 47-14-123 (quoted in blue book): prejudgment interest is awarded as permitted by statute or by
common law and may be awarded using equitable principles at a rate not to exceed 10% per annum
EXCEPT in contract cases where the contract expressly provides for a different rate
Prejudgment interest in TN is WHOLLY DISCRETIONARY (in the discretion of judge or jury)
computed using simple interest (no compounding) and can argue those points rejected in National
Gypsum because its wholly discretionary, it will be difficult to get a reversal on appeal BE
CREATIVE on this! (especially when it takes a long time to get to trial) this is something every
lawyer ought to know

Scholtz v. S.B. International (2001)

o Scholtz sued his employer, SBI, for severance he claimed was due
o Jury held for Scholtz, awarding $111,623.33 in damages
o Trial judge denied prejudgment interest b/c SBI had presented a reasonable defense
o Judge Koch explained the historical background for prejudgment interest, quoting John Stuart Mill and
Judge Learned Hand.

o Prejudgment interest is awarded not to punish the wrong-doer, but to compensate the wronged party for
the loss of the use of money it should have received earlier.

o 3 exceptions:
Pltf has been inexcusably dilatory
Pltf has unreasonably delayed the proceedings after suit was filed
Pltf has already been otherwise compensated for the lost time value of its money.
o Myint v. Allstate Tenn. overruled previous cases suggesting that prejudgment interest be denied when
the case is reasonably disputed.

o Post Myint in most cases a successful pltf should recover pre-judgment interest when he has been
deprived of the loss when he has been deprived of the loss of use of his money by defendant.

2.) Post-Judgment Interest

Federal rate is pegged to an index of market rates (fluctuates daily) this is extraordinarily complicated to figure

out (Spoden cant even figure it out)

TCA 47-13-121: 10% OR amount fixed by contracts starts to run from entry of verdict (doesnt matter if
appeal is filed) and is NOT discretionary! TN is a lot simpler than the federal court
Workers Comp cases (in TN) calculated differently pegged to the state banking rate (can find on the Dept of
Commerce and Insurance web site) PLUS 5% (state banking rate + 5%) begins to run on the entry of the
judgment (doesnt matter if appeal is filed)
Post-judgment interest is NOT delayed by motions, appeals, etc. ALWAYS runs from entry of judgment

Discounting for Present Value

The judge will say (TPI): In determining the damages arising in the future, you must not multiply a dollar
amount by the length of time you think the damages will continue or by the number of years the P is likely to live
instead, you must determine the present cash value of those damages; that is, you must REDUCE the award of
those damages to allow for the reasonable earning power of money (in blue book)
It is incumbent on the D to be sure the P includes that in their theory and if they dont to bring forth the proof that
the P has left that out the jury will be obligated to include that in their calculation

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Present cash value means: the amount of money that you could take today if, invested at a particular rate, that
will amount to over the life of the person the damage that they are going to suffer i.e. you apply a discount rate
to bring those future damages down to a present values
This only applies to FUTURE damages (NOT damages already incurred) in TN, the issue is submitted to the
jury (its up to the parties to educate the jury the two parties can present different discount rates and it will go to
the jury need to put on experts)
Prof. Cohens report all dollars were reduced to present value based on a 4.8% discount rate the D could
have argued for a different rate or put on proof that a higher rate would be more fair as lawyers, our job is to get
the evidence in front of the jury for the fairest assessment of the present value (I didnt get a copy of this report)

Concrete Spaces v. Sender (1999)

Election of remedies case Daltons (lessees) sued Sender (lessors) for compensatory, punitive, and treble
damages claimed breach of contract, negligent misrep, fraudulent misrep, and violation of the TN Consumer
Protection Act
Misrepresentation: compensatory damages + possible punitive damages but NO atty fees
TN Consumer Protection Act: treble damages + atty fees but NO punitive damages
No atty fees unless provided for by contract or statute (i.e. Consumer Protection Act in this case this is why
common law misrep has no atty fees)
Daltons claimed that Sender had deceived them about the quality and availability of the space in Cummins Station
and that Sender had intentional carried on a plan of harassment and lack of cooperation to force them to abandon
their leases so he could lease the space to others on more favorable terms
Jury charged on all counts and remedies EXCEPT TCPA confusion compounded why jury asked question about
TPA jury held for lessees for $75K plus atty fees and held that punitive damages were warranted awarded
$1.1M in punitive damages which was remitted to $500K by court (in TN, youre limited to the amount you plead
in your complaint, which was $500K in this case)
COA held that cannot have treble damages AND punitive damages in same case TN SC agrees with majority
of jurisdictions that it would be unfair to require election BEFORE a determination of liability and
entitlement to punitive damages and multiple damages has been made
Procedure: require the jury EITHER to provide a general verdict form accompanied by special interrogatories
(that track each theory of recovery and whether they find in favor of the P or not on each element of each theory)
OR to provide a special verdict form that has parallel instructions to the jury on each claim this was lacking in
this case
Significant parts of this case:
o Insist that courts in multi-theory cases use either a general verdict form with a detailed list of special
interrogatories OR a special verdict form
o The P doesnt have to elect the remedies until all the verdicts are in!
P is allowed to go to verdict on all claims only after the amount of punitive damages and multiple damages have
been assessed is the P required to make an election between the two types of remedies
One practical aspect of this is that the P MAY be better off to choose sooner and present easier instructions to the
jury (the jury may get too picky) it can get pretty confusing under even the best instructions

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OCTOBER 12, 2015

PUNITIVE DAMAGES

Punish the defendant fro egregious misconduct

Deter the defendant (and other ) from similar conduct
Need to know Hodges v. SC Toof AND 3 guideposts from US SC both of these protect Ds any
analyses of this should be extensive (especially on the exam)
Punitive Damages in TN
o Start with Hodges v. SC TOOF
The leading case in TN
Remember: bifurcated trial
Remember to follow the issues spelled out in Hodges
First part of trial: jury asked whether suitable case for punitive damages the judge is
supposed to make sure the case is submittable to the jury (to help the D not have a case
submitted to the jury under the question of whether punitive damages unless there are
SOME facts for it) suitable for punitive damages if malice, intentional misconduct,
fraud, reckless behavior, etc.
Hodges factors (second part) (these are the threshold questions the jury is supposed to
examine to determine the amount of punitive damages to award):
Ds financial affairs, financial condition, and net worth
The nature and reprehensibility of Ds wrongdoing, for example the impact of the
Ds conduct on the P or the relationship of D to P
Ds awareness of the amount of harm being caused and motivation in causing the
harm
Duration of Ds misconduct and whether D attempted to conceal the conduct
The expense P has borne
Whether D profited from the activity
Whether the D has been subjected to previous punitive damage awards based
upon the same wrongful act
Whether D took remedial action or attempted to make amends by offering a
prompt and fair settlement for actual harm cause
Other circumstances
The next 3 questions are what the court does to evaluate whether the jurys award is
excessive
Until 1996, little to no regulation of punitive damages by the US SC considered an
issue to be resolved by the states

CONSTITUTIONAL LIMITATIONS (Guideposts)

BMW v. Gore (1996)

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Dr. Gore bought new $40K car turns out car had been repainted and was not new BMW policy
was that all cars with less than 3% suggested retail price damaged = new thus, it was marketed as a
new car Dr. Gore claimed fraud jury awarded $4K for compensatory damages for the financial injury
from the reduced value of the vehicle from repainting and $4M in punitive damages note that Alabama
was notorious for large punitive damages awards in these days Alabama SC remitted to $2M
US SC held that BMWs conduct violated an Alabama statute preventing fraud BUT found no evidence
that BMWs behavior was unlawful in any other state US SC reversed
US SC did not limit its analysis to merely excessiveness the US SC said that even though the conduct
violated an AL statute, there was no evidence that that behavior violated fraud statutes in any other state
Since the 14th Amendment to the US Constitution, according to the US SC in 1996, prohibited grossly
excessive punishments, the US SC held that that should apply to civil damages in a civil case and
articulated the 3 guideposts to determine the constitutionality under the US Constitution of punitive
damages (whether violates due process):
3 GUIDEPOSTS FOR CONSTITUTIONALITY OF PUNITIVE DAMAGES (not related to
eligibility of punitive damages determine a limit)
o 1) Degree of Reprehensibility:
Consider whether this is a purely economic case or whether there was some personal
injury involved
Consider whether there was any danger to health or safety
Consider whether this is a failure to disclose case less reprehensible than an affirmative
false statement this is the MOST SIGNIFICANT FACTOR!
o 2) Ratio: the ratio between the amount of compensatory damages awarded and the amount of
punitive damages awarded
4 times the amount of compensatory damages might be close to the line (Haslip) no
mathematical formula dictated
500 times WAY too much
o 3) Sanctions for Comparable Conduct: consider where there are sanctions for comparable
conduct imposed by state law (some statute or admin regulation)
Far in excess of fines that could be levied by Alabama governmental officials
Must consider other less drastic remedies
Justice Scalia, in dissent, warned against the Courts extensive intrusion into a previously purely state
court arena
o The legal significant of these guideposts is nowhere explored but their necessary effect is to
establish fed standards governing the hitherto exclusively state law of damages
On remand, the P accepted a remittitur of $50K
State Farm Mutual v. Campbell (2003)
Campbell passed 6 vans and killed someone in a head-on collision SF refused to settle the wrongful
death case for the policy limits of $50K each case went to trial SF assured Campbell their assets
were safe and that they had no liability for the accident jury awarded damages of $186K against
Campbell SF refused to pay the $136 above the policy limits SF told Campbell to sell his house on
direct appeal, Campbell lost and SF paid the judgment in full Campbells had legit claims of stress
from the way SF handled the case
Campbell sued SF for bad faith alleging intentional infliction of emotional distress note: TN bad faith
statute has limited damages at maximum of 25% (TCA 56-7-105) this case is the appeal from the bad
faith case, NOT the wrongful death case

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During the trial, Campbell introduced evidence of SFs nationwide policy to reduce payouts its PP&R
policy jury awarded $2.6M in compensatory damages and $145M in punitive damages trial judge
reduced to $1M compensatory and $25M in punitive
The SC looked with great askins as to whether punitive damages could be assessed based on out-of-state
actions (i.e. nationwide policy) whether the court could even CONSIDER actions outside the state of
UT! SC reversed the due process clause of the 14th Amendment prohibits the imposition of grossly
excessive or arbitrary punishments this is a US Constitutional issue after BMW v. Gore
3 guideposts (BMW):
o The degree of reprehensibility of the Ds misconduct
o The ratio between the actual harm suffered by the P and the punitive damages aware
o The difference between the punitive damages awarded by the jury and the civil penalties
authorized under state enforcement mechanisms
Analysis:
o The only conduct which can be considered is the conduct in UT
o Ratio of 1:45 clearly violates due process it would be hard for due process to allow anything
more than a single-digit ratio most significant guidepost in SF v. Campbell was the ratio few
awards exceeding a single-digit ratio between punitive and compensatory damages will satisfy
due process this doesnt mean that the US Constitution provides that the maximum amount is
9x but it certainly alludes to that
o The penalty in this case was extremely modest ($10K) compared to the $145M punitive damages
(or even the remittitur to $25M)
The most important indicator of the reasonableness of a punitive damages award is the degree of
reprehensibility of the Ds conduct should consider 5 factors:
o 1) Was the harm physical or merely economic?
o 2) Did the conduct reflect reckless disregard for the health and safety of others?
o 3) Was the victim financially vulnerable? (i.e. the Campbells would have had to sell their house!)
o 4) Was the conduct part of repeated actions or was it isolated? BUT you can only consider
repeated actions IN THE STATE WHERE THE CLAIM IS BROUGHT (i.e. you cant rely on a
nationwide policy unless you only discuss the harm in that state)
o 5) Was the harm the result of intentional malice, trickery, or deceit? Or mere accident? (in the
Campbells case, it was at least intentional)
An absence of ALL of these 5 factors renders ANY punitive damages award suspect (as a matter of US
constitutionality) were they all absent here? What was the only factor possibly present? The financial
vulnerability definitely and possibly the intentional act factor
A state CANNOT punish a D for conduct that may have been lawful where it occurred a jury must be
instructed that it may not use evidence of out-of-state conduct to punish a D for action that was lawful in
the jurisdiction where it occurred this applies to the punitive damages phase of the trial but would also
probably be applicable to the punitive part of the trial because this evidence wouldnt be relevant
What do you think? A company operates nationwide and you can only introduce evidence of incidents in
the state where the case is pending is that in the Constitution too? SC bases this position on
federalism
Note: all cases which reached the US SC after BMW with ratios with more than a single-digit ratio were
vacated in a one-sentence judgment
Note: the jury is NOT supposed to try to punish the D via punitive damages!
One of the purposes of punitive damages is deterrence but, the SC doesnt put much stock in
deterrence in this case the US Constitution prohibits large awards against large companies (the size of
the D/wealth of the D alone does not justify large awards) even though large entities are more likely to

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be deterred when it hurts the court undermined one of the central purposes of punitive damages in this
case
Conduct legal in the state where it occurred cannot be the basis for a punitive damages award in another
state what about a state that doesnt allow punitive damages? Does that grant the resident D permanent
no-punitive-damages exposure? Think about car manufacturers in MI where punitive damages are not
allowed
If conduct is UNLAWFUL in other states, it probably can be considered in assessing punitive damages
The pinto case engineers in MI test the Pintos and the pintos fail the tests executives in MI decide,
based on the cost analysis in Exhibit 125, to produce the Pinto in MI anyway assume that all contracts
between Ford and its dealers call for the dealers to take delivery at Fords plant in MI

Phillip Morris v. Williams (2007)

US SC holds that a jury cannot be allowed to award punitive damages when the jury is motivated by
desire to punish the D for harming persons not before the court - this would be a violation of due process
Since the purpose of punitive damages was deterrence, it was believed before this case that evidence of
harm to others was necessary to determine if the case was suitable for punitive damages
Due process clause forbids a state to use a punitive damages award to punish a D for injury that inflicts
upon nonparties (i.e. strangers to the litigation) this is similar to the out-of-state conduct: I cant
consider out-of-state conduct and cant consider proof of harm to others not party to the lawsuit
Exxon v. Baker
The Exxon Valdez case the Valdez, captained by a drunken sailor, poured 11M gallons of oil into
formerly pristine Prince William Sound covered 1,300 square miles of ocean Exxon settled with the
EPA and the state of Alaska this case brought by those affected by the spill (commercial fishermen,
native Alaskans, and landowners)
Court uses maritime law (NOT the constitutional limits from earlier cases) to limit the punitive to a 1:1
ratio ($500M compensatory + $500M punitive = $1B) admiralty law is based on federal common law
(NOT constitutional!)
Flax v. Daimler Chrysler (2008)
Jury awarded $7.5M compensatory damages award in this wrongful death case trial court reduced the
$98M punitive damages to $13.3M because of the Campbell decision
Chrysler disregarded risks posed by the seats noting that the seats yielded incorrectly Chrysler also had
records of injuries that they concealed prior employee also gave Chrysler warnings about the
dangerousness of the seatbacks, and Chrysler ignored him and fired him
Reprehensibility the most important factor and finds Chryslers actions sufficiently deplorable to
affirm the $13M+ award this was significantly based on the detail in the reports and Chryslers
conscious disregard of the warnings also note that there are not just economic damages in this case
because Josh died
Ratio net ratio of compensatory damages: $2.5M to $13M = 5.35 court points out that such a ratio is
close to the outer limits Gore says that 4:1 approaches the outer limits of constitutionality BUT this
ratio is warranted in this case also if there is a large award of compensatory damages, 1:1 may be more
appropriate court says $2.5M is not terribly large and given that reprehensibility is the most important
factor so, a 5.35:1 ratio is constitutional in this case
Penalties highest penalty the state of TN could impose for the reckless killing of another is $150K
per Campbell, substantial deference must be given to TNs sanction this guidepost is NOT met does
this mean that the decision has to be reversed? NO there is not much guidance on how to apply this
guidepost

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Since the award meets the first 2 guideposts and there is not much guidance on how to apply 3rd, the
court affirms $13M+ award of punitive damages
Here, there was a GREAT DEAL of reprehensibility it was right ON THE LINE on the ratio so, the
court basically says that since the first factor is so strong and the second is in the middle, they were
going to ignore the third
At the time of this decision, this was the first articulation by the TN SC at how they were going to apply
the US SC guideposts this was very important that time but was also a unique case because it was so
clearly reprehensible with such catastrophic harm

LaMore v. Check Advance (2010)

This is the leading TN case on punitive damages (other than Hodges v. Toof in terms of what youre
supposed to consider) Goff v. Elmo Greer (2009) was leading on how to interpret 3 guideposts and is
quoted a LOT in this case need to know all 3!!
Classic employment retaliation case employee says she was terminated for reporting a co-working as
possibly violating child abuse laws employee says she was terminated in retaliation employer says
she was terminated for not calling in as required
Jury found employer was liable for back pay of $8,200 and found that the conduct justified punitive
damages after the punitive damages hearing, the jury awarded $1M in punitive which the trial court
reduced to $500K
Analysis relies heavily on Goff analysis in Goff, a construction company had unlawfully disposed of
tires on someone elses property the landowner learned about it years later it was all economic injury
the award in Goff for compensatory was modest at around $3K the punitive damages in Goff was
$1M which the trial judge remitted to $500K the court goes through a thorough analysis of the factors
and concludes that even though the ratio is higher than the single digits (its about 25:1), that the
remitted amount still was a viable and affirmable punitive damage award that case WAS appealed to
the US SC and the US SC denied certiary
The most important indicator of the reasonableness of a punitive damages award is the degree of
reprehensibility of the Ds conduct should consider 5 factors:
o Was the harm physical or merely economic? Here, the TN COA specifically says that this
conduct is reprehensible because it is against the good policy in our state of trying to protect a
child from child abuse, EVEN THOUGH the child was not a party to the case!
o Did the conduct reflect reckless disregard for the health and safety of others?
o Was the victim financially vulnerable?
o Was the conduct part of repeated actions or was it isolated?
o Was the harm the result of intentional malice, trickery, or deceit? Or mere accident?
So, 27x is too much but 13x (the amount of the remittitur) is NOT too much the SC isnt saying that
you HAVE to keep it at single digits
Ignores 3rd guidepost because no relevant statute
TN SC is a little loose with the US SC guideposts
Hutchinson v. Pyburn (pg. 135)
Real Estate Sale
$3,168.94 Compensatory Damages
$5,000 Punitive Damages
Defendant claimed that punitive damages were improper
o Punitive damages not allowed in breach of K cases
Not a mere breach of K case

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Pltf claimed and proved fraudulent misrepresentation sufficient to support rescission of the deed
Thus, punitive damages affirmed

Tenn Code Ann. 47-18-109 Consumer Protection Act (TCPA)

Codifies statutory remedy for unfair or deceptive practices
If willful or knowing violation, court may award 3 times actual damages
No punitive damages
Smith v. Scott Lewis Chevrolet
Truck sold as is, But told buyer it had never been wrecked
Jury found for pltf on TCPA
Only actual damages unless Defs conduct was willful and knowing
Jury found mere negligence in the representation re the condition of the truck
Thus, no treble damages
Rescission and award of the purchase price, less an allowance for use pltfs actual damages.
****US SC court decisions on punitive damages would be important to know the names of the cases
2011 Civil Justice Reform
Punitive Damages limited to:
o 2 times compensatory damages or
o $500 (whichever is greater)

October 19, 2015

Equitable Relief

Weve been dealing with compensatory and punitive damages so far now, were moving on to equitable relief

Injunctions
Introduction to Injunctions
o
o

Injunction is Court Order enforceable by contempt the goal is to maintain the Ps rightful position
(money doesnt always equal the value of what is lost) (keep them in the same place not to be better or
worse off)
2 types:
mandatory injunctions (the injunction compels the D to DO something) and
preventive injunctions (usually compel the D NOT TO DO something) there are preventive,
reparative (probably more mandatory than preventive), and structural injunctions ???

Preventive Injunctions

Preventive injunctions compel the D to do something

Practice tips: seek early, before harm occurs (purpose is to prevent harm/enjoin the imminent threat of harm)
must have a real threat of irreparable harm injunction must be narrowly tailored to prevent the harm threatened

Preventing Wrongful Acts

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Almurbati v. Bush (2005)

o Guantanamo detainees sought injunction against US transferring them to other facilities detainees had
unsubstantiated reports of threatened harm when transferred to other states (none from actual officials
of the US govt.) D provided evidence that policy was to not transfer to countries where theyd be
tortured and to provide human treatment
o Proof must show that the threatened injury is not remote and speculative innuendo and secondhand
media reports are not enough to show that threat is not remote and speculative in other words, the threat
must be real (this is the ripeness rule)

Humble Oil v. Harang (1966) (note 2)

o Humble Oil suit against Harang (a former employee) Humble sought preliminary injunction against
Harang destroying documents Humble Oil didnt come forth with any evidence to show he was likely to
destroy documents Humble had no proof that Harang intended to destroy documents (similar to
detainees at Guantanamo) Harang even testified that he had no intention of destroying any documents
Humble argued that there was no burden on Harang
o Held: no proof of an imminent threat of destruction of documents
o Rule: party who seeks an injunction must show that there is a real danger that the act to be enjoined will
occur if the relief is not granted fear ALONE is not enough!
o Note: lack of hardship on D is a factor but is NOT sufficient ALONE absent a real danger that the
wrongful act will occur, no injunction should issue (the ripeness rule)

The Ripeness Rule

o P must show a substantial threat of unlawful conduct directed at the P ripeness is a matter of timing an
act in the distant future is too remote for an injunction the preventive injunction must be necessary
the fear of injury must be real
o TCA 36-4-106: in every divorce case, upon the filing of the petition, there is an automatic injunction
against both parties this turns the ripeness rule on its face there is no showing necessary the only
requirement is the filing of the complaint if you allege any ground OTHER THAN an irreconcilable
difference divorce (non-contested) - i.e. this applies only to contested divorces this includes: cannot
modify, dispose of, etc. material assets (except expenditures to maintain standard of living), changing
insurance policies, making disparaging remarks about the other spouse in presence of children or
employer, relocating children out of state or more than 100 miles from marital home so, in short, no
dissipation of assets, no disparaging remarks regarding other parent, no relocation of children outside
state or 100 miles from home REGARDLESS of the ripeness rule if you want to request relief from the
statute at the outset of the case, you have to list specific reasons why you should be granted relief

Violation of Injunction
o May result in contempt of court whole class later on contempt court has power to put person who
violates an injunction in jail
Rule 65.01 (TN): Injunctive relief may be obtained by: (1) restraining order, (2) temporary injunction, or (3)
a permanent injunction in a final judgment a restraining order shall only restrict the DOING of an act (no
mandatory relief no relief compelling a party to do something affirmatively) an injunction may restrict or
mandatorily direct the doing of an act

Rules/Lingo
o All restraining orders or injunctions are injunctive relief (watch the nomenclature!)

TN Rules
Restraining order
Temporary injunction

Fed Rules
Temporary restraining order (TRO)
Preliminary injunction

What is the difference between the rules?

TN Rule 65:
Restraining order: temporary injunctive relief issued without notice (no notice of hearing required) lasts for 15
days ONLY

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Temporary injunction: pendent lite relief only during life of the case notice of hearing required

Federal Rule 65:

TRO: temporary injunctive relief issued without notice (no notice of hearing required) lasts for 10 days ONLY
Preliminary injunction: pendent lite relief only during life of the case notice of hearing required
TN Rule 65.02: KNOW FOR MIDTERM
Who is bound? The parties, their officers, agents, and attorneys AND other persons in active concert or
participation with the parties
When are they bound? When they receive actual notice of the restraining order or injunction by personal service
OR otherwise (do NOT have to have personal service)
TN Rule 65.03 (meat and potatoes) (RESTRAINING ORDER):
When is it authorized? If it is clearly shown that the applicants rights are being or will be violated and the
applicant will suffer immediate and irreparable injury before notice can be served and a hearing had thereon
TN Rule 65.04 (meat and potatoes) (TEMPORARY INJUNCTION):
Notice? no temporary injunction shall be issued without notice to the adverse party
When is it authorized? If it is clearly shown that the applicants rights are being or will be violated and the
applicant will suffer immediate and irreparable injury pending a final judgment
TN Rule 65.05: no restraining order or temporary injunction shall be granted EXCEPT upon the giving of a bond buy the
applicant with surety in such sum as the court deems proper for the payment of such costs and damages as may be
incurred by any person is found to have been wrongfully restrained or enjoined this is VERY important! No valid
RO/TRO or temp/prelim injunction w/out the bond! this is an important defense issue
Final injunction: after a final hearing on the merits

Marshall v. Goodyear Tire and Rubber Co. (1977)

Secretary of Labor sued Goodyear there was a violation of the ADEA (Age Discrimination in Employment Act)
proved one violation with respect to one employee sought nationwide injunction DENIED: one violation
does NOT demonstrate the need for relief that broad important to narrowly tailor injunction to the scope of
the problem demonstrated by the facts
If a POLICY, then it would be enough for a nationwide injunction
This is often forgotten on the final

US v. WT Grant Co. (1953)

Antitrust case under the Clayton Act, interlocking corporate directorates are made illegal US sued, claiming a

violation of the Clayton Act director immediately resigned (company voluntarily terminated the claimed illegal
activity) company moved for summary judgment trial court granted motion injunction claim is moot
Mootness: NOT automatic upon voluntary cessation BUT moot if there is no reasonable expectation that the
wrong will be repeated its not enough to be voluntarily ceased
The SC affirmed the motion the case is moot courts are reluctant to issue injunctions if they are no longer
needed it will depend on the facts of the case!
Claim for damages is NEVER moot (always possible to compensate for past damages where damages are bona
fide) termination of wrongful behavior is common basis for finding mootness BUT the fact that the act has
occurred, however, makes the court take seriously a threat that it will happen again (the D will need to come
forward with evidence of MORE than just mere cessation, and as a P you have to remember that mere cessation is
NOT enough and if there is any likelihood that the D may continue the behavior in the future, you need to put that
before the court)

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Preventing Lawful Acts that MIGHT have Wrongful Consequences

Nicholson v. Connecticut Half-Way House (1966)

Ps sought to enjoin Ds use of a home as a half-way house for prison parolees Ps claimed this will be a
nuisance (Ps FEAR/are AFRAID of criminal conduct in their neighborhood and diminished property values)
Per Conn. Ct.: whether use is a nuisance depends on reasonableness of use (i.e. legal)
Held: injunction denied (legal use, no evidence/proof of damage) generally FEAR alone is NEVER enough!

State v. Feezell (1966) (TN case)

Ps sought to enjoin a proposed crematory in a rural residential area claimed it would cause mental anguish,
depressed feelings, physical discomfort, and lower property values
Injunction DENIED no proof that any of these things would likely occur a mere possibility or fear of future
injury is not ALONE ground for injunction injunctions will not issue merely to relieve the fears or
apprehensions of a P FEAR ALONE is NEVER ENOUGH!

West v. Luna (1998) (TN case)

Neighbors complaining about noise from track (Ps claimed race track was a nuisance) every owner of land has
the entire dominion of the soil to whatever extent he or she may choose to occupy it BUT obviously subject to any
restrictive covenants or other obligations
May 1982 order enjoined Holt from operating speedway until such time as he can and will operate same where
the noise level will not be a nuisance to the Ps Holt operated track under this order for 14+ years
1986 Luna started changing the operations of the track Luna intended to begin holding stock car races with up
to 24 stock cars up to 130 miles per hour, some at night, and also to construct a grandstand for 15,000 spectators
and install a loudspeaker system at the track
Trial court was convinced the track was a nuisance in 1996, the trial court enjoined Luna from holding races of
any sort at the track the COA vacated this order because since stock car racing is a legal activity, they must
limit the injunction to only those activities that create the nuisance since this is a legal business, you cannot
enjoin its operation altogether this is that NARROW TAILORING that we talked about before
This case is more grey than the last two cases
NIMBY: not limited crematoriums, waste dumps, race tracks its important whether the conduct is legal but not
always dispositive results not always consistent (ex: Loan Oak Sportsmens Club case enjoined rifle range in
residential area even though it was a legal activity that had been there for 50 years)

Hutchinson v. Pyburn (1977) (TN Consumer Protection Act case) from before the mid-term

Punitive damages were an available remedy in this case (even though compensatory damages not given it was
the same conduct that would have justified compensatory damages but they got rescission instead)

HISTORY OF EQUITY
Maitland on Equity
o Distinction b/w law & equity
o End of the 13th Century

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Kings Bench
Common Bench
Court of Common Pleas
The Exchequer in charge of the departments of Govt
Chancellor: Person in charge of exchequer
o Normally a cleric
o Answered to a higher law than just the King
o Allowed to deviate from the strict rules of law as the keeper of the Kings
conscience.
o The Common law was the only general law
Law Courts: elaborate system of highly technical writs
King is still a source of justice
o Petition to King when law courts provide no remedy
o King referred the Petition to Chancellor of the Exchequer
Exchequer became the Chancery Court
o By 15th century
o Adequate legal remedy = limit on Chancellors power
If the remedy was adequate in the law courts, then the chancellor had no authority
o Boundary b/w Law and Equity
o No jury trials
USA
o Law & equity in one court federal district courts
But, a case was still either at law or in equity
o States started merging law & equity w/ the Field Code
o 1938 adoption of Fed. Rules of CP
Law & equity no longer formally separate in US fed. Court
o Remember the 1st class: What is the difference?
Right to jury trial exists only in what? Suits in common law
TN
o Still have Chancery and Circuit Court
o Original purpose to separate equity and common law courts
o By statute, distinctions minimized
Can have jury trial in Chancery Court
Cases for un-liquidated damages limited to Circuit Court
Can waive this limitation
Appeals of state administrative law rulings to Chancery Court
o Many current distinctions, local practice

**Important to know the law of equity for purposes of injunctions

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October 26, 2015

Equitable Relief (Cont.)
Preventive Injunctions (Prophylactic Relief) (Cont.)
Preventing Lawful Acts that MIGHT have Wrongful Consequences
Pepsico, Inc. v. Redmond (1995)

Pepsi sought to enjoin former employee Redmond from disclosing trade secrets and confidential information to
Quaker Oats Quaker makes Gatorade, Pepsi makes All Sport. In 1994, Pepsi introduced All Sport. Quaker
purchased Snapple (which owned Gatorade) in late 1994. All Sport was struggling, and Gatorade was doing very
well. Redmond worked for Pepsi from 1984 to 1994 signed confidentiality agreement in November 1994,
Redmond hired by Quaker to integrate Gatorade and Snapple Redmond privy to detailed strategic and tactical
plans of Pepsi
Pepsi sued to prevent threatened misappropriation: court notes that a case may be made for misappropriation if the
Ds new job will inevitably lead him to use Ps trade secrets (inevitable disclosure rule)
Trial court found that Redmond would inevitably use trade secret info from Pepsi (inevitable disclosure)
o Trial court enjoined Redmond (1) from going to work for Quaker until the end of May 1995 AND (2)
from disclosing any Pepsi trade secrets or confidential info
Quaker and Redmond said we dont intend to use Pepsi info! but cant explain how such will be prevented
Uzzi was a former Pepsi employee hired as the new head of Gatorade who then hired Redmond (that then smacks
of intent to use what Redmond knows of why would he have been hired??)
Affirmed injunction most likely, any person at Redmonds level that sits in on executive meetings about
strategy, etc., will be privy to trade secret information (his knowledge of what All Sports plans probably derives
independent economic value (see below), regardless of how good the information actually is its not just what he
knows but the fact that he knows things
PROPHYLACTIC INJUNCTION
o Why was injunction necessary? Quaker and Redmond said they would not use info
Here, inevitable disclosure theory (normally strong proof is required for this theory!)
In essence, Pepsi got a 6 month non-compete, even though they did not have such an agreement
Be aware that the inevitable disclosure rule is not always followed! If a court is going to adopt inevitable
disclosure, there is usually a requirement of pretty strong proof
The remedies under trade secret law are pretty strong and trade secrets are defined VERY broadly
TCA 47-25-1701 through 1709 TNs Uniform Trade Secret: a trade secret is basically any information that:
o (a) derives independent economic value from not being generally known to, and not being readily
ascertainable by proper means by other persons who can obtain economic value from its disclosure or
use; and
o (b) is the subject of [reasonable] efforts to maintain its secrecy these are the ONLY 2 issues in
establishing whether something is a trade secret!

Ham v. Turner this was Spodens case, and he won

A company claimed that its employee had stolen its trade secrets and was going to use them to benefit a
competitor
All the P did was cold-call auto parts stores

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Although there was a customer list, one could readily obtain a list of the auto parts stores in the US, so how could
this information be subject to reasonable efforts to maintain its secrecy
The P couldnt show that this information wasnt readily ascertainable in the market place?

Coercive Remedies at Law: Orders to do something are generally INJUNCTIVE remedies and NOT COERCIVE
remedies at law (these are exceptions!)
Writ of Mandamus: order for public or corporate official to perform a ministerial duty a type of
MANDATORY injunction duty to perform the act must be clear and non-discretionary if the official has ANY
discretion, its probably not a ministerial duty not available if P has another adequate remedy (usually, in a true
mandamus action, there usually isnt another remedy) in ancient England, this was a common law writ
Habeas Corpus: (note 5, p. 294) to compel a person holding another in custody to bring the prisoner to court and
show why he should be held commonly used to challenge the constitutional validity of a conviction (right to
habeas corpus is in the US Constitution) Article 1, Section 9 of the US Constitution: the privilege of the writ of
habeas corpus shall not be suspended, unless when in cases of rebellion or invasion the public safety may require
it this is NOT limited to prisoners challenging their convictions! (ex: a client is being held but has not been
charged with a crime)

Reparative Injunctions
Repairing the Consequences of Past Wrongful Conduct

Spoilation of Evidence
o Most likely sanction: adverse inference instruction this is an instruction by the judge to the jury to
consider finding against the party who destroyed the evidence the three elements are: (1) control and
obligation to preserve the evidence; (2) records destroyed with a culpable state of mind; and (3) destroyed
evidence was relevant to the partys claim or defense its for the lawyers to determine whether the
evidence would have been relevant or not
o This is a pretty weak remedy for the spoliation of evidence, and the remedies will likely get harsher over
time destroying evidence is also a crime!
o Civil Procedure Rule 26 is the kickoff for discovery under the federal rules, there are affirmative
obligations to produce information
o Litigation hold litigation hold is what is considered to be placed on the destruction of documents on the
outset of any case (certainly in federal court due to Rule 26) theres an issue as to how far the litigation
hold reaches (does it reach into the backup systems?) as a general rule, litigation hold does not apply
to backup tapes/data (e.g. those typically maintained solely for the purposes of disaster recovery) on the
other hand, if backup tapes are actively used for information retrieval, then such tapes/data likely subject
to the litigation hold litigation hold includes electronically stored information party need not
provide discovery of electronically stored information if not reasonably accessible because of undue
burden or cost in other words, unless the info is NOT REASONABLY ACCESSIBLE, you have to
produce it to produce it, you have to preserve it! party from whom discovery is sought must show that
the info is not reasonably accessible because of undue burden or cost if that showing is made, the court
may order discovery if the requesting party shows good cause, considering the limitations of Rule 26(b)
(2)(C) note: the Court can order the discovering party to pay for the accessibility

Forster v. Boss (1996)

P sued for fraud in sale of real estate on a lake in Ozarks. Ds misrepresented that Ps could obtain a permit for a
boat dock
Jury awarded damages of $12,250 compensatory and $10,000 punitive damages
o Ps also received a permanent injunction giving them Ds boat dock permit
o 8th cir held that cant have both compensatory damages AND a reparative injunction
Point of case: Cant award both compensatory and injunctions for the same relief
o On remand, Ps must elect their remedy
o NO CHANGE in punitive damages award

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If there are no compensatory damages, then how do they award punitive? They cant determine what the
multiplier is the TN interpretation is that the single-digit multiplier is NOT a hard and fast rule
What about the value of USING the dock that they didnt have? Under the courts ruling, they wont recover any
damages for this loss of use they didnt try the case on this basis
DO NOT take away from this case that one cannot recover compensatory damages AND an injunction the case
doesnt say that! It says that in THIS case, they two will not be awarded together the P should have argued loss
of use of the dock, and then the judge would have likely ordered compensatory damages for this loss of use are
compensatory and injunctions possible? YES!
Forster case: damages for loss of use of the dock during the time the D possessed the permit + injunction
compelling turn-over of permit injunction would be preventative and damages would be the pre-injunction
remedy
If the Ps had an adequate remedy at law, an injunction would not have been allowed
Damages and Injunction?
o Possible? Yes.
Forster case the damages for loss of use of the dock during the time D possessed the permit +
injunction compelling turn over of permit
o Injunction would be preventative and damages would be the pre-injunction remedy.

Bell v. Southwell (1967) - Voting rights case in GA

Voting lists segregated by race and sex black women voters excluded from white womens booth black
representative denied right to view election black representative was physically hit/struck whites allowed to
crowd the polls, intimidating blacks blacks (Ps)were ordered by the sheriff to leave and when they refused, they
were arrested
Reparative Relief: 5th circuit reversed and ordered a new election
o GA statute permitted the Ordinary to appoint the office taker if an election is voided
o Court said they would not be prevented from a rational remedy to repair this clear violation of federal law
by this state statute (which would have required the appointment instead of a new election)
o This type of injunction is to fix the harm of past violations of rights
o Purported rule of not setting aside elections no obstacle to this reparative injunction
The purpose of this case is to show that if the facts are bad enough, the remedy can be strong (and can even go
against statutes!)
You have to think about injunction cases differently than compensatory damages cases in compensatory
damage cases, you prove the offense and prove the damages and the jury gives you a verdict for liability and
affixes damages, if any an injunction case is more like a continuum (a preliminary injunction has 4 elements,
and a permanent injunction has 3 elements you dont have to prove all elements! its like a weight of the
evidence kind of thingyou may have strong facts on some elements and not on others) its not like a
compensatory damages case where if you cant prove an element, youre dead in the water
Primary use of equity is the exercise of discretion
o Chancellor has much leeway when something is left up to his/her equitable discretion
o Equitys conscience is as long as the Chancellors foot
o The person deciding your injunction case has a great deal of discretion in whether to issue your injunction
or not and also how to tailor your injunction
o Refer to Gibsons Suits in Chancery Equitable Maxims: equity will not suffer a wrong without a
remedy, equity acts specifically, not by way of compensation, when parties are unable to act, equity
will act for them, he who seeks equity must do equity, he who comes into equity must come with
clean hands (clean hands doctrine), equity looks to intent rather than to form, equity aids the vigilant,
not those who sleep upon their rights (if you know you need to seek an injunction, you need to act
quickly)

Winston v. Minicom (3M) (1965)

3M sought injunction to prevent Winston from producing or selling their machine Winstons basis for
developing the program was based on the same approach that was used at Minicom Winston improperly used

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information learned by the former Minicom employees Minicom wanted a permanent injunction Winston
wanted no injunction at all injunction against Winston from disclosing or using Minicoms trade secrets in any
manner for 2 years (proof showed that it took them 14 months to reverse-engineer the tape recorder, so the trial
court added 10 months to protect the party who developed the product to begin with) thats how the COA
justified
Since the D learned this trade secret by reverse engineering, the court isnt going to stop someone else from
reverse engineering this thing forever (thats what the P was asking for) the public interest aspect is important
too there is the tension that you want to protect trade secrets versus the public interest
There are always 2 sides to every element in an injunction case, and you need to be able to master your argument
on either side!
To compensate for delay which Minicom encountered in the final stages of development because Winston hired
away Minicoms key personnel
This is a good case to see the narrow tailoring aspectthe court didnt grant the P what they wanted (permanent
injunction) and didnt grant the D what they wanted (no injunction)the court tailored the injunction to what was
fair think about narrow tailoring in EVERY injunction case
See the reparative element? The reparative element is the additional 10 months of the injunction this may seem
more punitive, but the purpose is not punitive but to repair some of the damage done by the party taking the info
Section 2 of the Uniform Trade Secrets Act: actual and threatened misappropriation may be enjoined; an
injunction shall be terminated when the trade secret ceased to exist, but injunction may continue for an additional
reasonable period of time in order to eliminate commercial advantage that otherwise would be derived from the
misappropriation this allows an injunction to be in effect for a period longer than actually necessary, and this is
to provide for the compensatory aspect of the remedy

Bailey v. Proctor (1947)

An investment trust (kind of like a mutual fund) court had appointed a receiver originally because the
investment trust was insolvent not insolvent anymore because it had a big hit on a speculative investment the
court still wanted to liquidate the trust
Trusts structure was a problem because the people controlling the investment trust had so little invested court
saw the structure of the investment trust as essentially tending toward being unfair to the investors thus, the trust
was liquidated even though solvent
The power of a court of equity is significant

Apple Corps, Ltd. v. ADPR, Inc. (1993) Repairing Consequences

P was owner of publicity rights, trade names, and trademarks of The Beatles and its former members D was the
band 1964 as the Beatles P sues under TNs Personal Rights Protection Act (TCA 47-25-1104(a))
Initial hurdle: is D entitled to 1st amendment protection? Court holds that NO 1st amendment protection for use of
the names and likenesses of The Beatles
Injunction issue: undisputed that the goal of Ds group was to look and sound as much like The Beatles as
possible basis of injunctive relief in the federal courts has always been: (a) irreparable harm and (2) inadequacy
of legal remedies
o P cannot be made whole by an award of damages
o P alone owns the right to control the use of the names and likenesses of The Beatles
o Ds unauthorized use infringes on and detracts from the value of the Ps marks and names
o Ds recurrent misappropriations show that legal remedies are inadequate
o Ds are permanently enjoined from using the distinctive combination of the names John, Paul, George, and
Ringo or The Beatles in promoting Ds performances or products T
o This prohibition necessarily includes a prohibition on using the name The Beatles in the name of Ds
performing group
It is not a given that a P will always win this case it is also not a given that there was not an adequate remedy at
law in this case

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Equitable Relief (Cont.)

Structural Injunctions (Dealing with Systemic Problems)
Structural injunctions only come into play when you have systemic problem
The case with the election in GA could have been a good structural injunction case the
court only allowed for a new election, but it could have gone further in ensuring to prevent
the same problem from happening again with the new election
Tonight were dealing with problems that are more long-term (usually longer than one day)

Background
Plessy v. Ferguson
Plessy v. Ferguson provided separate but equal reality was separate but not equal
Moton High School in Farmville, VA was the black high school with 400 black students. The
school had a wing that was a tar paper shack. White High School had 200 students which
was a beautiful building. Barbara Johns was a student at the black high school. She missed
the bus to the black school and tried to ride on the white bus. That day, her and her friend,
John Stokes, led a student boycott by early 1951, the black students decided to boycott
school. The NAACP agreed to provide 2 lawyers to file suit against Prince Edward County to
challenge the separate but equal rule. There was a big meeting with the students and
parents. A number of parents spoke out against the boycott, but Johns silenced the few
parents opposed to the suit. The Prince Edward County case was one of 5 cases that
became part of Brown v. Board of Education. Thurgood Marshall was the lawyer who led
the fight.
Unanimous decision of USSC: court held that separate but equal was NOT what the
Constitution meant reversed Plessy
o Required integration of schools (separate but equal is unconstitutional, Jim Crow
laws unconstitutional) remedy was with all deliberate speed
o Thurgood Marshall and the NAACP got everything they wanted on the liability
finding but got the short end of the stick on the remedy (the ruling was to be
implemented with all deliberate speed T
o his certainly became a benchmark for delay) all deliberate speed led to incredible
resistance in the South
It wasnt until 1963 that JFK forced the government to move to enforce
Barbara Johns family home was burned to the ground wonderful book: Simple Justice
which goes through the details of all 5 cases
Another book: 58 Lonely Men is about the 58 federal judges in the South who were
charged with the obligation of enforcing Brown v. Board of Education
Frank Johnson was the US federal judge for the Middle District in Alabama (appointed in
1956)
o Johnson ordered state-wide desegregation of public schools
o Governor Wallace was opposed to Johnson (he was an old classmate of Johnsons)
Clinton High School was the first integrated high school in the South (East
Tennessee)

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Avon Williams filed Nashville case in 1955.

o In that year, the Nashville School Board conceded that the school system was
unconstitutional under Brown, but the General Assembly passed a law which
allowed parents to elect to send their children to single-race schools
o The Nashville School Board decided to implement Brown one year at a time, so it
would take 12 years to implement started in 1958)
o There was a Nashville lunch counter sit-in later (many Fisk students and college-age
students participated non-violent protest where students sat at lunch counters and
staff refused to serve students were attacked and beaten by the whites and then
arrested
o Z. Alexander Lobby was a lawyer who worked with Williams (his house was bombed)
o Mayer West says lunch counters should be desegregated the next day (1960)
The Saga of Clinton High School
Filed in 1950, and challenged Plessy
o Judge Taylor dismissed, citing Plessy
1954 Taylors ruling reversed Brown
1956, ordered HS integrated beginning the next term Fall, 1956.
Became first integrated high school
Outside White Citizens Council Leader came to town
Protests ensued
Black children had escorts to protect them getting into school
The community rallied to obey Judge Taylors order because Baptist minister was beaten
up.
Injunction was enforced.

De Facto v. De Jure Segregation

In Brown and all the cases just talked about, we had de jure segregation (compelled by
law)
De facto segregation is that which even though the law does not compel it, it is so as a
matter of fact
Brown made de jure segregation unconstitutional the lower courts had to deal with postBrown de facto segregation
Swann v. Charlotte-Mecklenberg School System (1971): the significance was that the court
held that a one-race school system raises a presumption that the segregation was
caused by the school board
In this case, the court can act
o The remedy was that the court may require children to be bussed across school
district lines in order to accomplish integration
With de facto segregation (i.e. one-race schools) which may be caused by a legal entity
(i.e. a school board), the court has the power to order a remedy to overcome the policy of
the school board
o This is what historically caused a great deal of push-back
o This was the high water mark of the SCs empowerment of federal courts ability to
order structural remedies for segregation
The nature of the violation determines the scope of the remedy

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o

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Busing affected far more than just the South (affected the South and the North), and
there were riots and resistance around the US
Riots really took off in the 1970s because of the Swann decision
Boston riot man uses US flag to spear a black man

Milliken v. Bradley I (1974): de jure segregation in the South where was Milliken v. Bradley?
The segregation was in Detroit. Segregation was not caused by virtue of a state law (was
no de facto) but was caused by school board zone drawing policy.
TC found that desegregation using Detroit schools alone was impossible
o 85% of Detroit schools were black court ordered neighboring townships (counties)
to be added as Ds to the case
6th circuit affirmed, but US SC reversed
Court said that outside school districts were not involved in the segregation, so court
cannot involve them in this desegregation plan (you cannot reach outside of the political
boundary of a city to enforce desegregation orders)
Milliken v. Bradley II (1977): on remand, court ordered Detroit-only busing plan and ordered
certain quality of education improvements (in service training for teachers, testing programs,
etc.)
SC affirmed these remedies. So, the SC basically said the Constitution wont let you reach
outside of political boundaries but will allow a courts injunction to manage a school
system in the sense of ordering this remedial-type program
WHERE DO WE DRAW THE LINE?
Just adjacent counties?
What if people moved beyond the counties?

Missouri v. Jenkins (1995)

Desegregation costs approached $200M per year (included air conditioning, greenhouses,
modern UN room wired for language translation, temperature controlled art gallery,
swimming pools, etc.) the problem was white flight the court was trying to prevent
white flight by enhancing the quality of the school the trial court was trying to make the
inner-city school as good as or better than the other schools they were really going the
extra mile to prevent the white students from fleeing the system
The district court was reversed the SC held that a trial court cant order a certain tax
(cant compel county to assess a certain tax) this is NOT within the power of the court
Its also not within the power of the court to extend beyond the boundaries of the political
areas (refer to the Detroit case), but that part wasnt new to this case like the tax part was
(interdistrict v. intradistrict)
Remember that Swann was the high water mark, and we will continue to see erosion as to
what the trial court can do to remedy the problem
Justice Thomas, concurring: thought that the mere fact that a school is mostly black does
not mean that its a product of a constitutional violation he thought that the courts
approach to desegregation was all wrong and relies upon questionable social science (uses
virtually unlimited equitable powers the exercise of this authority has trampled upon
principles of federalism and the separation of powers)

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o
o

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Thomas said that Brown was all wrong! (he took on the entire issue of segregation
in general)
Separation of powers imposes restraints on the judiciarys exercise of its
remedial powers (separation of powers is not in the constitution, but it is a
reality of how the constitution is setup) this is a case of the power of the
federal government over the states
Article II courts are constrained by the inherent constitutional limitations on their
powers there simply are certain things that courts cannot and should not do
In essence, Thomas says that one of those things courts should not do is run school
systems or prisons (courts do not have the power to run school systems or
prisons because of limits on federalism and separation of powers)
Link the remedy with the wrong, which help the injunction be legitimate.

NEED TO READ THOMASS CONCURRING OPINION

Today, we have essentially gone full circle

Hutto v. Finney (1978) - Arkansas prison conditions case

The court described the conditions in the state of AR as a dark and evil world
o Ex: 20 hours per day, 6 days per week work in the field; required to run to and from
work; rape so common that many slept huddled at the bars at the guard station;
inmates beaten with 5 long leather strap; guards were unpaid inmates with guns,
and there were 2 per 1,000 inmates; medical treatment only if bribed by guard;
guard misconduct rampant; isolation prisoners fed insufficient to sustain life
Trial court issued a series of orders to the Department of Correction
o Administrators complied somewhat but not entirely
o Ultimately found prison system not in compliance and made specific orders
limiting number of inmates in a cell, changing diet, limited length of isolation, etc.
th
8 circuit affirmed
SC affirmed (supported the facts, remedy does not interfere with DOC, defer trial judges
years of experience with the problem and his careful limitation of his use of power)
o So, the courts found that the order did not interfere with the DOC
o But, if you look at the order from the standpoint of the DOC, you might think youre
being interfered with!

Grubbs v. Bradley (1993) TN prison conditions case

Since 1982, Fed. Ct. had overseen TN prisons
o 1,584 specific remedial measures
o June 30, 1992, completion date.
In 1982, Prison System = cruel & unusual treatment violated 8th Amendment
o Overcrowded, unsanitary, unsafe
1993 Dramatic improvement in major areas
TN complied w/ the remedial order of Grubbs 1 w/ a few exceptions, but court
retained jurisdiction over 1 discrete area: management of health care services.
W/ that exception, TN prisons released from Order supervising their operation.

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Lewis v. Casey (1996) - AZ prison library case

Law libraries for inmates of the prison system
SC had already held in another case that prisoners are entitled to a law library (they do a
lot of their own legal work and are entitled to have resources in order to guarantee access
to the courts)
The trial court found that the state failed to provide for illiterate inmates (ordered the
prison library system throughout the whole state be revamped and reorganized to correct
this)
SC held that the remedy had to be limited to what was necessary to fix library
inadequacies and the trial courts remedy was too much (non-service of two inmates didnt
justify an order to revamp the entire prison system
This case sounds like Marshall v. Goodyear (where you have one person discriminated on
the basis of age did not justify an extensive injunction))
o Remember that the remedy must fit the wrong!
o If you have a structural injunction, more than 2 people must be affected!

***Narrowly Tailored Remedy Required***

The remedy must be limited to the inadequacy that produced the injuryin-fact that P establish
In Lewis, only one P was actually harmed, so this was a patently inadequate basis for
finding a system-wide violation
- Mexicano v. Alliance Bond Fund (1999): SC refused to enjoin the dissipation of assets
Scalia used the historical analysis to find that English Courts in 1971 did not have the authority
to issue such injunctions, so neither did our courts
Prison Litigation Reform Act: purpose was to restrain federal courts from becoming too
involved in the regulation of prisons (reign in federal courts)
**Imposed structures on judicial action
Court must make extensive findings that fed. Right is being violated
Limits fed courts prospective injunctive relief to 2 years
No prospective injunctive relief, unless narrowly tailored
Limits prisoner release as a remedy. Requires 3 judge panel for such cases.
Brown v. Plata (2011):
US SC decides the CA prison conditions case that had been pending for many years in
many forms
Justice Kennedy for the 5 vote majority serious Constitutional violations that have
persisted for years system designed for 80,000 prisoners and now has 156,000 prisoners
Issue was whether the remedial order was valid (whether the order to reduce the overall
prison population substantially was valid
Did the court have the power to direct the state to release prisoners to make the
conditions of those remaining constitutional?)
The remedial order (aka injunction) required reduction of population of prisoners, offered
alternatives for compliance (the court was influenced by the Prison Reform Litigation Act
Dramatic injunctive remedy only available by a specifically empanelled 3 judge court)
found: degree of overcrowding is exceptional

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State operated prisons at 200% capacity for at least 11 years, 200 prisoners may reside in
a gym with 2 or 3 guards, 54 prisoners may share a single toilet, independent body found
prisoners were severely overcrowded, imperiling the safety of guards and inmates
Governor found state of emergency (overcrowding increased the risk of spread of disease
and suicide (about 1 per week), arcane mental health care, suicide rate 80% higher than
national average for prisons)
o Overcrowding found to be violation of 8th amendment prohibition against cruel and
unusual punishment
Prison Reform Act imposed limits on courts power to remedy unconstitutional violations in
state prison systems but did not extinguish those powers (duh!)
Trial courts order did not require release of prisoners!
o To order a population limit, the Prison Reform Act requires court to find that the
overcrowding is the primary cause of the violation of a federal right trial court so
found
Majority of SC agreed
Dissent: today, the court affirms what is perhaps the most radical injunction issued by a
court I our nations history: an order requiring CA to release the staggering number of
46,000 convicted criminalsin my view, a court may not order a prisoners release unless
it determines that the particular prisoner is suffering from a violation of his constitutional
rights and that this release and no other relief will remedy that violation (starkly different
view than the majority!)
Dissent: this decree is a perfect example of what the Prison Litigation Reform Act was
enacted to preventthe Constitution does not give federal judges the authority to run
state penal systems
So, we have a 5/4 split where the two sides COMPLETELY disagree!! (this is unusual)

US v. VA (1996): The VMI case

VMIs system of excluding females violated equal protection clause
VA created separate but equal institution (VA Womens Institute for Leadership)
o No hazing, so better than VMI, VA argued
Court finds that VAs remedy does nothing to cure the wrong being committed
by VMI (the exclusion of women)

Municipal Bond Cases

Late 19th century, 200 cases made it to the SC in which the court orders counties to
impose taxes
o Bonds issued by municipalities to the railroads to get the railroad to build through
the county or town (bonds sold to raise money for this public purpose)
o When the bonds became due and the cities or counties defaulted on the bonds, the
counties pled poverty (we dont have any money to pay the bonds)
o The SC ruled that the county (or city) had to impose taxes sufficient to be able to
pay off the bonds (the court implied the power to levy special taxes to pay bonds
from the legislation authorizing the issuance of the bonds)
Microsoft Case: dramatic remedy splitting this huge company into different specific parts!

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Court of appeals reversed the remedy but affirmed on liability (i.e. Microsoft was a
monopoly), holding that the remedy went too far based on this record remand for the
trial court to new hearing on the remedy
The tendency of the limited power of the court is beyond just constitutional violations
even outside the constitutional sphere (i.e. antitrust laws (ex: Microsoft case)), the courts
are leaning this way too it always needs to be tailored to the specific facts!
Dobbs on Remedies:
If remedies are matched specifically to the rights they are intended to support, or in the
alternative, if good reasons can be articulated for providing a remedy greater than the
right itself, the structural injunction should hold its place an occasional, troubling and
complex remedy, which nevertheless must sometimes be invoked.

NOVEMBER 9, 2015
Civil Justice Reform Act of 2011
Most significant piece of tort reform legislation in TN history codifies vast portions of formerly
common law remedies
Most significant is $750K cap on non-economic damages in most personal injury and wrongful
death cases; $1.25M cap on non-economic damages in very severe injury cases and one type of
death case (spinal cord injury resulting in paraplegia or worse, substantial burns (more than 40% of
body or face), death of a parent of minor children); does apply where death not caused as a part of a
felony or drunken act
Punitive damages limited to 2 times compensatory damages or $500K, whichever is greater
Other limitations: a vicarious Ds culpability will be determined separately from its agent or employee; seller
not liable for punitive if sold what manufacturer delivered; drug manufacturers not liable for punitive damages
if followed FDA rules; same rule applies to other manufacturers who follow other federal regulatory standards
Fye v. Kennedy reversed: recoverable economic damages do not includes charges that have been discounted or
forgiven, even by Ps own insurance (collateral source rule does not restrict the diminution in damages if its
diminished by the forgiveness of the provider or through some discount available through your own insurance);
did not change collateral source rule in all casesjust when bill forgiven or discounted
Med mal reform: just about anyone working in health care field included as health care providers and covered
by previous med mal statutes
Procedural changes: statute requires jury to set out amounts for past damages, amounts for future damages,
and the periods over which they will accrue, on an annual basis and by category
Apply to High Stream (exam question): negligence killed Irene Brown she had no children or income (only
non-economic damages) M/M Brown recovery of compensatory damages capped at $750K High Stream
punitive damages capped at $1.5M

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Did you know that if you do not have a child, you are only worth $750K (plus whatever you can earn) unless
killed by a drunk or a criminal from a public policy point of view, what do you think about the legislature
setting this amount? it used to be set by juries

CHOOSING REMEDIES
Adequate Remedy at Law boundary b/w law and equity
2 Questions for tonight:
o What is irreparable injury? Injury that damages are not adequate to repair.
When is an injury irreparable?
o What is relationship b/w irreparable injury & adequate remedy at law?
o The theory behind injunction is that if you an adequate remedy at law, then you dont have
irreparable harm.
Irreparable Injury Rule
o Rule 65.03 Restraining Order
Plaintiffs rights are being or will be violated & Pltf will suffer immediate & irreparable
injury
o Rule 65.04 Temporary Injunction
Pltfs rights are being or will be violated & Pltf will suffer immediate & irreparable
injury
Replevin
Specific Performance
Are cut logs the same as standing timber? NO!

Substitutionary or Specific Relief

Pardee v. Camden Lumber Co. (W. Va. 1911)
Pardee sued to enjoin Camden from cutting timber on Pardees land old rule required Pardee to show
good title, trespass by Camden, and insolvency of Camden
Former rule allowed total destruction of a forest if wrongdoer was solvent old rule: damages adequate
if that which is destroyed can be replaced with money
No equitable relief if legal relief is adequate owner has the right to possession, dominion, and
immunity from injury for his property UNLESS the property can be substantially replaced
Compensation is adequate when the property may be substantially replaced with money when
personal property has some peculiar (unique) value to the owner, equity will uphold the right to
possession and immunity from injury and equity will find that the legal remedy (money) is not adequate

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to protect the owners right in something unique keep in mind that standing timber is part of real
property which becomes personal property when cut!
Equity goes no further than is necessary equity will not permit: destruction of unique property or
conversion of property from one type to another (like real property into personal property) helps
Pardee Court get to result in timber cutting case equity permits an owner of property to maintain the
condition he desires the point is that when property is unique, the more value it has
Mere logs =/ standing timber so, legal remedies are inadequate to return mere logs back into standing
timber court is recognizing this change in societys perception timber is unique and irreplaceable
takes half a century to replace!! were not trying to learn the law of timber but instead the notion
of unique property and how uniqueness can evolve (while it may not have been unique at one
point in time, it may be unique now!)
Irreparable Injury Rule
Equity will not act if there is an adequate remedy at law
o So, if there is an adequate remedy at law, then no injunction
Equity will act only to prevent irreparable injury
o So, no irreparable injury, no injunction
If money damages are inadequate, then the injury is not irreparable and will not be prevented/enjoined
o So, if money is adequate, no injunction!
Watch for when $ is going to be inadequate what did you learn from Pardee:
(1) When property is unique
(2) When property is threatened to be converted from 1 type to another (in Pardee from real to personal
property), or
(3) When the condition of property is threatened to be change from that which the owner desires
Brook v. James Cullimore & Co. (Okla. 1967)
Cullimore sued Brook in replevin seeking specific personal property what is replevin? An at law
writ seeking the return of specific property not seeking money judgment (money judgment was
the remedy of trover) Cullimore wanted the property and NOT the money! need to know what
replevin is (at common law, one could require the writ of replevin and that would command the D to
return a specific item of specific property) sounds like replevin is an equitable remedy (an order
directing someone to do something, not for money) BUT, its a legal remedy because of the historical
backdrop!
Brook tried several ways to just pay the money (in this case, the property was worth less than the debt
about $2.5K Brook tried to pay that, plus atty fees) court said no, not an option Brook agreed that
debt was secured by this specific property thus, Cullimor has option of gaining possession of the
property by replevin
In TN: there is the ability of alternative pleading you can seek, in the same case, replevin (writ of
possession) or, in the alternative, deficiency (both are remedies at law!)
Replevin: legal principle This was an at-law remedy, where the specific property is capable of being
returned, it shall be returned
o AKA: Writ of Possession
o How is enforced? Sheriff go get the propert

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o As opposed to an injunction?
Sheriff seize D he is in contempt
Irreplaceability was vital in Pardee but irrelevant in Brook why? replevin was a remedy at law (a
common law remedy!), and you werent trying to get an injunction!!! THUS, NOT the subject to the
irreparable injury rule!! if youre seeking the return of specific personal property, all you have to do
is show that its your property and NOT that its irreplaceable!
How is replevin enforced? Sheriff go gets the property with an injunction, if the D fails to obey, sheriff
seizes the D and the D is held in contempt
Continental Airlines v. IntraBrokers (9th Cir. 1994)
Continental issued coupons to IntraBrokers in 1991 and 1992 coupons clearly stated that they could
not be sold but Continental knew IntraBrokers was selling them after 1992, Continental told
IntraBrokers to stop selling the coupons
Continental sued IntraBrokers for an injunction against the sale of the coupons Continental could not
show financial injury trial court held for Continental (IntraBrokers were no longer able to sell the
coupons) 9th circuit affirmed
Primary reason Continental won this case: its their property!!! (Continental was allowed to control
their own couponing policies however they wanted) Continental actually benefited by not knowing
how many coupons IntraBrokers had, so they couldnt prove their damages, so an injunction was proper!
Coupons are Continentals property Continental was entitled to dictate the rules under which they are
used or transferred
Is showing of financial harm required? NO! (remember, Continental couldnt show how much they were
harmed)
Why werent money damages sufficient? The fact that the harm was not measurable was not an obstacle
to recovery (in the form of an injunction) but if it HAD been measurable, they may have gotten
damages!! Its difficult to prove
Note: Continental benefits from its own inability to prove damages
Adequate remedy at law: is the legal remedy adequate? definition: a legal remedy is adequate
only if it is (a) as complete, (b) practical, and (c) efficient (d) as the equitable remedy everything
is sort of in the eye of the beholder

Specific Performance
TN law: Specific Performance is an equitable remedy and, like an injunction, a pltf must show that the
legal remedy is inadequate.
Campbell Soup Co. v. Wentz (3d Cir. 1948)
Campbell agreed to buy from Wentz all of a particular type of carrot grown by Wentz Campbell
provided Wentz with the carrot seeds what was the carrot? Chantenay red carrot Campbell agreed to
pay $30 per ton for the carrots 100 tons of carrots produced that particular year by Wentz this type of
carrot on the market were worth $90 per ton Wentz sold 62 tons to Lojeski Campbell Soup learned
about the breach by Wentz when it bought 29 tons of the carrots from Lojeski
Campbell Soup sued for an injunction to require Wentz to deliver the carrots to Campbell Soup trial
court denied injunctive relief Campbell Soup has an adequate remedy at law ($ damages) third

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circuit reversed these carrots are unique (Campbell Soup had based their product line on the color and
type of carrot that was being used, and Campbells reputation was at stake) Campbell was entitled to
specific performance of the contract to deliver these Chantenay red cored carrots
Specific performance because of the nature of the carrots Chantenay carrots were so unique and
valuable to Campbells reputation that specific performance awarded based on that one issue the
court said the carrots were unique
o Unique = only one Campbell soup could no purchase these same carrots? Why not? Wentzs
customers were doing it (available on the open market for $90 a ton)
Convinced Campbells couldnt get the carrots anywhere else? Limited quantity but available at a higher
price elsewhere Campbell had to pay a premium in order to get the carrots
Why not require Campbell to buy the carrots and sue Wentz for the difference the measure of damages
would be the difference in the market price and the contract price (aka cover)
UCC 2-761(1): specific performance of a sales contract is available where the goods are unique or in other
proper circumstances so, you argue that theyre unique!!
TN law is clear specific performance IS an equitable remedy requires the same showing (inadequate
remedy at law) as any injunction case

NOVEMBER 16, 2015

IRREPARABLE INJURY CONTINUED
Williamson County Broadcasting Co. v. Intermedia Partners (Tenn. Ct. App. 1998)
K b/w Ormes & Matrix
Ormes to receive compensation if he brings cable TV to Franklin
Part of compensation was exclusive sales agen for advertising
Chancellor ordered SP of that promise b/c it was unique
COA Reversed
Ormes had an adequate remedy at law = damages
Nothing to suggest that Ormes cant be made whole w/ an award of damages
While difficulty in proving damages may make them inadequate, not the case here.
Look at Continental Airlines case.
This case is to remind of the validity of irreparable injury law.
Van Wagner Advertising Corp. v. S&M (NY 1986)
Van Wagner leased space on the side of a building for a billboard after 6 months, S&M bought the
building and cancelled the lease Van Wagner sought specific performance
It is real estate (normally considered unique) court says its just a lease so the court found that
damages were adequate remedy can you buy a building and just terminate existing leases? NO!
Interest in real estate is always unique traditionally, damages NEVER adequate when real estate is
involved leasehold interest in property facing the midtown tunnel would be very unique!! but court
held NOT enough for an injunction! Why? damages CAN compensate! balance the burden on the D
with the burden on the P

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Compare Billboard case v. Coupon case: why cant damages compensate the billboard case but not the
coupon case?
o Undue hardship on the owner of the real estate to have to lose control of his whole building to
facilitate one measly lease!!
Jerry MaGuire: he was a sports agent played by Tom Cruise in the movie he had ONE contract (his
one client), Cuba Gooding does that make it unique so that Jerry could enforce the contract? no,
because it is a personal services contract
Whitlock v. Hilander Foods, Inc. (1999)
Whitlock noticed that the construction was on his property
Hilander employee told Whitlock well negotiate payment for being on your land.
Whitlock wanted to be a good neighbor
Parties unable to agree
Whitlock withdrew permission
o Highlander kept building from its site.
Whitlock sued for an injunction
TC denied: negligent encroachment & unreasonable delay to Whitlock
COA Reversed
Hilander knew it was on Whitlocks property
If knew, then encroachment must be removed regardless of burden
Hilander knew or could have easily learned it was on Ps land.
o P put D on notice that D was proceeding at its peril
o D kept on building anyway
Whitlock entitled to injunction
Law in Illinois: If D knew that he was building on Ps property, then he has to move that portion on Ps
property there is no adequate remedy at law.
o If encroachment is intentional or with knowledge, then no balancing of the burdens or equities
o Injunction issued w/o regard to undue hardship or burden
Welton v. 40 East Oak St.
IL court granted injunction against building over Weltons easement
Even though cost to rebuild 20 story building was $350K.
Morrison v. Jones I (1968)
Neighbors in Fayetteville
Before construction Jones warned Morrison that he will build on his land
Jones tells him he is on his land, and Morrison continues to build
Morrison built 3 to 10 feet on Jones property
Morrison had survey done, and Jones said survey was wrong
o The bois darc tree is the boundary marker.
Chancellor:
o Survey failed to follow the description, bois darc tree still there.
o Chancellor followed property description
o Natural monuments rule
o Granted Jones a mandatory injunction against Morrison

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Mandatory injunction: requires you to do something, not refrain from doing something.
Required Morrison to remove the portion of the building that encroached onto Jones
property
Balance of Hardships
o COA Reversed
Noted that Jones didnt sue immediately, and waited too long
Found hardship on Morrison to remove building could be measured in damages
Even though Jones told Morrison he was encroaching
Remanded to TC.
o Gave Morrison a private right of eminent domain.
GET NOTES FROM OTHER OUTLINE
More flexibility in TN than in Illinois.

Morrison v. Jones II when Morrison appealed after remand

Co-operative Ins. v. Argyll Stores, Ltd.
Argyll wanted to close its Safeway store
o Breaching its shopping center lease, losing 70,000 pounds a year
P wanted SP
TC refused
o Business being operated at a loss undue burden to require it to operate
o Damages adequate
General rule: assess damages and not require D to operate business at a loss.
Public interest think about how you can make your side in the public interest
COA reversed found K sufficiently precise to issue injunction
House of Lords revered and reinstated TC ruling.
Rationale:
o Balance of injury more burdensome to require operation of a business that to award damages
o Public interest: not in public interest to require someone to carry on a business at a loss if any
plausible alternative is available.

NOVEMBER 23, 2015

Injunctions (Limitations)
Preliminary vs. Permanent Limitations
The Bond Requirement

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Ebay v. MercExchange
D Patent Holder
o Claims business method patent on Ebays way of doing business
TC held in favor of D regarding patent issue, but denied injunction
Fed. Cir. (patent cases all go to the federal circuit) reversed.
US SC
o 4 issues in an injunction case:
Irreparable injury
Inadequate remedy at law
Balance of burdens favors P
Public interest
TC & Fed. Cir. Misapplied elements reversed & remanded
Epilogue: TC denied injunctive relief and awarded MercExchange $30 million in damages.
Public Interest
The 4th and final component to injunctive relief
Observe its influence in the next several cases
Try to think of both sides
Willing v. Mazzocone
Lawyers sought injunction against protest by former client - defamation (have to deal with this
delicately b/c defamation is a tort and the remedy is money damages)
Woman paraded outside office blew whistle, rang cowbell, wore sandwich board that stated:
Lawfirm stole money from me and sold me out to the insurance company.
Previous work comp client that wasnt upset w/ settlement of her case, but upset that lawyers got $25 of
the $150 that was for her doctor.
TC stated client was obsessed by reason of eccentricity of mental instability.
o Granted injunction
Appellate court reversed.
o General Rule: Equity will not enjoin a libel
Damages adequate remedy, even where party is obviously insolvent
o No injunction against speech.
Influence of 1st Amendment underscores the courts resistance to enforce injunction for
libel.
There is a public interest in not enjoining speech because of the 1st Amendment
Upheld by SC in fraud, misleading advertising, and breach of secrecy obligation
o See note 4, pg. 436.
What TNs Automatic Injunction in divorce cases?
Automatic injunction against disparaging remarks regarding the other spouse to children or employees.
Public interest expressed in legislation
Not challenged hard to argue 1st amendment right to disparage your spouse.
**Elements of an injunction are considered on a sliding scale
One element may be enough to grant or deny an injunction

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Need to be careful to not assume that one element will be sufficient b/c one element can also cause it to
be denied.

Permanent Injunction Elements:

Real threat of irreparable harm
No adequate remedy at law
Balance of the Burdens
Public Interest
Winter v. NRDC (US 2008)

NRDC sought to enjoin Navys use of sonar in training exercises without an environmental impact statement
(EIS) trial court found likelihood of irreparable injury to marine mammals substantial near certainty of
irreparable harm trial court granted preliminary injunction against Navy continuing their training using sonar
because they failed to provide an EIS 9th circuit affirmed on the same grounds (near certainty of irreparable
harm)
Navy versus dolphins
4 issues in preliminary injunction case (2 years after Ebay case):
o (1) Likelihood of success on the merits
o (2) Likelihood of P suffering irreparable harm
o (3) Balance of the equities
o (4) Public interest
Threshold had to be a likelihood, NOT a possibility!
This is a sliding scale it has to be a balancing of the four factors
Is balancing the equities the same as balancing the burdens? theres no real difference its just a different
way of saying the same thing
This test ALSO applies to the grant of a permanent injunction EXCEPT the first factor (likelihood of success on
the merits)
Navy beats Dolphins 5 to 4: balance of the equities public interest causes USSC to rule for Navy (national
security in having trained sonar operators trumps EIS requirement) a court can get in trouble by making a
qualitative analysis (saying the national security interest is higher than the interest in dolphins) BUT that is
exactly what goes on in an injunction case! thats why theres a sliding scale so, the court held that even thought
there is a near certainty of irreparable harm, the importance of the Navy in conducting sonar training is more
significant overall than whether dolphins are hurt or not
Note sliding scale trial court held harm irreparable but SC says balance of the equities (which is more
important? who is burdened more?) and public interest TRUMP irreparable injury!
Remember the Ebay case: 5 issues for permanent injunction 2 years later (this case), they say 4 issues for prelim
injunction! often, irreparable injury and inadequate remedy at law is often stated as the same element
(likelihood of P suffering irreparable harm and not having an adequate remedy at law is factor 2 in this case
they really mean the same thing!)

Preliminary v. permanent relief

Preliminary relief is decided in the course of the case (temporary injunction in TN = preliminary injunction in
fed) prelim relief doesnt decide the case, but often times, the prelim injunction is, for all practical purposes, the
decision in the case

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Purpose of the prelim injunction is to preserve the status quo ante litem (the state of affairs before the litigation
commenced)
Standard for a prelim injunction (temp injunction in TN): (1) irreparable harm to P if the injunction is not
granted (absence of adequate remedy at law), (2) balance of hardships in favor of the P, (3) advancement of the
public interest, (4) strong likelihood of success on the merits

LA Coliseum v. NFL (9th Circuit 1980): case of the Good Bye Oakland Raiders Oakland Raiders agreed to move to
LA NFL rule prevented move LA Coliseum sought prelim Injunction against NFL rule LA Coliseum would suffer
$M in not having the team but Raider coliseum would also suffer $M for not having it there public interest of residents
of each city if the team is there public interest in antitrust laws sort of tips it in favor of the injunction the court denied
the prelim injunctive relief! the 9th circuit reversed because irreparable injury not shown (damages = lost revenues,
which is a reason to deny an injunction because damages are adequate at law!) trial court considered hardship on
Oakland Raiders when they werent even a party to the case 9 th circuit held that the hardship on the Raiders and the LA
Coliseum were the same and remanded this time, the trial court granted the prelim injunction subsequent history:
permanent injunction against enforcement of the rule (permitting the Raiders to move to LA), affirmed on appeal with no
discussion of irreparable injury/adequate remedy at law rule was a clear violation of the antitrust laws, making other
issues less important
Point is that you DO NOT have to show all 4 elements!!! The LA Coliseum clearly had an adequate remedy at
law and yet they succeed din preliminary injunctive relief because of the significance of the antitrust laws and the
importance of protecting people from those
Sliding scale: while there are 3 elements for an injunction (combine 1 and 2 of the Supremes) and 4 for a
preliminary injunction (temp in TN), ALL elements are on a sliding scale of importance you need to address all
elements BUT if all you have is one and it is compelling enough, you may get it!

Strategy

Look before you leap!

Strategic considerations for the P: standard (4 elements), proof (what kind of proof do you have? How good is
it? what other proof do I need to support my proof of each of these elements? etc.), bond requirement (educate
your client as best you can in obtaining a bond and what to expect with a bond), impact of losing (many cases at
the prelim injunction stage spend a lot of money up front and go very fast the impact of losing can be
catastrophic just be sure you think about the strategy of it)
Practical advice: status quo effect: general bias/presumption in favor of preserving the status quo at the outset of
litigation so, if youre on the side of maintaining the status quo, USE THIS BIAS! if everything else is equal
(i.e. theres not a significant finding in favor of the other party on one of the 4 elements), its likely the court will
deny/grant the injunction if that will preserve the status quo if NOT, be aware that you will need to be even
more persuasive to overcome the bias!
Rees v. Panhandle Eastern Pipe Line (Indiana Court of Appeals 1978): Rees threatened Pipe Co with violence if
PEPLC did not stop clearing his land Pipe Co sued preliminary injunction granted enjoining Rees from
interfering with the pipeline company laying pipe preservation of the status quo was the on-going clearing
operation! see how the status quo is all in the eyes of the beholder??? you can usually use the status quo on
either side! ultimately, appellate court found the status quo in cutting the trees and affirmed the imminent risk
of harm (public interest) from Pipe Co NOT being able to aerially inspect for gas leaks (this was more important
than Reess interest in having trees on his land)

11/30/15
CAB v. Ingram (TN SC 1984)

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CAB = collection agency Ds were managers and salesmen who had client contact salesman/customer
relationship important non-compete provided that for 2 years after termination, Ds cannot compete with CAB
(nationwide) non-compete barred: owning a competing business, divulging confidential information, calling on
any customers of CAB (this is a very typical non-compete these are the basic parameters, including length (2
weeks), scope (nationwide), and non-compete terms!) Ingram setup new business before he left CAB!
(immediately began calling on his former customers) Ds used the knowledge and personal contacts they gained
while at CAB
CAB sued to enjoin the former employees from violating CABs non-compete agreements Chancellor held that
CAB had a protectable interest, found non-compete too broad in time and geographic scope, BUT enforced them
with modification! (ex: prevented Ds from calling on customers whom they had called on for CAB)
Non-competes in TN are generally enforced if reasonable! Theres a lot of dicta you almost start with the
premise in TN that they will be enforced and look for the few exceptions where they will not be length of time
and geographic scope are always the first two factors to consider
COA reversed
Main issue was whether the trial court actually had the authority to modify the covenant in the first place
TN SC affirmed TC and reversed COA and adopted the rule of reasonableness
o Unless the circumstances indicate bad faith by the employer, court will enforce non-competes to the
extent reasonably necessary to protect the employers interest without imposing undue hardship on
the employee (so long as the public interest is not adversely affected)
o Prior to this, the approach was either all or nothing or blue pencil
All or nothing led to a hyper-technical approach
This meant that if there was anything offensive in the non-compete, the entire agreement
failed this is why a lot of business people think that non-competes are difficult to
enforce
Blue Pencil Approach: the court would just delete the improper provision the problem is if you
delete 2 years, theres no provision for time at all!!
Bar from chosen employment is NOT an undue burden on the employee
o AS LONG AS the employer has a protectable interest, it can have an enforceable non-compete AND,
even if the scope is too broad, the court will rewrite it to make it enforceable the employer will usually
win, to SOME extent
o Protectable interest is the key to defeating a non-compete clause.
Examples: special list, training, trade secrets, etc.
o Evaluate reasonableness of the clause
If there is a legitimate interest/protectable interest, then the non-compete will be enforced.
What incentive is there for an employer to draw up a narrow non-compete? The reality is that employees have a
difficult time getting out of their non-competes altogether this puts a challenge/burden on employees
In TN, one can argue that there is SOME problem with the non-compete agreement
o If an employer has no protectable interest in the non-compete, that IS a way to win in TN! (just being an
employee does not equal protectable interest
o Usually requires sharing of confidential/trade secret information or significant training) thats about the
only way to avoid a non-compete altogether, and its a long shot because most employers know better
o You can also argue void for public policy, but this is a long shot (refer to MTMC v. Udom)
MTMC v. Udom (Tenn. 2005): MTM had non-competes with its doctors Dr. Udom wanted to
go out on his own in 1991, TN SC held non-competes invalid per se between lawyers TN SC
held that non-competes unenforceable with doctors too! look at the rationale? What is in the
public interest? AMA says non-competes impact negatively on health care and are NOT in the
public interest also pointed out the importance of publics right to choose also, confidential
information given to doctor (like lawyer) on the heals of this decision, the TN General
Assembly reversed it an enacted TCA 63-6-204(f)(2) which allows for non-competes between
hospitals and doctors
Post-Udom: TCA 63-1-148 - if agreement is signed by a physician, then no more than 2
years in length and limited to 10 miles from office or same county, whichever is greater

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The point is that there are some VERY narrow ways to avoid a non-compete in TN if you have one, run with it!
What is a protectable interest?
o CAM International v. Turner: CAM automotive parts wholesaler tried to enforce non-compete former
salesman acquired customer information from public source trial court denied injunction because no
protectable interest this is an example of the importance of protectable interest
Non-competes are still enforceable against terminated employees (just because you didnt quite doesnt mean that
its not enforceable)
Main Line Pictures v. Basinger: DONT forget damages when youre thinking about injunctions! Kim Basinger
told a producer she would star in his movie then she read the script and refused to make the movie the jury
awarded a judgment against Basinger of over $8M movie was Boxing Helena (Sherilyn Fenn ended up taking
the role it was a cheesy movie!) while injunctions are normally where non-compete cases are won or lost, in
this case, the producer couldnt get an injunction to force her to appear in the movie (generally speaking,
personal services contracts will not be enforced by specific performance or other types of injunctive relief
because of slavery! Theres a constitutional amendment that makes involuntary servitude illegal) and continued
and won!

Curb v. McGraw (2012) Unique and extraordinary case

Curb had K w/ McGraw. Required McGraw to deliver Masters on a certain schedule. McGraw delivered first 3
required and then delivered 4 more required. 5th year McGraw delivered another album (Emotional Traffic).
Curb contended it didnt meet McGraws contractual obligations. Curb sought injunction against McGraw from
recording for any other label.
TC found that Curb had established likelihood of success on the breach of K, but not irreparable injury. Denied
request for injunction.
COA affirmed
o Although courts can order specific performance of unique & extraordinary services sometimes, but not
here.
o K to indefinite & enjoining McGraw would amount to involuntary servitude.

Sampson v. Murray (US 1974) Remedy at Law case

4 month government employee given notice of termination sought an injunction against her termination trial
court granted TRO and extended it until the boss explained the reason for the termination affirmed by the COA
SC reversed court must have REAL showing of an irreparable injury for such an injunction mere loss of
income and possible humiliation and embarrassment are not enough there WAS an adequate remedy at law
which was damages (this is classic adequate remedy at law case) an employee has no right to enjoin
termination but only can sue for damages BUT the only way the employer can NOT have a jury trial is to
keep detailed notes and be able to explain in their summary judgment motion why they fired the employee for a
non-discriminatory reason

Power to issue injunctions:

GS Court
o TCA 16-15-401
o Metro v. Printers Ally Theater, LLC (2008)
Circuit Court
Chancery Court

Caroll v. Princess Anne (US 1968)

KKK had a loud, provocative demonstration on courthouse steps announced another rally the next night
county officials sought and obtained a temporary restraining order against the demonstration for 10 days this

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was obtained ex parte (i.e. with no attempt to give notice to the KKK) it was entirely possible to give the KKK
notice that the TRO was being sought
After a hearing, the injunction was extended to 10 months Maryland COA affirmed the TRO but reversed the 10
month injunction due to lack of proof that the danger of riot would persist for 10 months SC reversed the 10 day
RO due to the absence of notice to the KKK rule: NO TRO without notice in a First Amendment case
Rule 65 specifically provides that a TRO cannot be sought IF POSSIBLE to give notice to the other side!!!
In real list, if the trial judge feels like youve pulled the wool over your adversarys eyes or pulled the wool over
the courts eyes (you tell the court that you cannot give notice when you can), then the court will usually hold that
against you, and the hurdle you will have to then overcome will become insurmountable so, its good practice to
obey the rules and obey rule 65 and give notice to the other side WHENEVER YOU CAN

Coyne-Delaney v. Capital Development Board (7th Circuit 1983) didnt talk about in class this week
Bond requirement in federal court P won prelim injunction against award of contract trial court required only a $5K
bond 7th circuit reversed grant of preliminary injunction (IL law had changed since the trial court granted the prelim
injunction) D was damaged by grant of injunction
Wronged D is limited to the amount of the bond at the prelim injunction stage, a D dissatisfied with the bond can seek to
increase the bond

Wright Medical Technology v. Grisoni (TN COA 2001)

Employer obtained temp. injunction barring employee from selling allegedly improperly obtained
medical device
Posted $500K bond
TC ultimately found injunction improper and nullified it
o TC further found that employee had suffered $9M in damages.
P is liable for damages for erroneously issued injunction
o However, the damages are limited to the amount of the bond
o Thus, although P had $9M in damages, he recovers only $500K.
What happens if the court makes a mistake when it grants the injunction? P is liable for damages for erroneously issued
injunction! (EVEN if the court is responsible!) in both federal and state court, damages are limited to the amount of
the bond and P is liable!

Boyd v. Green Farmers Coop (TN COA 1990)

In action involving real property, party may file a lien lis pendens file in the registers office where land is
if have no claim of interest in the land, cannot file lien lis pendens if register one without a claim, may commit
tort of slander of title
A lien lis pendens is NOT valid unless you have some claim of interest in the title of the property (ex: just
because someone owes you money doesnt mean you can put a lien on his property)

TRO/ROs NON-APPEALABLE
Will expire before any appeal will be taken, normally
Preliminary injunctions are appealable

12/14/15
Tennessee Tort Reform 2011 (TCA 29-39-101)

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Non-economic damages capped punitive damages capped Hodges v. Toof codified specific
requirements for jury verdicts (for how jury verdicts are to be articulated) venue limitations (they have
narrowed the venue options available to a P, somewhat) appeal bond caps medical malpractice
protections expanded (anybody in the healthcare industry is going to be covered by what was formerly
called the medical malpractice statute and is now called the healthcare malpractice statute) class
actions limited somewhat
Cap for catastrophic injuries is lower than we discussed ($1M (not $1.25M as state before)
catastrophic injuries slightly narrower (spinal cord injury only catastrophic if results in paraplegia or
quadriplegia) exception for felonious acts is broader than we discussed (if the D has the specific intent
to cause serious bodily injury to the P, then the caps do not apply) exception to caps not identified
before (if the D intentionally destroys documents, the caps do not apply) no modification to the
collateral source rule (except that the limitation already contained in the medical malpractice statute is
expanded to all in the healthcare filed)
Takes effect October 1, 2011 and applies to all actions for injuries, deaths, and/or losses which ACCRUE
on or after such date

DECLARATORY RELIEF
Declaratory Judgments
Nashville, Chattanooga, & St. Louis RR v. Wallace (US 1933)
o Davidson County Chancery Court challenged constitutionality of Tenn. Excise Tax on Gasoline
under US Constitution
o Issue: does a case asking a court to declare whether a statute is constitutional present sufficient
case or controversy under the US Constitution? YES!
o Only question is whether there is a real dispute or question the court cannot issue an
advisory opinion, but it can render a declaratory judgment the question is really
whether the case is seeking an advisory opinion or not but arent we really seeking an
advisory opinion in every declaratory judgment case? were just asking the court to give an
opinion (theres no order to be in contempt of, for example)
o History: US Constitution, Article III says that the judicial power of the US shall extent to
cases[or] controversies President Washington asked Chief Justice John Jay for advice on
how best to maintain neutrality during a war between England and France John Jay says that
the Constitution does not allow the SC to answer such a question because the Constitution only
authorizes the court to determine real cases or controversiesSO, no advisory opinions are
permitted!!
o An advisory opinion is when you ask the court for its advice on a matter a court cannot give
this
o So, the question is where is the boundary between seeking advice and deciding a case or
controversy whether a case or controversy is real is obviously somewhat in the eye of the
beholder
o FRCivP 57:
Cardinal Chemical v. Morton International (US 1993)
o Morton owned 2 patents Morton sued Cardinal claiming Cardinal was infringing on Mortons
patents Cardinal counterclaimed seeking a declaratory judgment that Mortons patents were
invalid Morton lost and Cardinal won but the Court would not issue a declaratory judgment
that the patents were invalid
o While the issuance of a declaratory judgment of validity when a challenge to a patent failed
makes senserefusing to issue a declaratory judgment when a patent has been thrice held

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invalid was wasteful SC found refusal to enter a declaratory judgment was an abuse of
discretion
o In this case, the parties litigated to judgment the issue of infringement, so obviously theres a
dispute! How could you not have a dispute/controversies if the parties litigate to judgment the
issue of whether someone stole something or not?
o Why seek a declaratory judgment that a law is illegal and not seek an injunction against its
enforcement? No irreparable harm is required for declaratory judgment!! (this is one of the
most challenging obstacles to getting injunctive relief) FRCivP 57: existence of another
adequate remedy does NOT preclude a declaratory judgment that is otherwise appropriate
(TRCivP 57 is the same!)
o Often times, litigants still have a relationship (ex: in franchise litigation) declaratory judgment
is a much more gentleman-like litigation you want the dispute resolved, but you dont want to
be an ass and go to the mat in this case, the court would simply just answer this question as
a practical matter, all they want is the answer to the question, and once they have it, thats the
way theyll conduct their business going forward so, thats why you primarily see declaratory
relief in business settings
o This will also save the parties lots of time and effort
Steffel v. Thompson (US 1974) War protest case: Ps were passing out anti-war leaflets on private
party (1 quit, 1 prosecuted for trespass) both sued for injunction against enforcement of criminal
trespass statute and for declaratory relief that statute as applied violated 1st amendment
o COA referred to In re Younger: courts should refrain from enjoining ongoing state
prosecutions
o When no state prosecution is pending, federal court may consider issuing declaratory relief
BUT, the primary question then would be that if no prosecution is pending, is there
a real controversy??
o The court will NOT enjoin a criminal prosecution! so, whats the relief for the D who is
defending a criminal prosecution on the basis that a statute is unconstitutional? They have to
raise it in their defense!!! Thats the only way! It can again be raised collaterally on habeas
corpus, though you CANNOT collaterally attack the conviction based on declaratory relief
OUTSIDE the case (except through habeas corpus) (you cannot enjoin a prosecution by a
separate action) why? separation of powers issues
o Not only can the criminal D not seek to enjoin the prosecution, he cannot either seek a
declaratory judgment!
Doran v. Salem Inn (US 1975)
o Bars challenging city ordinance forbidding topless dancing sought declaratory and injunctive
relief 1 bar (M&L) resumed topless dancing and was charged criminally; the other 2 did not
trial court lumped all 3 together
o SC followed Younger and Steffel cannot seek to enjoin or seek declaratory relief in a separate
proceeding when a criminal prosecution is pending non-criminally charged, however, can seek
declaratory relief the three bars should NOT have been grouped together for this reason
o Collaterally = in a separate action
o Comedy = separation of powers??
Colonial Pipeline v. Morgan (2008)
o Colonial Pipeline company sought DJ that certain taxes were unconstitutional
o Held: sovereign immunity doesnt bar a suit against the State for DJ challenging the
constitutionality of a statute so long as the action doesnt seek money damages.
Campbell v. Sundquist (Tenn.Ct.App. 1996)
o Constitution challenge under the TN Constitution to TNs Homosexual Practices Act

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Ps admit violating the law (before it was passed)

Ps assert that law criminalizes private behavior violating their privacy rights under TN Const.
Ds moved to dismiss for lack of standing non of the Ps have been prosecuted
Held: standing exists
State criminal sodomy statute unconstitutional court granted declaratory judgment
holding statute unconstitutional
o Court: statute itself is an actual threat of prosecution & Ps acknowledge the conduct
o This particular threat is an injury, which is not common to the public.
o If threat to the public generally, then Standing may have been in question
o Was there any question that the court didnt have the power to declare this judgment
unconstitutional? No
o If a court can get away with just declaratory relief, then that is the most narrow form of relief
necessary at that time
Standing: defense that Ps need to remember
o Pertinent in equity cases if not damaged/injured, then cant recover damages in a
tort/K/common law case
o Ps injury (or threatened injury) must be specific toward P or Ps group, not the public generally.
o ADA case example:
ADA Public Accommodation Law requires certain structural accommodations for the
disabled in public facilities
Injunction & atty fees only remedies no damages
P must be affected by the claimed violation.
Fuller v. Campbell (Tenn.Ct.App. 2003)
o No declaratory judgment actions may be filed against the state of TN to construe statutes TN
courts just cant hear such cases Fullers claim was not ripe either (i.e. no allegation that he
is presently affected by the policy in question)
o Fuller distinguished Campbell on the ground that Mr. Fuller was attempting to require the state to
expend its funds to provide him with an alternative method of drug testing
o Spoden has GREAT difficulty understanding how the COA can decide BOTH Campbell and
Fuller!!! Use either case to your benefit, depending on what you want! to Spoden, they are not
reconcilable, and its a stretch to think of going for the treasury as different than Campbell
o Typical case: McDonalds franchisee has dispute with McDonalds dispute may be over how
royalties are calculated or something that does not go to the essence of the parties relationship
litigating over a legitimate dispute as to contract meaning is much more gentlemanly
o All a declaratory judgment does is declare the rights of the parties! there will be NO money
made for your client and NO order to enforce at the end of the day, theres really no hard and
fast relief
o
o
o
o

Typical Case:
McDonalds Franchisee has dispute with McDs
Dispute may be over how royalties are calculated or something that doesnt go to the essence of the
parties relationship.
Litigating over a legitimate dispute as to the K meaning is much more gentlemanly.

QUIET TITLE

Question of ownership that helps determine who has title of the property, basically a DJ

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Newman Machine Co. v. Newman (NC 1969)

o Dispute over who had title to certain personal property (stock in Newman Machine Co.) court reviews
the old bill quia timet (quiet title) this sounds a lot like declaratory judgment!! Its seeking the court to
DECLARE who owns the stock!!
o In Newman, D said such cases (for quieting title to personal property) were not authorized by any statute
court said it doesnt matter such cases were heard in equity and still may be so determined the
issue in the modern quiet title suit is who owns the property
o If you have a dispute over the title to property, the way to resolve it is a suit in quite title (aka
declaratory judgment)
o This type of case is commonly used in real property ownership dispute litigation it proceed like any
case in which the parties present evidence to show who is the rightful owner

REFORMATION
Hand v. Dayton-Hudson (6th Cir. 1985)
o Reformation is a dandy remedy with the right set of facts this is a classic reformation case
o Hand was an in-house atty for Dayton-Hudson attorney-employee settled employment
dispute/wrongful termination case with his former employer the lawyer/former employee modified the
agreed upon settlement document deceitfully
o Purpose of reformation is to enforce the actual agreement of the parties difference between the
remedy for fraud (rescission) and reformation
o Dayton-Hudson raises the defense in Hands suit against D-H and files a motion to have the court hold
that Hand is bound by the actual agreement of the parties this is a terrific remedy! In this case, the
court REFORMS the agreement and ENFORCES the REFORMED agreement!
o Reformation is ALWAYS on the final!!
o Nominal damages: essentially, nominal damages are declaratory relief in a suit at common law case
what is the significance? The P has an argument that theyre entitled to atty fees in a case where atty fees
are recoverable (but, atty fees in nominal damages cases are normally ZERO) note: joinder of
remedies (seek all that you can!)
o Quo warranto proceeding: special writ for determining eligibility for public office when used for this
purpose, the case is brought through the atty general usually only comes up in election-type cases
only rarely results in any monetary relief

MIDTERM
1 ESSAY
MULTI-CHOICE QUESTIONS SIMILAR TO BAR EXAM

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o 2 ANSWERS ARE REALLY CLOSE TO THE RIGHT ANSWER

Essay Exam answer structure:
o State your conclusion at the beginning
o State the pertinent facts
o Articulate the applicable law
o Apply the law to the facts
Explain the result using the pertinent facts and law
Addressing both sides arguments is helpful

AFTER MIDTERM
JANUARY 4, 2016
RESTITUTION/UNJUST ENRICHMENT
This is the hard stuff most lawyers struggle with it in the mental map of most lawyers, restitution consists
largely of blank spaces with undefined borders and only scattered patches of familiar ground (Prof. Laycock)
P. Laycock article describes 3 meanings/types of restitution (pg. 208):
1 UNJUST ENRICHMENT: enrichment is measured by the Ds gain (i.e. the benefit conferred on the
D), NOT the Ps loss this is the concept that we need to get the most but the hardest concept to get a
lot of times in these cases, there is no loss for the P this is a crucial concept to get!
a Not like compensatory damages, which compensates the plaintiff for their loss not Ds gain.
b Measure of something that is not already measured.
2 Specific restitution: restore to the P the specific thing that he lost or undo a specific transaction
3 Restore to the P the value of what he lost: this is the common criminal justice usage this is really a
misnomer in civil law (because its really the same as damages!)
When do you use restitution in Civil Cases?
1 When the P prefers to measure recovery by the Ds gain (unjust enrichment)
2 Specific Restitution:
a D is insolvent
b What P has lost has changed in value (ex: possible that the specific property has increased in
value)
c P values item for non-market reasons (ex: an heirloom in a family dispute)
d Rescinding a transaction (restore parties before transaction occurred)
3 Otherwise, the restitutionary remedy looks like damages!
Unjust enrichment = enrichment that lacks an adequate legal (or equitable) basis this is when the gain
received by the D is just not supported by a legal or equitable foundationthis is a significant reason to argue
for restitution
1) One limitation to restitution:
A transfer based on adequate legal or equitable basis is NOT unjust
o Transfer of money or property pursuant to:

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A valid contract
Payment of a valid obligation
A valid gift will NOT normally result in unjust enrichment (these are DEFENSES to
restitution!)
When youre looking at a fact situation, question whether the property or money is held by the D
justifiably by a legal or equitable basis (even a moral basis) an old definition of restitution: the gist of
an action for restitution is that the D is obliged by the ties of natural justice and equity to refund the
money (1760) (the do right rule)

2) A second limitation to restitution: restitution is not normally available to the party who should have made a
contract but failed to do so
Normally, a sophisticated party is going to be limited to its contract remedies even less than
sophisticated parties can be so limited!
Common sense example: a neighbor borrows a lawnmower from owner neighbor fails to return it
obviously unjust enrichment
Is this also a tort? Probably conversion!
The measure of recovery would be the fair market value of the lawn mower (i.e. what the P had lost)
but what if the neighbor mowed yards of others for a profit during his custody of the mower?
o Not only has the D caused you this loss, but hes also profited from it!
How does that affect the measure of damages? This is not recoverable in the tort action but it IS
recoverable as unjust enrichment and is measured by the Ds gain!
Now is when you have to remember what class you are inremedies! What REMEDY will suit your clients
needs best? That is the key to when to seek this remedy
Blue Cross v. Sauer (Mo. Ct. App. 1990)
William R. Sauer had disability insurance when checked into hospital, he said he was covered by
BCBS (he was not) clerk entered him as William J. Sauer (who had coverage) but used Rs address
BCBS sent 66 checks totaling $22K to the wrong Sauer either Sauer or his father endorsed every
check the Sauers received the money but had NO right to it at all!
BCBS is entitled to restitution of the monies it erroneously paid (complete mistake) contributory
negligence or comparative fault are NOT defenses thus, that monies were paid due to mistake by
BCBS is irrelevant the fact that the Sauers are not innocent doesnt really matter because the point is
not that they committed a tort by cashing the checks but that they werent entitled to the money
regardless of how they got it!
The important thing here is that the D received this money and had no right to it whatsoever the P paid
this money to the D by COMPLETE mistake get the idea of culpability of the Ds out of your head
because the result is the same in this case either way
Culpability will be a factor later on when we get to how to measure unjust enrichment. Here, the
measure is easy!
Lingo remains confusing: restitution, unjust enrichment, and damages are used, sometimes
interchangeably theyre NOT the same
o Unjust Enrichment or Defendants Gain = the restitutionary remedy
o Damages = the compensatory damage remedy
Burkhart v. U.S. Commerce Equip (2001)
Burkhart & US Commerce K
o P to acquire certain theater equipment

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o Under a lease, w/ an option to purchase

o Lease 27 month term
Lessee to return equipment thereafter
o A year after the K expired, P exercised option to purchase equip for $11K
o P also sought refund of amount paid
o D refused refund
o TC held for D
P had 3 options at expiration of the lease
Return equipment
Keep equipment on month to month
Option to purchase at price in K
o Held that P essentially chose option 2 by not returning the equipment
o The K provided for retention of the equipment
o NEED MORE INFO
Somerville v. Jacobs (W.Va. 1969)
Somervilles owned lots 44, 45, and 46 built warehouse on lot 47, owned by Jacobs, by mistake sold
lots 44, 45, and 46 to Engle & Pappas Engle & Pappas leased warehouse to the Coca Cola bottler
Somervilles sued for the value added to lot 47 ($20,500) or that the land be conveyed to them for a fair
price parties agreed that lot 47 was worth $2K before the warehouse was built and $19,500 with the
warehouse Engle & Pappas paid $19,500 for lots 44, 45, and 46 court says both builder and current
owner are innocent
If both are innocent, then owner is unjustly enriched by the building Somervilles entitled to judgment
for benefit conferred on owner court ruled that Somervilles have lien for $17,500 (value of benefit
conferred) OR may buy the land for the value of the land less the value of the improvement ($2K) here
Youve got to assume this is in some industrial area of town the building has REAL commercial value
BUT, the D didnt ask for the warehouse, doesnt want the warehouse how do you measure the
enrichment?? The court says both parties are completely innocent, but how innocent is the P really? If
the P should have protected itself, is the Ds gain really unjust? The dissent was concerned about this (P
had a duty to ensure they were building their building on property they owned)
There was a survey in this case, and it was wrong normally you have a claim against the surveyor its
unknown in this case why they didnt sue the surveyor
Buy/sell remedy
State v. ANW Seed Corp (Wash. 1991)
The state of WA won a default judgment against ANW after time for appeal passed and time for bond
to stay during appeal passed, state executed on $16,588.50 worth of property ANW property was
seized and sold, and money received at the sale was applied against the judgment that the state of WA
had
The COA ultimately vacated the judgment the question is what is the result when a party wins a
judgment in the first instance, the judgment is vacated on appeal, and in the interim, the original
prevailing party collected money theres NO question that it would be unjust enrichment for the P to
keep the money
ANW claimed the property sold was worth > $51K this complicates things
Judgment procedure: te judgment in this case goes down for $75K in TN, if its a court of record
(chancery or circuit), the parties have 30 days in which to appeal or post a supersedious bond the D
can appeal, but execution on the judgment will not be stayed unless a supersedious bond is posted the

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maximum amount of supersedious bond is 125% of the judgment so, the D, in order to prevent the P
from executing on the judgment, would have to post the supersedious bond if that is not posted, the P
can execute on the judgment anytime after the 30 days has run! to do this, the P would issue a writ of
execution (there are others) that would permit the sheriff to seize some property (ex: warehouse X full of
seed) so, the sheriff picks up the property, takes it to the court house, and gives notice through a
publication of an execution sale then, the sheriff auctions the property off on the courthouse steps the
expenses of the sale are deducted from the amount that goes to the P
On appeal, ANW won! The $75K judgment is set aside so, the money held by the P has to be paid
back to the D (THATs the unjust enrichmentthats the restitutionary remedy right there)
The only issue in this case is that ANW says the property that was sold was worth way more than it was
sold for! They wanted a judgment against the P for the damages caused by the P for the seizure of the
difference between $51K and $16K because the D did not post the supersedious bond, the execution
was completely legally valid! So, the P LOST the difference between $51K and $16K! if the D had
wanted to be sure its property wasnt executed on, all it had to do was post the bond they didnt do
that!
It wouldnt have made any difference if the D had been indigent and couldnt afford the bond!
The party can REASONABLY protect himself, then the receipt of the benefit is NOT unjust the
difference here is that what benefit did the P receive? The P only received $16K! thats the only benefit!
The D LOST $51K, but they dont have a claim against the state for that loss because the state was
acting legally if it didnt work this way, the purpose of the supersedious bond would be thwarted the
bond benefits both parties
This is a classic unjust enrichment case
ANW can recover the mount recovered by the judgment creditor but NOT the value of the property
ANW could have stayed execution by posting a bond ANW points to nothing wrongful in the
execution of the judgment

Anderson v. Schwegel (Idaho 1990)

Schwegel owned an auto body shop agreed to restore a 1935 Plymouth for $6K Anderson thought
deal included all but upholstery, and Schwegel thought deal included only body work Schwegel hired
engine shop to do engine work, which cost more than the $6K Schwegel sent an invoice that exceeded
the $6K for the engine work, and Anderson didnt object Schwegel charged $9.8K Anderson paid
$5K no written contract
Trial judge concluded that no agreement reached, period (no real contract no meeting of the minds
terms didnt match up so, QUASI CONTRACT) trial judge held for Schwegel against Anderson for
$4.8K (the value of the services rendered i.e. the benefit conferred on Anderson NOT the value of
the car!!) the dollar-for-dollar cost is probably going to be more than the increase in value (they did
$9K worth of work, which is the fair market value of the services but since we didnt have a contract, I
only owe the amount my car increased in value BUT the court said that Anderson was wrong and hes
responsible for the value of the services performed)
The amount of recovery in a quasi contract is a question of fact for the trier of fact
Schwegel is entitled to the value of the services rendered (note: not the contract price no contract)
court allows the value of the services BECAUSE the benefit conferred WAS the value of the services
this court said they were one and the same because Anderson asked for the work
If there was an actual contract, Anderson would have to pay the contract pricein this case it would be
the same as the value of the services performed!
The value of the improvement may not always equal the amount of the fair market value for the services
performed but you may be able to articulate that and win!!

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Unjust enrichment = quasi contract (parties didnt enter into a K) = quantum meruit
Quantum meruit = as much as he deserved usually synonymous with quasi contract note the
issue in question: the value of the services rendered (value to whom?)
Restatement of Restitution(3rd): value to the recipient (of the benefit) is the usual measure of
enrichment in all cases where an innocent recipient has obtained unrequested, nonreturnable benefits
consider in car restoration case the value of the benefit to the recipient may change, depending on if
the recipient asked for it or not
o Note: sometimes the benefit is requested and there is a disagreement over what was agreed to be
paid.
Value to whom:
o UE from requested benefits is measured by their reasonable value to the recipient
o Reasonable value is normally the lesser of market value and a price the recipient has expressed a
willingness to pay
o Certainly watch for evidence of what D was willing to pay
Paschalls, Inc. v. Dozier (Tenn. 1966) IMPORTANT CASE
Paschalls built bathroom addition in Doziers house Paschall built the addition at the request of Mary
Best, Doziers daughter, who lived at the Doziers house Best filed bankruptcy, and the debt was
[probably] discharged Paschalls sued seeking unjust enrichment (Paschall lost mechanic lien right
through some defect)
Quantum meruit may lie to recover reasonable value of labor and materials furnished what are the
elements? (1) a benefit conferred on the D by the P, (2) appreciation of the benefit by the D, (3)
acceptance of the benefit under circumstances that would be inequity for him to retain the benefit
without payment, (4) exhaustion of remedies
Normally, the most vital element is: acceptance of the benefit under circumstances that would be
inequitable to retain the benefit without payment
The Doziers are appreciating the bathroom without paying anyone for it! thats unjust enrichment this
is the CLASSIC quantum meruit case in TN this is the BIBLE for quantum meruit in TN its the case
from which all others spring it is essential for TN lawyers to know this case and know how unjust
enrichment applies in the construction context
DT McCall & Sons v. Seagraves (Tenn. Ct. App. 1990) IMPORTANT CASE
DT McCall supplied a heat pump to Seagraves home and was not paid DT McCall sold the heat pump
to General Contractor Holland Seagraves paid Holland in full DT McCall had defect in its
mechanics lien DT McCall sought to recovery in quantum meruit DT McCall loses since the
homeowner had paid Holland, it was NOT unjust for the homeowner to retain the benefit because they
had paid for it! now, Holland didnt pay DT McCall, so theyre out the money they have a breach of
contract claim against Holland
Its NOT unjust for the Seagraves to be able to use the pump
These two cases are the foundation of TN unjust enrichment construction claims these exact issues are
litigated over millions in big construction cases
In the car case, Anderson got the benefit of the work when you simply look at the benefit Anderson is
conferred, hes clearly conferred some benefit the real rub is the same rub in Paschalls and is what is
that measure? in the car case, it equaled the value of the services rendered the same argument could
be made in the Doziers case

JANUARY 18, 2016

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Restitution/Unjust Enrichment (cont.)

The point last week was that the retention of the benefit, in order for the P to win, had to
be unjust
o IS THE RETENTION UNJUST?
What if theres a contract involved?

Burkhart v. US Commerce Equip (Tenn. Ct. App. 2001) IN NOTES FOR LAST
CLASS

Burkhart and US Commerce Equip there was a contract between the two Burkhart to
acquire certain theater equipment under a lease with an option to purchase the lease
had a 27-month term lessee to return equipment thereafter, if does not return, lease
term becomes month to month
After contract expired (he made the 27 required payments), Burkhart continued
possession and making payments claims he did so by mistake he made 7 extra
payments - a year after the contract expired, he exercised the option to purchase and
acquired the equipment for the contract price of $11K
Burkhart also sought refund of amount paid in excess of the initial lease term ($82K) US
Commerce refused refund
Trial court found in favor of US Commerce and found that Burkhart had 3 options at
expiration of lease: (1) return the equipment, (2) keep the equipment on month to month
basis, or (3) option to purchase at price in contract Burkhart had essentially chosen
option 2 by not returning the equipment
To sue on the theory of money had and received versus unjust enrichment versus
restitution: these are the same theories!
Burkhart argued that US Commerce was unjustly enriched by the mistaken payments
used phrase money had and received key issue here (and in most cases): whether US
Commerces retention of the money would be unjust
The contract set the terms US Commerce didnt receive a benefit that was beyond the
terms of the contract! the contract provided for retention of the equipment as long as
Burkhart continued to pay the monthly lease amount he kept the equipment and paid
the lease amount thus, not unjust for US Commerce to retain funds called for under the
contract!

CPB v. Don Everly (Tenn. Ct. App. 1996)

CPB = Brown (Everly Brothers Agent)
1989 Brown was hired as agent for Don Everly (agent agreement was: 5% of gross income
= fee, no written contract) in 1990, Brown arranged for European tour for band on the
basis that he would get 5% of the proceeds of the tour (Phil agreed) Don knew of and did
not object to Brown putting tour together (but did not agree to extra fee) in 1991,
Everlys terminated Brown
The bands gross revenue from the tour was $678K Don paid CPB $54K, which was 5% of
Dons gross revenues from income Don expressly opposed Brown earning additional
money for the European tour over and above the 5% gross for Don Brown said the
European tour was over and beyond the agent agreement (the European tour required
that the book dates, something he rarely did under the agency agreement)
Brown had unwritten contract that provided for his compensation the court held that
the European tour booking was covered by the contract thus, receipt of services was
not unjust because it was covered by the contract (it was not unjust for the Everly
Brothers to retain the benefit for Browns services with regard to what he did for the
European tour)
The big difference between this case and the last case was that in the previous case, the
agreement was written and specifically addressed the circumstances of the case (was

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crystal clear that the benefit was not unjust), while in this case, the agreement was
unwritten and a little fuzzier another difference was that there was no clear agreement
about whether the tour services were/were not included in the terms of the agent
agreement (that worked to the benefit of the Everly Brothers) (the specifics of the terms
were not in agreement, and if the contract had been in writing, it would have been easier
to determine) also, Brown could have protected himself if he was concerned about not
getting paid his extra compensation (above and beyond that agreed to in 1989), he could
have refused to do the services without having it specified in writing to protect himself!
As between the two parties, could you say that one or the other party was more
sophisticated? You probably could have said that Brown may have been the more
sophisticated party! this is usually an element in evaluating whether the enrichment is
unjust or not

Bright v. QSP, Inc. (4th Cir. 1994) (not in book)

Bright was a salesman for QSP with a written contract sought to recover for services
beyond those expressly covered in the contract Bright does not have unjust enrichment
claim the contract called for payment Bright cannot complain after the contract about
doing things for which he says he was not compensated
If QSP was wanting him to do something above and beyond the contract, Bright should
have said no until we get another agreement (this is basically the same as the previous
case)
Where theres a contract and the party has the opportunity to negotiate the very term
theyre now complaining about, they will be generally precluded from arguing unjust
enrichment (this is the basic rule)
Its hard to get unjust enrichment in a contract case you would want to argue that the
parties were not on equal ground (one more sophisticated, greater bargaining power),
unenforceable contract, etc.

CULPABILITY: responsibility for a fault or wrong; blame

So far, all the unjust enrichment cases weve had, maybe with the exception of the check
cashing case, there was not much culpability.
Olwell v. Nye & Nissen Co. (Wash. 1946)
o Olwell sold to N&N half interest in Puget Sound Egg Packers Olwell retained
ownership of Egg Washing Machine Olwell stored the machine at the N&N plant
o N&N, without Olwells knowledge, took the machine out of storage and started using
it (for 3 years!) Olwell learned of the machine being used and offered to sell it to
N&N for $600 (half its original cost, his estimate of its fair market value) N&N
declined
o Olwell recovered a judgment for $10 per week for 156 weeks ($1560 much more
than the fair market value estimate) Olwells theory was restitution (he sought to
recover the value of the use of the machine)
o What would be the damages for the tort of conversion? The reduction in the fair
market value of the machine itself Olwell claimed FMV was $600 (that would be if
they completely took the machine, which they didnt do) the P asserted the theory
of restitution instead (value of the benefit to N&N), which was far better than the
amount he would have gotten for conversion!
o The Ds theory was that they just used it and it wouldnt have been used so they
didnt interfere with the Ps right (that the Ps loss was ZERO) but restitution is
available even if P has an adequate remedy at law, and the remedy is the
amount D has been unjustly enriched (the Ds GAIN, NOT the Ps LOSS) the SC
said that the essence of property ownership was the right of exclusive use, and just

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o
o

o
o

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because it would have been in storage anyway is irrelevant theres also some
culpability here because the D is using property its not entitled to use!
The amount the D gained can also include the amount the D gained through a
savings (in this case, the D didnt have to pay someone to wash the eggs or rent
another machine!) thats a way of articulating how the D was enriched by using
this machine wrongfully it was clear that N&N had benefited $1.43 per hour it
used the machine a benefit is conferred where the D is saved from expense
or loss
Benefit = any and all forms of advantage!! (you want to look at everything the
D got out of it, maybe reduced by the expenses the D incurred)
Olwell was NOT DAMAGED no actual damages (Olwell was merely storing the
machine) the court held that ownership means Olwell had the right to exclusive
use N&N gained more than Olwell lost (does that matter? Nope) is Olwell limited
to what he lost? Nope (but in tort, he would be what about in contract?)
DONT NEED ACTUAL DAMAGES FOR UE (ON FINAL)
This is a class example of unjust enrichment!
What do you think about the it was not being used argument? What is the most
economical division of liability? Is it fair for N&N to have to pay Olwell for the use of
a machine that he was not using anyway? What about the benefit to society? If
youre letting your property to sit idle, youre not benefiting society but generally,
courts see property owners as entitled to exclusive use
Economic Analysis
Damage calculations (not really important for purposes of the point of this
case): assume fair rental amount for an Egg Washing Machine was $10 per
month N&N saved $1,560 in labor costs but could have had the same
savings by renting a machine for $360 ($10 per month for 36 months) the
$360 would be equal to damages for lost rental value (if P had sought
recovery in tort)
Remember that Olwell is COMPLETELY ignorant of the Ds using the machine
estoppel may be a defense, but mere knowledge is not enough for estoppel there
has to be some PREJUDICE to N&N (N&N would have to be prejudiced there would
have to be some reliance on N&N and some detriment)
Waiver is the willful and knowing waiver of a known right you COULD make this
argument possibly in a case it would be difficult to have a waiver by silence

Edwards v. Lees Admin (Ky. 1936) (not in book)

o Cave entrance on Edwards property cave extended under Lees property
Edwards developed cave as tourist attraction Court awarded Lees estate
restitution for the benefit Edwards gained from showing Lees part of the cave
o Note: Lee would not have earned anything if Edwards did not develop the cave
o Easy case, but then you get into the question of how much of Lees benefit should
Edwards be awarded since the cave was under BOTH their properties?
Vincent v. Lake Erie Transport Co. (Minn. 1910) (not in book)
o Ds ship was tied up at Ps dock very violent storm came up Ds ship did $500
damage to Ps dock no one negligent, but D had to pay for the $500 damage to
the doc why is award just $500? Wasnt the benefit the non-sinking of its ship?
o The D was not culpable in ANY way (couldnt even be sued in tort), but the P LOST
$500
o Note: emergency situation no time for voluntariness
o Cupability: in N&N, N&N was culpable, and the P recovered essentially ALL the Ds
gain!; in KY case, there is not much culpability by Edwards but some; in the Lake
Erie case, there was NO culpability at all
Maier Brewing Co. v. Fleischmann Distilling (9th Cir. 1968)

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o
o

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Trademark infringement case Fleischmann owned trademark for Black & White
scotch whiskey Maier used B&W label for its beer Lanham Act (the trademark
statute (section 117)): can recover (a) Ds profits AND (b) any damages sustained
by P trial court awarded Fleischmann $34,912 from Maier
Under the statute, those profits are recoverable goal is to make deliberate
infringement unprofitable court awarded to Fleischmann ALL of Maiers profits
even though there is no competition between products! So, recovery would be
damages (lost sales, but none in this case) AND what the D gained (which was all of
his profits!)
No lost sales BUT infringement on the trademark results in award of ALL of Maiers
profits Maiers gain was unjust enrichment!
The reason why Fleischmann has a trademark infringement claim is that even
though beer is not whiskey, its sufficiently similar such that people might think that
Fleischmann endorsed the bar and it might harm Fleischmanns trademark by its
selling of the cheap beer if it were books or something, it wouldnt be an issue
because there wouldnt be confusion of the source
Maier is normal trademark infringement case if no [possibility of source confusion,
no infringement here, the confusion is the source (not the product) no one
thought they were getting scotch when they bought the beer but it is conceivable
that whiskey maker might make beer consumers might be confused as to the
source of the beer
Trademark infringement = Ds profits + Ps damages
IP damages (4 types of IP recovery): copyright (fed), patent (fed),
trademark (fed), and trade secret (state)
o Copyright infringers: must be fixed in a tangible mean of expression (i.e. ideas
are not copyrightable, could be recorded, written down, etc.) and must be
UNIQUE
Damages = ALL damages (everything theyve lost) plus all profits not
taken into account in computing actual damages may elect statutory
damages from $750 to $30K up to $150K if willful reduced to $0 for not for
profit parties who infringe in good faith you may be able to prove your
DAMAGES by what the P gained copyright infringers may be able to recover
BOTH the Ps loss and the Ds gain
o Patent infringement: patent is a monopoly granted by federal law to inventors
of something for the use of that thing (the owner of the patent, when the patent
is issued, has to publish the patent) damages = P can recover up to 3
times actual damages may be able to measure Ps damages by showing Ds
profits (sales P would otherwise have made as evidence o factual damages)
damages are what the D gained AND what the P lost! P will always recover no
less than a reasonable royalty
o Trademark infringers: trademark is to act like a symbol of you, your product,
etc. (it doesnt necessarily need to be communicating anything unique or
different from someone else (ex: golden arches for McD) court has discretion
to or not to award both actual damages and Ds profit may try to use
Ds profit as a measure of actual damages (note pitfalls: that approach would not
have worked in Maier) 1984 statute allows treble damages or treble profits
o Trade secrets: state statutes, not federal, so laws vary a little general
damages: actual loss caused by the misappropriation + unjust
enrichment caused by the misappropriation that is not taken into
account in computing the actual loss in TN, our statute (TN Trade Secret
Act) allows for a remedy of actual loss + unjust enrichment + 2x for willful
violation + atty fees

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Hamilton-Ryker v. Keymon (Tenn. Ct. App. 2010) (not in book)

TN Trade Secret Act, breach of duty of loyalty, and non-compete case Keymon worked for
Hamilton-Ryker (she signed a non-compete agreement) on her last day of employment
w/ H-R, she emailed herself 56 H-R documents (these documents enabled her to provide
services to 1 of H-Rs biggest customers the info Keymon took was not readily
ascertainable to the public and was held to be a trade secret by the court Keymon used
the info to supply the key customer and supplant H-R as a supplier H-R asserted that
Keymon made $477K profit on the transaction Keymon defended that H-R only suffered
actual lost sales of $94K
Trial court held a bench trial and found for H-R found Keymon liable for the $477K she
made under the Trade Secret Act, that amount was doubled (2x multiplier) over $914K
awarded v. Keymon on the trade secret claim!
Although Keynon had a non-compete, the recovery was significantly less than the trade
secret act

February 1, 2016

Restitution/Unjust Enrichment (cont.)

Measuring Profits (Allocation of Profits)
Sheldon v. MGM (US 1940)

Sheldon wrote a play called The Dishonored Lady MGM negotiated with Sheldon for the
rights to the play, but Sheldon did not agree to MGMs terms the most MGM offered him
for the play was $30K, and he declined so, MGM just copied the play, knowing it did not
have permission (they stole the guys play!) MGM made a movie called Letty Lynton
Joan Crawford was the lead and a big star it also starred Robert Montgomery who was
another big star at the time
Sheldon sued for all of MGMs profits on the film there was no dispute that there was
infringement of Sheldons copyright (MGM stole the play!) the only question was how to
measure MGMs gain P proved that MGMs profit was $587,604.37 on the film (profit =
revenue expenses)
MGMs proof was that they were at $30K when negotiations broke off motion picture
rights are not very valuable ($30K was a legitimate offer) MGM put on a bunch of experts
that testified that between 5% to 12% of the receipts were contributable to the play (i.e.
value of the play to the movie) one expert said the play contributed 0%
District court bound by the rule that P gets all of MGMs profits and awarded the P ALL of
MGMs profits district court made some other interesting fact findings they wrote a very
detailed opinion about how unfair it was that MGM had to pay all their profits they said
that MGM did more than just copy the play and added a lot by making it into a movie (a
movie is different than a play) it was punitive and unjust to award ALL the net profits to

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the P MGM contributed greatly to the profit on the movie (highlighted 3 things: great film
direction, excellent filming, and stars drawing power)
The 2nd circuit reversed (Judge Learned Hand) and awarded 20% of net profits (more than
MGMs experts wanted) but less than all profits this was greater than MGM acknowledged
The SC affirmed the court, for the first time, approved apportionment of net profits in a
copyright infringement case purpose of apportionment was to limit the Ps
recovery to the UNJUST PORTION of the Ds gain the SC found that exhibition of the
play as a movie added distinctive profit-making features, separate and apart from the use
of the infringing material theres not really a lot of guidance on how to allocate, so when
it comes time for you to allocate, youve just got to use common sense to determine what
seems fair under the circumstances the SC agreed with the COA analysis regarding the
20% (this was less than Sheldon wanted but more than MGM wanted to pay) the court
noted that mathematical exactness is NOT required (equity is concerned about a
fair apportionment so that neither party will have what justly belongs to the
other)
This is still the leading case on apportionment of an unjust enrichment award today!
We can all pretty much agree that a movie different than a play what if MGM had made a
play instead? What about the stars? Do they justify MGM being able to keep 80% of the
profit of the movie?
Compare Fleishman and MGM cases: P received ALL of Ds gain in Fleischman how do
you reconcile?
After losing this case, MGM did not show the movie again in 1947, United Artists made
another movie using an authorized version of the play

Mishawaka Rubber v. SS Kresge (US 1942) (Note 5, p. 669)

Trademark case court allocated gain awardable to P by profits from sales to confused
customers but profits from sales to consumers who were not confused are not to be
awarded to P (for there to be trademark infringement, you have to prove confusion as to
the source of the product) here, the Ps lawyers actually used surveys to show the % of
consumers who were confused here, the allocation for the apportionment of profits was
that the P was able to recover ALL of net profits from customers who were confused!

Hamil America, Inc. v. GFI (2nd Cir. 1999)

GFI copied 1 of Hamils fabric patterns GFI violated Hamils copyright trial court did not
include an allocation of general overhead in its profit calculation 2 nd circuit held that
allocation MUST be made
The burden of proof is ALWAYS on the D as to how to allocate profits (Sheldon v.
MGM is a great example) (burden is on infringer) BUT infringer is allowed to reduce
profits awarded to P by a fair and acceptable formula for allocating a portion of
overhead expenses to the manufacture of the infringing product realize that
there are going to be a myriad of ways to allocate profits or ways to reduce profits by
increasing the amount of costs/expenses incurred
The court also held that a higher standard should be observed when someone purposefully
infringes on someones property the court doesnt give a tremendous amount of
guidance on how to implicate the significance of culpability for our purposes, jus think
that if the D is very culpable, there should be SOME way of including that in your allocation
of apportionments
This case is also frequently cited
These two cases give us about as much guidance as weve got in establishing the
parameters of the issues, and youve got to fill in the gaps with the facts in your case and
the equities
Revenue Expenses (include overhead) = Profit (REMEMBER THIS)

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Schnadig Corp. v. Gaines Manuf. Co. (6th Cir. 1980)

Patent infringement case Schnadig owned sofa design patent Gaines infringed
Issue: how to calculate Gaines profit? trial court awarded only after-tax profit and
reduced Gaines after-tax profit by about 2/3 of the fixed costs attributable to the
production of the infringing product Schnadig says it should be awarded ALL of Gaines
pre-tax profit without reduction for any fixed costs
Statute provides that design patent infringer shall be liable to the owner to the extent of
his total profit this was a case of first impression
Regarding allocation issue: are profits reduced by taxes and/or fixed costs? the 6 th circuit
reversed the trial court ruling re: taxes (Schnadig WAS entitled to Gaines pre-tax profits)
Regarding fixed costs issue: $76,420 in fixed expenses were attributable to the production
of the infringing product the guiding principle is that the patent holder must
recover every dollar realized by the infringer from the patent affirmed district
courts ruling that 2/3 of the fixed costs allocable to the infringing production to reduce
profit awarded to Schnadig by that amount was reasonable affirmed this specific fact
finding by the trial court

Frank Music v. MGM (9th Cir. 1989) (note 7, p. 678)

This is the MGM Grand hotel, NOT MGM from the first case MGM used infringing material
from a Broadway play in show P attributed success of hotel and casino, in part, to
success of the show court agreed and allocated 10% of the profit from the show tickets
(direct profits) AND 2% of profits of hotel and casino (indirect profits) for the entire
time the show ran 9th circuit affirmed
This is OFFENSIVE use of allocation up and until now, we really discussed
DEFENSIVE use of allocation in this case, the P is trying to increase the profits
attributable to the infringement in the other cases, the D is trying to increase the cost
associated with the infringement to reduce the profits attributable to the infringement

3 Boys Music Corp. v. Bolton (9th Cir. 2000)

Michael Bolton used an old Isley Brothers song called Love is a Wonderful Thing jury
found that his song infringed the Isley Brothers copyright jury found that this song
accounted for 28% of Boltons profits on his CD and that the original song accounted for
66% of the song 66% of the 28% = $5.4M see the power of allocation? Theres a song
that BARELY infringes on another song, and the jury finds that it accounts for $5.4M! 9 th
circuit affirmed
In this case and in the hotel casino show case, you can see the offensive use of allocation
here, the Isley Brothers didnt claim he stole the entire songtheyre only claiming he
stole the NAME of the song this did the Ps very well in this case

Key points:
o

FIRST STEP in deciding whether this is a case for allocation: did the D bring any
distinctive profit-making features to the table? If not, the P will recover ALL of
the Ds profits from the infringement if the D did bring something distinctive to the
table, then there will be allocation
Remember that were talking about allocation of PROFITSnot the value of the
stock but, you maybe could make that argument you probably wouldnt get both
he encourages us to get creative just remember you cant double-dip, so if
shareholder value is reflected in profits (which it probably is), you cant get both
as the P, take your pick and make the best argument you can
The greater the culpability, the greater the need for deterrence when you
think about deterrence, you think about punitives is there an argument that
allocation may include punitives? Yes because if the court approves more than the

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proof the P put on, that has the effect of punitive in deterring the D its not
CALLED punitive, but it has the EFFECT of punitives
REVIEW for infringement cases:
P sues for infringement (proves Ds gain)
D has burden to show that profits should be allocated and rate of allocation
P argues and puts on proof for greater allocation.

February 8, 2016
Restitution
Constructive Trusts (pg. 70 in other outline)
Snepp v. US (US 1980)

Snepp promised to get permission from the US government before he published anything
about being a CIA agent this effectively gave the US the right to sensor what he wrote
he published without following the rules (he published no classified information) he wrote
a book re: his experience as a CIA agent during Vietnam he did not gain permission
before publishing his excuse was that he didnt publish anything that would not have
been okd anyway
At trial, the trial court suggested that we should impose a constructive trust (a
constructive trust differs from a regular trust in that it really is not a trust at all it is really
a court-imposed trust its imposed by a court as an equitable remedy when the court
finds there is not a basis for the P to be made whole otherwise its an equitable trust for
the benefit of a party that has been wrongfully deprived of its property due to a person
obtaining property which they should not possess) so, the court in essence says its
going to declare a constructive trust and decide that all the profits Snepp made from the
sale of his book, he holds in constructive trust for the US government whats fair about
holding the profits from this book in a constructive trust for the government? If he had
gotten the approval for the book and published it, he would have gotten the profits if he
didnt get approval and published the book, there was nothing in the contract that said the
government would get the profits so where the court came up with this idea, he has
trouble making that connection but, with all of that aside, the court found that that was
the proper remedy
The court also put down an injunction against Snepp not following the contract if he was to
write anything else
On the issue of it being a freedom of speech issue, the court said that if you agree to sign
your right away, that will be upheld
The COA reversed the constructive trust, but the US SC reversed the COA the US SC
found that the constructive trust was the most appropriate remedy in this case the US SC
also upheld the injunctive relief the US SC said it would not be right to impose
punitive damages there was a breach of trust here the US SC liked the constructive
trust because it was an opportunity to give damages proportionate to the loss
Apportionment/allocation factors: cuplability doomed Snepp (but it wasnt that important
in MGM (could MGM have been more culpable?)) it added value (none in the B&W beer
case because it was lousy beer) ability to quantify (no proof in beer case)
Talked about nominal damages but said that the constructive trust was better (makes no
sense to me in this case)

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The trust remedy simply requires the infringer to disgorge the benefits he earned due to
his faithfulness and attributes only those funds attributable to the breach
Note impact of culpability (blame/fault)

**Look at Paoloni v. Doggett case

**In 6th circuit cant use constructive trust in a bankruptcy case we are the 6 th circuit.
Ruffin v. Ruffin
Divorce case H ordered to pay child support pendent lite
A week after ordered to pay child support, H won VA lottery on a $2 ticket
o Won $4.9 million
o Didnt pay child support for 4 months
TC denied W relief sought
COA affirmed for constructive trust, Ps money must be distinctly traced into the property sought to be made
subject to the trust
Cant trace these $2
Injustice of not paying child support insufficient to grant Constructive trust
This highlights the need for tracing.
New York Life v. Nashville Trust (1956)
NY sued Nashville Trust the holder of the proceeds of funds paid on life insurance policies issued on the ife of
Thomas Buntin
Buntin faked a suicide he is the wrongdoer
Beneficiaries of the Nashville Trust trust are Buntins wife & children innocent recipients are in court trying to
prevent insurance company from getting money back
Buntin insurance man
o He disappeared Nashville sued NY to recover the proceeds of life insurance policies
1933 Buntin supposedly died
1942 TN SC held for Nashville, finding that NY owed the benefits and paid the benefits
1942 NY paid the benefits
When it was discovered he was not dead, they wanted their money back.
Note the absence of specific tracing
CONSTRUCTIVE TRUST IN TN
Imposed to prevent unjust enrichment
Requires some element of fraud, concealment, duress, etc., such that a person has obtained property which
he ought not, in equity and good conscience, hold and enjoy
May be imposed when: Elements (look in book)
o A person procures the legal title to property in violation of a duty to the actual owner;
o The title to property is obtained by some inequitable means;
o A person makes use of some influence to obtain title on better terms
o A person acquires property with notice someone else is entitled to its benefits.
State v. TCCN (2005)
TN Coordinated Care Network health maintenance org HMO for Tenn Care
Regulated business
o In trouble
TC ordered that constructive trust be placed over the sister companies to whom TCCN had transferred the $5.7
o Also ruled that the order was effective as of the time the transfer from the estate was made
Transfer by TCCN was breach of trust.
o Defiance of commissioners order = bad conduct

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o

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TCCN knew it was violating order an order that imposed trust obligations on TCCN to hold any $ for
court approval
Failure to obey the order was a breach of trust making the constructive trust the preferred remedy

Barbie v. Bratz
MGA started selling Bratz dolls in 2001
Barbie sales started to suffer right away by 2004 down 15%
Mattel lost $20 million a year from 2004-2008 total $100 million
MGAs net profit from the sale of the Bratz was $500M per year from 04-08 - $2 Billion total
Bryants designs were nothing more than concepts
MGA & Larian added the color, spice and marketing savvy to launch the Bratz doll & make it succeed.
MGA spent $250M on marketing
Experts testified that original design accounted for only 5% of the ultimate success of the Bratz dolls
MGA took the risk and added value
Mattel seeks all of MGAs gain - $2B
Outcome: verdict for Mattel
o Jury found Bryant designed doll while employed by Mattel
o Damages: $100M the amount of Mattels loss, and not any of MGAs gain.
After verdict, TC judge issued injunction against manufacture of Bratz dolls and constructive trust over all Bratz
trademarks
o Order to MGA: Issue public notice of recall.
COA suspended the injunction called it draconian
o Allowed Bratz dolls remained on the shelves during the appeal
o 9th circuit reversed TC erred in awarded Mattel ownership of Bryants ideas & drawings
o NO CONSTRUCTIVE TRUST WHERE ALLEGED INFRINGER ADDS MUCH VALUE
In 2011, goes back to trial new jury verdict for MGA
o Mattel didnt own the Bratz design
o Mattel unjustly enriched by using the Bratz design in the my scene doll
o Under Calif. Trade Secret Statue, the verdict was doubled to $137M, $85.5M in punitive
In 2013, 9th Circuit reversed again MGAs trade secret counterclaim was not properly before the court
In 2014, MGA sued Mattel and alleged new business tort claims in a state court (Bratz v. Barbie II)
Later in the year, Mattels motion to dismiss was denied.
Still no result yet pending.
Review: what to look for in CT
Specific property
Wrongful high culpability Fraud
Tracing (level of culpability will determine the particular tracing low culpability requires
more of a need for tracing)
Look at Class 21

February 15, 2016

DISGORGEMENT OF PROFIT:

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May v. Muroff (Fla. Dist. Ct. App. 1986) pg. 684, note 5
Court was faced with an obvious situation there is attractive land where, after the contract
entered but before closing, the seller took a bunch of fill off of it perhaps the logical
conclusion was to apportion the land and charge only per acre (total damages = $122K) the
court took the right course of action and said they would value this differently because the seller
acted INTENTIONALLY (he knew what he was doing, sold for X price, and then took the fill off the
land) because the seller was intentional, the court awarded the sellers profit to the P
Buyer in a real estate K has right of specific performance
Supporting total disgorgment of profit

RESCISSION
Remember from 1st year Ks
What is it? Unwind the transaction; put the parties back where they were

before the K
When is it appropriate?

Mobile Oil & Producing SE v. United States (US 2000)

Mobile Oil entered into a contractual agreement with US for the right to explore for and
drill for oil in the Outer Banks final price was $156M one caveat was that Mobile had to
adhere to 2 federal acts and had to present a plan to DOI as to how they would do this
within 30 days of providing the plan, the US government would provide yes or no answer
Mobile did this but did not hear back within 30 days while plan was being reviewed, an
additional act (3rd federal act) was put in place which would stand to prevent Mobile from
doing any exploration in the Outer Banks Mobile would not approve plan for 3 rd act
Mobile sued for breach and asked for rescission and restitution of their $156M the SC
awarded full restitution amount back to Mobile
Cannot rescind part of the contract (must rescind the entire thing)

Mutual Benefit Life Ins. V. JMR Elec. Corp (note case)

This company had key man life insurance they had this guy fill out the insurance app
one of the questions was if he smoked he answered no but, he died less than a year
later (he did not die of smoking-related causes) the insurance company refused to pay
because of misrepresentations on policy there was a specific clause that said misreps
would void the policy
The insurance company said there should have to be a causal relationship between the
falsehood on the app and the guys death the court said that if they allowed the
company to recover, it would incentivize others to lie on their apps court refused to play
that game court said material misrep justifies rescission of the insurance contract
its a material misrep if it increases the risk (in the insurance setting at least)
Rescission is to undo the contract and put everyone in the position they were in
before if you cant do that, you probably cant rescind it in this case, they
refunded premiums and voided terms of the policy
TCA 56-7-103: no misrep made in the application for a policy of insurance by the insured shall
be deemed material or defeat or void the policy unless such misrep is made with (1) actual
intent to deceive or (2) unless the matter represented increases the risk of loss

Sine v. Tenn. Farmers Mut. (Tenn. Ct. App. 1993)

Real property insureds misrepresented title, amount of mortgage, and prior insurance
cancellations

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Insureds sued lost at TC

o Per TC, misrepresentation that mortgage was $30K, when it was $43,250 was a
material misrepresentation
Does title increase the risk? Probably what about the amount of the mortgage? How does
a misrep as to that increase the risk? what about prior insurance cancellations? the
court said all three of these increased the risk, so the insurance company was entitled to
rescission and the owners were not entitled to payment on the policy
Law in TN is that if a misrep materially increases the risk of loss, it is material
COA finds that all all 3 misreps materially increased the risk of loss as a matter of law.
Whether misreps materially increased risk was decided by the judge, not the jury
question of law, not fact
Rescission changes the rightful position rule a bit if the insured had told the
truth, the insurance company would not have issued the policy to begin with
simply undoing the transaction rights the wrong

Cherry v. Crispin (notes case)

Sellers concealed termite infestation buyers wanted rescission cost of exterminating
was $1,500 buyers won rescission the court found that this was a substantial issue
the buyer had to pay reasonable rental for the time it occupied the house
reduced by the value of minor improvements made to the house (this is true in
real estate transactions) when youre dealing with improvements, it can be a sticky
question (generally, if youve just tailored the house to your own taste, youre not
entitled to compensation for that)
***RESCISSION IS ALL OR NOTHING (the P cannot keep some of the contract and reject other
parts)
Irreparable injury is NOT required
P must act promptly (laches or other complications will prevent a P who consciously
waits to lose rescission remedy
There is law that before you seek rescission, you must tender the transaction back to the
other party, but most TN law doesnt recognize that as a requirement, but it is a
requirement in the Restatement

Lamons v. Chamberlain (Tenn. Ct. App. 1993): This is the video rental store case
Lamons agreed to by Chamberlains video store written contract - $26K down - $200 per
week to pay off the balance Lamons had leasehold interest in business Lamons agreed
to pay for the insurance of the building and the inventory
Time was definitely a factor (there was more than 1.5 years before they surrendered)
also it would have been difficult to go back and completely void the transaction (to difficult
to put the parties back in the same posture they would have been in but for the entry of
the contract from a practical standpoint, it wasnt practical) also, there was no mention
of the property taxes in the written agreement
Rescission was not proper in this case rescission involves the avoidance or setting
aside of a transaction its an equitable remedy available where the contract was
induced by fraud or duress or one person unequivocally renounces the contract or is
unable to perform (not an exclusive list because mutual mistake, fraud plus unilateral
mistake also count) rescission is intended to return the parties to the positions
they were in before the transaction took place

Isaac v. Bokor (Tenn. 1978): This is the case where there was a mutual mistake as to the
boundaries of the lot

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Isaacs purchased a lot in the Oak Hill suburb of Nashville from Bokor (developer) (Lot 31)
Isaacs looked at lot several times Isaac paid only $18K for the lot Bokor submitted bid
to build home and Isaac hired him for $105K Bokor had to build a road Bokor gave plat
showing dimensions and location, but construction occurred on the neighbors property
instead of the lot with the knowledge of both the P and D both P and D were surprised
facts took place on the wrong lot (mutual mistake!)
Isaacs notified Bokor that the sale was rescinded and demanded restitution
The general law when someone has been defrauded or the victim of misrep or even a
mutual mistake is that they are entitled to rescind the contract and be placed back in
the position they were in before (restitution)
Jury held for Isaacs and awarded compensatory for $50K (expenditures for lot, progress
payments, incidentals, etc.) and rescission but COA reversed and said restitution was
improper because there was partial performance of the contract SC reversed and said
part performance is irrelevant and it is not necessary to have fraud you can have
either (1) mutual mistake or (2) fraud and unilateral mistake
Here, no fraud but definitely a mutual mistake declared rescission and awarded damages
unwinding this contract was difficult, but the court allowed it why? Ps completely
innocent, Ps did not sleep on their rights, developer able to address complexity through
financial restitution
The decision uses the terms rescission and restitution interchangeably, but probably both
terms together (i.e. rescission and restitution) is more correct we use the two together
REVIEW:
What is needed to have rescission?
o Mutual mistake
o Fraud and unilateral mistake
o Repudiation (Mobile Oil case)
Limits
o Timely assertion
o Not too complex to unwind

FEBRUARY 22, 2016

EQUITABLE LIENS/SUBROGATION
In re Mesa (Fla. Bankruptcy Court 1999)

Mesa and McKay bought house together as tenants in common paid $215K for it McKay
was a Travelers insurance adjustor was fired and had taken $378K from Travelers McKay
wrote Mesa 17 checks totaling $147K, Mesas mother $35K, and $195K to different
suppliers/contractors so, all the money from Travelers went to remodeling the home
Mesa was told by McKay that these checks were issued by Travelers and drawn in his
retirement account when Travelers noticed the missing money, they figured out where it
went Mesa filed bankruptcy and tried to use the homestead exemption (to protect from
bankruptcy) the court found that the money was gained fraudulently, the equitable lien
was placed against the home, and he could not keep the money
Mesa claimed he had no knowledge of the source of the funds from McKay the court
specifically found that Mesa was not believable on that issue so, a party received money
that was the fruit of Travelers, and can Travelers prevent that party from retaining that
benefit? (that sounds like unjust enrichment!) an equitable lien is a remedy in an unjust
enrichment case

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What Travelers is doing is leaping over the other creditors of Mesa and saying they are
going from a general unsecured creditor a secured creditor who has an interest in this
particular asset youre most likely to see an equitable lien when theres a specific
property it was imperative for Travelers to trace the stolen money to this home
The Equitable lien is a money judgment secured by a lien on specific property; occasionally, it is just a
lien for a specific amount, with no judgment collectible out of Ds other assets. Like the quasi-contract
and the constructive trust, it is a lien created by the court, without regard to the intentions of the parties.
It protects against the risk of Ds insolvency because it is enforceable in bankruptcy. And an equitable
lien is a tracing remedy.
o Equitable lien is the standard remedy when Ps money is traced into improvements to Ds
property
o The strongest remedy courts can give a P is a choice between constructive trust and equitable
lien. If P can trace into property worth more than she lost, she will elect the constructive trust. If
the traceable property worth less than she lost, she will seek a money judgment for the full
amount of the loss and an equitable lien on the traceable property to secure the judgment.
**Look at pg. 729
Robinson v. Robinson (note case)
o Ann & Wylie get divorce Ann built a house on real property owned by her in-laws
o Court placed an equitable lien on in-laws property for vale (Anns half) of the
value of the improvements made by Ann and Wylie
o Lien imposed when in-laws refused to pay for of the value of the improvements
o Although they did nothing wrong, their property was improved and they have to pay
for it.
o Similar to Pascalls v. Dozier

Mort v. US (9th Cir. 1996)

In 1990, Kern deed of trust in August 1992, IRS lien Novemeber 1992, Belmonts used
Fidelity Title to do a title search and Fidelity Title did not find the IRS lien Belmonts paid
off Kern DOT in December 1992, Belmonts sold property Morts and Morts took DOT on
same property summer 1993, Morts found out about IRS lien, and August 1993, property
seized by IRS
Morts are seeking subrogation from IRS???
On appeal, the court found that there was no authority that would not allow the Morts
equitable relief and that equitable relief should only have been denied if there was a legal
remedy, which was there not they also found that Morts have same rights to equitable
subrogation that Belmonts had
5 elements for equitable subrogation:
(1) Party seeking subrogation (subrogee) made a payment to protect his own interest
(here, thats the Morts payment of $38K to the Belmonts to take over the loan)
(2) The subrogee is not a volunteer (volunteers have no interest to protect someone
who inserted himself into the transaction with no financial interest to protect) (here,
the Morts did have an interest to protect, which was the promissory note (they bought
the promissory note), which was secured by the property so, to protect the loan, they
needed that DOT)
(3) The subrogee is not primarily liable for the debt (here, the Myers are the ones who
actually borrowed the money, and they are the ones who are actually indebted to the
IRS the Morts dont owe the IRS debt)
(4) The subrogee paid off the entire encumbrance (here, this means the Morts paid off the
former debt)
(5) Subrogation would not work an injustice (that was really the big issue to the IRS here
(that they would lose their lien priority to a subsequent purchaser)

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This case shows there can be an issue of subrogation in the context of priority of debts
The doctrine of equitable subrogation allows a person who pays off an encumbrance to assume the
same priority position as the holder of the previous encumbrance.
Equitable Subrogation is a very broad remedy and therefore it applies not only when these 5 factors are
met, but also whenever one person, not acting as a mere volunteer or intruder, pays a debt for which
another is primarily liable and which in equity and good conscience should have been discharged by
the latter.
Equitable Subrogation is a doctrine whereby a surety is permitted to stand in the shoes of the party that
benefitted from its performance of the surety obligation in order to prevent unjust enrichment on the part
of a wrongdoer who caused the suretys expense.
SUBROGATION: whenever one person, not acting as a mere volunteer, pays a debt which
another is primarily liable which in equity and in good conscience should have been discharged
by the latter that party is subrogated by the rights of the other party and stands in their shoes
(p. 734)
Subrogation used to be synonymous with substitution think of it as whether the party
has the right to stand in the shoes of the other party typically, when a party pays off a
debt of another, they will stand in their shoes you see this a lot in the insurance context
(ex. The junior lienholder in a multiple mortgage situation)
o Tracing conceptually, it was a tracing remedy - through the rights of another (Mort
case)

Newton v. Porter (1877)

The owner of stolen securities may pursue his money so long as the proceeds/substitutes
can be identified, and he can place a lien on it
The crucial fact in this case was that the attys had notice that these notes were the fruit of
the poisonous tree (fruit of the stolen bonds) its usually not going to be easy to show
that the attys know the source of the payment here there was no question of reasonably
equivalent value because there was no claim they werent equal so, here all you have is
the actual notice of the fraud issue, and the court said they did
What if they had paid the retainers in cash? It would be difficult to trace in this case, the
bonds were traceable!

Banque Worms v. Bank of America (NY 1991)

Sedley Securities owed Worms money Sedley Securities requested wire transfer in 1989
through Security Pacific to the account with Banque Worms the Worms account was
maintained at Bank of America shortly after the request to transfer, they sent a request
to stop transfer and transfer to a different bank (Nat West) amount was ~$2M Security
Pacific disregarded the stop payment and completed both transfers Sedley Securities is
then bankrupt! Sedley became involuntarily insolvent at that point
BOA , who holds the account for Worms, agreed to transfer the funds back in exchange for
a US indemnification but Worms refused to transfer the money Security Specific had to
make good on their promise to indemnify so, Security Specific ended up being the loser
of the $2M banks sue each other everyone settles except Worms and Bank of America
Discharge for value rule: a creditor of another who has received from a third person any
benefit in discharge of a debt is under no duty to make restitution as long as the creditor
makes no misrep and had no notice of the mistake
The NY court decided that it facilitates commerce if everyone knows that a creditor
receives notice without notice its a mistake and without any fraud of their own that they
get to keep the money

Acuity v. McGhee Engineering (Tenn. Ct. App. 2008)

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Contract for construction of pumping station between Logan and Todd and Peters Acuity
is insurance company and had to get payment and performance bonds to ensure work
completely correctly on time and for the correct amount of money during constructions,
Peters made a change to the pipe (engineers did not object) embankment ended up
collapsing Logan and Todd terminated contract with Peters, and Acuity had to finish job
at added cost of $3M in order to satisfy obligation under performance bond
Acuity then filed suit against engineers seeking to recover their losses can Acuity collect
against engineers under subrogation? COA said yes Acuity stands in the shoes of Logan
and Todd and could go against anyone Logan and Todd could go against
Acuity paid, under the performance and payment bonds, what they were obligated to pay
for the benefit of the owner (Logan and Todd) having paid all these obligations, then, in
just basic subrogation law application, Acuity is eligible to stand in the shoes of Logan and
Todd and pursue whatever claims they had against whomever that gave rise to the
obligation to pay
Equitable subrogation is a doctrine whereby a surety is permitted to stand in the shoes
of the party that benefited from its performance of the suretys obligation in order to
prevent unjust enrichment on the part of a wrongdoer who caused the suretys expense

Make Whole Rule

The general rule prevents an insurers recovery in subrogation unless the insured has been
made whole but there are some major exceptions to this!
2 TN exceptions:
o (1) TCA 71-5-117 states that the doctrine cannot prevent recovery of subrogation by
either work comp or TennCare insurers and
o (2) ERISA (if a party pays benefits covered by ERISA, which is basically any health
care expense paid for through employer-sponsored benefit plans, those are not
prevented by the doctrine)
TN SC decided a case in 2007 (Health Cost Controls v. Gifford): typical car accident case
Gifford suffered serious injuries medical expenses of over $45K Prudential paid about
$38K, and BNC paid about $7K Gifford sued the driver and received the policy limits of
$100K in settlement Prudential sought the full amount it had paid for his medical care
Gifford defended that he was not made whole and that Prudential should get nothing in
1999, trial court ordered Gifford to reimburse Prudential the full amount in 2003, the TN
SC reversed and said the trial court did not consider adequately whether Gifford had been
made whole in 2004, trial judge conducted another hearing and held that Gifford had not
been made whole in 2007, the TN SC held that the proof that Gifford had not been made
whole was insufficient and went through a formula and challenged the trial court to
conduct a searchingly fierce investigation of the claimed injuries and whether the
settlement amount made him whole here, the only proof was that medical bills were
high and he had severe injuries sent the case back for a third trial on the issue of
whether the P had been made whole SO, there remains some life left in the make whole
rule

EJECTMENT
94th Aero Squadron v. Memphis-Shelby CO. Airport

There are no self-help evictions, even in a commercial lease case, even when the lease
agreement says the landlord has the right of self-help evictions

FEBRUARY 29, 2016

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Contempt
UMW v. Bagwell (US 1994)
Series of violent acts in the course of a strike court orders were ignored US SC found fines
levied to be criminal in nature and requiring a jury trial
Were the fines penalties for pre-existing occurrences or were they avoidable? The first time the
sanctions were handed down, they were for acts that had already occurred is there a way the
union could have gotten out of that contempt citation (i.e. did it hold the keys to the jail?)? NO!
if the court was punishing the union for actions already conducted, could the union have avoided
that? NO! so we can see here that if the distinction between civil/criminal is that you can avoid
the punishment, that would not be criminal and wouldnt require a jury trial that would be easy
enough to see here
For our purposes, hes not going to test us on whether something is civil or criminal contempt
because its too difficult to parse that out
BUT, you can look backwards and figure it out is the remedy being imposed for conduct thats
already occurred or conduct occurring in the future? If its for conduct in the future, it MIGHT be
civil contempt because the party has the ability to avoid being held in contempt by compliance
if its for conduct thats already occurred in the past, the party couldnt avoid it by compliance,
and it would be criminal
So, in the federal system, the US SC makes the availability of a jury trial where there are going to
be criminal contempt sanctions FAIRLY BROAD!
This is a good starting point

Anywanwu v. Anywanwu (NJ 2001)

This case highlights the extraordinary difficulty in child custody matters and the supervision of
those matters in divorce court the length of time that the party is deemed to be in contempt for
failing to obey a court order may be indefinite 5 years, as in this case, is a long time, but
anything is possible this guy was in jail for 5 years in contempt
Just because the person refuses to comply doesnt mean they should be released from jail
because that would reduce the effect of the contempt remedy!
Recalcitrant witness situation: this could be in any case there is always the power to
subpoena a witness to testify in a trial, and when the witness is on the stand, theyre supposed
to answer the question if the witness refuses to testify, they can be held in contempt this
happens before the court, so the court has the power to hold the party in contempt the witness
has the power to relieve the contempt by agreeing to testify a witness does NOT have the
option to refuse to testify a court can hold them in contempt and put them in jail for refusing to
testify

Griffin v. County School Board (4th Cir. 1966)

There is a little bit of soft peddling here by nature of the order itself

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There was a clear order that was violated by the Ds but it was also clear that the Ds had made
a concerted effort for many years to disregard the rulings of the US SC and otherwise
This case doesnt give much clear guidance.theres a better TN case

Contempt: The Beginning

The starting place is to remember the purpose of contempt the first purpose of contempt is to
protect the integrity of the purpose (the notion that judge can hold a person in contempt
and put them in jail started in England when people were being disobedient IN the courtroom,
and whoever was presiding needed to have the power to restrain that person so the business of
the court could be conducted it was an administrative activity necessary for the courts to
function) in the operation of the court, the judge may punish my contempt certain wrongs it
may be civil or criminal (the best way to tell is to look backwards the only real difference is for
you as a lawyer to see what kind of protections are available for your client)
They key question is where did the offense occur? Was it part of the proceedings? Was it in the
presence of the court?
Civil or criminal usually disobedience of an order of the court, not specified by any rule
or statute or order the acts constituting the contempt may or may not constitute
criminal law violations
Direct contempt: contempt of the process (in the presence of the court or CLOSE to the
presence of the court) may be summarily punished

Dargi v. Terminix Internatl Co. (Tenn.Ct.App. 2000)

The contempt statute (TCA 29-9-102): the power of courts to inflict punishments for contempt
of court is limited to the following: (1) willful misbehavior of any person in the presence of the
court or so near thereto as to obstruct the admin of justice (2) willful misbehavior (6) any
other act or omission declared a contempt by law
Dargi argued that his misbehavior was not in the presence of the court his statements were
outside the physical presence of the court court would not have been affected by them if D had
not chosen to play excerpts the COA affirmed the lower courts finding that the conduct was in
the presence of the court, even though it was part of a deposition that didnt actually occur in
front of the court because depositions can be used for any purpose! (as if he were present in the
court)
Depositions are: conducted under courtroom conditions, attendance may be compelled by
subpoena, are under oath, exam and cross under rules of evidence, and witnesses obligated to
answer all questions except under very limited circumstances procedurally very similar to being
present in court
Since the primary purpose of contempt power is to protect the process, its important for the
court to be able to protect the process during depositions
Purpose of formality surrounding the taking of depositions is the possibility that deposition
testimony will be introduced into court Rule 32.01 TRCP: depo testimony may be used in
court as though the witness were then present and testifying

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The judge in this case treated the contempt as criminal contempt, held another hearing, and
held the sanctions to the criminal contempt sanctions
Deposition of a party is admissible for any purpose (any statement he made at depo could have
been presented to the court) he cursed and insulted the opposing atty in the present of the
court, just as if he were on the witness stand
At the hearing, judge found direct contempt: I heard what I heard. Its not like I need to have a
hearing about what was said or who hit who or who did what. I mean, I know what happened. I
was here even though with direct, in TN, you can punish without a separate hearing, the judge
went through with the special hearing just to be fair COA said Mr. Dargi received all the due
process he was entitled to (and even more!)

Reed v. Hamilton (Tenn.Ct.App. 2001)

Compensatory contempt
Easement dispute between neighbors Warlick et al sued the Hamiltons to declare the existence
of such an easement court issued a number of orders enjoining the Hamiltons from interfering
with the easement and obstructing or preventing Warlick et al from accessing their properties
(this was DURING the courts process)
Hamiltons repeatedly violated the courts orders trial court found the Hamiltons in civil
contempt assessed as sanctions and damages against them of $35K, equal to Warlicks atty
fees
On appeal, the Hamiltons argued that attys fees could not be assessed against them COA held
trial court had the authority to assess attys fees against the Hamiltons as part of the remedy
This is the CLASSIC type of contempt we will likely encounter: the court has entered some kind of
order either compelling or preventing a party from doing something (injunctions) very common
to be during the pendency of the case so, the remedy if a party violates the injunction/court
order is contempt! here, the process of the court is interfered with by the partys refusal to
obey a court order
When one party continues to disobey a court order, it causes the other party atty expenses! If
you had to incur atty fees to ensure an injunction obeyed, you may be able to recover the atty
fees! And you may get them for each time you were forced to go back to court
Courts generally prefer not to put people in jail (divorce court notwithstanding)
TCA 29-9-103: the general rule regarding punishment for contempt: (a) the punishment for
contempt may be by fine or imprisonment or both (b) where not otherwise specifically provided,
the courts are limited to a fine of $50 and imprisonment not exceeding 10 days
Ds argued that this statute didnt permit the award of a $25K atty fee award
TCA 29-9-105: if the contempt consists in the performance of a forbidden act, the person may
be imprisoned until the act is rectified by placing matters and person in status quo or by the
payment of damages this is why its important to remember that the atty fee assessment is
considered DAMAGES in this context (atty fees are not normally damages)
In Hamilton, contempt by D was of the court of the courts direct order/injunction the injury
was to the court and to the P the court decided to assess D for the Ps atty fees as damages

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court has the power to award compensatory contempt if its process has been harmed violation
of a court order is harm to the process per se

Brown v. Latham (Tenn. 1996)

Divorce decree called for H to pay child support W obtained judgment for arrearage when he
failed to pay W sought contempt under TCA 36-5-104 for failure to pay child support H
moved for a jury trial trial court denied jury trial request COA reversed SC affirmed
A person charged under the criminal statute for failing to obey a child support order under TCA
36-5-104 is entitled to a jury trial special child support statute is different than the
contempt of court statutes!
All this case speaks to is this special statute

Ahern v. Ahern (Tenn. 2000)

The Aherns get a divorce H to pay alimony, child support, medical costs, and school tuition W
sought order directing H to pay alimony and child support in the petition, W sought civil and
criminal contempt H filed jury trial request trial judge conducted a hearing trial judge found
h in criminal contempt for failure to pay both alimony and child support (in the past) sentenced
H to 5 days for each contempt for a total of 140 days under TCA 29-9-102(3) was criminal
contempt (b/c punished for past violation)
Each day you remain in contempt is a separate violation
Citing Brown v. Latham, Ahern said he was entitled to a jury but Brown was a different statute
altogether that was a special criminal statute
No jury trial for criminal contempt in TN - its also not required for civil contempt in TN

Contempt: Civil v. Criminal

Civil: wrongdoer holds the keys to the courthouse by compliance (more prospective in nature)
Criminal: court is protecting the court as an institution (misconduct in the presence of the court,
violation of a court order)

Konvalinka v. Chattanooga-Hamilton County Hospital (Tenn. 2008)

Konvalinka was a Chatt lawyer Erlanger Hospital in dispute with certain doctor over loss of his
staff privileges while discovery stay was in effect in that case, Kon filed separate action seeking
documents trial court held that Kon violation court issued stay
A stay is an injunction (a court order directing a party not to do certain things)
Kon held in contempt for violating stay order opinion explains contempt remedy very well the
courts contempt power is now purely statutory (per the SC no longer any inherent
contempt power)
4 elements for civil contempt:
(1) The order alleged to have been violated must be lawful
(2) The order alleged to have been violated must be clear, specific, and unambiguous

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(3) The person alleged to have violated the order must have actually disobeyed or otherwise
resisted the order
(4) The persons violation of the order must be willful
SC says: in a civil contempt proceedingacting willfully does not require the same standard of
culpability that is required in the criminal context willful conduct is an intentional or voluntary
conduct if a person knows what they are doing, it is willful
You cant willfully violate something if its not CLEARLY prohibiting you from doing it!
the stay order didnt clearly prevent Kon from filing an action to try to recover these documents
(the order was general and was written to apply to the standing case)
Court said issue was whether the underlying order was clear, specific, and
unambiguous did it CLEARLY, specifically, and unambiguously order Kon not to do what he
did? NO! court order did not clearly, specifically, and unambiguously apply to the separate
proceedings thus, Kon could reasonably have believed that the order did not prevent his new
record access case
In civil contempt and criminal contempt hearing, is the BOP different? Yes preponderance of
evidence versus beyond reasonable doubt civil contempt may be a summary procedure but
in criminal contempt only are you required to be given a separate hearing
Simmons v. Simmons (look at this case)
Griffin v. School Board (1966) Anticipatory Contempt
Remember Prince Edward County VA that closed its public school rather than integrate?
After Brown, Prince Edward closed public schools and issued tuition grants for whites
students to attend private schools.
Closed school for 5 years no public school and grants for private school
The Court approved the remedy of replacing the money back into the financial system of
the county there was no clear order that was violated, but Ds did disregard the
Segregation Rules of SC.
Aug. 4 -5, SB issued bonds and processed 1,217 applications for tuition grants, paying
private school tuition for the fall of 1964
4th circuit held this to be an act in contempt of court disregarded that there was no
injunction/order barring the tuition grants
School board members ordered to reimburse the treasury of the County for the tuition
grants
DISSENT challenges legitimacy of the contempt ruling given no existing order barring.
RECALCITRANT WITNESS: if witness refuses to testify, then they are held in contempt of court
Note 8 pg. 780
Federal Court limited to holding witness for now more than 18 months.
**To hold someone in contempt must have an order granted first. The contempt is for violating
the order
Ex: Woman in KY who refused to issue gay people a marriage license.
RULE 37 FAILURE TO MAKE DISCOVERY
SANCTIONS: the general approach
o Direct sanctions: available only for complete failure to make discovery
Failure to appear at depo

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Failure to serve rogg responses

If some response has been made, then move for an order requiring a response and
then (if other party fails to obey the order) seek the sanction (ex: dont give a
legitimate response

MARCH 7, 2016
Contempt (Cont.)

Civil and criminal contempt: criminal contempt happened in the past

o With civil contempt, you have the ability to right the wrong
o Criminal contempt is often referred to as allowing the court to dignify its orders
(where the court asserts its authority)
o Determining the difference depends on the purpose in going to court
Another distinction: if the sentence is for a definite time and it doesnt matter
what the guy does to right the prior wrong, that is criminal contempt
Another distinction: the protections you receive (no right to atty, even if
youre in jail, for civil contempt
With criminal contempt, you have all the rights that one has in a
criminal case, including notice that the burden of proof is beyond a
reasonable doubt (civil is preponderance of the evidence), right to
notice that you have the right to remain silent, right to presumption of
innocence until proven guilty, right to confront/cross-examine
witnesses who testify against you, in TN, NO RIGHT TO A JURY TRIAL!)
criminal contempt can be punished by up to 10 days in jail (civil
contempt doesnt necessarily have a time limit)
Direct and indirect contempt:
o Direct contempt is in the presence of the court
Contempt when the judge exercises his power right there, on the spot, in an
effort to keep order
Must be done immediately and must be necessary to preserve order
(think of judge from Memphis who sanctioned after recess and it was
overturned)
Generally, right there in the sight of the court
When it doesnt happen right away, the person is entitled to another
hearing on it, and the judge becomes a witness, and the judge then
has to recues himself from the contempt hearing
o Indirect contempt is out of the presence of the court
Indirect doesnt happen on the presence of the court, theres usually proof
necessary, and the judge enters an order based upon the failure of an
individual to comply with a court order
If its a civil debt, unless its a support allegation, then a contempt allegation will not
result in imprisonment (remember DEBTORS PRISON) you dont file a contempt action
for failure to pay a civil debt
Contempt is usually seen to collect on an equitable judgment (specific performance,
injunctive relief, declaratory judgment, etc.)
Turner v. Rogers (US 2011): held that no right to atty under federal law in an action for
civil contempt (thats also true in state court)

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In civil contempt, the judge must make sure that the person being punished has the ability
to purge themselves (the keys to your own jail cell) D has no right to atty, D is entitled
to clear notice that his ability to pay would in fact be a critical question, and D
Can you issue a contempt order without a written order having been entered? Its rare, but
yes you can (if there was an oral order entered) theres also contempt of an anticipated
court order (even more rare)

Alexander v. Jackson Radiology (Tenn. Ct. App. 2004)

This is the case where the paper went missing at the deposition, and the plaintiff
(Alexander) getting deposed denied knowing what happened despite being caught on
video swiping the paper
The court sanctioned Alexander by dismissing the entire case was this proper? This was
an extreme sanction here, there was no court order, but this was such a clear case that
he destroyed the exhibit AND perjured himself under oath the court of appeals upheld
the dismissal
More frequently well see a situation where someone will be ordered to comply with
discovery there may be sanctions to include payment of atty fees or something thats a
relatively frequent court order sometimes when someone refuses to comply with a
discovery request, a court may reimburse the party for the efforts they have to go through
to get the information from another source (depo costs, expert witness fees, atty fees, etc.
whatever is appropriate) sometimes a court may order that someone cant testify
Rule 11 sanctions, court have wide discretion abuse of discretion standard on
appeal abuse of discretion: a situation where (1) a trial court utilizes an incorrect legal
standard or (2) where decision of trial court is illogical or unreasoned AND (3) trial court
causes an injustice to a party

SPOILATION OF EVIDENCE
Most likely sanction = adverse inference instruction
o Control & obligation to preserve the evidence
o Records destroyed with a culpable state of mind
o Destroyed evidence was relevant to the partys claim or defense.
LITIGATION HOLD: DOES NOT APPLY TO BACKUP TAPES/DATA (those typically maintained solely
for the purpose of disaster recovery)
On the other hand, if backup data is actively used for info retrieval, then such data is likely
subject to the litigation hold.

Collateral Bar Rule:

Applies only to criminal contempt and NOT to civil contempt as a

general rule, though, if you look up this term in TN, you wont find this principle listed in any TN
cases it means that one must obey an injunction until that injunction is reversed, even
though the injunction may be reversible

Walker v. City of Birmingham (US 1967)

Defendants ignored injunction on the basis that they felt it was unconstitutional and
restricted their freedom of speech
What if the only way to prove an order is unconstitutional is to violate it? in other words, in
order to test the constitutionality of a law, the law had to be violated contempt actions
are NOT that way you dont have to violate a contempt order to contest it
In this case, the defendants never challenged the validity of the order until they violated it
the court here refused to consider the Ds contention because they had not moved to
dissolve the injunction, did not make any attempt to comply with the terms of an

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injunction by trying to obtain a permit even if they would have been denied the permit,
they should have tried (this disfavored them in the analysis) Ds sentenced to 5 days in
jail and $50 fine
Judges should use extreme caution when entering an injunction that is a restraint on a
constitutional right unless there is an extreme need, judges should allow a hearing first
when entering an order when the question involves a constitutional right
The court said there are 2 factors: (1) did court have authority to enter injunction?
(2) did Ds violate the injunction? this was an easy decision in this case you do
have to show that the D had notice of the order of the court
Collateral Bar Rule: An injunction generally has to be obeyed even though it is
entered erroneously parties who know of an order must generally obey it,
even if they are not parties to the action when its clear the court has NO
authority (i.e. jurisdiction) to enter the order at all, you may not have to obey it
An injunction can be challenged for being over-broad, but not collaterally the
remedy here would be appeal and to ask the court to revise the injunction

In re Green (notes)
An atty was held in contempt in Ohio atty had advised a labor union that they could picket at a
strike site in violation of a court order atty had advised his client this way because state court
had entered order and atty felt that state court had no jurisdiction because it was really a federal
issue SC agreed and held that fed court had exclusive jurisdiction the atty had sought a
hearing on the injunction, the state court denied it the contempt order was later reversed in
that case the court held that because in fact fed jurisdiction preempted state jurisdiction and
because the atty had tried to get the state court to consider his motion, the injunction should be
dismissed in that case the court said no contempt because state court judge had no authority
and lawyer was not bound even under collateral bar rule

US Mine Workers (notes)

A court that has no jurisdiction to enter an injunction shouldnt be followed even under the
collateral bar rule, you dont have to follow a court order of a court that has no jurisdiction
whatsoever only when a court is so obviously traveling outside its orbit as to be
merely usurping judicial forums and facilities may an order by a court be disobeyed
the very existence of a court compels the jurisdiction to decide whether the court has jurisdiction
to begin with its got to be REALLY CLEAR

Planned Parenthood v. Garibaldi (California Court of Appeals 2003)

This was a case where they were trying to hold a third party to an injunction requiring
certain activities outside an abortion clinic
Injunctions are based on prior behavior (something someone has done to warrant an
injunction)
Although a court in equity can act in rem, generally courts in equity act in personam, and
court act to the person and not the land/area which may be in question
Only persons who are parties may be properly enjoined there are other cases that tell us
that someone who may not be a party but has knowledge of the injunction and knows or
reasonably should know they are included in the class to be enjoined may also be subject
to the penalties of the court if they violate the court order
Persons who are enjoined cannot avoid an injunction by acting through others who are not
enjoined

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US v. Hall (notes)

A non-party who violates an injunction solely when he is pursuing his own interest cannot
be held in contempt (in other words, he was acting in such a manner that he was pursuing
his own interest and not trying to violate the injunction or evade the court order)
Court also said that when actions of a third party violate the rights of the parties to the
action, he in fact may be held in contempt of a court order that he knows about and that
he reasonably understands should be applicable to him
The courts have the inherent jurisdiction to preserve their ability to render a judgment

Factors to consider when drawing an injunction/order:

(1) Be sure the injunction/temporary restraining order is clear and unambiguous (when the D
youre seeking to enjoin reads the order, it ought to be real clear to that person what it is
that they are ordered to do or not to do) with a TRO, generally it should be preventive
and not mandatory
(2) The injunctive order should be no broader than is necessary (where overbroad, those are
the types of orders that are set aside)
(3) The order should not reference the complaint, affidavits, or any other documents
If youre drawing a contract for your parties and you want to have your contract provide that the
party who isnt in breach is entitled to atty fees, expenses, etc., you cant just put in the contract
that the prevailing party is entitled to recover the costs of bringing the action and litigation
Cracker Barrel v. Epperson (284 SW3d 303 (Tenn. 2009)): dispute over real estate, contract
provided for atty fees for prevailing parties, SC said NO that it wasnt enoughyouve got to say
attorney fees in the contract if you want the party to collect them

ANCILLARY REMEDIES (Part III)

Rule 69 is important as well as the TCA statutes well go over tonight

What remedies do you have when you win a money judgment and need to collect the
judgment?
These are collection remedies

Attachments, Receiverships, Execution (Collecting the

Judgment)

Winning lawyers and law students focus on winning a judgment real winning is
collecting the money; otherwise, its just a moral victory

Collection Process

There are two things you can do: pre-judgment and post-judgment
Pre-judgment: purpose to ensure assets are there to apply to judgment you cant
collect your judgment in advance, but you can freeze it/hold it under certain limited
exceptions this is rare (theres not much you can do), only in special circumstances
(when a pre-judgment attachment statute thats really the only way you can seek
certain property in advance of judgment), receivership (very, very rare, especially in TN
party seeking receivership must post bond), must post a bond
o Limited Pre-Judgment remedies:
Attachment
Receivership
Lien Lis Pendens
o Purpose: to secure or hold assets to be available for application against the
judgment

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Post-judgment: common, no bond required

o Paying the judgment with the assets of the judgment debtor
o Examples: garnishment

PRE-JUDGMENT
1. RECEIVORSHIP:

is a very sophisticated form of attachment skilled business person or

lawyer operates the business or property a pre-judgment receiver manages the property,
pending resolution of the dispute, for delivery to the ultimate victor practice of getting a
receiver appointed is the same as a preliminary injunction (present to court why needed, why
imminent threat, and what arrangements youve made for the receiver to be appointed, etc.) if
theres a receivership, the court will appoint someone to run the receiver and arrange for their
payment its a very complex form of attachment
Sometimes you see a receivership over a particular asset where the parties are fighting
over that asset (ex: when partnership owns business and cant agree on how to run
business) most common app is where there are co-owners of a business and there is a
dispute over the operation of something valuable
As you might expect, fear alone is not enough fear is going to be natural from the
existence of the dispute the assets must be in REAL danger (thats what ended up
dooming Erickson below) this is a good remedy when you know management is
involved in nepharious activities and the asset itself (i.e. the business itself) is worth
preserving
Erickson Construction, Inc. v. Congress-Kenilworth Corp (Ill. Ct. App.

1983)
o

o
o

Erickson had construction contract with C-K to build a water slide price was $535K
at 60% complete, Erickson applied for payment but was not paid (C-K gave
Erickson the deed instead) Erickson completed the project on time Erickson was
paid $115K on the project property was actually owned by the US Army C-K
entered into a lease with the Army
Erickson filed action seeking money judgment for breach of construction contract
at trial, C-K claimed it could not pay because it had no assets trial court found the
deed worthless and that hundreds of thousands of dollars were going through C-K to
Thunder Mountain Co. (even though Erickson was only paid $115K) trial court
appointed a receiver
Extraordinary remedy (like an injunction): only granted if threat of imminent
and irreplaceable loss must show: (1) (a) clear right to the property or a lien
upon it OR (b) that the property constitutes a special fund to which P has a right to
resort to to satisfy his claim AND (2) possession of the property was obtained by the
D by fraud OR (3) property or some income arising from it is in danger of loss from
neglect, waste misconduct, or dishonesty note: property can mean any property
The fear was more than speculativeErickson really wasnt getting paid did C-K
do anything arguably fraudulent during the transaction? Yes because the deed to
the land wasnt legit! The only reason Erickson finished the project was because of
the deed, and the deed was fraudulent
This is a very close-call case you can see why Erickson went through the trouble of
trying to get a receiver appointed, especially since there was Thunder Mtn.
established to run the asset that Erickson built and over which C-K had control but
Erickson wasnt getting paid Spoden can see this case going either way
When you see fraud or at least an argument of fraud, youre antenna should go up
that maybe you need some extraordinary equitable remedies (like a receiver) to
protect the party that was misled
The second flag in this case was the establishment of Thunder Mtn

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o
o

This is a good example of factually when a receiver might be appropriate

Ultimately, Erickson lost the receivership on appeal

2. Attachment

Exceptional remedy attachment is over property

TCA 29-6-101: any person having a debt due either before or after judgment, may sue
out an attachment against the property of a debtor when: debtor (1) resides out of the
state (if you can find property within the state of TN and your debtor resides outside the
state, thats a basis for pre-judgment attachment); (2) is about to remove, or has
removed, himself or his property from the state (i.e. absconding/fleeing debtor); (3) has
removed, or is removing [himself] out of the county privately; (4) has concealed himself to
avoid service; (5) is concealing himself or his property; (6) has fraudulently disposed of
property; (7) resides out of the state and dies, leaving property in the state (in this case,
the estate is going to do this); or (8) is a foreign corporation which has no agent in this
state upon whom process may be served
Bond: P must post a bond in sufficient amount to cover any damages D may suffer from
any loss of use of the property bond is set by the court you may lose your bond, so you
want to only do this if youre questioning whether your D will pay at the end of the day
as the D, you can always ask for a greater bond if the bond posted is insufficient to cover
the loss of use of the property

City of NY v. Citisource (SDNY 1988)

o

The city sought pre-judgment attachment against Citisource under RICO claimed
officials had been bribed City had evidence that individual D inquired about
withdrawing money from a bank and tried to transfer a $400K treasury bill to
himself trial court found that factual support was present to justify the attachment
if disappearing assets, attachment appropriate this is just an example of when a
pre-judgment attachment was useful the P had specific evidence about a specific
asset that the D was trying to liquidate and the court found that was sufficient to
justify an attachment
In NY, they have a freeze order: this is a pre-judgment injunction to prevent the
dissipation of assets courts prefer attachment (you dont see freeze orders much
theyre closer to receivership than attachment) theres no prohibition in TN of a
freeze order, but its not a common practice because its like an injunction to
prevent the D from dissipating any assets the proof youd have to show for this
injunction would be much more substantial than for a mere attachment

Commerce Union Bank v. Kephart (Tenn. Ct. App. 1986)

o
o

o
o

Liberty bank had a debt owed by Kephart they sued out an attachment at the time
they filed their complaint they alleged in their complaint that Kephart was
concealing himself and therefore was suitable for a pre-judgment attachment
Pre-judgment attachment filed, served, but no levy (in other words, the bank
did not take physical possession of the money to levy an attachment on the
money, you have to take possession of the money) absent perfection by levy, no
valid attachment theres no such thing as a paper levy in TN
REMEMBER THE LEVY
In Nebraska, they can make a paper levy on a vehicle (the sheriff makes a mark on
the title, and the judgment creditor has title to the vehicle) in TN, you have to take
physical possession as part of the execution process
There is a type of execution that is essentially a paper levy in TN, and thats a
garnishment thats an order to a person owing a debt to report to the court how
much money is owed and then paying some of that to the court which will then be
turned over to the judgment creditor

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3. LIEN LIS PENDENS:

a written notice that a lawsuit has been filed concerning real

estate, involving either the title to the property or a claimed ownership interest in it. The notice
is usually filed in the county land records office.

POST-JUDGMENT
Collection Process

After judgment entered, D has a certain period of time for appeal (expiration of
appeal): 10 days for general sessions, 30 days for all others (courts of record) (you cant
take out any collection processes until appeal period is up) remember if you appeal a GS
case, the case starts over in Circuit Court if the appeal is in any other court, the D has to
post supersedious bond to stay execution of the judgment
The first thing you do after the appeal time expires is to register judgment in any county
in TN that you think the D may have real property (this immediately acts as a judgment
lien against all real property in county where registered)
After you register the judgment, then you may execute on the judgment different
types of execution: writ of execution, writ of possession, writ of attachment writ
of execution is filled out and you identify specific property for the sheriff to execute on
(ex: describe the Ds bass boat in the execution writ and describe where its located) and
the writ of execution is the legal document that enables the sheriff to accompany your
agent when they go execute on the bass boat
After using one of those writs, property is brought into custody of sheriffs department,
and you set a time to sell the property the court costs are paid first with proceeds and
then your clients judgment is paid any left over is paid to D
The most common type of execution is garnishment because its easier to tell someone
to pay money than to tell someone to pickup property a garnishment is a type of
execution, but its an execution on MONEY)
Up and until 2004, the collection of judgments was all statutory AND common law in
2004, Rule 69 was passed to help clarify some of the methods to use in collecting
judgments admittedly, Rule 69 does not cover everything purpose is to consolidate
collection rules and statutes you no longer have to execute on personal property first
(execution against personalty need not precede execution against realty) discovery is
now available in aid of execution garnishments, executions on personalty and realty are
all addressed in Rule 69

GARNISHMENT: Garnishment is an order to the party to first answer how much

money they are holding and then, within a certain period of time, to deliver that money
to the court
Dixie National Bank v. Chase (Fla. App. 1986)
o Garnishment issued to garnishee (Dixie Bank) on $48K judgment against Jim Gore

Dixie Bank answered that it was indebted to Gore in the amount of $32.86
Dixie Bank missed a second account that it held wherein Gore had $275 at the time
of the garnishment Dixie amended to identify that account, which was down to
$65.63 by that time (Gore deposited and withdrew over $13,870.61 before the
second account was identified)
o Judgment was entered against Dixie Bank for $13,870.61 affirmed (result would be
the same in TN)
o If a party fails to accurately report out what they are holding, that party can be
subject to a conditional judgment in the amount of the debt this puts a great
incentive on parties to accurately report what was owed here, the bank was not

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held liable for the amount of the debt because it came into the court and showed
that they screwed up
A separate independent action in many states, like TN, garnishee who fails to answer
becomes liable for the full judgment garnishee who misses a debt owed or property held
for the benefit of the debtor can be held liable for the full debt
Rule 69 says garnishee must answer and make accounting of property held by garnishee
for judgment debtor garnishing party (judgment creditor) must serve a copy of the
garnishment on the judgment debtor garnishees duty: if garnishee holds any property of
the debtor, garnishee must mail copy of the garnishment to the judgment debtor, must file
answer within 10 days accounting for property held, and within 30 days must pay that
money into the court
Failure of garnishee to respond: conditional judgment may be entered against the
garnishee there will be an order to show cause why the conditional judgment should
not be made final if garnishee does not explain within 10 days, conditional judgment
shall be made final judgment creditor may execute against the garnishee for the full
amount of the judgment!! with a conditional judgment, theres a separate hearing on
the judgment entered against the person who owed the money (its essentially a show
cause hearing on why a judgment should not be entered)
In Davidson County, you can serve garnishments to all financial institutions
simultaneously, even if you dont know if the D has an account there in some rural
counties, you have to serve one garnishment at a time
Bank levy = garnishment to a bank

RULE 69 COLLECTING THE JUDGMENT

Purpose: to consolidate collection rules & statutes
No longer have to execute on personal property first
o Execution against personalty need not precede execution against realty
Discovery is available in aid of execution
DICOVERY:
o Unless you know exactly where judgment debtor has plenty of assets against
which you can collect your judgment (insurance?)
o Serve immediately upon Judgment Debtor
o Roggs and Doc. Production requests.
Execution on Personalty (Rule 69.06)

A levy is effective when the sheriff with the writ of execution exercises control over the
debtors personalty
o The rule provides that the first judgment creditor to deliver a writ of execution to
the sheriff has priority,
o The lien of levy remains effective until the property is sold
o Personalty shall be sold at auction
o Notice of sale to be published at least 10 days in advance unless property is
perishable
In re Hockaday (Bnkr. M.D. Tenn. 1994): pre-2004 case, but issue of what is exercising
control is still open question under the statute in TN, mere notation of levy on the
writ of execution is not enough some authority that physical possession is not
required either (Cf. the Kephart case) the levying officer must exercise dominion and
control over the property whether control has been taken is a FACT question
Execution: must file an execution to be able to subject interest in personal property
must register judgment to be able to get writ of execution (TCA 25-5-103) writ of

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execution must be issued for the sheriff to be able to levy upon any personal property no
writ of execution (or garnishment or other type of collection) until after time for appeal has
expired (writ can be stayed by debtor posting appeal bond in an amount sufficient to cover
the judgment if appealed from a court of record)

Execution on Real Property (Rule 60.07)

Lien lis pendens: applies only to property that is subject to suit to affect bona fide
purchasers, an abstract of suit must be filed in the registers office

Judgment lien (Rule 69.07): created against all judgment debtors real property upon
registered certified copy of judgment in registers office of the county where the real property is
located as long as the judgment lien is effective (see above), no levy is necessary and
judgment creditor may simply move for an order of sale (eliminates old paper levy
requirement, but you can still say that theres a paper levy on real property in TN)
How to get a judgment lien: you register judgment in county where judgment debtor may
own property (TCA 25-5-101) TN is a race notice state, so the first in time, between
consensual judgment, or tax liens, has priority must register an abstract or other
memo of judgment (Spoden uses a certified copy of the judgment) real property or an
interest in real property is subjected also affects all land in that county acquired after the
judgment too lasts for 10 years after judgment all you have to do is renew judgment
after 10 years
There are statutory exemptions from judgment collection (certain assets of debtor are
exempt from collection) just know this!
3 easiest ways to collect judgments: (1) get judgment against party with insurance
and collect against insurance company; (2) garnishment on bank accounts; and (3)
garnishments on earnings
o Garnishments can also come out of the Ds paychecks you serve the garnishment
on the employer (the employer owes the employee the wages) there are limits on
what an employer can take out of wages if employer ignores garnishment, it can
also be held liable for the amount of the garnishment! Garnishment goes to
anything thats OWED!
o If you want to collect on an asset, you need to enter a writ of execution
In re Logsdon (1984):
o Acquaints you with the potential for exemptions from collection
o Here, ex-husband tried to argue that his funds were exempt, but the court
disagreed.
o Important exemptions:
TN Social security completely exempt from garnishment
Pensions
Public assistance or benefits including workers comp
Homestead exemption
Garnishment maximum amount 25% of disposable income or percentage of
someones wages
Personal property up to $4K
Including all necessary wearing apparel, the trunks or receptacles
necessary to contain same, all family portraits, and family Bible and
school books

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MARCH 14, 2016

Fraudulent Transfers

guest speaker (Patrick Warfield)

In General:
This should be covered in bankruptcy in the book, there is a discussion from an article
about fraudulent transfer law
In 2003, the TN General Assembly passed the uniform fraudulent transfer act there
are not many fraudulent transfer cases in TN under the new act, so be sure if you do have
a case, recognize that the cases youre reading are probably decided under old law
The law of fraudulent transfers is very old (over 400 years old) the basic concept is that
the transfer of an asset with the intent to defraud your creditor is void as to the defrauded
creditor
What modern law says is that there are certain things that will be perceived as
intentionally to avoid creditors (called badges of fraud in the Twinings case) there are
two categories of fraudulent transfers under the new act: (1) intentional transfers and
(2) constructively intentional transfers
TCA 66-3-301 (not confused with fraudulent conveyance)
Very popular questions from clients or potential clients:
o How can I get out of paying this?
o Can I just give all of my assets to my sister? No.
What is a transfer: a transfer is any mode of parting with an asset (includes a gift, change
of beneficiary name)
Intent: must have actual intent
o May be inferred by the circumstances
Creditor: a person who has a claim
Debtor: person who is liable on a claim
Person: individuals and any commercial or legal entity
Property: anything subject to ownership
Intentional Fraudulent Transfers (any of these may be proof of intent to defraud and enough
to set aside the transfer):
Transferor acts with the intent to:
o Hinder;
o Delay; OR
o Defraud a creditor
Note the disjunctive rather than the conjunctive
How do you prove fraudulent intent?
Badges:
(1) Transfer to an insider
(2) Retention of control after transfer
(3) Concealment of the transfer
(4) Transfer on the heels of being sued or threatened with suit
(5) Transfer of all of the debtors assets
(6) An absconding debtor (a debtor who flees)
(7) Concealing of assets
(8) Transfers for less than reasonably equivalent value
(9) Debtor is made insolvent by the transfer
(10)
Transfer is made shortly before or after a substantial debt is incurred

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(11)
Strawman transfer (the debtor transfers assets to a party who then transfers assets
to an insider of the debtor usually some sort of corporation)
Any of these 11 types of transfers may demonstrate intent to defraud entitling
challenger to set aside the transfer.

CONSTRUCTIVE FRAUD
Constructively intentional transfers:
(1) A transfer where the debtor did not receive reasonably equivalent value (#8 from list
above) AND the debtor was engaged in a business or transaction for which the remaining
assets after the transfer were unreasonably small
(2) The debtor intended to incur or believed or should have believed that it would incur debts
beyond debtors ability to pay
(3) Debtor: was engaged in business or transaction for which the remaining assets were
unreasonable small; or
a. Intended to incur or believed or should have believed that debtor would incur debts
beyond debtors ability to pay
What is value? Its up to the P to show what is not reasonably equivalent value the burden is
on the party challenging the transfer
Value is given for a transfer if in exchange for the transfer property is transferred or an
antecedent debt is secured or satisfied
What is insolvency? Its the same as under the bankruptcy code a debtor is insolvent if his
total debts are greater than his total assets (debtor has more debts than assets)
Balance sheet (assets less than liabilities)
Not paying debts as they become due
Remedies:
One of the most popular remedies is to set aside the transfer and void the transaction
If youre the P, that may not satisfy you, so the court has the authority to attach the assets
actually transferred (issue a writ)
The court also has the power to enjoin further disposition of the assets
The court has the authority to appoint a receiver of the assets if they are complex and
need someone to manage them
If the creditor is a judgment creditor, the court can issue an execution (seize and sell the
asset) the court could declare an equitable lien as well
So, there are lots of remedies the basic rule of thumb is that a transfer of less than
equivalent value that leaves the debtor insolvent is a fraudulent transfer and you better
advise your client not to do it
What about the purchaser?

An innocent purchaser is protected to the extent he paid for the property in good
faith
That same protection applies for all the parties down the line
A good faith purchaser is protected completely ONLY if the consideration given is
reasonably equivalent value
o Ex: (Brandonburg v. Hayes case) in this case, Mr. and Mrs. Hayes owned a wedding
chapel in Gatlinburg, and they got a divorce; the couple employed for many years a
woman named Angela Brandenburg; the husband continued to try to run the chapel
but ended up abandoning the business; Ms. Brandenburg started running it; after a
while, she then employed the husband and paid him for his services; in the divorce

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case, the wife was awarded whatever interest the husband had in the chapel
business; in this case, the wife sought to void the transaction between Brandenburg
and the husband; the court held for the wife; the court held the transfer a
fraudulent transfer because: there was no documentation discussing a transfer of
assets, no consideration offered or paid, and something else I missed; so, wife was
awarded the business)
o This is not defined in the Uniform Fraudulent Transfer Act.

STATUTE OF LIMITATIONS
Generally 4 years

MARCH 21, 2016

Attorney Fees & Ethical Issues

The American Rule

No recovery of atty fees unless (1) provided for by contract OR (2) permitted by statute
exceptions (atty fees allowed): bad faith litigation, contempt, family law (usually
provided by statute), malicious prosecution the modern footnote to the rule is that
you can only recover reasonable atty fees
In most cases, the loser DOES NOT PAY atty fees atty must know when the loser may
be obligated to pay in modern litigation, the ability to recover atty fees is a tremendous
part of the litigation itself (in employment litigation, the ability to recover atty fees is
usually the gorilla in the room)
Should the loser pay? Thats the way it is in England
How do I collect atty fees from my clients? You get a written fee agreement signed by your
client, you get a retainer in appropriate cases, you keep your retainers segregated from
your other funds, you charge reasonable fees
House v. Estate of Edmondson (2008)
o Policy Rationale:
Should not be penalized for merely bringing or defending a lawsuit
Poor might be discouraged from filing suit to vindicate their rights
Settlement promoted by each party being responsible for their own fees
Burden on courts to litigate issue of attorney fees.
o Exceptions:
Common Fund Doctrine
Atty fees may be awarded when the efforts of a litigant succeeds in securing,
augmenting or preserving property or money for others to share in common.
Those who benefit may be required to share in atty fees.
o TN Corporation Statute
Court reviews statute
Finds that the General Assembly specifically declined to include a provision
that would have allowed for recovery of atty fees in a shareholders
derivative action
No deviation from the American Rule

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Here the atty fees are not allowed, b/c the statute specifically provides that it isnt
allowed
TN Loser Pays Lite
o TCA 20-12-119(c)(3)
o When TC grants a Rule 12 motion to dismiss for failure to state a claim upon which
relief may be granted
o The court shall award the cots and reasonable and necessary attys incurred up to
$10K
o 6 Statutory Conditions (not tested on):
Actions against governmental entities or public officials
Motion to dismiss filed 60 days after the latest complaint
LOOK AT STATUTE FOR THE REST OF THIS
o

BEST PRACTICIES TO COLLECT ATTORNEY FEES FROM CLIENTS:

Graduate from law school

Pass bar
Written fee agreement signed by your client
Retainer in appropriate case
Keep retainers segregated from other funds in separate trust account
Charge reasonable fees

Tennessee Rule 1.5 of Professional Responsibility (pg. 352 in Spodens book):

(a) A lawyers fee charges for expenses SHALL be reasonable the factors to be considered
in determining reasonableness:
(1) The time and labor required, the novelty and difficulty of matter, and the skill
needed to perform the legal service properly (aka how much time did it take to
perform the service reasonably?)
(2) Likelihood that other employment by the lawyer will be precluded
(3) Fee customarily charged in the locality for similar legal services
(4) Amount involved and the results obtained
(5) Time limitations imposed by the client or the circumstances
(6) Nature and length of the professional relationship with the client (you can charge
your client a higher fee if you have a lot of experience with that client)
(7) Experience, reputation, and ability of the lawyer
(8) Whether the fee is fixed or contingent
(9) Prior advertisements or statements by the lawyer
(10)
Whether the fee agreement is in writing
(b) Fee agreement requirements: when the lawyer has not regularly represented the
client, the basis or rate of the fee shall be communicated to the client, preferably in
writing, before or within a reasonable time after commencing the representation (i.e. you
do not HAVE to have a fee agreement unless its a contingent fee agreement) (part (b)
does NOT apply to contingency fee matters!!!)
(c) Contingency fees: a fee may be contingent on the outcome, except in a matter in
which a contingent fee is prohibited by paragraph (d) or other law the contingent fee
agreement SHALL be in writing, signed by the client (A contingent fee agreement
not signed by the client is NOT enforceable)
(d) Prohibited as contingent fees: a lawyer shall not enter into an arrangement for,
charge, or collect: (1) any fee in a domestic relations matter which is contingent upon
securing of a divorce or award of custodial rights, the amount of alimony or support, or the
value of a property division (subject to exceptions) OR (2) a contingent fee for
representing a defendant in a criminal case

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How important is that fee agreement? Its REQUIRED for a contingency fee in TN and
PREFERRED for any other fee arrangement in TN with few exceptions, the people
deciding these questions always gave the benefit of the doubt to the client when the client failed
to have a written fee agreement

CONTINGENCY FEES

Certain required disclosures:

(1) The method by which the fee is to be determined, including percentage to the lawyer
in the event of litigation, settlement, trial, or appeal
(2) Other expenses to be deducted from the recovery and whether such expenses are
deducted before or after the contingent fee is calculated
Upon conclusion of a contingent fee matter, the lawyer SHALL provide the client
with a written statement:
o (1) Stating the outcome of the matter,
o (2) Stating whether there was a recovery,
o (3) Showing the remittance, if any, to the client, and
o (4) Stating the method of its determination
Rule 1.5, part (d) states that a lawyer SHALL NOT enter into an arrangement for, charge,
or collect (prohibited as contingent fee arrangements):
(1) Any fee in a domestic relations matter which is contingent upon securing of a
divorce or award of custodial rights, the amount of alimony or support, or the value of a
property division
a. EXCEPTIONS: the matter relates solely to the collection of arrearages in
alimony or child support or the enforcement of an order dividing the marital
estate (BUT it SHALL be disclosed to the court that there is a contingent fee
arrangement)
(2) A contingent fee for representing a defendant in a criminal case

FEE RECOVERY FROM OPPOSING PARTY

One of the basic ways is if there is a contract

o Note the language in the contract (any disputearising out of this
agreementincurred in collection) the terms of the contract are very
important!!
o Contract also has to be enforceable under contract law
o In TN, the contract does NOT have to be signed!
Beech v. Powell: Beech submitted a form bid called a job contract to Powell for
masonry work for $66,627 Powell did not sign the job contract but proceeded to have
Beech do the work Powell did not pay final $10K Beech sued Powell for the balance
owed under the contract
o The trial court held that the job contract was not a contract but that Powell agreed
to the pricing and performance terms of the job contract (in other words, this
document reflected some of the terms of the agreement of the parties) and that
Powell did not agree to the atty fees provision in the job contract
o The COA REVERSED and said that Powell, by his actions, consented to the job
contract and the atty fee provision (even though not signed by Powell) was
enforceable because it was contained in the job contract which was accepted by
Powell
o So, you may have a contract thats not in writing!!

City of Riverside v. Rivera (US 1986)

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Classic civil rights fee case atty fees allowed by statute in the Civil Rights Act of 1964
(this is an example of the second type of case where you may obtain atty fees from your
adversary) in this particular case, it was a hotly litigated case involving the civil rights of
these people the attys were fairly inexperienced but worked very hard and won
The amount allowed by the court was nearly 10x the amount that the client recovered in
the lawsuit!! the D asserted that the atty fee awarded should be limited to what the P
recovered the law is that there is no such limitation in the recovery of atty fees when
there is a statute that provides for the recovery of atty fees
This case discussed the lodestar method of calculating atty fees the basic rule of
thumb is you take the number of hours the atty worked on the case x reasonable rate
(based on essentially same 10 factors as Rule 1.5 above) the point is that in cases in
which the statute allows for the recovery, the legislature believes these rights are so
important to protect that the amount of atty fees will not be determined by what the P is
allowed to recover from the D in this case, there were important civil rights to be
protected you will find in some cases that judges will sometimes modulate the award if
the amount recovered by the P was very small, but clearly under this case and most
judges do not consider the amount of the award for the P as a significant factor in
determining how much to award in atty fees
The policy reason is the importance of protecting the rights covered by the particular
statute
The Johnson factors note 3, pg. 878 (these are similar factors for determining a
reasonable fee under Rule 1.5):
o The time and labor required
o Novelty and difficulty of the questions
o Skill required to perform the service
o Preclusion of other gainful employment
o Customary fee
o Undesirability of the case
o Experience, reputation of the attorneys
o Awards in similar cases
o The only factors different from Rule 1.5 are: the undesirability of this case and
awards in similar cases
When the P prevails, the atty has to submit to the court a fee application the best
practice is to support this application an affidavit of another atty in the community
attesting to the reasonableness of your fee application if its a significant fee application,
you may want more than one affidavit

2011 tort reform: only limits non-economic damages. does not list atty fees but the only
possible category atty fees might fit into is all other non-pecuniary losses of any kind or nature)

McDonnell Dyer v. Select-O-Hits (Tenn. Ct. App. 2001) preference of a written

fee agreement

SOH hired MD to handle sale of SOH MD said it would cost $120K no written fee
agreement sale of SOH did not occur SOH refused to pay MD MD sued for $113K +
interest SOH counter-sued for the retainer trial court held that the $120K fee claimed
by MD was excessive but awarded $90K (based on the time value of the fee based on
standard hourly rates)
SOHs primary defense was that MD could not recover a fee because $120K was clearly
excessive (based on prior case law) COA examined the evidence flat fees were
reported to be the norm in securities practice while $120K was on the high end, there
was no testimony that it was clearly excessive it was appropriate to allow recovery of a
reasonable fee (nearly $90K here)

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This case pre-dated the rule, but even under the rule, its not required to have a written
fee agreement in a non-contingent matterits just preferred
Can a lawyer charge an excessive fee? No under Rule 1.5, it says that lawyers can ONLY
recover a REASONABLE fee!
This case MIGHT not come out this way under Rule 1.5

Reasonable fee Determinations: Application is not uniform theyre all over the map

Example cases:
o Recent commercial landlord v. tenant case: lease provided that landlord can recover
its reasonable atty fees
Tenant counterclaimed for $200K damages and lost in jury trial
Landlord won $44K in damages
Attys submitted fee app for $150K
TC awarded attys $25K
o Recent sex harassment case: P and D settled for $30K + what court determined to
be reasonable atty fee
Trial court prepared to award at least $125K in atty fees

In re Cabletron (DNH 2006)

Class action case common fund case settled for $10.5M counsel sought approval by court
of fee award of 30% ($3.15M) logged 22,397 hours (using reasonable hourly rate, the lodestar
would be over $8M)
Opinion reviews all the possible methods of coming up with a reasonable fee in a class action
case: multi-factor approach (6th Circuit uses this) using the Johnson factors, 25% benchmark
(9th Circuit uses this), or market mimicking approach (7th Circuit uses this tries to determine
what would have been agreed upon if the services had been competitively bid) court says it will
use the 7th Circuits approach in the future (market mimicking approach) and awarded 21.5%
This is common fund litigation, so its a different animal than what weve been talking about in
fee award statutes in class action cases, the role of the court is to act as an arbiter as to
what is a reasonable fee to protect the class members from the lawyers
We are going to find a lot of different ways trial judges analyze fee awards in class action cases
its in the discretion of the trial judge know that in these class action cases, judges are loath to
award everything to the lawyers and nothing to the class members
Ingram v. Sohr
Complex business dispute
Parties reached a settlement called the Exchange Agreement
o Agreement provided that in the event of a dispute, prevailing party recovers their
atty fees
Jury trial D won on most, but not all issues (this is the important part of this
case)
o Ingram didnt think he had to pay atty fees because Sohr did not win all issues not
the case
Post-trial hearing regarding atty fees
TC awarded nearly $700K in atty fees
Prevailing Party: one who succeeds on any significant issue in litigation which
achieves some of the benefit the party sought in bringing sought

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Evans v. Jeff D. (US 1986): This is a civil rights class action case
Case settled settlement called for Ds to not be responsible for Ps attys fees
Court held that was allowed (act does NOT require an award, and the trial court has the

discretion to approve such a settlement)

This is probably an unusual case

Defensive Move in Employment Cases

Rule 68 Offer of Judgment (this is a defensive move): only effective in cases where D
may be liable for atty fees, such as a civil rights/employment case civil rights D may limit
liability for atty fees by making a Rule 68 offer of judgment (federal court ONLY) so, in a
case where a P has the right to recovery atty fees, the D can make the argument that any
atty fees incurred by the P after the offer of judgment are not recoverable if the ultimate
award is less than or equal to the offered judgment
If the ultimate judgment is less than the offer, the D may not be liable for atty fees
incurred after the offer was made
Risk: if the P accepts offer of judgment, a judgment will be entered against the D any
ambiguity in the wording of the offer may leave liability for atty fees open to
determination by the court you would need to include in the offer that the offer includes
damages AND atty fees or it will be left up to the court outside the judgment! (i.e. if its
silent, it may not be an effective offer on that term) so, to be an enforceable offer of
judgment, it must state whether the attys fees are included or not so, if atty fees not
addressed and the end judgment is less than the offered judgment, the offered judgment
would be unenforceable and would not cut off atty fees
There is natural resistance from most clients against the notion of a judgment being
entered against them
There are a couple of federal court cases that have held that a P is limited in their atty
fees in this situation
Costs, Expenses, and Fees: Each of these mean something different, even though
clients like to lump them all together

Attorneys fees are one type of expense, completely different form costs and other
expenses, and must be reasonable as determined by Rule 1.5

Costs are the charges assessed by the clerk of the court (federal costs are broader than
state costs)
o Federal Rule 54(d): costs SHALL be awarded to the prevailing party unless the
court otherwise directs you submit a bill of costs and clerk signs off and its
included in the final judgment to the prevailing party costs are fairly liberally
approved so, in federal court, costs are awarded to the prevailing party (present
bill of costs after award and clerk assesses) in settlements, it should always say
each party bears their own costs (if it doesnt say that, you run the risk of a
party saying they prevailed and submitting a bill of costs to the clerk (you can also
say costs and atty fees so there is no doubt)
o TN Rule: MUST APPLY FOR DISCRETIONARY COSTS

The clerk assesses costs as the case is going on, and they are more narrowly
approved than in federal court
If you want to include things that are not typically included in state costs (like
things federal court automatically allows as costs, including attendance fees,
deposition costs), then you have to file a motion for discretionary costs
(these can sometimes be dramatic)
Scholtz v. S.B. International (2000)

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P won case

Award of DCs are not intended to punish the D either for its conduct
that caused the litigation or for its conduct during the litigation

Filed motion for DC

TC denied
COA Courts generally award DCs if they are reasonable and the
winner properly files and supports his motion.

Rather, they represent another step toward making an injured P whole.

Expenses are the charges incurred by counsel (or the party) in prosecuting (or defending)
the case

Cracker Barrel v. Epperson (2009)

o Parties contract said prevailing party recovers all costs and expenses
o Held: Costs are not atty fees expenses are not atty fees

If parties want to assign risk of atty fees, those words must be used.

MARCH 28, 2016

REMEDIAL DEFENSES
UNCONSCIONABILITY:

Unusually harsh and shocking to the conscience; that which

is so grossly unfair that a court will proscribe it. When a court uses the word unconscionable to
describe conduct, it means that the conduct does not conform to the dictates of conscience.

Adhesion Contract
o Adhesion contract (3 things) = standardized contract + imposed by drafter of
o

superior bargaining strength + gives other party opportunity only to accept or

reject (take it or leave it basis)
If a contract is all 3 of those things, it is an adhesion contract for a contract to
be unconscionable, it has to be an adhesion contract, but not all adhesion
contracts are unconscionable is an adhesion contract always unenforceable as
unconscionable? NO! (PROBABLY ON FINAL)
If it is a contract of adhesion, there are 2 more steps in your analysis to determine
validity:
(1) Does the contract fall within the reasonable expectations of the
weaker party?
(2) Is the contract unduly oppressive to the weaker party? (oppression is
weighed both substantially and procedurally)
Substantive oppression = overly harsh or one-sided aspects (non-mutuality for
example)
Procedural oppression = will the process be fair?

o
Buraczynski v. Eyring (Tenn. 1996)
o
o

Doctor-patient arbitration agreement: standard form, presented on take it or leave it

basis, arbitration of malpractice claims was noted in large print, provided for
initialing of the arbitration clause itself, right of revocation in 30 days
Held to be a contract of adhesion however, the contract was held to be
enforceable because of its procedural and substantive fairness (revocation

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o
o

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period, clear and fair document, no one-sidedness in process or scope) there was
nothing inherently unfair about the process once it was in arbitration (i.e. the deck
was not stacked)
This is a great example of how a contract can be a contract of adhesion and still be
enforceable
How did this contract demonstrate procedural fairness? Each side was allowed to
pick their own arbitrator, and those 2 arbitrators selected the final arbitrator
What part of the process might the P be able to argue was procedurally unfair? The
P gave up her right to a jury trial (this is a statutory right) the courts have
consistently held that the policy benefit of arbitration outweighs the giving up of the
jury trial right
What was a substantively non-oppressive factor in this process? The revocation
period, no mutuality issues, and it was a clear and simply stated document (this
provision was not buried in a mass of paper!) (it wasnt obtuse legaleseit was
simple, plain English and easy to understand) if the contract is laid out in a clear
fashion to the recipient, it is more likely to be seen as substantively fair

Taylor v. Butler (Tenn. 2004)

Taylor bought used car from City Auto City Auto used form arbitration provision in
sales contract arbitration provision made a buyer arbitrate any claims it had but
did not require City Auto to do the same (i.e. not mutual)
o Taylor sued, and City Auto moved to compel arbitration (D will typically either move
to dismiss OR compel arbitration typically the court will stay the case pending
arbitrationits unusual to get the court to dismiss the case) trial court granted
motion and compelled arbitration (compelled arbitration is always appealable)
o Taylor claimed that arbitration agreement was unenforceable: (1) fraud in the
inducement and (2) unconscionable
o Fraud in the inducement can be determined in arbitration, but
unconscionability can be determined by the court
o Unconscionability analysis: under the agreement, only Taylor was required to go to
arbitration while City Auto was not (this is referred to as mutuality) generally,
that is considered substantive oppression (where a party is not granted the same
access/power/limitations as the other there is no balance/mutuality)
unconscionability bars enforcement here because: (1) inequality of the bargain AND
(2) terms oppressive to a reasonable person if substantively or procedurally
oppressive, adhesion contract will not be enforced against the weaker party
Analysis: (1) contract of adhesion because standardized form, take it or leave
it;
(2) One-sidedness because City Auto could sue Taylor in court but Taylor was
limited to arbitration
o Watch for the context! In the consumer/merchant context, courts are likely to find
unconscionable here, Taylor waived her right to sue while allowing Butler that
same right this imbalance caused the court to hold the agreement unconscionable
Mitchell v. Kindred Healthcare (2008) FIND THIS CASE
o Two types of unconscionability:
Procedural: may arise from a lack of a meaningful choice on the part of one
party
Substantive: when its terms are unreasonably harsh
o

IN PARI DELICTO:

In pari delicto = in equal fault

Pinter v. Dahl (US 1988)

o Oil investment opportunity Dahl was a real estate broker, Pinter was the oil man
violation of Securities Act in manner in which interest in company was sold

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o In pari delicto is an available defense this is based on the Ps OWN actions the

concept is that the P bears EQUAL RESPONSIBILITY for the violations he seeks to
redress in pari delicto can be used even in a strict liability case Dahl as a
promoter was just as bad as Pinter therefore, defense of in pari delicto would
apply to Dahl, barring suit
o The important thing to know is that there is a potential defense where the P is
in equal fault with the Ds thats what is important to take away from this
casenot the securities stuff this defense applies, even in a strict liability
case!
o How was Dahls role equal? he actually recruited investors (11 of them) also,
he was to benefit from the investments (he was not a mere paid salesman)

Unclean Hands

Best v. Best (Tenn. Ct. App. 1999)

o

This is a divorce case dispute over which spouse gets the family farm, known as
The Broken Arrow titled in the name of Ms. Best Mr. Best wanted his share of the
title to the property (he claimed it was joint property) the reason his name wasnt
on the deed as owner was that they were trying to hide money from the IRS!
Unclean hands defense: he who comes into equity must do equity and no one
can take advantage of their own wrongs notice that these are EQUITY cases

Estoppel

Geddes v. Mill Creek CC (Ill. 2001)

o
o
o
o

Geddes sued for trespass by CC due to golf balls coming onto property before suit,
P agreed to not protest the building of the golf course as long as CC built an 8 foot
fence CC built the fence incredibly, golf balls cleared the fence
Party claiming estoppel must show: (1) misrepresentation or concealment of
material facts, (2) reliance, and (3) prejudice
How, in this case, was the CC able to show prejudice? Because the [substantial]
amount of money they already spent to appease Geddes prejudice is usually the
hardest thing to show to support estoppel
The essence is detrimental (prejudice) reliance estoppel is only a defense

Waiver
USF&G v. Bimco Iron (TX 1971)

In waiver, you will also seem in an insurance claim matter, that the failure of the insurance
company to identify all the reasons it is denying coverage will act as a waiver of any
reason not stated! Often, youll see the insurance company try to include that they reserve
all their rights to their defenses the insurance company is held to a high standard
TN law: waiver is the voluntary relinquishment or abandonment of a KNOWN
RIGHT or privilege sometimes a party doesnt even know they have a right, so if you
want to be sure the waiver is enforceable, you want to be sure the party knows of the right
they are waiving
TN requires a WILLFUL AND KNOWING WAIVER!!!
Difference between waiver and estoppel: estoppel requires reliance and prejudice, waiver
does not (waiver is a unilateral act)

Age Discrimination in Employment Act

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Oubre v. Entergy (US 1998)

As part of termination agreement, Oubre signed a release of all claims against her employer
she was given 14 days to review she consulted with atty and accepted severance package in
consideration, she received severance pay in installments after receiving all payments, she
filed with EEOC, who issued right to sue letter she sued based on age discrimination
The release did not comply with specific federal statutory requirements for a release of claims
under the ADEA
Employer claims employee ratified the non-conforming release by retaining the money
employer: release bars claim unless the employee tenders back the monies
Rescission/restitution argument by employer
SC held that because release did not strictly comply with the ADEA, it cannot bar the ADEA
claims the SC and Congress really meant what they said when they said you MUST comply with
the OEDA!!!!! If you do not, you will not have an enforceable waiver so, non-compliance = NO
RELEASE and employee gets to keep money!
Oubre was able to sue AND keep her severance
Atty lesson: fail to follow the requirements of the ADEA statute, P gets money AND the company
gets no release and the P can sue!! (win/win for the P)
Note important aspects of ADEA waiver: (1) time to consider (21 days if individual, 45 days if 2 or
more), (2) urge review by atty (in writing), (3) 7 days to revoke, (4) substantive information about
a RIF (who is eligible, who is not, why?) (IF part of a group)
Point of the ADEA requirements is a willful and knowing waiver Congress has bent over
backwards to be sure that older workers do not get run off without making a willful and knowing
waiver of their rights as for what establishes willfulness and knowledge? The more protections
you build in the more likely the waiver of rights will be held to be valid

APRIL 4, 2016
Remedial Defenses (Time as a Defense)
Waiver (TN) (Cont.)
Faught v. Estate of Faught (TN Case): estate administrators met with Faught at a restaurant
penciled out his agreement to waive his rights to a certain part of the estate in exchange for
some items of personalty affirms the need for a WILFUL and KNOWING WAIVER thus,
when an individual does not know of his rightsthere can be no effective waiver of
those rights the administrators failed to explain Mr. Faught his rights fully

Laches
Pro-Football, Inc. v. Harjo (DC Cir. 2005)
Trademark case trademark cant disparage others Harjo challenged the Washington Redskins
trademark as disparaging to Native Americans 6 Redskins trademarks 1 st registered in 1967

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3 more in 1974 1 more in 1978 1 more in 1990 in 1992, Native American challenged the
marks the Redskins expended a great deal of capital in expanding their trademark
Trial court granted Pro-Football summary judgment on laches laches: equity aids the
vigilant, not those who sleep on their rights 2 elements: (1) lack of diligence, (2)
prejudice spending a lot of money is prejudice! Theres also trial prejudice (witnesses could be
lost, evidence lost, etc.)
1 of the Ps, Romero, was only 1 year old when the 1967 mark was registered, so DC Cir. Held that
dismissal of his claim was improper under these facts (laches only applies if the P takes an
inordinate time to sue (and there is prejudice) here, cant hold against Romero his failure to sue
until he was an adult
On remand, the trial court found for Pro Football 2 issues: (1) time, (2) prejudice (on the
Redskins (D who is asserting latches) caused by the delay) regarding prejudice: Edward Bennet
Williams (team owner) met with Native American leaders near the time of registration Williams
died in the period between when the marks were registered and the claim was made Redskins
easily show financial prejudice (they expanded their use of the marks dramatically at great
expense)
One key point here: the amount of prejudice needed varies with length of delay (8 year
delay here seemed substantial)
Redskinettes mark registered in 1990 Romero filed only 29 months after this mark was
registered 29 months was sufficient for laches in this case because Romeros delay in attacking
the marks was 6 years underway when he could have challenged the Redskinettes mark failing
to act promptly doomed his claim
NAACP v. NAACP Legal Defense Fund (not in book): suit over the rights to NAACP in 1939,
the NAACP allowed the LDF to use NAACP in its name in 1966, NAACP asked LDF to stop and it
declined in 1979, NAACP revoked LDFs right to use NAACP court ultimately held for the LDF
mere delay may not be enough if D invests substantial labor and capital that builds the
trademarks goodwill, laches may bar injunctive relief note: prejudice increases likelihood of
defense

Laches and Estoppel

While each emphasizes something different, laches = delay while estoppel = misleading
each may satisfy the other (BOTH require prejudice) so, laches is more about the delay;
estoppel is more about misleading, but they may both be present and BOTH require prejudice!

Statutes of Limitations
Statutes of limitations: create a fixed time in which suit must be filed time starts when
claim accrues suit barred when time runs out originally only applied to actions at law
Laches: originally laches was equitable substitute for statutes of limitations that distinction is
still there, but many claims are creatures of statutes, so if it says it in the statute and its
equitable, it can still have a SOL you can try to use laches even if there is a SOL, though (a suit
may be barred by laches even before the SOL has run this is very unlikely)

The Discovery Rule

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McCroskey v. Bryant A/C (Tenn. 1975)

Personal injury case injury from allegedly defective gas furnace furnace manufactured 1967,
installed February 1968, P injured May 1971, suit filed July 1971, P died September 1971, timely
amended complaint filed the issue is: when did the claim accrue?
Old rule: accrued when product was sold
Court: cause of action accrues and the SOL begins to run in tort cases when, in the
exercise of reasonable care an diligence, the P should have discovered the claim
(DISCOVERY RULE) (this is when the SOL begins to run) in this case and in most tort cases
where injury is obvious (not latent), the claim occurs on the date of injury in this case, this is
when the P KNEW she was hurt (May 1971), so this suit was within the SOL

Fraudulent Concealment
Klehr v. AO Smith Corp. (US 1997)
No explicit SOL for RICO US SC said 4-year SOL from Clayton Act governed Klehr is a dairy
farmer AO Smith made Harvestore silo
Klehr said their injury began in 1974 at the time of purchase (suit filed in 1993) AO Smith
moved to dismiss Klehr asserted that AO Smith tolled the SOL by covering up its actions
In 1991, the Klehrs discovered the mold accrual rule: did one of the predicate acts occur
within 4 years of the filing of the suit? Under RICO, if 1 act occurred in that time frame, P can
recover from all damages and they would be trebled
SC rejects accrual rule it improperly expands the period of recovery because district court
found that Ps should have discovered their claim before 1989, claim is barred (even though the
Ds tried to conceal it, the Ps had enough facts to file suit earlier and should have)
This case goes off on RICO, which isnt important for our purposes

Knaysi v. AH Robins Co. (11th Cir. 1982)

Dalkon Shield case claim was that Robins failed to disclose the adverse information it knew
about the Dalkon shield thus, Ps asserted that Robins was equitably estopped from asserting
the SOL defense
Tolling (one or the other): (1) actions by D induced P not to sue OR (2) fraudulent
concealment of an action that is unknown to another party BOTH apply here (public
relied on Robins) Ps will have to show ONE of the foregoing) Ps concede that Robins made
no statement directly to themthe only evidence is Robins advertising no evidence that Ps
doctor relied on the advertising absent reliance, NO TOLLING!
D had control and superior knowledge necessary for the P to make out a cause of action AND D
affirmatively concealed the cause of action from the P
These 2 cases together are great examples of when you may be able to extend the SOL (its
called TOLL the running of the SOL) IF you can show that the D undertook an aggressive
advertising case (must prove false and misleading)

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These fraudulent concealment/equitable estoppel tolling cases are difficult to win failing to
review certain facts may have the effect of tolling the running of the SOL this is a difficult road

Potts v. Celotez (Tenn. 1990)

Mesothelioma case SOL for personal injury and wrongful death is 1 year Potts = insulation
worker from 1953 to 1987 in 1975, Potts diagnosed with asbestosis (no symptoms until 1987)
in 1987, diagnosed as having mesothelioma in 1988, he sued (both diseases were asbestosrelated but were separate, distinct, and independent diseases) a person may have one
without the other one disease does not arise out of the other
Single injury rule: once P is on notice of an injury, he shall bring suit on all claims arising from
that injury or be barred by res judicata it was unfair to apply that rule when P does not know he
has a particular disease and could not have discovered it even with exercising reasonable
diligence
Discovery rule: claim accrues when injury occurs OR is discovered OR in the exercise
of reasonable diligence should have been discovered
Discovery Rule: applies to break of K cases too!
SC: claim for a separate and distinct asbestos-related disease does not accrue until
that disease becomes manifest
This is a classic latent issue
Discovery rule applies to breach of contract cases too
Exceptions: (1) if legislature has provided otherwise OR (2) if parties agree to a limitations
period in the contract, as long as the P has a reasonable time to file suit
TCA 28-3-202: suit for deficiency in construction must be brought within 4 years of substantial
completion

Statue of Repose:
Example statute of repose
TCA 28-3-202
10 year statute of repose
tca 28-28-103
product 10 years from the frist purchase or use
or 1 year from expiration of useful life
Hawks v CD Development:
Developer hired architect to render services
Did not pay architect
4 years after doing the work, A registered lien on property
D promised to pay and A released the lien
Developer failed to pay
A sued on dept
Develepr asserted 6 year Statute of Limitations defense.
A countered: D is equitably estopped from asserting the SOL Defense

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By (a) promising to pay upon which a relied to his detriment (& prejudice) and (b) causing Architect to release
the lien.