remedies hutchinson - 2012

Remedies Fall 2012 Hutchinson UF

I. What is a Remedy?A. Definition – anything a court can do for a litigant who has been wronged or is about 2B wronged

1. the wrong can be something that has already occurred or something that is about to occur.B. 2 Most Common Remedies

1. Damages = judgments that P’s are entitled to sums of money from D’s2. Injunction = orders to D’s to refrain from wrongful conduct or to undo its consequences

C. How do we distinguish remedies from substantive law classes?1. Substantive law = tells you what rights you have 2. Remedies add to the substantive law (tells you what rights you have), as they correct for deviations - so

remedies give meaning to substantive rightsD. How do we classify remedies?

1. Compensatory –compensate P for value of thing P lost at time of loss - losses from D’s actionsa) Usually $$ - compensatory damages to make P as well off as if he was never wrongedb) These include substitutionary remedies – where money substitutes for the thing that was lost.

2. Preventative – designed to prevent harm or loss before it occurs a) Coercive remedies – includes injunctions (order for court to litigants to do or refrain from doing

specific things) – e.g. specific performance, writs of mandamus, prohibition, habeas corpusi. The direct order and potential for punishing disobedience distinguishes coercive from

declaratory remediesb) Declaratory remedies – state rights of parties under substantive law, but do not order parties to

do anythingi. Simply declares rights, judgment – announces rightsii. Preventative because - understanding that once declaratory judgment is set forth, litigants

will complyiii. Most important – declaratory judgmentiv. Other examples: bills to quiet title, and cancellation of instruments

3. Restitutionary – designed to restore to P in amount D unjustly enricheda) Restitutionary and compensatory damages can be =, but restitutionary can also be far greater than

damages i. Can include unjust enrichment – e.g. someone taking your property and profiting in a way that

exceeds the value of what was taken – under remedies, you can recover all those gainsb) focus on D’s gains

i. disgorges unjust profits ii. damages may be speculative/vague

c) damage can be caused by D’s mistake – not always intentionald) Sometimes differs practically – reverse transactions in kind, restoring possession of specific

property when it’s practical to do soe) Administered through variety of devices – quasi-K, constructive trusts, equitable liens, accounting

for profits, rescission, and subrogation (courts see it as the same thing, granting restitution)4. Punitive – designed to punish where there’s not only N, but some other type of bad behavior by

wrongdoersa) in equity, we gave prophylactic injunctions which award more to P’s than they would be entitled

to under legal principles, because of some type of bad behaviorb) e.g. criminal prosecutionsc) There are also punitive damages

5. Ancillary – designed to give life/aid of other remedies (costs/attorneys fees, etc._a) e.g. went to court, got damages or injunction, but D doesn’t comply, ancillary remedies come in to

enforce remedies:i. contempt – ii. garnishment – court orders people who owe $$ to D to pay P insteadiii. execution – sheriff seizes D’s property, sells it, and uses proceeds to pay P

b) includes costs and attorney’s feesc) receivership – court appoints 3rd party to manage assets pending litigation

E. Remedies are further divided into 2 more basic categories:1. Substitutionary Remedies –substitution for what P loss (if don’t give P what actually lost)


a) P suffers harm, and receive cash payment – usually damages – as substitute for what lostb) Includes compensatory damages, attorney’s fees, restitution of $$ value of D’s gain (based on fact

finder’s valuation of loss) and punitive damagesc) Thus P who recovers damages, gets neither what he started with nor what he was promised,

instead gets defective goods and money to compensate for defects2. Specific Remedies – get the specific thing you owned, aspire to prevent harm, or undo it, rather than

letting it happen and compensating for ita) Includes specific performance of K’s, injunctions, restitution of specific property, and restitution

of specific sum of $$F. Remedies are further classified as Legal or Equitable: distinction is important because you only get a

jury trial with legal remedies. VIP 2 determine which is which1. Legal

a) Damages are the quintessential legal remedy – generally compensatory and punitive remedies are legali. These allow the Π to sieze property

b) Some of specialized coercive remedies, such as mandamus and habeas corpus are legalc) Most legal remedies are substitutionary with important exceptions

2. Equitable – a) Only available if no adequate relief in law must show damages available by law are inadequate b) P will be irreparably harmed w/o equitable remedy c) Injunctions and specific performance are the most important equitable remedies

i. These allow Π to coerce Δ’s behavior.ii. ex/ - the irreparable injury rule – that there is no adequate relief at law

(i) Preliminary injunctions – unless courts intervene, injury will occur(ii) No adequate relief in law – thus specific relief in equity will be ordered to prevent harm

from occurring - assuming it can be foreseen(iii) Unique – what lost – not adequate $ to compensate need specific performance

d) Equity being courts of last resort – there are high standards for getting things like injunctions as they are extraordinary remedies

e) Although once you get in there is more flexibilityII. Paying for Harm: Compensatory Damages

A. The Basic Principle: Restoring P to His Rightful Position – Tailoring Principle1. Tailoring - remedies must be tailored to loss this gets you to “rightful position”

a) Comes w/theory of “corrective justice” – prevents windfall to D (if do less) to P if do more2. Rightful Position – position P would occupy in absence of D’s actual/imminent wrongdoingUnited States v. Hatahley (10thCir.1958) (11) - Govt. agents rounded up P’s horses and burros and sold them to a glue factory. District Court In calculating damages, court place a fixed number on each animal without

differentiating condition, age, and sex of animals – In addition, court found a total amount and divided it amongst P’s for Pain and suffering. Crt took aggregate amt of damages divided in ½ said that’s amount government responsible for

P argued based on his theory that animals were unique with special training, so market value was incalculable.

SC o Damages held that the lower court’s calculations for the amount of damages and pain and

suffering failed to consider evidence of the availability of other animals were incorrect. Need to compare w/similar animals at market, age, condition of each animal to find worth,

o Pain & Suffering - need to evaluate each person for pain & suffering/can’t assume all suffered equally – rejects group/culture harmed same cuz look at loss same way.

o No showing Native Americans tried to mitigate losso No showing why gov responsible for 50%

3. RULE - A damage award should be individualized “tailored” to get P back to the “rightful position”: to restore injured party as nearly as possible to the position they would have been in had the wrong not occurred.

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a) Right to sue for damages is limited to the time in which a prudent person would replace this destroyed horses and burros – thus you have to mitigate damages when possible

4. Applied Here - P’s were entitled:a) to the market value, or replacement cost of horses and burros at the time of the taking –

i. Must consider availability of like animals in the immediate vicinity and their valueii. Must factor in a premium for training costsiii. P’s must show proximate cause – show some facts as to why D’s were responsible for harm

b) plus use value of animals during the period of time between the taking and the time they could have replace the animals

c) to pain and sufferingi. award for pain and suffering must result from wrongful taking of P’s animals by US agentsii. and it must be treated on an individual manner, as it is unique to each person

B. LAW & ECONOMICS – different approach to this: Profit Maximizing1. If D can profit from doing wrong -- if still have profit left over after remedy given to P

a) PROBLEMS w/THISi. Encourages wrongdoing, makes Ks more unpredictable - since may get more if breach – may

underestimate damages will be when breachii. Externalities – D’s not always motivated by $iii. More dimensions to law – fails to consider – P’s losses may not be monetary

III. INJUNCTIONS – A. Defined - A court order that directs a party to engage in a particular course of conduct or to refrain from

engaging in a particular course of conduct1. Fed Rule for Injunctions – Rule 65(a) must be complete documents:

a) State reason/issue in clear detail why issuedb) State its terms specifically, and c) Described in reasonable detail within document itself – can’t refer you to other documents to get

rest of infod) Must be reasonably clear who parties bound by injunction – so they have sufficient notice

2. Tailoring Principle – tailor the remedy to the injurya) Applied to both quantitative damages, and injunctions as well

3. Types:a) Preliminaryb) TROc) Specific injunction

4. Non-compliance can lead to sanctions/contempt5. P has to show that there is a harm that has occurred or is going to occur6. Functions of injunctions (academic terms, don’t need to classify in ct)

a) Prevent harmb) Repair harm that has already occurredc) Restructure public institutions to bring them in compliance with statutory and institutional norms

7. Injunctions are treated as unusual or extraordinary reliefa) Can’t just order parties to obey law – need to be more specific 2 facts of case since injunctions are

a higher level of relief than law – since injunction are last resort relief , injunctions are special because they carry ancillary remedy of contempt, so there is support 2 primary remedy

b) Could damage the reputation of D (see Humble Oil)c) Issuing too many injunctions would dilute their force.

B. Preventing Harm – The Measure of Injunctive Relief ()1. Preventative Injunctions –

a) First step: we have to show ripeness – P must show threat/injury ripei. Almurbati v. Bush (D.D.C. 2005) (263)

(i) Facts : Plaintiffs, six Bahraini nationals classified as "enemy combatants," filed a petition for habeas corpus. Relying on news reports and statements of the petitioners, they allege that they will face irreparable harm (from torture to possible death) if transferred to certain foreign nations. The Department of Defense -- Senior Exec officials testify/

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counters prisoners aren’t transferred if there are any concerns about mistreatment of prisoner in his home country (or prospective destination country) cannot be resolved.

(ii) Issue : Whether injunctive relief forbidding the government to transfer any plaintiff out of Guantanamo without 30 days' notice to the court and counsel is appropriate

(iii) Rule : To obtain injunctive relief, the petitioners must show w/reasonable certainty that alleged controversy likely to occur – not just threatened injury is "remote and speculative." – “irreparable injury” – reasonably likely to occur

(iv) Holding : No. Because gove directly refused prisoners' allegations of their potential torture, mistreatment and indefinite detention to which the US will in some way be complicit, this Court cannot conclude that the petitioners would suffer irreparable harm if they are transferred from the Guantanamo facility.

1. NOTES : Prisoners sought prophylactic relief – party gets more/above rightful position 2 ensure P doesn’t fall below rightful positiona. 30 days notice – so give time to react/prevent possible harm of torture

2. Problems with Issuing Injunctions Right off the bat:a. Injunctions are unusual or drastic remediesb. FRCiv Pro – note #8, pg. 274c. Courts have discretion (only unreasonable or decisions contrary to law will be

overturned – abuse of discretion standard)b) Second Step: determine scope of relief – injunction relief tailored to harm

i. Marshall v. Goodyear Tire & Rubber Co . (5th Cir.1977) (269) - Secretary of Labor sued appellant Goodyear alleging violation of Age Discrimination in Employment Act of 1967, for discharge of 1 employee -William Reed. District court issued a nationwide injunction against further violations.

ii. ISSUE: Goodyear argued that scope of injunction was too broad. 5th Cir. Agrees.iii. RULE - Injunctions should be narrowly tailored to remedy the specific problem/issue/harmiv. 5th Cir –

(i) In terms of ripeness, no evidence that age discrimination is occurring on a nationwide scale – no findings of a discriminatory company policy or practice

(ii) Lower court only dealt with isolated wrongdoing. Equal Pay Act, Fair Labor Standards Act, and Age Discrimination in Employment Act cases establish that a nationwide or companywide injunction is appropriate only when the facts indicate a company policy of practice in violation of the statute. In Hodgson, a broad injunction against the employer's future discrimination hiring was on age was appropriate, inasmuch as the proof showed a company policy of hiring discrimination extending beyond the category of tellers' positions.

(i) Holding : The district court may no finding of discriminatory company policy or practices and relied only on the isolated fact of Reed's discriminatory discharge in enjoining appellant nationwide. Relief should be limited to the particular store.

ii. Notes(i) #3 pg 272 -Std argument against Crt granting company-wide relief – just cuz D

committed act in violation of statute doesn’t justify broad injunction 2 obey statute -- which subjects D to contempt for a new violation of act unrelated to act originally charged

(ii) #4 pg 272- bigger company, more violations can get away with – since # high, but overall %age low, Extended-A-Care Employee Assn. v. NLRB

(iii) #5 pg 273 – E.J. Gallo Winery v. Gallo Cattle Co. Gallo winery sued Joseph Gallo for trademark infringement for selling cheese under his own name “Gallo.” Initial injunction forbid J. Gallo from selling cheese or other product under his own name. Court of appeals narrowed to only forbidding Gallo to use his own name in selling cheese since cheese & wine commonly paired together therefore potential to confuse customers

(iv) Class injunctions – courts can certify a class of Ps therefore injunction in individual case of P representing class will protect all members in class

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c) Equitable Mootness – D has burden if claims moot – first courts review merits of case – then look at harm – if court cannot do anything to prevent /remedy harm from re-occurring harm moot i. Π has the burden of proving propensity and then Δ has the burden of showing mootness.ii. D must show “subsequent events make it absolutely clear that the allegedly wrongful behavior

could not reasonably be expected to reoccur.”Pg.279 note 3iii. United States v. W.T. Grant Co. (1953) (276) – government brought suit against Hancock

who was director for 6 companies (3 were direct competitors), arguing that there was an interlocking corporate directorate. Gov asks court to order interlocks terminated and enjoin future violations by Hancock and corporate D’s. District judge concluded that since Hancock had resigned from all 3 boards, there was no threat that violations would reoccur. Appeals court reverses for abuse of discretion –misapplying law. SC reverses.(i) Voluntary Cessation -

1. RULES – a. voluntary cessation of allegedly illegal conduct doesn’t deprive courts the

power to hear and determine a case – doesn’t make case moot, may be factor for court to consider but not only factor:i. Why? ii. Behavior may re-occur, iii. finality of judgment – issue not decided, no judgment on whether

conduct was illegal or notb. court’s power to grant injunctive relief survives discontinuance of illegal

conduct- but P must in begging of case that there exists some cognizable danger that relief is needed – more than just mere possibility – based on TOC

(ii) Abuse of Discretion: 1. government’s arguments for abuse of discretion:

a. failure to resign for 5 years until eve of litigation, b. refusal to concede his actions were illegal, c. and failure to promise not to commit similar violations in the future do not meet

its burden – 2. CRT – didn’t meet its burden -- unclear if interlocks were illegal- gov kept

postponing case – so took 5 years to get to court – can’t overturn district court finding to say unreasonable – therefore upheld

(iii) Notes1. D usually wins w/voluntary cessation – but here D didn’t until eve of litigation

therefore court wasn’t as apt to apply2. P usually wins w/ripeness 3. Mootness:

a. Constitutional -- sufficient to end the case or controversy and deprive court of jurisdiction

b. Equitable -- Likelihood of repetition so low that relief should be withheld as a matter of discretion i. To decide this, courts will look at:ii. Expression of intent to complyiii. Effectiveness of discontinuanceiv. Character of violations

c. And then the 9th Circuit has it’s own test – a much more complicated test – it’s on pg. 250.

4. Holding in Grant, only goes to preventative relief5. Damages claims = never moot, never impossible to compensate for past loss

d) Case below attempt at Prophylactic Relief – prohibit behavior/act altogether to prevent harm, also can be ripeness case – since no harm yet since halfway house not even in neighborhoodi. Nicholson v. Connecticut Half-Way House, Inc. (Conn.1966) (280) –

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(i) D wanted to set up a half-way house in neighborhood. P’s, property owners in the neighborhood, brought suit under nuisance law to enjoin its operation arguing that they were fearful of a rise in criminal activity and decreases in property value. CT SC denies injunction.

(ii) RULE –Plaintiffs claiming nuisance must show with reasonable certainty that harm is likely to happen to justify an injunction – not ripe merely “speculative” fear

(iii) Applied here CRT– 1. P’s fears were unfounded and unreasonable – not enough proof to show with

reasonable certainty that harm would occur to justify an injunction – i. not enough to substantiate property depreciation theory –mere depreciation

of land values not enough to support nuisanceb. just speculative would commit crime, since had in past – no evidence of pattern

or specific acts 2 support assertion2. P’s relied on 2 cases – showing nuisance 4 unreasonable use of property that is

merely anticipatory can be enjoined -- but court distinguished botha. Brainard v. Town of West Hartford (281) – proposed use of a town dump in a

residential area was a known quantity whose hazards and evils as a nuisance were discernible prior to its undertaking (smoke, litter, odors, rats, vermin, fire dangers- not speculative)

b. Jack v. Torrant (281-82) – funeral home would depress neighborhood residents – constantly reminding them of death (still somewhat speculative – court doesn’t get into)

3. NOTES: NARROW RULING REQUEST - Could’ve asked court to keep area free from crime by requiring halfway house to ↑ measurements 2 prevent crime, ensuring safety of neighbors by adopting specific precautions.

4. Grant v. Lone Oak Sportsmen’s Club, Inc. (283)a. Court granted riffle range was nuisance to neighbors even though active and no

injuries for 50 years. Crt said neighbors injured in other ways, couldn’t let children go outside, afraid 2 use parts of their yards

ii. PepsiCo, Inc. v. Redmond (7th Cir. 1995) [284](i) Facts : Redmond, a General Manager of PepsiCo's business unit covering all of CA,

signed confidentiality agreement not to disclose info learned at Pepsico. Redmond then accepted an offer from Quaker to become VP of Field Operations for Gatorade but 2 days later just tells Pepsico just thinking about offer then 2 days later quits Pepsico. 6 days after Redmond VP at Quaker PepsiCo seeks to enjoin Redmond from assuming his duties at Quaker and to prevent him from disclosing trade secrets or confidential information to his new employer.

(ii) Issue : Whether an injunction was proper in this situation(iii) Rule : The Illinois Trade Secrets Act, which governs the trade secret issues in this case,

provides that a court may enjoin the "actual or threatened misappropriation" of a trade secret. A plaintiff may prove a claim of trade secret misappropriation by demonstrating that defendant's new employment will inevitably lead him to rely on the plaintiff's trade secrets.

(iv) Holding : Pepsico gets injunction1. Redmond can’t turn off brain --- Redmond cannot help by rely on PepsiCo trade

secrets as he helps plot Gatorade and Snapple's new course, and that these secrets will enable Quaker to achieve a substantial marketing advantage by knowing exactly how PepsiCo will price, distribute, and market its sports drinks and new age drinks and being able to respond strategically. This type of trade secret problem may arise less often, but it nevertheless falls within the realm of trade secret protection under the present circumstances. When we couple the demonstrated inevitability that Redmond would rely on PepsiCo trade secrets in his new job at Quaker with the district court's reluctance to believe that Redmond would refrain from disclosing these secrets in his new position, we conclude that the district court

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correctly decided that PepsiCo demonstrated a likelihood of success on its statutory claim of trade secret misappropriation.

2. Behavior of Redmond – not good faith – not trustworthy lied to Pepsico about going to work for Quaker

3. Pepsico’s rightful position = not to divulge trade secrets= enforce K4. Pepsico got more than that since Redmond can’t work for direct competitor for

certain period of time(v) NOTES : pg. 289 – abortion protests –prophylactic injunction to have abortion protestors

stay certain distance away from clinic. 1. Gangs – CA put preliminary injunction for nuisance for gang members in 4 block

radius but since no gang member showed up in court – couldn’t enforce, since no notice

C. Reparative Injunctions (Repairing Harm) – courts can issue injunctions ordering D to do something in order to correct harm that has already taken place, 2 prevent u from living w/harm already occurred

a) Bell v. Southwell (5th Cir. 1967) (260) – GA election for Justice of the Peace. Bell was a black candidate. Southwell, white candidate, won due to various acts of racial intimidation and discrimination. Bell asks court to set aside election and order a new one, and enjoin Southwell from taking office. Lower court while finding a clear constitutional violation holds that it cannot issue an injunction to rectify a past wrong – especially when there is no evidence to suggest that outcome will be different, as they have to be forward looking. Ct. of Appeals reversed and remanded for an appropriate order setting aside the election results and calling for a new election.i. RULE - A court can issue an injunction to rectify a past action, even if it’s not certain that the

outcome will change – that if affirmative relief is essential, court has the power and should employ it – this was exceptional remedy

ii. Injunctions can be both forward and backward lookingb) Forster v. Boss (8th Cir. 1996) (295) – The Bosses, in selling their property to the Forsters,

defrauded them. The Bosses said that the Forsters could obtain a permit for a boat dock knowing that they themselves owned a permit, which would prevent the Forsters from obtaining one. Also, the Bosses said they would remove their swim dock, which they did not do. The district court awarded $10,000 in punitive damages, $12,500 in compensatory damages for the boat dock, $2,500 in compensatory damages for the swim dock, and injunctions ordering the Bosses to remove the swim dock and for the boat dock permit.i. RULE - A P can be awarded damages and an injunction so long as there is not a double

recovery – cannot have both compensatory damages + injunctive reliefii. Applied Here:

(i) Court allows P to choose remedy – probably didn’t like D for fraud(ii) P can either get removal of boat dock + permit or compensatory damages(iii) P’s get to keep punitive damages – as damages for delay are not a double recovery

iii. NOTES: Distinction between preventative and reparative (since all injunctions are preventative in a sense) is between preventing the wrongful act (racial intimidation on election day, failing to deliver dock permit at closing), and preventing some or all of the harmful consequences of that act (four years under an illegally elected justice of the peace, living without a dock)(i) thus reparative doesn’t literally undo past violations, rather it prevents some of the harm

from that past violation(ii) \reparative injunction is thus appropriate when P will suffer additional harm in the future,

and when it is possible to prevent that additional harm from happening2. How much Harm Should Injunctions Prevent? How much harm should the injunction undo?

a) Winston Research Corp. v. Minnesota Mining & Manufacturing Co . (9th Cir. 1965) (300) – Rightful Position – restores 2 position would’ve had but 4 harmi. Mincom developed an improved precision tape recorded and reproducer. Somewhat later,

Winston developed a similar machine by using confidential information supplied by former employees of Mincom. Mincom sues Winston arguing Winston machine made by former Mincom employees from trade secrets known by employees. Dist. Ct. finds that technology

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was a trade secret, and granted injunction for 2 years(time protected after public disclosure), but no damages, both sides appealed – Mincom wanted a permanent injunction.

ii. RULES – (i) Courts will not issue damages where P has not been damaged and D has not been unjustly

enriched(ii) Appropriate Injunction period is for a reasonable period of time in order to eliminate

commercial disadvantage that otherwise would’ve derived from misappropriation –1. Reasonable time competitors would require after public disclosure to develop a

competitive machineiii. Applied Here –

(i) permanent injunction would’ve been inappropriate, as it would run counter to the public interest in allowing technical employees to really use their knowledge and skill in fostering research and development1. 2 year injunction deprives Winston of any benefit it gained from unfair advantage –

took Winston 14 months, so add a few months more since taking into account parties may take longer since not familiar as those w/trade secrets already

(ii) no money damages as D’s didn’t sell anything, so no injury, evidence of possible future profits were speculative1. assuming damages were applicable, would’ve been restitution – losses from sales

and profits for D’s2. damages would’ve been duplicative here, as injunction sets things right

iv. Notes(i) Slipperiness of distinction between preventative and reparative injunctions:

1. If wrong is stealing trade secrets – injunction is reparative2. If wrong is selling products manufactured from trade secrets – then preventative

b) Bailey v. Proctor (1st Cir.1947) (304) – Prophylactic Remedy (i) Voting control of mutual fund was held by owners of $150,000 in stock (control group),

while holder of $6M in debentures provided most of capital (group no control over decisions made for fund). Under scheme, debentures get a fixed rate of return, while stockholders get additional profits. Moreover, stockholders only lose what they put in, while debentures have less protections. Fund became insolvent, and voting stockholders were caught in fraud and self-dealing. Dist. Ct. appointed receiver to take possession and control of property and manage it under judicial supervision pending litigation. Court ordered liquidation, but during proceedings Bailey’s bought out original control group, made fund solvent again, and appealed arguing that since trust was solvent, and since those responsible for fraud were no longer involved, the reasons for receivership were eliminated, and the court no longer had power to order liquidation.

ii. RULES –(i) Court of equity has inherent power (jurisdiction) to appoint a receiver to liquidate a

corporation or investment trust where fraud, mismanagement or abuse of trust is present whether or not insolvency is likewise present1. Solvency doesn’t terminate jurisdiction2. Court must determine until it becomes satisfied that equity has been done to those

whose interests the court had been asked to protect(ii) Liquidation, being a drastic remedy, will only be decreed in an extraordinary case or

where special and peculiar circumstances existiii. Applied Here

(i) trust was insolvent and there was a gross abuse of trust – justifying jurisdiction(ii) even after solvency, strong likelihood of similar events occurring again (solvency was

only due to risky, speculative investments)1. moreover, existence of Trust’s structure poorly allocating distribution of risk, makes

abuse likely to occur again, and combined with other factors supports liquidation {even though no statute allows court to liquidate trust}

iv. Notes: 2 Competing Traditions 2 Awarding Remedies

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1. Receivership is an equitable remedya. Equity doing Equity = Bailey – represents tradition that one violation in equity

court – chancellor has roving commission to do good i. Criticisms: Equity courts have too much flexibility w/discretion they use ii. SC Rebuffs : Courts need to back up their equitable remedies w/sound legal

principles and reason so this limits discretionb. Rightful Position – Winston – restores P as near position would’ve occupied but

for violation – remedy narrowly tailored 2 fit harm(ii) Prophylactic Remedy: Can also classify this remedy as a prophylactic remedy –

enacted to prevent the recurrence of fraud and insolvency – 1. Settings where prophylactic injunctions often come up:

a. Recurrence of harm likelyb. Bad faith D’s – don’t trust them, so just fix the mess

(iii) Community Renewal Foundation, Inc. v. Chicago Title Trust Co. p9. 3091. Ex/statute applied to case and court ordered remedies above what granted by statute

–In middle of 2 cases above 2. Statute – housing codes were violated – court orders repairs that were above

minimum required by housing code. Appellant challenges but loses. RULE: judge given discretion to determine the repairs necessary to comply w/legislation – no evidence that judge abused discretion by requiring repairs returned building to economic life & acceptable usefulness

D. Restructuring Public Institutions1. Structural Injunction – collection of more specific preventative/reparative injunctions addressing

complex factual situations, courts highly involved in day-2-day operations in public institutions (i) designed to restructure public institutions or private organizations in order to bring them

into compliance with the constitution or statutory norms(ii) Actually a series of injunctions, a complex judicial order, comprised of a series of orders(iii) Why Complex? – organizations affected are complex, orders have to be detailed to repair

harms and prevent further harm(iv) The Scope of the Injunction When Issued – controlling principle in desegregation cases

was that the scope of the remedy was determined by the nature and extent of the constitutional violation1. E.g. It must be shown that racially discriminatory acts of the state or local school

districts, or of a single school district have been a substantial cause of interdistrict segregation before boundaries of separate and autonomous school districts may be set aside for cross-district remedies

2. Modern structural injunctions trace back to school desegregation casesa. Brown II , said that Dist. Cts. had to fashion remedies to desegregate, and lower

court had to follow equitable principlesi. De jure: legally mandated, intentional(by law-unconstitutional segregation)ii. De facto segregation (by fact- patterns of segregation)

b. what followed was Dist. Cts. supervising school districts and detailing what they had to do to desegregate

c. ex/ of courts monitoring public agencies: public schools, prisons, hospitals3. 2 Approaches: Broad vs. Narrow

a. Liberal approach – equity seen as a broad thing (equity doing equity, fair – Swann)

b. Narrow/Conservative approach – equity must be tailored to harms – guarding against equity going too far – Milliken I, Jenkins (the most conservative)

TODAY – litigants should seek narrower scale reform rather than broader reform. Crts only seem to get involved w/ day-to-day operations 2 vindicate rights mostly constitutional therefore criticisms of separation of powers are unwarranted since need to take a long time to correct wrong

EDUCATION

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a) Broad View – Swann v. Charlotte-Mecklenburg Bd. of Education (1971) – schools districts maintained black and white district schools – got rid of de jure segregation (by law), and instead relied on neutral practices in order to keep the system segregated – locating schools in segregated neighborhoods, bussing students long distances(segregation de facto - segregation patterns),. SC upheld dist. cts. remedies.i. RULE - The nature of the violation determines the scope of the equity and courts have

broad powers to fashion remedies that will assure a unitary school systemii. Applied Here

(i) Neutrally drawn attendance zones were not necessarily a sufficient remedy. Lower court’s finding that that segregation was the intentional result of the school system was reasonable given the disproportionate race percentages 1. Gerrymandering school districts, implementation of a bussing plan, and the setting of

a benchmark to determine if schools were integrated enough was appropriate as neutrally drawn attendance zones were not a sufficient remedy as court must “achieve the greatest possible degree of actual desegregation”

2. Courts looked at racial composition itself to determine if remedy is needed (segregation de facto)

iii. Notes:(i) important for identifying the more flexible standard for fashioning remedies

b) Narrow View – Milliken v. Bradley I (1974) (312) – District Ct. that desegregation was impossible, based on demographics of population and “white flight” to suburbs and ordered the parties to submit proposals for a metropolitan desegregation plan by consolidating the suburbs with the inner-city, and creating wedges much like in Swann. Appeals court affirmed. SC reversed. i. RULE – Yes, the scope of the remedy is determined by the nature and extent of the

constitutional violation (de jure), but the remedy must then be narrowly tailored to the harmii. Applied Here:

(i) P’s rightful position was desegregation within Detroit, thus the courts had no power to involved the suburban districts unless the violation in Detroit had caused segregation in the suburbs – no evidence of that provided1. The remedy must then be limited to the inner-city school system where the disparate

treatment occurrediii. Notes:

(i) 2 ways to approach the “rightful position” in segregation cases1. In the absence of the constitutional violation, what would the racial composition of

the schools look like? Look at benchmarks and demographics2. Or, courts try to remedy more intangible things, that may have resulted from

segregation – improvements in schools?c) Broad/Narrow –Meet in the Middle Here- Milliken II –(312-13) “equity doing equity”

i. District Court – made Detroit only bussing plan + ordered remedial training in reading, communication skills, testing programs, etc.. SC Affirmed. (i) The specific remedy was tailored to the harm – therefore court’s injunction upheld

1. Quality of education needs to be addressed – if education inferior fix it -- so harm of segregation could be addressed n’ victims of segregation made whole

d) Narrowly Tailored & Rigid -- Dayton Board of Edu v. Brinkman – (313) “incremental-segregative effect” i. Dist Crt found - limited efforts school district to stop segregation in its schools. The Appeals

Court ordered citywide bussing to remedy lack of racial distribution. SC reversed. ii. SC – remedy > scope of violation = must show past practices contribute to harm 2 justify

remedies you’re seeking – show how racial segregation now is different than would be if complied/no constitutional violation

e) Most Narrowly Tailored & Rigid Missouri v. Jenkins (1995) (314) – i. Dist Court found State & KCMSD had substantive intradistrict violation, operating a

segregated school system, was found in the KCMSD (Kansas City Metropolitan Area). Dist. Ct. ordered major remedies costing over $220M which ordered programs expanding

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educational opportunities, ordered quality education programs, effective schools program. Created a magnet school plan, and a long range capital improvement plan, salary assistance program. Dist. Ct. focused on “desegregative attractiveness” couple with “suburban comparability” arguing that it would remedy reduction in student achievement and attract nonminority students not presently enrolled in the KCMSD. Ct. of Appeals affirmed. SC reverses.

ii. RULE – Desegregation remedy is “necessarily designed, as all remedies are, to restore the victims of discriminatory conduct to the position they would have occupied in the absence of such conduct.” - It is okay to remedy segregation by improving schools if you can trace the inequality back to segregation but it is not okay to compare inner-city schools to suburban schools – look if ↓ in achievement by minority students attributed 2 prior (de jure segregation) law segregation has been remedied to extent practible

iii. Applied Here:(i) District Court trying to create interdistrict remedy like Miliken I, the remedy here is

not tailored, the pursuit of “desegregative attractiveness” is beyond the scope of the court’s broad remedial authority1. clear that court isn’t just curing segregation, they’re making a really nice school, thus

becoming an inter-district remedy, as it’s trying to compete with suburbs who are not part of the discrimination – court devised a remedy to accomplish indirectly what it admittedly lacks the remedial authority to mandate directly – the interdistrict transfer of students

2. remedying white-flight would only be in the court’s authority if it was directly caused by the constitutional violation

(ii) very expensive & long oversight to comply with mandates -- local autonomy is an important goal – thus dist. court must strive to restore authority to local and state officials – thus state and district are entitled to a rather precise statement of their obligations – measure of progress needs to be set

(iii) CONCURRENCE THOMAS – structural injunctions violate separation of powers – legislative or executive to order state how to run its school programs

(iv) DISSENT – not like Miliken since only improving within own district not others1. NOTES: how much is too involved in reaching remedy, when is it outside

institutional capacity of Crt/outside their jurisdiction2. Is Thomas correct if constitution is violated then court needs to be able to remedy

(Marbury v. Madison – where there is a right there is a remedy)PRISONS – Courts concerned w/8th (cruel & unusual) & 14th (due process) violations

f) Hutto v. Finney (1978) (325) – Prophylactic Remedy i. Terrible conditions in Arkansas prisons. Dist. Ct. found conditions unconstitutional but

allowed prisons to self-correct to. A Second hearing was held, and while the court found some improvements, it was still unconstitutional, again it allowed officials to devise their own plan for improving conditions, but issued guidelines and ordered them to move as fast as funds were available guidelines improve conditions in isolation, ↑ inmate safety, eliminate barracks sleeping, end trustee system – (inmates used as guards).

ii. More hearings were held later, and dist. court found that supervision was no longer necessary. Ct. of Appeals reversed, and

iii. Dist ct. held a 4th hearing, in which it found constitutional violations had not been cured, entered order: limiting number of men in one cell, each person must have bunk, no longer gruel diet, 30 max isolation. and found that D’s acted in bad faith. Ct. of appeals affirmed, SC affirmed

iv. RULE - Courts are allowed to examine the situation as a whole when deciding if something is unconstitutional and ordering a change – court within their authority to order remedy that was broader then earlier orders to ensure against inadequate compliance (prophylactic remedy)

v. Applied Here: (i) while there is a strong deference toward penological interests, prisons here acted in bad

faith – years of non-compliance – thus setting tough standards was appropriate

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(ii) lack of compliance justified a prophylactic remedy – adjudicated wrongdoer, bad faith on D’s, non-compliance for many years

(iii) ↓ unrest, ↓ days in isolation are interdependent on ↑ prison conditions = remedy tailored to harm

vi. Notes:(i) Why did Court allow D’s to fix things in the first place?

1. Efficiency – allow people implementing the policy to have a say2. Easier to comply – know the limitations involved3. Separation of powers argument – federalism – governmental D’s get more

opportunities to created their own remedies than anyone else4. Takes a long time to tailor remedies

(ii) SC says in Hutto we don’t trust you prisons – 2 remedy conditions – so we will impose own remedies to ↓ severity of conditions

vii. CA CASES – (334) class action against CA –over adequacy of mental health care for mentally ill prisoners (1990s), (2001s) class actions for adequacy of medical care for all prisoners in CA (i) After years of noncompliance w/injunctions ordering CA to improve prison conditions –

District Court released $13K inmates since prison couldn’t provide medical care for prisoners

g) Lewis v. Casey (1996) (313) – class action by AZ prisoners arguing that inadequate libraries prevented them from getting to court. Dist Ct. findings detailed only two incidents, both involving inadequate assistance to illiterate prisoners, yet it entered into an injunction regulating the details of law libraries in entire US prison system. SC reversed injunctioni. RULE – Remedy must be limited to the inadequacy that produced the injury in fact that P has

established (nature of remedy is to be determined by the nature and scope of the constitutional violation)

ii. Applied Here:(i) 2 instances were an inadequate basis for a conclusion of a system-wide violation and

imposition of system-wide relief remedy 2 broad 1. Findings revealed one case where a prison failed to provide special services to

prisoner who would have needed due to his illiteracy, to avoid dismissal of case – which is quite different from this suit

2. Other instance involved a prisoner who while incarcerated had once been unable to file a legal action

(ii) granting a remedy beyond what was necessary to provide relief to the 2 prisoners was improper

(iii) moreover, dist. ct. didn’t defer to “penological interests” and failed to give them chance to propose their own remedy1. CRT – disagreed whether broad holding unnecessary – sep powers 2 broad – other

view could be broad if more evidence to support h) United States v. Virginia (1996) (336) –

i. lower court and SC found VMI’s men-only program unconstitutional, gave school the option to create a remedy – either become a private school, fully integrate, or create an alternative program for women. State chose to create VWIL. SC finds that VWIL fails as a remedy

ii. RULE – remedy not tailored to harm VA still excludes women from opportunities/advantages offered by men’s instiution

iii. Applied Here(i) remedy didn’t match the violation – schools were distinctly different

1. different curriculum, different training methods (adversative vs. cooperative), endowment, faculty – plus intangibles

iv. Rehnquist Concurrence – excluding women/gender specific education okay, but that no comparable institution existed here so not okay (not = prestige, $ spent, quality of faculty to make work)

1. [distinction btwn complete equity & comparable]Prof – What if Va created milt institution for women?

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Need to make identical resources, attach prestigious school as alumni network, curriculum Prestige still may be difficult to achieve we don’t know if court looking for exactly same or comparable

since doesn’t address

D. Modifying Injunctions – FED RULE 60(b)(5)1. RULE 60(b)(5) = permanent injunction is a final judgment. Unless vacated or modified on appeal, it is

res judicata (decided therefore barred) from subsequent proceedings.i. Drafted before “institutional reform litigation/structural injunction”ii. CRTS HATE – Why? – judges view as person brining suit to re-hear litigation/retry claim iii. Only applies to remedies that operate prospectively (expected to happen) – ensuring those

remedies are equitable iv. CANNOT USE TO COMBAT INJUNCTION ITSELF – only to combat effect of injunction

– result of injunction b) United States v. Swift & Co. (1932) [342]: The inquiry in modifying an injunction is whether the

changes are so important that dangers, once substantial, have become attenuated to be shadow. Nothing less than a clear showing of grievous wrong evoked by new and unforeseen conditions should lead us to change what was decreed after years of litigation with the consent of all concerned.

c) United States v. United Shoe Machinery Corp. (1968): [342] Swift is inapplicable when a decree fails to achieve its central purpose and a party seeks modifications designed to achieve that purpose.

d) Rufo v. Inmates of the Suffolk Country Jail (1992) [344]: inmates sued claiming pretrial detainees were held in unconstitutional conditions. Court issued injunction enjoining Government D’s from (1)housing at the jail an inmate awaiting a trial with another inmate, and after a later date (2) from housing any inmates awaiting trial at all.i. RULE: A party seeking modification of a consent decree must establish that a significant

change in facts or law warrants revision of the decree and that the proposed modifications is suitably tailored to the changed circumstance.(i) Courts – CANNT RELITIGATE FLOOR OF INJUNCTION – IF new law requires less –

leaving injunction requirements > law requires – cannot relitigate (ii) A consent decree can be modified if events that were unforeseen at the time it was made

occur that make it inequitable to bind the parties – a flexible approach that takes into account certain changes:1. Changes that make compliance unworkable2. Factual conditions make compliance onerous 3. Proves to be detrimental to public interest4. Becomes illegal to comply, or likewise, laws change to make legal what decree was

designed to prevent(iii) modification should not be granted where a party relies on events that actually were

anticipated a the time it entered into a decree(iv) once moving party meets burden of establishing change in fact or law, Dist. Court should

determine whether proposed modification is suitably tailored to the changed circumstances – thus 3 matters should be clear:1. modification must not create or perpetuate a constitutional violation2. modification should not strive to rewrite a consent decree so that it conforms to the

constitutional floor3. public interest and separation of powers requires court to defer to local govt

administratorsii. Applied Here:

(i) change in fact: surge in inmate population(ii) change in law: SC held that double cells were constitutional(iii) The outcome depends on if the jail anticipated the growth, and whether D’s though single

celling of pretrial detainees was mandated by the constitutione) Agostini v. Felton (1997): [344] An injunction is modifiable for significant change in law when the

precedents on which it is based have been seriously undermined or eroded; only the SC can decide that one of its own decision has been so undermined.

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f) Frew v. Hawkins (2004) [344]: State officials cannot re-litigate the minimum requirements of federal law on plaintiffs' motion to enforce a consent decree.

2. CONSENT DECREES : A consent decree is an injunction entered by agreement of the parties, subject to the approval of the court.

i. Structural injunction = once court agrees to enter into record ii. -Once entered, final judgment and a permanent injunction just as much as if it had been fully

litigated.iii. -The meaning of a consent decree must be discerned within its four corners, and not by

reference to what plaintiff might satisfy the purposes of either party or what the court might have ordered if plaintiffs had proved their case.

iv. -The court's authority to enter a consent decree comes only from the statute or other substantive law which the decree is intended to enforce, not from the parties' consent.

v. -Federal consent decrees (1) must be directed to protecting federal interests; (2) must spring from, and serve to resolve a dispute within the court's subject-matter jurisdiction; (3) must come within the general scope of the case made by the pleadings; and (4) must further the objectives of the law upon which the complaint was based.

a) Horne v. Flores (U.S. 2009) [346]i. Injunction against AR because didn’t provide adequate funding 2comply w/federal law that

required states to offer ESL support to students, over decade passes and AR still hasn’t complied w/injunction. New law passes “no child left behind” law passes – which gives funding to state for ESL program so AR claims injunction no longer needed. Dist. Crt says up to AR to prove no longer needed

ii. Issue : Whether the objective of the 2000 declaratory judgment order has been achievediii. Holding : SC ignores Dist Crt requirement that D burden to prove. Remanding to Dist Crt for

a proper examination of at least four important factual and legal changes that may warrant the granting of relief from the judgment: the state's adoption of a new ELL instructional methodology, Congress' enactment of the No Child Left Behind Act, structural and management reforms in Nogales, and increased overall education funding. These changes are critical to a proper Rule 60(b)(5) analysis, as they may establish that Nogales is no longer in violation of the EEOA and, to the contrary, is taking "appropriate action" to remove language barriers in its schools. If this is the case, continued enforcement of the District Court's original order is inequitable within the meaning of Rule 60(b)(5)(i) Prof/Notes:

1. modifications determinations difficult to overturn since discretion standard – so arbitrary n capricious.

2. SC Horne ruling – gives more flexibility in determining whether injunction is no longer necessary a. This case shows conservatives saying we hate structural injunctions therefore

ruled this way to ↓ them

3. The Rights of 3rd Parties –parties not involved in litigation – injunction can still be imposed on them for minor & ancillary tasks but not usually substantive relief

i. Rule = innocent third parties can be affected substantially, but not to the point of being restructured, by orders to defendants who violated the law.(i) Innocent third parties may also be subjected to minor and ancillary tasks to orders

themselves. (so still can be subject to injunction)ii. Claim and Issue Preclusion

(i) Martin v. Wilks (1989) [372]: No one is bound by a decree unless he was a party, and no one is obliged to intervene in a lawsuit to which he has not been made a party.

a) Hills v. Gautreaux (359) – Court of Appeals found that HUD had violated 5th Amendment when it knowingly funded the CHA’s (Chicago Housing Authorities) racially discriminatory family public housing authority. After efforts to implement a remedy within Chicago, Ct. of Appeals ordered HUD to develop a metropolitan housing plan -- develop public housing in desegregated

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neighborhoods, not just in low-income minority neighborhoods. HUD argued that remedy should only apply to Chicago. SC rejects this argumenti. ISSUE : Can metropolitan housing plan be required to go outside city limits?ii. RULE – Remedial powers to restructure the operation of local and state governmental entities

may be exercised “only on the basis of a constitutional violation” and once that violation has been found, court is required to tailor “the scope of the remedy” to fit the “nature and extent of the constitutional violation.” - Thus, the remedy to segregation may extend to any area where the state agency which was causing the segregation had authority –using “all reasonable methods available to formulate an effective remedy”

iii. Applied Here:(i) unlike the suburban districts in Milliken, HUD has been found in violation of the

Constitution, and since CHA and HUD have authority to operate outside Chicago city limits, its distinguishable from the D’s in Milliken

(ii) separation of powers issues – HUD can go through private entities w/o going through state so no intrusion on state to have program comply w/constitution and therefore create interdistrict remedy

(iii) State could comply w/injunction w/o being forced to ↓ their state power – can enforce land use restrictions/remedies, etc., to provide minorities w/alternatives to racially segregated Chicago pulic housing system created by HUD and CHA

b) General Building Contractors Association v. Pennsylvania (U.S. 1982) 366(i) Facts : Local 542 (union) & other trade associations and employers, practiced a pattern of

intentional discrimination in administering the hiring hall system, and union practices in the overall operation of a hiring hall for operating engineers created substantial racial disparities. Dist Crt found that there was no evidence that trade associations were aware of unions’ discrimination, or that employers intended to engage in discrimination as a class. However, Dist Crt ordered trade assoc. & employers had violated statute and therefore must comply w/injunction. SC reverses.

ii. Issue : Whether a party not subject to L for violating the law may nonetheless be assessed a proportionate share of the costs of implementing a decree to assure non-discriminatory practices on the part of another party which was properly enjoined

i. Holding : Dist Holding too harsh – 4 nonparties not held L, can only impose on them “minor” or “ancillary” tasks 2 comply w/injunction(i) Absent a supportable finding of L, we see no basis for requiring the employers or the

association to aid either in paying for the cost of the remedial program as a whole or in establishing and administering the training program.

(ii) Nor is the imposition of minority hiring quotas directly upon petitioners the sort of remedy that may be imposed without regard to a finding of L1. PROF EXAMPLES:

a. Court can order someone (nonparty 2 litigation) to produce documents, property at issue in litigation i. Can only order persons not in violation of law to small tasks to facilitate

litigation

IV. CHOOSING REMEDIES – Categorize Remedies into 2 GroupsA. Substitutionary vs. Remedies

1. NUTS AND BOLTS a) Categorizing Remedies into 2 Groups

i. Substitutionary Remedies = normally $$, compensatory damages, paid to compensate what lost

ii. Specific Relief = more equitable relief, primarily injunctions1. Seeks to avoid transaction altogether by preventing injury B4 happens2. Want to get property back

b) damages vs. restitution – courts have created a host of doctrines determining what P’s get, thus it’s not really P’s choice, but usually when its damages vs. restitution, it’s P’s choice (right of election)

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c) damages vs. injunction – P’s must satisfy irreparable injury rulei. Irreparable Injury Rule : Courts will issue an injunction if P proves:

1. Will sustain irreparable injury absent court injunction2. Legal remedies inadequate if damages are insufficient to cover P’s loss

a. adequacyi. damages are adequate when -- are calculable, when thereii. damages inadequate when -- intangible rights, unique property

ii. General Principles of Irreparable Injury Rule (i) -Equity will not act if there is an adequate remedy at law.(ii) -Equity will act only to prevent injury that is irreparable [at law].(iii) -A useful distinction is to use the:

1. "adequate remedy" formulation = choice of remedies at final judgment, and the 2. "irreparable injury" = the requirements for interim relief pending final judgment.

d) Replevini. = legal remedy, not subject to the irreparable injury rule.ii. enforced by state official seizing the property and delivering it to the plaintiff.iii. only to recover goods; it does not lie to prevent a threatened destruction or dispossession

e) TODAY – relatively easy to satisfy the irreparable injury rule now although some challenges to 7th amendment right to jury as this is equitable relief therefore no jury requirement no court has repudiated irreparable injury rule

2. IRREPLACABLE LOSSESa) Pardee v. Camden Lumber Co . (W.Va.1911) () - P got an injunction to prevent D from cutting

down his trees. Appeals court overturned finding P had to show that D was insolvent & unable 2 pay damages 2 get an injunction. W.Va. SC overruledi. RULE - an injunction is necessary when it is the only thing that will keep P in the rightful

position – court won’t grant equitable remedy if a legal remedy would be adequateii. Applied Here: Damages are inadequate

(i) Saying that injunction only applies if D is insolvent is no good, this is property, you have the right to control your property, and if you can demonstrate uniqueness of the real property such that money damages would be inadequate, then an injunction is ok1. Timber has become a scarce resource, moreover, once timber is turned into lumber,

can’t be converted back to normal state so unique2. Right to have control over property – so shouldn’t let someone trespass to violate

your rightsiii. VIP Notes:

(i) Why do we have an irreparable injury rule?1. Injunctions impose a greater burden on court as they have to be enforced over

time, as opposed to damages, which are a one-time solutioni. although damages aren’t always quick, sometimes difficult to calculate,

sometimes difficult to collect ii. sometimes injunctions only require party to refrain from doing something

so not burdensome on court to oversee2. injunctions impose a greater intrusion over D’s property – requires a particular

type of conduct, whereas damages allow D to proceed as long as D is willing to bear costs

i. damages could be extremely burdensome – depending on assetsii. why are we concerned with D? the wrongdoer

3. Jury Trial – irreparable injury rule is equitable relief which deprives D of jury trial – by asking for injunctiona. How often does D want jury trial and P want bench trial?

4. sometimes timing is an issue, when preventing something, risk that remedy requiring D to act takes longer than getting damages after act occurs, D may claim timing for preventative relief deprives right of full trial b4 required to act/give up something

(ii) Law & Economics $$ awards ↓ incentive for D to commit wrong

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1. Criticism – could be non-monetary motive that D motivated by, other social goals not related to $$ won’t be compensated, some people use their property inefficiently don’t have right to take, efficient thief valued

2. Law & Econ – some rebut efficient thief – only support voluntary transactions – since directly challenges other important rights which are necessary to have efficiency – right to have sole dominion over property/right to exclude

(iii) Laycock argues that irreparable injury rule is dead:1. definition of adequacy for legal remedies: legal remedy is adequate only if is as

complete. Practical and efficient as the equitable remedy – thus, always gives way to equitable relief as legal remedies almost never meet adequacy standard

2. Although it has life at the preliminary stage – prelim injunctiona. but courts are afraid to enact preliminary injunctions – as facts aren’t fully

known, plus you don’t know who is right or wrongb. law and economics theory- that we should be encouraging profitable violations

of the law, economic efficiency

b) Brook v. James A. Cullimore & Co . (Okla. 1967) (384) – Does the Δ have a choice of remedy?i. whether in a replevin action (to recover specific piece of property), defeated litigant can (1)

retain property as his own against the will of the other party (2) impose court to render $$ damages judgment and (3) tender $$ damages

ii. RULE – REPLEVIN -- action to recover a piece of property -- the wronged party (winner) has a choice between the property or money, but defeated litigant may not choose, he must relinquish property

iii. Notes(i) Irreparable injury rule only applies to equitable claims – replevin is an action at law(ii) With an injunction there is contempt, with replevin the sheriff comes and seizes the

property.c) Continental Airlines, Inc. v. Intra Brokers, Inc. (9th Cir.1994) (377) – Intra acquired Continental’s

discount coupons and sold them to travel agents, for resale to customers. Continental sought injunctive and declaratory relief ordering broker Intra to stop selling its coupons. District Court granted the injunction, 9th Cir. affirms.i. RULE – Where there is in fact harm, the fact that it’s hard to calculate or establish economic

harm supports the proposition that damages would be inadequate, thus equitable relief is better

ii. Applied Here:(i) the effect on the revenue of the brokering of its coupons was hard to prove and measure –

here there was no evidence of economic harm, as there could’ve been various results of brokering coupons

(ii) damage to Continental’s power – control of its own business – D’s are substituting their judgment for P’s as to whether to distribute coupons

(iii) collectively – this situation calls for an injunctiond) Campbell Soup Co. v. Wentz (3d Cir. 1948) (383) – Specific Performance

i. Campbell entered into K with Wentz for all the Chantenay red cored carrots on his farm for a season for certain price. The market price spiked and D’s didn’t want to sell. Campbell brought suit to enjoin D’s from selling carrots to others and an order for specific performance ordering D to comply with K. Trial court found that based on objective standards, P’s hadn’t proven that goods were unique. 3d Cir. reverses to grant specific performance

ii. RULE - Specific performance is warranted when a legal remedy would be inadequate – inadequacy of legal remedy is necessarily a matter to be determined by an examination of the facts of each case

iii. Applied Here:(i) On question of adequacy of legal remedy – appropriate for specific performance

1. at time, goods were of special type and unavailable on open market “virtually impossible” to obtain this carrot type in open market

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2. P contracted for goods long in anticipation of needs, and built up general reputation for its products of which uniform appearance was important – Campbell needed Chantenay carrot to ensure would preserve uniformity in appearance

iv. Notes on Specific Performance:(i) Why did damages seem adequate? – ability to cover, market price was calculable(ii) Why did damages seem inadequate? – unique carrot, harm to reputation if use different

product, scarcity(iii) Why give Campbell’s carrots they’re attaching a lower value to?

1. law and economics – carrots worth more so more efficient use of good2. counter – allow Campbell to buy at lower price, and then decide what to do – use or

sell its’ carrots (iv) The Cover Principle –UCC § 2-716 – codifies SP, SP “if goods unique or in other

proper circumstances” 1. inability to cover is strong evidence of other proper circumstances in which SP is

appropriate2. Courts will often given specific performance for ordinary goods when:

a. there is a scarcityb. time constraintsc. or the size of the orderd. when supplier has monopoly – correlate w/irreplaceable

i. all things that make the order nearly impossible to cover3. P in SP also required to perform their part of K so must be able to or SP will not be

granted e) Van Wagner Advertising Corp. v. S & M Enterprises (N.Y. 1986) (402) - Van Wagner advertising

leased wall of building facing midtown tunnel for billboards. He leased it to Asch Advertising for 3 years starting March 1, 1982. Michaels, who leased the property to Van Wagner, sold it to S&M earlier in 1982, and in August of 1982 sent letter to Van Wagner canceling the lease as of Oct. 18. S&M’s cancellation of the lease was breach of contract. S&M says money damages are adequate. Van Wagner wants specific performance since sign location unique - off busy tunnel, no property is the same i. RULES –

(i) SP is properly denied where damages are an adequate remedy and equitable relief would impose a disproportionate burden on the D1. equity shouldn’t itself work an inequity on D

(ii) Issue isn’t about uniqueness or substitution, rather the uncertainty of valuing itii. Applied Here:

(i) Value of the unique qualities could be fixed with reasonable certainty and without a high risk of undercompensating P, 1. Not unique -- P in business had 400 other signs posted in city so value easily

calculated since there is a mket for this, so not unique even though real property (ii) Moreover, SP would be inequitable to D as property was supposed to be redeveloped –

SP too costly 2 Diii. Notes

(i) Undue hardship is a separate means of denying relief(ii) EQUITY balance of hardships (benefit P balanced by burden of injunction imposed on

D [N/A if D intentional wrongdoer]1. CRT CONSIDERS – no irreparable injury, burden to D

(iii) Uniqueness not end-all-be all are there adequate substitutes that can replace? If yes, SP will be denied

(iv) Cases exist which grant SP for K’s to sell used goods – new goods aren’t adequate replacements

3. Burdens on Da) Whitlock v. Hilander Foods, Inc. (Ill. App. Ct. 1999) 409

i. Facts : D was building a wall near his land, P gave him permission to allow the construction crew on his land while the wall was being built. P noticed wall's footings abutted P's

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land/encroached on his property 18 inches. P attempted to negotiate with D about compensation, but no agreement was reached. Dist crt – grants D summary judgment – on laches (you waited to long to bring P), D found nonintentional wrongdoer so balanced equities 18 inches encroachment < cost of moving structure – Appeals Crt Reverses

ii. Issue : Whether an injunction was an appropriate remedyiii. Holding : The trial court erred in concluding that, as a matter of law, the encroachment on

plaintiff's property was not intentional. Whether to categorize defendant's encroachment as intentional or unintentional is potentially of crucial significance – therefore need to go to trial to determine (i) “material facts” still need to be decided.

1. D could be intentional wrongdoer2. D may have caused delay therefore laches wouldn’t apply

(ii) Ordinarily, in deciding whether to order a D to remove an offending structure, the trial court must balance the hardship to the D against the benefit to the P; if the former is great and the latter slight, the court will ordinarily leave the plaintiff to his remedy at law. However, if the encroachment is deliberate, the court may issue the injunction without considering relative hardship on D (no balance of equities if D intentional wrongdoer)

b) Undue Hardship to D Boomer v. Atlantic Cement Co. 411i. Facts: Court found cement plant was causing nuisance to neighboring homes but refused to

grant injunction so cement plant could stop spewing cement dust on neighboring homes causing health problems. Instead court ordered cement plant to pay damages of ↓ value of neighboring homes

ii. Why? Balance of burdens1. cement plant, employs over 300 people and the owner invested $45 million into the

plant > than health risks & ↓ property value of Ps iii. -Hardship to defendant

(i) the hardship must be disproportionate to any benefit plaintiff will derive from the injunction. 1. Courts also give heavy weight to D's culpability 2. P's diligence or acquiescence, 3. Relationships between the parties

(ii) a wide range of factual variations can influence these assessmentsiv. When a court denies the injunction because of undue hardship on the Δ, they will usually

award damages.4. Burden on the Court -

a) Co-Operative Insurance Society Ltd. v. Argyll Stores (Holdings) Ltd. (1997) (417) – English Casei. Facts: D’s decided to close Safeway supermarket in shopping center, breaching lease, D

consented to order for damages. Ct. of Appeal reversed trial judge and ordered that K be specifically performed. This Court reverses

ii. RULE – General practice is to not order specific performance for D to carry on a business in K disputes

iii. Applied Here: (i) Undue burden on D

1. Public interest against requiring someone to operate a business at loss(ii) Burden on court to have to supervise performance for so many years

1. waste of resources and prolongs the battle2. concern that court difficult to measure D’s compliance – too vague if scale back

store to only sell 1 item, etc. iv. Damages brings litigation to an end

1. Notes:a. Universal Health Services v. Thompson (Tex. Ct. App. 2000) 420

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i. Hospital had 15 year lease w/physicians that wanted to break because operating hospital at a loss. Physicians wanted SP. Crt- denied SP, awarding physicians damages instead

b. Metropolitan Sports Facilities Commisssion v. Minnesota Twins Partnership (Minn. Ct. App. 2002) [421]i. Twins only contracted 1 season at a time. Renewed K Sep 2001 – couple

weeks later major leagues announced would eliminate the team. Crt required SP. Amt revenues lost was minimal BUT intangible & tangible benefits major league brought to metropolitan area > D burden on staying in K. Stadium funded by public who relied on team. Not ordinary commercial lease. Had public significance.

CRTS value some rights more than others – school desegregation – constitutional right, belonging to public as a whole, private rights less likely to require equitable relief

5. Balancing of the Equities TEST FOR PERMANENT INJUNCTION – VIP!!!!!! a) EBay Inc. v. Mercexchange, LLC (U.S. 2006)

i. Facts : EBay violated Mercexchange's patent. Merc. Sues for patent infringement. Dist Court grants damages, denies Merc’s motion 4 injunction. SC reverses.

ii. Issue : Whether 4 part test for permanent injunction applies to disputes under Patent Actiii. Rule : A plaintiff seeking a permanent injunction must demonstrate:

1. that it has suffered an irreparable injury;2. that remedies available at law are inadequate to compensate for that injury;3. that, considering the balance of hardships, a remedy is equity is warranted; and4. that the public interest would not be disserved by a permanent injunction.

iv. Holding : Yes -- decision whether to grant or deny an injunction rests within the equitable discretion of the district courts, and such discretion must be exercised consistent with the traditional principles of equity, in patent disputes no less than in other cases governed by such standards.

v. Concurring (Roberts) : This historic practice does not entitle a patentee to a permanent injunction or justify a general rule that such injunctions should issue.

vi. Concurring (Kennedy) : The existence of a right to exclude does not dictate the remedy for a violation of that right.

1. NOTES ON EBAY pg. 426-27 (note #3) a. -Irreparable injury is a traditional prerequisite to injunctive relief, although it is

easy to show at the stage of permanent injunctions. Also SC puts must show “P has suffered irreparable injury” rather than P “threatened against irreparable injury” also irreparable injury requires no adequate remedy at law so not sure why that’s another element

b. Undue hardship – has always been a defense but now P must show c. Undue hardship and effects on the public interest can both be reasons to

withhold an injunction, but each is unusual so P must bring up each time and then negate them.

2. Patent Cases a. A distinction has emerged between suits by Ps who compete in the market

with their D & P who don’t, former usually get injunctions, and the latter do not.

b. When P & D compete, measuring damages requires an estimate of P's lost profits, which can depend on how much the infringement changed each side's market share and pricing.

c. When they do not compete, damages can be measured by estimating a reasonable royalty for D's use of P's patent.

3. Undue Hardship in IP a. These cases easily fit the pattern of classic undue hardship cases; D invested

much $ and effort and now must pay ransom or abandon large parts of his investment.

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a. If D not reckless with regard to Ps patent rights, the undue hardship defense readily applies.

6. PRIOR RESTRAINT RULEa) Willing v. Mazzocone (Pa. 1978) (421) – Crazy lady was protesting law firms saying they stole

money from her. It was untrue. Firm sought injunction to stop her from giving libelous & defamatory statements about firm. She was insolvent so there was no way to get money from her. Thus, lower court granted injunction barring her from saying libelous & defamatory statements (in general). Appeals court – narrowed to only include libelous & defamatory only about the firm. Penn SC said that violated her constitutional rights to freedom of speech: can’t take her rights away since she is insolvent. i. RULE –

(i) Equity will not enjoin defamation(ii) Insolvency of D doesn’t create situation where there is no adequate remedy at law (thus

allowing equity to step in)– in deciding whether a remedy is adequate, it is the remedy itself, not the possible lack of success that is the determining factor

ii. Applied here(i) The fact that D is insolvent doesn’t justify injunction to infringe on right to freedom of

expression – damages appropriate since available remedy for violation of law, Crt shouldn’t take into account likelihood of payment

iii. Notes:(i) COULD’VE ARGUED – Law firm could’ve said damages so speculative from her

actions that too difficult to calculate/measure, harm to reputation difficult to calculate (ii) WOULD’VE BEEN BETTER TO HAVE JURY TRIAL – 1st to determine defamation,

libelous statements, then may enjoin right 2 free speech(iii) PRIOR RESTRAINT RULE -- legal restrain on speech that has not been uttered or

published.1. Reckless or deliberate libel and obscenity are categories of unprotected speech.2. NOT PRIOR RESTRAINT – if injunction against speech is not based on the

content of the speech and forbids speech only in a particular time, place, or manner.3. It is no longer a rule against restraints prior to publication; it is a rule against

restraints prior to adjudication.(iv) Sexual harassment cases – pgs. 435-37

III. PRELIMINARY OR PERMANENT RELIEF A. PRELIMINARY INJUNCTIONS

1. 2 Types of Preliminary Injunction Relief [under Civ Pro Rule 65] a) Preliminary Injunction Order - need all 4 – now requires crts to fact find b4 trial

1. Likelihood of success on the merits [most important if dnt hve walk away]2. Likelihood of irreparable harm in absence of the injunction [2nd most vip]3. Balancing of hardships (interests/equities) --- favors Ps4. Public policy unimpaired – pub policy favors injunction

b) Temp Restraining Order [TRO]i. Ex parte – no notice for D if in same jurisdiction

2. Substantive Standards for Preliminary Reliefa) Winter v. National Resources Defense Council, Inc. (U.S. 2008) pg. 440

i. Facts : National Environmental Policy Act (NEPA) requires the Navy to prepare an EIS (environmental impact statement) before deciding whether to continue with its training exercises. It did not. Dist crt. & 9th Cir. P’s have shown likelihood of success on merits. SC Reverses.

ii. Issue : Whether a preliminary injunction is appropriateiii. Rule : A P seeking a preliminary injunction must establish:

1. that he is likely to succeed on the merits, 2. that he is likely to suffer irreparable harm in the absence of preliminary relief, 3. that the balance of equities tips in his favor, 4. and that an injunction is in the public interest.

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iv. Holding : (i) Navy challenges 9th Cir std that irreparable injury is “possible”

1. SC – agrees. Need more than likely. Our frequently reiterated standard requires plaintiffs seeking preliminary relief to demonstrate that irreparable injury is likely in the absence of an injunction. Issuing a preliminary injunction based only on a possibility of irreparable harm is inconsistent with our characterization of injunctive relief as an extraordinary remedy that may only be awarded upon a clear showing that the P is entitled to such relief.

(ii) Public policy is a critical analysis here. – even if have likelihood success1. SC – NAVY training – national security paramount public interest> mammals

possibly harmed a. Harm to unknown number of marine animals < natl security

2. SC – Abuse of Discretion for lower court to order perm injunction a. Since test essentially same requirements – except for don’t need to prove

success on the merits. Since only issue Navy must prepare EIS report – not must cease sonar training – no basis for enjoining training since can narrowly tailor injunction to require NAVY to produce EIS report, etc.

(iii) DISSENT: substantive claim will inevitably prevail on merits since NAVY required by law to produce EIS report before training – there is a balancing scale for weighing factors – if high likelihood prevail on merits other factors can be lower. Substantial likelihood harm to environment, public policy, success on merits likely – would not be abuse of discretion if granted perm injunction

3. Sliding Scale or Not for Preliminary Injunction 4 Part Test a) Lakeshore Hills, Inc. v. Adcox (Ill. App. Ct. 1980) –445 - prof uses as good ex/of sliding scale

i. D has moved 2 suburbs w/pet bear which was 5th gen. captive, defanged, double caged, & declawed. The bear violated covenant in deeds. Homeowners association claimed success almost certain since violated their rule, based on covenant in deeds, to have bear. Possibility of injury low but risk to public if death or injury high.

b) Shivo case -- no likelihood success on merits – cuz husband had right to remove tubes. FL crt said likelihood of success on merits weeks so injunction denied. However, irreparable injury very strong -- not even considered.

c) RECONCILING THE 4 PART TEST – many courts require all 4 to be present but just give same language to test and then in practice really are applying a sliding scale

4. Procedure For Obtaining Preliminary Relief a) Coyne-Delany Co. v. Capital Development Board (7thCir.1983)Injunctin Bonds -450

i. C-D suing under §1983, under color of law, arguing that they were deprived of their property right without due process of law since state denied right of P to participate in bid – sought TRO 2 days b4 bid– wanted a 50K injunction bond, but magistrate set 5k bond –thinking process dealt with quickly. District judge then issued a preliminary injunction without changing injunction bond amount. 7th circuit overruled case relied on by C-D – no property right in gov bid. Case was decided incorrectly. D therefore entitled to damages since wrongly enjoined in suit and therefore cost money to re-bid K $56K.

ii. RULES – 1. Injunction wrongfully issued – party wrongfully enjoined entitled to seek damages

by capped at amt of damages = cost of injunction bond iii. Applied Here

(i) Change in law is legitimate consideration, but not grounds alone for denying damages(ii) Bond only covers a fraction of the loss supports issuance of damages(iii) Here D failed to appeal interlocutory for an increase in the bond amount, should’ve done

so – so damages limited to amount of bondiv. Notes –

(i) In fed courts Fed Rule Civ Pro 65(c), the bond is discretionary. In determining how much (or if) of a bond is required, courts will look at: pg. 453 note #2b1. Potential loss to the Δ

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2. Financial hardship to the Π3. Public importance of the rights being enforced.

(ii) It is Δ’s responsibility to ask for the bond(iii) What triggers liability on the bond?

1. Texas v. Camenisch says that the L on the bond couldn’t be equated with whether the preliminary injunction had been properly issued – it’s based on the ultimate disposition of the case – success not “likelihood of success”

(iv) What damages are covered by the bond?1. The damages must be caused by the wrongful prelim – not just caused by the

litigation2. Federal courts disallow attorney’s fees, but some states allow them.

(v) Liability above the bond: most of the time, no. But there are generally 3 exceptions:1. Liability by statute in some states2. Π who are clearly able to pay damages3. Some independent ground for liability, like malicious prosecution.

Injunction Bond -- Assuming bond is discretionary (depends on jurisdiction), courts consider potential loss to the D, financial hardship to the P, and the public importance of the right being enforced.

It is defendant's responsibility to ask for a bond. If the court fails to require a bond, through oversight or an erroneous decision to waive bond, the preliminary injunction is nonetheless binding.

Some courts claim discretion not to enforce the bond even if the injunction was wrongfully issued.

Damages Covered --- The damages must be caused by the wrongful preliminary injunction or temporary TRO; it is not enough that they were caused by the litigationSome jurisdictions disallow fees; some allow fees for seeking dissolution of the preliminary order.

Courts can waive bonds: indigent P, D can agree to waiver of bond -- There must be REASONS for waiving the bond. -- Each party must pay its own litigation costs.

5. TEMPORARY RESTRAINING ORDERS (TROs)i. TROs are designed to prevent irreparable harm that will occur even before a preliminary

injunction hearing can be held.ii. FRCP 65(b) pg. 459iii. -The Federal Rules of Civil Procedure allow for ex parte TROs

a) Carroll v. President of Princess Anne (1968) (456) – i. Officials of Princess Anne and Somerset County applied/obtained TRO enjoining white

supremacy group ex parte -- from holding rally for 10 days. Trial court then had hearing ex parte and granted a preliminary injunction for 10 months. On appeal, the Maryland Court of Appeals affirmed the 10-day order, but reversed the 10-month order on the ground that the period of time was unreasonable and that it was arbitrary to assume that a clear and present danger of civil disturbance and riot would persist for 10 months. Petitioner - “white supremacy” org – National States Rights Party challenged TRO. SC reverses TRO finding.

ii. Issue : Whether, by what processes, and to what extent may the authorities of local governments restrict petitioners in their rallies and public meetings?

iii. SC : (i) TRO issue not moot since 10 days past – cuz harm likely 2 happen again, again w/o court

ever being able to hear claim (ii) 10 day order procedurally defective – no reason given by trial court why couldn’t give

notice (iii) 1st amendment rights – order in this area must be narrowly tailored 2 exact needs 2

prevent harm – therefore both parties must give their sides to judge so can figure out real interests (if any) that need to be tailored 2

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iv. RULE –in area of basic freedoms guaranteed by the First Amendment TRO orders won’t survive where no showing is made that it is impossible to serve or to notify the opposing parties (formally or informally) so have opportunity to participate.

v. TAKEAWAY: Unless have compelling reasons 4 not giving notice ex parte -- TRO proceeding will not survive judicial scrutiny

vi. Notes – VIP pg. 459 note 1 Fed Rule TROs(i) Preliminary injunctions require notice to the other party always(ii) TRO’s can be ex parte but only last 10 days (even with notice there is still the limitation)

1. With TRO, you have to notify the other side after you get the TRO, since a party isn’t bound by a TRO they don’t know about.

2. TRO must state reason why its issued FRCP 65(d)(1) pg. 4673. TROs are not appealable

(iii) A TRO cannot be appealed (unless the denial of the TRO decides the merits or is the equivalent of a dismissal), a preliminary injunction can

b) BIG TRO CASE -- Sampson v. Murray (1974) (460) – i. P was a probationary employee of the federal government and was fired. P met w/personal

officer after fired [gov worker so get broader procedural rights when terminated] n’ officer suggested P was fired due to reports of previous employment at another agency. P filed a lawsuit seeking preliminary injunction to prevent her discharge pending an administrative appeal. The district judge grants 10 days TRO then extended indefinitely until the government produced Sanders, the acting commissioner who fired her, to testify. Sanders refuses saying court lacks jurisdiction. SC reverses.

ii. SC Rehnquist:(i) SC characterizes TRO as preliminary injunction (since lasts over 14 days (now 10))– so

entitled to hear since preliminary injunctions entitled to interlocutory appeals (otherwise would have to wait til case ended)1. Can P get damages for loss of income rather than specific remedy of preventing

discharge (via preliminary injunction)? a. Since there is an available remedy for wrongful termination at law (back pay

awards) then preliminary injunction not available to Pb. Can be reinstated after if wrongfully discharged as well

2. Can discharge be considered an irreparable injury? a. Not in this case -- CAN IN EXTRAORDINARY CASES but not being able to

obtain employment, not enough $ to live, etc. not enough to be irreparable injury must be extraordinary harm in these cases of employment

b. Loss to reputation not enough since can get agency determination in P’s favor (ii) Separation of Powers – we the court don’t want to micro manage government’s internal

affairs iii. Marshall Dissent –

(i) not preliminary injunction – since that requires finding of fact, no finding of fact here – so TRO

(ii) No separation of powers issue – issue is to determine if gov violated their own statute then not against congressional intent, also procedural irregularities in her discharge, no statutory support or administrative right to discharge

c) Notesi. SC says that government traditionally granted widest latitude in dispatch of its own affairs

(i) Look at public policy and separation of powers(ii) Traditional unwillingness to enforce personal service K’s(iii) Consider the disruptive effect of injunction

d) Right after Sampson -Granny Goose Foods, Inc. v. Brotherhood of Teamsters: 465i. SC -- Δs were not in contempt of a TRO with notice, because it had expired ten days after it’s

issuance and before they violated it.

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Scope of hearing for TRO or preliminary injunction:(i) Depends on the complexity and urgency of the case.(ii) TROs are usually much shorter – findings of fact and law aren’t really required(iii) Evidence admitted at a preliminary injunction hearing may be considered at the trial of

the case and need not be repeated.(iv) TROs are not appealable (v) Notice for TRO less restrictive (can be same day notice) – preliminary injunction need

more notice (vi) Preliminary injunctions are reviewed for ABUSE OF DISCRETION – so if close case

courts usually affirm

III. PROSPECTIVE OR RETROSPECTIVE RELIEF, Creating COAs, Right to JuryA. State Sovereign Immunity (SSI)

1. 11 th Amendment – provides that you can’t sue state in which you don’t live i. Courts have interpreted this many different ways ii. Conservatives = SSI strong – states have immunity from certain regulations iii. Liberals = SSI weak – states agreed to be bound by fed rules & regs conceded to SSI when

signed Constitution(i) At minimum – go to case law to see if state has immunity

iv. TODAY: SSI – citizens cannot sue their own state in state/fed courts, admiralty suits (state cannot be sued in admiralty court)

v. 11th Amendment does not bar enforcement of consent decrees in which state officials agree to do more than the federal law requires

2. SSI bypassed by = i. states passing state laws which allow themselves to be sued, ii. Congress can also abrogate SSI by passing laws (via 14th amendment) which provide certain

protections for all individuals (i) US v. Georgia (2006) – look to nature of act to see if 14th amendment applies if does then

P can get damages, no injunction though 3. Power of Congress

a) -Fitzgerald v. Bitzer: When it acts to enforce the Fourteenth Amendment, Congress can override sovereign immunity and authorize retrospective relief against states.

b) US v. Georgia (2006) – look to nature of act to see if 14th amendment applies if does then P can get damages, no injunction though i. PROBLEM – SC is one to interpret whether the 14th Amendment applies to statute

(i) so limited to SC precedent of what has been covered in past AND(ii) how today’s court interprets precedent

1. Ex/Garrett Decision – ADA – state can’t be forced to comply w/law since law not under the 14th Amendment , disability discrimination not unconstitutional

2. Civil Rights – south having hard time suing state w/civil rights violations 3. Mental retardation not a suspect class 4. Welfare – not 14th Amendment

c) -Seminole Tribe: Congress cannot override immunity under the Commerce Clause or most of its other Article I powers.i. Congress lacks powers to impose retrospective remedies on states that violate the patent laws,

the Age Discrimination in Employment Act, or the employment provisions of the Americans with Disabilities Act.

d) -United States v. Georgia: Congress can override state immunity on statutory claims to the extent that the facts alleged in support of those claims would also support constitutional claims.

4. CLEAR STATEMENTE RULE State waivers of state immunity, congressional waivers of the federal immunity, and congressional overrides of state immunity all must be expressed in a clear statement in statutory text that excludes any other possible interpretation.

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i. -There is no implied waiver or abrogation.

5. Prospective vs. Retrospective relief i. Prospective = equitable relief – prohibit future conduct ii. Retrospective = limited to 3 areas = $$ damages

(i) When state consents to be sued(ii) Congress abrogates SSI 2B sued (iii) Personal suits against gov employee who was acting in his “official capacity”

6. How does not having damages erode enforcement of federal statutes? i. If no remedy 2 violation of law, no incentive to follow it since w/injunction can violate just

held in contempt after so damages important ii. States claim that have limited funding which legislature relies on to respond to public needs –

takes away from public resources(i) This rebutted since $$ use to pay for injunction can be just as costly 2 enforce

a) Hans v. Louisiana –(1890) pg 479 – expands SSI no citizen can sue state i. Hans was Louisiana citizen who sued state to collect on state bonds. Louisiana argued

immunity. ii. SC – Louisiana has immunity from suit. States are immune from suits brought by their own

citizens or citizens of another state. b) ExParte Young – pg. 472

i. 11th Amendment didn’t bar fed court from enjoining AG of Minnesota from enforcing a statute which claimed to violate 14 Amendment.

ii. RULE—AG only enjoined for future conduct = “prospective relief” (i) ExParte Fiction

1. Suing state official “acting within their official capacity” – not suing state a. Lots times state indemnifies their employees so state actually pays damages not

individual – crt just saying state has choice to indemnify 2. Only get “prospective relief” relief from their actions going forward 3. Can’t use ExParte Young 2 recover property from government

c) Alden v. Maine state can’t be sued in state court d) Edelman v. Jordan (U.S. 1974)

i. Facts : Regulations required states to determine eligibility in 45 days, but Illinois took up to 4 months to pay benefits. P sued the director of the Illinois Department of Public Aid. They had to pay back benefits.

ii. Issue : Whether an injunction ordering the D officials to comply with federal regulations in the future was appropriate

iii. Rule : A suit by private parties seeking to impose a L which must be paid from public funds in the state treasury is barred by the Eleventh Amendment.

iv. SC Reasoning:(i) Ex parte Young: - different than this case – in Young relief awarded was prospective only

– here it’s $ so not prospective relief (ii) Lower court wrong when said not compensatory relief but equitable restitution for harm

already occurred/profits in future SC -- $$ is $$ no difference(iii) No constructive consent from state for merely participating in program – consent needs

2B explicit, clear unambiguous statement 4 states to wave sovereign immunity or for congress to abrogate SSI

v. Holding : A federal court's power, consistent with the Eleventh Amendment, is necessarily limited to prospective injunctive relief, Young, and may not include a retroactive award which requires the payment of funds from the state treasury, Ford.

vi. Douglas Dissent : 11th Amendment doesn’t make distinction btwn law & equity so you shouldn’t either

vii. Brennan Dissent : State conceded to be sued when signed convention – so no issue w/11th Amendment

1. NOTES :

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a. This case inverts principle that injunctions are remedy of last resort this makes damages remedy of last resort

b. Why? Not wanting courts to have control over state treasury -- $ 4 lawmakers not court (sep powers issue)

B. Suits Against Officers in Their Personal Capacities 1. Can sue gov official for their conduct “while acting under color of law” in their “official capacity” 2. Absolute Immunity: US, State Constitution, by law 3. Suits Against Officers:

i. P may sue the officer in her official capacity, to make her exercise or refrain from exercising some of the powers of her office.

ii. P may sue the officer in her personal capacity, to make her pay compensation out of her own pocket.

iii. When a government official is sued for damages in her personal capacity, the suit continues against her personally after she leaves office, and P can collect from the official's personal assets. The official in her personal capacity is protected by a qualified immunity

4. Qualified Immunity: most gov officials could claim – only immune if your behavior violates a right which was clearly established at the time of the harmful conduct/wrongful act & reasonable person would’ve known

i. Exception: Predator Judge – behavior so unconceivable that no one had to ask if wrong b) Harlow v. Fitzgerald (U.S. 1982) 486 – Qualified Immunity

i. Facts : Fitzgerald alleged that petitioners entered a conspiracy in their capacities as senior White House Aides to Nixon to have him fired. Dist Court ruled petitioners were not entitled to absolute immunity. Petitioners appealed but dismissed by Appellate Court.

ii. Issue : Whether the aides have immunityiii. SC : Qualified or "good faith" immunity is an affirmative defense that must be pleaded by a D

official. Immunity is available only to officials performing discretionary functions. Qualified immunity is decided on case-by-case basis. (i) Absolute immunity = small group of officials in executive branch, exec officials (only

certain ones not including cabinet), judges, ALJs, President. Prosecutorsa. Gov official bears burden that public policy requires an exemption

(ii) Qualified Immunity = executive officials but determined in case-by-case basis by balancing damages remedy to protect citizens w/protecting officials using their discretion in their official capacity

iv. Holding : Bare allegations of malice should not suffice to subject government officials either the costs of trial or to the burden of broad-reaching discovery. Government officials performing discretionary functions generally are shielded from L for civil damages insofar as their conduct does not "violate clearly established statutory or constitutional rights of which a reasonable person would have known." – purely objective standard

1. NOTES: a. Absolute immunity applies to a very small group.b. The old qualified immunity rule had objective and subjective prongs.c. The Court here drops the old standard – w/subj prong probably 2 prevent cases

from going to jury trial since subjective intent is a factual questions so need jury d. Safford Unified School District #1 v. Redding (SC 2009)

i. SC found school strip search of 13 yr old girl suspected of having over the counter drugs was unreasonable, w/no constitutional basis. BUT, court found that law regarding school strip searches were not “clearly established” since lower court cases were going different ways so officials had immunity.

e. Wilson v. Layne (SC 1999)i. “clearly established” defined – “controlling authority in D’s jurisdiction” or

“consensus of cases of persuasive authority” Developments of Harlow – more notes

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-Anderson v. Creighton: The right the official is alleged to have violated must have been "clearly established" in a more particularized and more relevant sense. The contours of the right must be sufficiently clear that a reasonable official would understand what he is doing violates that right.-United States v. Lanier: If a rule is too obvious ever to have been litigated, it does not follow that the first official to violate the right gets immunity.-Pearson v. Callahan: Officers are entitled to rely on cases from other circuits, and when the courts were divided, officers should not be liable for choosing the wrong side.-Safford v. Redding: Conflicting lower court decisions can be sufficiently numerous and well-reasoned to counsel doubt that the prior statement of law was clear.-Wilson v. Layne: Two ways to show the law had been clearly established: (1) controlling authority in defendant's jurisdiction or (2) a consensus of cases of persuasive authority.

-Most states have adopted some version of qualified immunity for state-law claims against state officials, but Maryland and Montana have expressly rejected it as inconsistent with judicially enforceable constitutional rights.

Enforcing New Rules of Law-Reynoldsville: Retroactive application of a new decision requires a retrospective remedy, unless there is some other legal rule, based on something more than mere reliance on the old law, that independently precludes a remedy.-The Court's insistence on retroactive application of new court decisions was accompanied by a renewed presumption against retroactive application of new statutes.

Fear of Damage Remedies

-The law of governmental immunity and the law of non-retroactivity are substantial bodies of law that prefer prospective to retrospective relief.-The preference for injunctions in government litigation has two important exceptions:

(1) Governmental preference for collecting taxes and making taxpayers sue for refunds.(2) With respect to contracts, Congress and most states have consented to be sued for damages but assert sovereign immunity to specific performance

What to look for on test Not immune from all damage litigation, only immune if your behavior violates a right that wasn't "clearly established" at the time-Things to look for:

-What's clearly established?-If Supreme Court or Circuit Court's have ruled, it's clearly established.-If there is a District Court or Circuit Court split, it might not be clearly established.-Does the broad right cover a narrower set of facts?

-Ex. Broad rule: have a right to bodily integrity; does that cover strip searches? Does it matter if the plaintiff is an adult or child? Etc.

-Was it so obvious no one had to sue about it?B. CAUSE OF ACTION

1. Bivens – confined to constitutional rights violations enforced by fed courts w/o statutory remedy --- since up to courts (not congress) to determine remedy of constitutional violations

i. Marbury v. Madison – where there is a right, there is a remedy ii. Bivens – where there is a constitutional right there is a federal remedy

a) Bivens v. Six Unknown Named Agents(US 1971) 530 Fed Agnts&Const. Violatini. Facts : federal agents entered Bivens’ home, arrested him for alleged narcotics violations &

searched his home w/o warrant or probable cause. Then taken to police station, interrogated, stripped searched. Bivens brought suit asserted an unlawful arrest, wanting $15K per officer. The district court dismissed, and the appellate court affirmed.

ii. Issue : The question is merely whether petitioner, if he can demonstrate an injury consequent upon the violation by federal agents of his Fourth Amendment rights, is entitled to redress his injury through a particular remedial mechanism normally available in the federal courts.

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iii. Holding : Having concluded that P's complaint states a COA under the 4th Amendment, the P entitled to recover money damages for any injuries he has suffered as a result of the agents' violation of the Amendment.(i) Reasoning:

1. Why damages -- “where fed protected rights have been invalidated, it has been the rule from beginning that courts will be alert to adjust their remedies to grant the necessary relief” – so even though Congress didn’t provide damages in a statute, also didn’t preclude damages, damages are typically type of remedy for this type of invasions

2. Why not tort law ? – more harm created when fed officer violates private citizens that tort law can’t comprehend (since only looking at private citizen) greater magnitude of injury – so even if tort law overlaps – authority of national gov carries more force

i. Sidenote : state wanted L to be state claim since less L probably – also if made constitutional then broadened avenue 4 litigants to get into fed court

iv. Harlan Concurrence: When determining if right remedy must use standard if remedy is “necessary” and “appropriate,’ however it is necessary & appropriate since injunction useless since harm unlikely to happen again, exclusionary rule won’t work since not brought to court

(i) Notes: Implied Remedies for Constitutional Violationsa. -Scope of Bivens

i. -Davis v. Passman: The Court found an implied cause of action under Bivens in a sex-discrimination suit.

ii. -Carlson v. Green: The Court implied a right to sue for damages from unconstitutional prison conditions.

iii. TODAY – mostly case-by-case basis – so exact opposite from cases above – now not automatic at all

b. When Congress creates a statutory remedy, the statutory remedy 4 most part – will controli. Criticisms- Congress can pass law exempting remedy – court must comply

w/possible infringement of right since would be unenforceable since no damage relief

ii. Exception to criticism – if protected class – will have remedy since law would be unconstitutional

c. Why does court go into damages before hearing issue? Doesn’t do this w/injunctions

d. Civil Rights Statutes – current court anti-anti discrimination, Congress doesn’t usually go back to correct courts (make statute to correct) since can’t get majority to give damages

e. -Plaintiffs seeking a federal remedy against a state of the federal government must identify:i. a substantive right, ii. a grant of jurisdiction, iii. a private right of action, and iv. a waiver of immunity.

b) Alexander v. Sandoval (U.S. 2001) 536 –Crt refused 2 look beyond text of statutei. Facts : The Alabama Department of Public Safety accepted grants of federal assistance in

exchange for compliance w/Title 7. It later decided to administer state drivers' license examinations only in English. Federal Regulations prohibited exclusion based on race, color, or national origin.

ii. Issue : Whether there is a private cause of action to enforce the regulationiii. Holding : There is no evidence in the text to suggest that Congress intended to create a private

right to enforce regulations. (i) § 601 – goes towards enforcing intent of title 7 statute – Congress gives private COA to

individuals

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(ii) § 602 – Congress gave agency write to regs to prohibit policies which have “disparate effect” -- no private right 2 enforce, agency enforces

iv. Rule : Intent of Congress to create private COA must be explicitly depicted in statute

C. RIGHT TO JURY TRIAL – law based lawsuits – not equity based lawsuits 1. What need to know for Right to Jury Trial

i. 7th Amendment – required nature of COA must give history 2 determine if equitable or legal

ii. If have mixed claim – must decided legal issue 1st by jury --then judge must decided equitable issue 2nd (note #1 pg. 565)

iii. State courts – most have rejected need to parce out legal and equitable and if have both will try as if equitable (no jury trial for legal claims) (note #2 pg 565)

b) Chauffeurs Local No. 391 v. Terry (U.S. 1990)i. Facts : Ps were truck drivers who were transferred to terminal in Salem, union took side of

original drivers n’ laid transferred drivers off. Ps sued for collective bargaining with union & their employer under the National Labor Relations Act. Originally, they sought an injunction and compensatory damages; later they dropped the injunction request. Only wants jury trial 4 $ damages

ii. Issue : Whether Ps are entitled to a trial by juryiii. Rule : To determine whether a particular action will resolve legal rights, there is a two

part test: 1. Nature of COA -- Compare the statutory action to 18th-century actions brought in

the courts of England prior to the merger of courts of law and equity to determine if legal or equitable AND

2. Nature of Remedy Sought --examine the remedy sought and determine whether it is legal or equitable in nature.

-Often, the first factor is often mixed or unclear. The second factor seems to be more important since always clear

iv. SC – 1st part -- must look at issues individually to determine = when do mixed law/equity(i) In isolation - Duty of fair representation – - looks like breach of fiduciary duty like

trustee therefore looks equitable(ii) In isolation – collective bargaining agreement violation – more like breach of contract –

so legal issue v. SC – 2nd part – Damages need to be legal in nature duty of fair representation (legal) and

backpay (under Title VII equitable usually but not here) more restitutionary therefore legal

V. PREVENTING HARM WITHOUT COERCION: DECLARATORY REMEDIESA. DECLARATORY JUDGMENTS

1. -No monetary relief or requirement to engage in a course of conduct.2. -If a court issues a declaratory judgment, it issues an opinion stating the rights and Ls of the parties in

litigation.3. Subtly prevents harm -- known as a “good faith rule” -- since parties conform behavior around court

declaration 4. -Declaratory judgment v. Injunction

i. Injunction requires you to do something and can lead to contempt (does more/harsher remedy) –so higher std to get it

ii. Declaratory judgments outline rights and L; there is no order requiring either party to do anything at all.

5. The federal act explicitly requires an "actual controversy" and does not authorize declaration of status – so must have claim at that moment when seek (576 note 1)

6. P need not show irreparable injury to get a declaratory judgment. The existence of another adequate remedy does not preclude a declaratory judgment that is otherwise appropriate.

7. Supplemental relief can also be compensation for damages caused by failure to comply with the declaratory judgment.

8. A declaratory judgment has the force and effect of a final judgment or decree .

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i. A declaratory judgment is therefore issue preclusion in subsequent litigation with respect to all issues actually decided.

ii. -Claim preclusion is a bit different, because of the statutory provisions for supplemental relief. A request for such further relief is not barred because it was not included in the original request for declaratory judgment. But this rule has limits. It the initial action sought more than just a declaratory judgment, most courts hold that all related relief should have been sought at the same time.

9. In federal court – can get declaratory judgment (if appropriate) even if there is another adequate remedy available

10. Declaratory Judgment DENIED WHEN “would not terminate the uncertainty or controversy giving rise to proceeding” – ie/if wouldn’t end conflict

a) General Case -- Nashville, Chattanooga, & St. Louis Railway v. Wallace (U.S. 1933) 573i. Facts : Appellant brought suit under the Uniform Declaratory Judgments Act to secure a

judicial declaration that a state excise tax as applied to appellant was unconstitutional – violating commerce clause. Trial court granted decree for appellees, affirmed by state SC. On appeal, SC rules for appellant.

ii. RULE - There must be a case or controversy in order for a court to issue an opinion. Case or controversy means that there are rights affected by someone’s actions. No advisory opinions(i) Concerned with substance not form

iii. Applied Here SC-- controversy presented is real and substantial(i) Looking at the nature of the proceedings which the statute authorizes (rather than the

legislative label), and the effect of the judgment rendered upon the rights which appellants asserts----so long as the case retains the essentials of an adversary proceeding, involving a real, not a hypothetical controversy ---1. the proceeding which terminated appellant’s decree was between adverse parties,

asserting valuable legal rights, which were threatened with imminent invasion by appellees

b) -Public Service Commission v. Wycoff Co. 576: i. The complainant in this case does not request an adjudication that it has a right to do, or to

have, anything in particular. It does not ask a judgment that the Commission is without power to enter any specific order or take any concrete regulatory step. It seeks simply to establish that, as presently conducted, respondent's carriage of goods between points within as well as without Utah is all interstate commerce.

ii. One naturally asks, "So what?"iii. The Uniform Act says the declaratory judgment may be denied if it "would not terminate the

uncertainty of controversy giving rise to the proceedings."----------A declaratory claim is unlikely to be ripe if it seeks only to resolve disputes about the procedures or substantive guidelines under which more specific disputes would be resolved.

c) Cardinal Chemical Co. v. Morton International Inc. (U.S. 1993) 579i. Facts : Morton sued Cardinal alleging that Cardinal had infringed its patents. LA case ended in

judgment for D. Federal Circuit affirmed. SC court dismissed the action and declared the patents invalid. Federal Circuit affirmed dismissal and vacated declaratory judgment. The Fed Cir's practice is to uniformly declare the issue of patent validity moot if it affirms the District Court's finding of non-infringement.

ii. Issue : Whether the Federal Circuit's practice is validiii. Holding : The Fed Cir's practice of routinely vacating judgments of validity after finding non-

infringement creates a potential for relitigation and imposes ongoing burdens on competitors who are convinced that a patent has been correctly found invalid.

a. Finding of non-infringement NOT SAME b. Finding patent is valid (therefore declaratory judgment should stand)

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iv. The Fed Cir's practice denies the patentee appellate review, prolongs the life of invalid patents, encourages endless litigation over the validity of outstanding patents, and thereby vitiates Blonder-Tongue.

(i) Note1. SCARECROW PATENTS – potential Ps who assert claims w/o filing suit to seek $$

settlement or to control potential D’s behavior – threat of infringement may be more valuable to potential P than actual award of infringement a. 2 things you can do to avoid it:

i. sue first for a declaratory judgment or file counterclaim for a declaratory judgment

ii. sue to enjoin a suit – but you must show irreparable injury2. Young dilemma – the choice between forfeiting asserted constitutional rights or

risking penaltiesi. If RR complied with rate law, forfeits constitutional rights – loss of

constitutional rights is nearly always an irreparable injuryii. If RR violates rate law but risks criminal penalties – penalties inflict

irreparable injuryb. Solution: Raise initial claim that statute is unconstitutional 1st – that way (since

federal issue) won’t be dropped to state court. If wait to file raising as defense – will be state jurisdiction since part of same controversy therefore heard in state court (fed defense ≠ fed jurisdiction)

B. Declaratory Judgments, Injunctions, and Federalism1. Race to Courthouse –

(i) If a state prosecution is pending, D must present his federal defense in state court, or wait until state action done (absentation)1. D cannot sue in federal court to enjoin either pending prosecution or any threatened

future prosecutions. Younger v. Harris (590)i. Doesn’t preclude/forbid parallel state & federal litigation in ordinary civil

cases(ii) However, if no state prosecution is pending, D can sue in Federal court to have law

declared unconstitutional because otherwise he would face the Young dilemma of forfeiting his rights or risking further penalties. Steffel v. Thompson (589)

(iii) Moreover, federal P may seek preliminary injunction to prevent enforcement of state law during pendency of declaratory judgment action (dilemma of forfeiting rights or incurring penalties shows irreparable injury)

2. Reasons for race to court:(i) Federalism – want to respect state courts – states are =ly competent as fed courts to

decide fed issues(ii) Protecting duplicative legal proceedings (disruption of state process)(iii) Have option – so not w/o remedy – can raise in state court

b) Steffel v. Thompson (1974) (531) – Steffel and friend threatened with arrest and prosecution for trespassing if they persisted in passing out antiwar leaflets in shopping center. Steffel quit, while Becker continued and was prosecuted. Both filed actions seeking injunction against enforcement and declaratory judgment that criminal trespass statute was being applied in violation of 1st Amendment rights. Dist. Ct. denied relief, 5th Cir. affirmed. SC reverses and remandsi. RULES –

(i) Still need actual controversy(ii) Where state criminal prosecution begins before a federal suit, same thing that prevents

injunction will also prevent P from obtaining declaratory judgment (absentation doctrine will kick in)

(iii) Regardless of whether injunctive relieve may be appropriate, federal declaratory relief is not precluded when no state prosecution is pending and a federal P demonstrates a

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genuine threat of enforcement of a disputed state criminal statute, whether an attack is made on the constitutionality of the statute on its face or as applied

ii. Applied Here(i) While P does not have to expose himself to actual arrest or prosecution, must look at

whether reduction in Vietnam has altered P’s desire to continue handbilling remanded for determination

(ii) Choice between forfeiting asserted constitutional rights or risking penalties is an irreparable injury – if can’t bring to court issue would never be resolved unless violate law to bring on state action [Ex Parte Young Doctrine]

(iii) Friend’s arrest demonstrated imminent harm therefore iii. Concurrence Stewart – Rare – P shouldn’t be able to satisfy jurisdiction by P’s sub relief that

law unconstitutional – need to be obj std iv. Note

(i) Arrested friend had to raise his defense in state court as he was criminally prosecuted, can’t bring suit in federal court

c) -Hicks v. Miranda: 595 NEED 2 GET TO FED COURT BY WIDE MARGIN i. Hicks went to fed court to fed court challenging TRO denial. Each side submitted briefs &

court had under advisement for 1 month. Then court dismissed when state filed charges. ii. The federal proceeding must be dismissed if a prosecution is commenced before any

proceedings of substance on the merits.(i) If federal proceeding embryonic state – no summary judgment, if submitted briefs,

waiting for court to decide – still embryonic.

d) Doran v. Salem Inn, Inc . (1975) (597) –Salem, Tim-Rob, and M&L were restaurants with topless dancers. The town passed an ordinance forbidding such entertainment. On 8/9 they filed suit; on 9/10 M&L reopened, in violation of law, and in September, M&L and its dancers received criminal summonses. M&L resumed, and was served with criminal summons, yet federal court preliminarily enjoined enforcement of ordinance despite Younger, noting that it would have been anomalous to grant relief to 2 P’s and not one. Ct. of Appeals affirmed. SC grants relief to 2 P’s but reverses decision to grant relief to M&L being prosecuted in state court..i. Issue : Whether the holdings of Younger, Steffel, and Samuels must give way before such

interests in efficient judicial administration as were relied upon by the Court of Appealsii. Holding : Each respondent should be placed in the position required if it stood alone. iii. -M&L's prayers for relief are subject to Younger.

1. If a state prosecution is pending, D cannot sue in federal court to enjoin either pending prosecution or any threatened future prosecutions. Younger v. Harris (524)

iv. -Salem and Tim-Rob were entitled to have their claims for preliminary injunctive relief considered without regard to Younger.

v. Absentation disallows absentation for one party but doesn’t allow for others 1. NOTES:

a. Still may be a problem for Ps that are granted preliminary injunction, allowing to violate act/ordinance they claim unconstitutional, then courts final ruling is it’s constitutional since it’s unclear whether the state could then prosecute for previous acts under preliminary order.

C. Reformation – parties that have agreement but written document doesn’t confirm parties’ intent. Court may reform K – by changing language of the K so that it reflects what the parties originally thought they were contracting for1. Cases of mutual mistake of fact, which don’t involve fraud, no choice – must have reformation of K 2. If fraud then reformation could be by unilateral mistake of fact but must be supported by clear and

convincing evidence 3. Reformation is equitable remedy but doesn’t seem to have irreparable injury or ripeness requirements 4. Rescission v. Reformation

i. Reformation changes K parties are still bound

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ii. Rescission – parties leave w/what they had before K, no K, as if never had K

a) Hand v. Dayton-Hudson (6th Cir. 1985) 610 – Hand, an attorney working for Dayton, lost job allegedly due to major restructuring. Dayton agreed to pay $38K, if Hand agreed to release claims. Dayton prepared a release for Hand to sign, Hand changed the document asserting that he was NOT releasing claims of age discrimination and breach of K. Hand altered the release such that it looked identical. Hand then filed suit in Dist. Ct. alleging age discrimination and breach of K against Dayton. Based on fraud, Dist Ct. reformed the release, and in light of it, granted SJ to Dayton. i. RULE – general rule is that Reformation requires a mutual mistake of fact, rather than a

unilateral mistake, BUT where there is a unilateral mistake due to fraud or inequitable conduct on the other side, reformation is ok

ii. Finding that one person knew the K did not reflect the other person’s intent must be supported by clear and convincing evidence(i) Applied Here –

1. Hand committed fraud by not informing D of changes in release, and while fraud is usually an issue for the jury, here P admitted to misleading D, thus reformation is appropriate.

2. There was a “meeting of the minds” since Hand presented K as if he was agreeing to Dayton’s initial offer. Hand’s awareness of Dayton’s understanding prevents any claim that there was no “meeting of the minds.” Holbeck

iii. Notes on Reformation(i) Remember – most mistakes of fact are either fraudulently induced or clerical, but parties

can correct these

VI. RESTITUTION – Benefit to D as the Measure of ReliefA. Introductory Notes

1. DEFINED: Restatement Third (not yet out yet) “Unjustified enrichment is enrichment that lacks an adequate legal basis; it results from a transfer that the law treats as ineffective to work a conclusive alteration in ownership rights.”

i. ie/no legal basis for you to hold onto the $$

2. Restitution can either be a COA “unjust enrichment” or a remedy i. Unjust enrichment is only a COA

(i) COA when P doesn’t have any other way (no remedy at law) to get remedy (ii) Generally describes benefit D gained & the COA to recover those benefits(iii) Source of L and COA is unjust enrichment

ii. Restitution as a remedy: restoring D to his rightful position -- measures the benefit D got [doesn’t measure P’s loss](i) Ex/Constructive trust –must have identifiable property(ii) Ex/if sales went down due to trademark infringement – P gets amt of lost profits

3. INTENTIONAL WRONGDOER = (i) Restitution as remedy for intentional wrongdoer D = amt D gained from wrongdoing

4. Disgorgement of Profits=P retains all profits D made on property D had taken from P5. Restitution can bring more $$ as remedy when P’s injuries are pretty slight or where damages are

really hard to calculate (ex/mirror brewing case)6. Unjust enrichment is enrichment that lacks an adequate legal basis; it results from a transfer

that the law treats as ineffective to work a conclusive alteration in ownership rights.7. Forced Exchanges = Restitution is generally unavailable to a claimant who should have made a

contract with the recipient but failed to do so.i. –ex/Would-be Ps cannot deliver unrequested goods or services and then demand payment for

the benefit.ii. There is also a strong presumption against forcing an innocent D to pay for benefits she never

requested and might not want.

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1. EXCEPTION - EMERGENCIES -- An exception (to forced exchanges) not securing promise to pay in advance, sue for unjust enrichment. law presumes D wants EM assistancea. If treated at hospital or by doctor - benefit received measured by market value of

treatment b. If one intervenes in an emergency to protest property, benefit received measured

by the value of the services or the value of the property damage avoided, whichever is less.i. Unwilling suicidal patient admitted to hospital. Patient had to pay for cost

of stay. Pg. 632

8. Claim for unjust enrichment is often available in cases of : (i) intentional tort or breach of fiduciary duty, (ii) in cases of statutory torts such as infringement intellectual property, (iii) and sometimes in suits for breach of K

9. Examples of Unjust Enrichment i. Mistakes – receiving money or property by mistake is unjust enrichment

(i) Overpay a bank for a debt, mistakenly convey property, mistakenly perform a service(ii) Mistakes Restatement Third § 5 general right to recover benefits conferred by mistake

– VIP in restitution(iii) MUST BE TOTALLY CLUELESS to be considered mistake, if were uncertain then not

mistaken—complete unawareness1. Voluntary Payment Rule - One cannot recover payments made in the face of

uncertaintya. The key to the rule is not that plaintiff paid voluntarily, but that she paid despite

notice or awareness that she might not owe some of the money.

ii. Actual or supposed K’s–under quantum meruit, party who performs partially can recover benefits conferred even if statute of frauds or impossibility voids K

iii. Judgments – money paid as a result of a judgment, which is subsequently reversed must be refunded

iv. Emergencies – parties who reasonably provide essential goods and services in an emergency is excused from not securing promise to pay

v. Joint obligations – paying more than share of joint obligation entitles restitution from other obligors(i) Roommates, one pays for the other’s share of the rent – actionable cause for rent

vi. Wrongful acts – if acquire benefit from someone through theft, conversion, fraud, etc. liable in restitution

vii. Examples of restitutionary labels(i) Rescission, equitable liens, indemnity, constructive trust, quasi-K

B. RESTITUTION FROM INNOCENT DEFENDANTS 1. Constructive Trust : restitutionary remedy if D

a) Blue Cross Health Servs. Inc. v. Sauer (Mo. Ct. App. 1990) 619 MISTAKEi. Facts : William R. Sauer informed the clerk that he carried Blue Cross Health Insurance and

did not have his card. In fact, his coverage had recently been terminated. The address he gave was the PO Box of his father's business. The clerk entered the information and found a William J. Sauer. Clerk then changed that address to the PO Box of WRS. For a few months, Blue Cross mistakenly mailed $22,000 (6 checks) to the PO Box intended to cover William J. Sauer's child's medical expenses. Each check had explanation of benefits and were made payable William Sauer. The father, and WRS, and father’s business cashed the checks (they did nothing wrong by cashing checks). Blue Cross wants $ back says D unjustly enriched by Blue Cross mistake.

ii. Issue : Whether the defendants were unjustly enriched

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iii. Rule : The remedy for unjust enrichment is restitution. A person who pays money to another by mistake is entitled to restitution from the payee or other beneficiary of the payment. This is true even though the mistake is due solely to the payor's lack of care, inadvertence or when the payee shares in the payor's mistake. Generally, restitution will be ordered when a payment is made under a mistake of fact. A payor's lack of care will not diminish his right to recover, or somehow justify retention of the unintended beneficiary's windfall.

iv. Holding : The payment by Blue Cross to defendants, rather than William J. Sauer, was such a mistake of fact and no circumstances disclosed by the evidence would make it inequitable to require return of payment. Therefore, D unjustly enriched. Blue Cross wants constructive trust as remedy but can’t get since D’s spent $, can’t locate assets, so must give damages as remedy. Since not dispute of fact so don’t need jury for this legal remedy.

C. MISTAKEN IMPROVEMENTS1. Encroachments

i. -There is no bright line between encroachments and improvements.ii. in encroachment cases, there is no unjust enrichment because there is no benefit to the

neighboring landowner.2. The buy-sell remedy -- The court sets values on the land and the building, and then the innocent

landowner gets to choose whether to buy the building or sell the land. i. Restatement Third – endorses –but balances the equities to determine if owner should be

forced to sell or should buy3. Innocent defendant - The benefits will be valued at what the improvements cost or what they are

worth, whichever is less.i. Normally D’s get market value of improvement = appreciation of property – not cost of

improvement (which can be much higher than their worth) UNLESS D is not innocent 4. Not innocent defendant The cost or value of improvements, whichever is greater.5. Comparative Fault -- Generally P who builds despite actual notice that she might be making a

mistake will not recover; a plaintiff who only has constructive notice (such a filing in land records that she neglected to check) will not be barred on the ground that the mistake is her fault.

6. Knowing Misconduct --The improver who knows he is building on someone else's land will get no remedy.

7. Modern Rule = same as Somerville majority – came about to encourage development

a) Somerville v. Jacobs (W. Va. 1969) 627i. Facts : Ps owned lots 44, 45 and 46. P built a warehouse on what they thought was lot 46, but

it was actually on lot 47, owned by Ds. No evidence P knew the land they were improving wasn’t theirs. D discovers warehouse on his lot, P wants to keep warehouse so offers to buy lot from D, D refuses to sell.

ii. Issue : Whether Ps can sue D to recover D’s property P made perm improvements on? iii. Rule : Equity (COA of unjust enrichment) will grant relief to one who, through a

reasonable mistake of fact and in good faith, places permanent improvements upon land of another, with reason to believe that the land so improved is that of the one who makes the improvements, and that the Ps are entitled to the relief they seek in this proceeding.

iv. Holding : D has choice here and chose to give P value of property. An improver of land owned by another, who through a reasonable mistake of fact and in good faith erects a building entirely upon the land of owner, with reasonable belief that such land was owned by the landowner, is entitled to recover either:

1. Give P $$ value of the cost of improvements from the landowner – id D doesn’t have $$ P may force to sell land (w/ equitable lien) to enforce payment of such lien, OR

2. to purchase the improved land from landowner for amt = value of the land without the improvements.

Land owner can either sell the land or pay for the improvement.b) Manning v. Wingo pg 630

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i. Man died and his ex-wife still owned ½ interest in house. The children lied to ex-wife, saying house was being foreclosed so they could sell the house to interested buyers (who were unaware). Years past before ex-wife found out the truth. Ex-wife sued to recover her ½ interest in house. Court gave ex-wife whole house (w/o explanation) subject to buyers claim for restitution for improvements made.

D. COURT ORDERS LATER REVERSED 1. Court Orders Later Reversed

i. $$ paid or collected pursuant to the order of a court of an administrative agency, subsequently vacated or reversed, must be refunded.

ii. Profits earned under the protection of an injunction later reversed are also subject to restitution.

iii. Two theories of recovery here: 1. should receive the market value of the items sold or 2. the money earned in selling the items

a) State v. A.N.W. Seed Corp. (Wash. 1991) 634i. Facts : Default judgment was entered against Dt. Judgment creditor obtained a writ of

execution, seized and sold farm equipment for $16,588.50. Months later, the default judgment was vacated. The house had been sold at auction for much less than FMV. P moved for restitution, and the trial court entered an order of restitution for the FMV of the property, $57,631.50.

ii. Issue : When a P executes on a judgment which is later reversed on appeal does P get the market value of property lost or the amount = proceeds of sale?

iii. Rule : only get what state made at sale of property NOT FMV of property sold iv. Holding : Why? State acted in good faith. Statute allowed state to sell property while appeal

pending. P would’ve not lost property if had gotten bond to protect property sale. So only get amt D benefited by for unjust enrichment.

1. NOTE: P also could’ve gotten agreement filed w/court that the property will not be sold pending appeal

E. UNENFORCEABLE CONTRACTS AND QUANTUM MERUIT1. Quasi-Contracts= Quantum Meruit = 2. measure of K damages when there is an enforceable K w/o a specific price term OR3. measure of restitution when there is no enforceable K, fictional K 2 do justice & equity, no meeting

of the minds (no intent of parties), K implied in law and imposed to bring about justice and equity4. Measuring Benefits:

i. Benefits were given on P’s request – presumptive measure is FMV or amt P agreed toii. P can never recover more in restitution than ??????????????

a) Anderson v. Schwegel (Idaho Ct. App. 1990) 638i. Facts : Schwegel orally agreed to restore Anderson's car for $6,000. Anderson thought the

price included everything exception upholstery; Schwegel thought it included only the body work, which was the only work he did himself (since gave Anderson itemized list > $6K before sent out for body work). The final bill totaled $9,800.27. Anderson paid $5,000, and insisted that only $1,000 was due. Schwegel sued for cost of services not ↑ value to car since the value ↑ was much less. Magistrate determined that the parties had failed to reach an agreement and held that Anderson was L to Schwegel under quasi-contract, permitting Schwegel to recover $4,800.27 for the reasonable value of services and materials retained by Anderson.

ii. Issue : Whether the trial court employed a proper measure of recoveryiii. Rule : In cases where restitution is available for mistaken improvements to another’s property,

the usual measure of recovery is the value to the property of the enhancement. In quasi-contract cases, like this one, a property owner has asked for the services and so demonstrated

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a desire to have them, he may appropriately be held L for their value, whether they add any economic value to his property or not.

iv. Holding : Here, Anderson either requested the services or at least didn’t object when given itemized list of repairs exceeding $6K. Thus, treat transaction as Anderson requesting for services – so must pay for services. So don’t look to amount car ↑ in value. Lower court affirmed.

a. NOTES: if no invoice sent/car owner didn’t know – Schwegel probably would’ve only gotten $6K since quasi-K linked to facts that show what party’s understanding was

b) Farash v. Sykes Datatronics, Inc. (N.Y. 1983) 643 Fictional Benefit Rule i. Facts : P and D entered into an oral contract where P would lease building 2 D after P made

certain building renovations/modifications. D never signed any K and never occupied the building. P brings 3 COAS. (1) enforce oral lease < 1 yr, (2) enforce oral K for lease in exchange for improvements <1yr (3) value of work performed by P in reliance of D’s statements

ii. Issue : Whether P can recover for the value of the work performed in reliance of oral agreement that was for <1yr so barred by statute of frauds?

iii. Rule : Restitution measure of value of gain to Div. Holding : 1st 2 COAs barred by statute of frauds. Restitution problem here since D didn’t

actually receive anything of value, since never took possession of property/never took over lease. However, “receipt” is a term of art, a fictional benefit. D deemed to have received since acts were for D.

1. NOTES: a. Prof things decided wrong since both sophisticated businessmen – would’ve

known consequences of not writing K – so thinks P got $ for improving his own property

b. In NY, you can't use promissory estoppel when the statute of frauds is violationc. FICTIONAL BENEFIT RULE

i. VIP – courts apply fictional benefit rule – if other party asked for it they must pay for it

ii. However -- Restatement Third – does away with this – since would require an actual benefit/enrichment to award quantum meruit.

d. PAST PERFORMANCE DOCTRINE i. = if part performance evid K existed and therefore can take out form statute

of frauds (in some jurisdictions)

F. DISGORGING PROFITS FROM INTENTIONAL WRONGDOERS1. Intentional Wrongdoer = a person guilty of “misconduct” who “acts w/notice of the underlying

wrong” pg. 656 #2 i. “misconduct” = “an interference w/the claimant’s legally protected interests that is tortuous or

otherwise wrongful and that leads to L in restitution by the substantive rule of this Restatement.” § 51(1)(i) “otherwise wrongful” = fraud, duress, undue influence, opportunistic breach of K (not

ord breaches), trespass & conversion, misappropriation of financial assets, infringement of IP, breach of fiduciary duty, homicide, intentional & wrongful w/a donative transfer

pg. 655 note #1

2. Disgorgement of all profits = “if he was conscientiously tortious in acquiring the benefit, he is also deprived of any profit derived from his subsequent dealing with it”

i. P gets all profits D made on property taken from P (i) Courts will try (but not required) to relax the windfall to the P, N situations or

unintentional wrongdoers, as innocent parties shouldn’t be required to relinquish all profits (relaxed standard for innocent wrongdoer)

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ii. Third Restatement:(i) intentional wrongdoers are L for “the net profit attributable to the underlying wrong”

1. “object of restitution in such cases is to eliminate profit from wrongdoing while avoiding, so far as possible, the impossible penalty.”a. “profits” = use value of all property takenb. “consequential gains” = “gains from a subsequent transaction in which the

recipient makes profitable use of property”3. D’s Culpability Determines if P get Disgorgement

i. Conscious wrongdoer L for all the profitsii. N, illegal but in good faith, Court will likely find D only L for the FMV of property since

unintentional wrongdoer(i) Some courts might be too careful not to award all profits UNLESS intentional wrongdoer

1. Ex/egg washing case -- $$ saved on labor vs. market value of rent of property that took/COA conversion

4. Apportionment =

5. P has right of election i. When choice between damages & restitution, P can choose what wants to get

a) Olwell v. Nye & Nissen Co. (Wash. 1946) (657) – P sold and transferred his share in company to D, but retained egg washing machine. P stored machine near D for a little over yr. Then D took put machine and began to use, once a week, for a few years until P discovered it. Upon discovery, P offered to sell machine to D for $600 (1/2 orig cost). D refused saying 2 high offering $50. P sued D to recover reasonable value of D’s use of machine. Trial Ct. entered judgment for P of $1560 (sum of D’s average labor savings from using machine) for 156 wks.i. Issue : Whether P could recover in restitution when the D committed conversionii. Rule : In cases where D tortfeasor has benefitted by his wrong, P may elect to "waive the tort"

COA and bring a COA in assumpsit (quasi-K/restitution).iii. Holding : 1st – injury was violation of P’s property rights of exclusive use & #2 restitution not

about what P lost but what D gained. D knowingly took P’s property so intentional wrongdoer. P elected to waive right of action in tort, so entitled to the measure of restoration which accompanies the assumpsit remedy of quasi-K. He sues in restitution and receives the D's labor savings ($1,560) – since benefit D received for use of machine -- rather than damages (P’s loss = rental value to of eggwasher, which would be $300).

1. NOTES : a. Law & Economics -- Economic efficiency arguments against this case – D

argues that P was storing it, wouldn’t use it, didn’t even know D was using it for 3 year

b. However – Law & Economics requires voluntary transactions so remedy deters future wrongful acts & promotes voluntary transactions

2. Why does P get to choose what he wants?a. Laycock right that irreparable injury rule [= P can’t chose only get restitution if

no remedy at law available] is gone – since crts mostly side w/P and find irreparable injury some way

b. especially when it comes to restitution, as P has right of electionc. Important calculation to think about, what remedy gets the most money

b) Edwards v. Lee’s Administrator (Ky.1936) 651 - D found an entrance to a cave on his land and turned it into a tourist attraction. The cave went under P’s land but P could not access it. Crt awarded P part of the profits.

2. Intellectual Property Infringement:i. Trademark Infringers : are L for all profits derived from infringement BUT court has

discretion to award ↑ or ↓

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ii. Copyright Infringers : L for all damages + profits “not taken into account in computing the actual damages”

iii. Patent Infringers : L only for damages, in no event less than a reasonable royalty. Court may award up to 3xs actual damages

iv. Trade Secret Infringers : L for both actual loss caused by misappropriation & unjust enrichment cause by misappropriation that is not taken into account in computing actual loss

c) Maier Brewing Co. v. Fleischmann Distilling Corp . (9th Cir.1968) 658 - P had a trademark for Black and White scotch whiskey, D began brewing a cheap beer under the Black and White label, and distributed the beer exclusively through certain grocer. Lower court found that D deliberately infringed on trademark, although no competition between the 2 products, but that consumers might think that the beer and the scotch were produced by the same company so damaged trademark reputation. Lower Court --P awarded profits D made from beer ($34,912 from D, and $29,849 from grocer). D appealed wanting to only pay value of license. 9th Cir. awarded profitsi. Issue: is the restrictive approach to accounting for profit appropriate? ii. RULES –

(i) Where there is infringement, but no direct competition, accounting of profits based on unjust enrichment rationale is appropriate– such an approach would remove motive for infringement, thus deterring future infringement

(ii) Where infringement is “knowingly, willfully and deliberately” done, accounting of profits is appropriate

(iii) Where infringement is entirely innocent, an injunction would be appropriateiii. Applied here

(i) D’s knowingly, willfully and deliberately infringed on P’s trademark, thus accounting of profits was appropriate

(ii) Moreover profits from grocer was appropriate – dollar amount of recover in accounting for profits under unjust enrichment rationale has no relation to the damages sustained by the P1. Notes

a. TODAY – P can go for all profits D got for infringement (restitution) or lost profits from infringement (really damages)

b. How would it measure market value damages? - Licensing scheme, etcc. Opportunity to discuss damages vs. restitution

i. P wanted accounting of profits (restitutionary label) for unjust enrichment ii. D argued that there is no competition, thus no diversion of sales from P’s ,

thus no showing of injury

G. MEASURING THE PROFITSi. usually 2 types of fights

(i) Revenue fights – while we made some revenue from infringement, we also made revenue from things we legally did

(ii) Cost fights – because profits equal revenue-costs, D’s want costs to be highii. There are too ways of look at the apportionment of profits:

(i) Pro rata method: when you have to figure out the relative importance of the infringing product. The infringing product is generally a separate entity. (Sheldon)

(ii) Actual profits method: looks at all the revenues and expenses attributable to the infringing product (Hamil).

iii. Federal rule is that the conscious wrongdoer gets no credit for income taxes paid on disgorged profits.

a) Sheldon v. Metro-Goldwyn Pictures, Inc. (U.S 1940) 665 MGM VIPi. Facts : MGM negotiated rights to use play but negotiation for play but negotiations for play

fell through. Then MGM deliberately used play (w/o P’s consent) as an unpublished work to make a motion picture. Trial Court – intentional wrongdoer so entitled to all profits of movie (no apportionment of copyright). Appeals Crt – should be apportionment of 1/5th of profits.

ii. Issue : Whether there can be apportionment of profits in a suit for copyright infringement

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iii. Rule : The Copyright Act = infringer shall be L to pay to P damages as the copyright proprietor may have suffered due to the infringement + all profits infringer made from infringement, or in lieu of actual damages and profits, such damages as to the court shall appear to be just.

iv. SC : Cir Appeals court holding affirmed. Both the Copyright Act and our decisions leave the matter to the appropriate exercise of the equity jurisdiction upon an accounting to determine the profits "which the infringer shall have made from such infringement."

v. Issue : Whether the court properly measured profits due to Pvi. Rule : What is required is not mathematical exactness but only a reasonable

approximation is needed (i) Where commingling of gains(when cannot separate profits from infringement from

profits generated from rightful acts ) P entitled to all profits derived from infringement. a. Belford – copyright of cookbook where the D’s intermingled copyright material

throughout the book “making it almost impossible to separate one from the other”

(ii) However : If D can prove “reasonable approximation”: rational separation of net profits so that no party may have what rightfully belongs to the other – can deduct those amounts out of net profits (leaving only those linked to the nexus of infringement of copyright)

vii. SC : Cir Appeals court holding affirmed. The controlling fact in the determination of the apportionment was that the profits had been derived, not from the mere performance of a copyrighted play, but from the distinctive profit-making features, apart from the use of any infringing material, by reason of the expert and creative operations involved in its production and direction, stars in movie- their reputation, marketing expertise, directors & filming experts.

b) Three Boys Music Corp. v. Bolton (9th Cir. 2000) GOOD APPORTIONMENT i. 2 similar songs “love is a wonderful thing,” one a minor (Isley Brothers) hit then one major

hit by Bolton. Isley Brothers sue Bolton for infringement. Jury was able to approximate that the song accounted for 28% profits from CD and the song itself contained 66% infringing elements. So P received 66% of the 28% of profits from song.

c) Mishawaka Rubber & Woolen Manufacturing Co. v. S.S. Kresge Co. (U.S.): 670 note 5 --- D didn’t have to account for profits generated from consumers who weren’t confused by mislabeling, but D bears the burden of proving the amount of those consumers which is “as often as is not impossible to obtain”

d) Truck Equipment Service Co. v. Fruehauf Corp. (8th Cir. 1976) – D funded a marketing survey which a random sample showed 20% customers purchased due to D’s infringement – in attempt to appropriate those profits. 8th Cir. Rejected this on equitable grounds stating was “clearly inadequate” to deter infringement if D still was able to keep 80% of profits.

e) Hamil America, Inc. v. GFI (2d Cir. 1999) 671 (ignore language of lost profits in this case since that’s damages – court used wrong language)i. Facts : Hamil sued GFI for copyright infringement. GFI copied one of Hamil's floral fabric

patterns and sold the garments to JC Penney.ii. Rule : Under § 504, Hamil could recover the "actual damages suffered by it as a result of the

infringement, and any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages.

iii. Issue #1 : Whether the district court erred in excluding an allocation of general overhead expenses in its calculation of GFI's profits

iv. Rule : Sheldon contemplates a two-step procedure for deducting overhead expenses from an infringer's profits:

1. Determine what overhead expense categories are actually implicated by the production of the infringing product.

i. The infringer must show a sufficient nexus between each expense claimed and the sales of the unlawful goods.

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(i) Arrive at a fair, accurate and practical method of allocating the implicated overhead to the infringement --- determine what overhead expense categories (rent, business, entertainment, personnel and PR) are actually implicated by the production of the infringing product and there’s sufficient nexus between category of overhead & production or sale of the infringing product

ii. The infringer has the burden of "offering a fair and acceptable formula for allocating a given portion of overhead to the particular infringing items in issue.

v. Holding #1 : Sheldon's two-step approach must be applied with particular rigor in the case of willful infringement. When infringement is willful, the court should give extra scrutiny to the categories of overhead expenses claimed by the infringer to insure that each category is directly and validly connected to the sale and production of the infringing product. Unless a strong nexus is established, the court should not permit a deduction for the overhead category. The allocation formula of a willful infringer should be held to a particularly high standard of fairness.

vi. Issue #2 : Whether the court erred when it determined that Hamil could not recover for profits realized by GFI for their infringement

vii. Holding #2 : GFI's sales to the shared customers – too speculative. Double profits – not sure amount of additional customers would’ve had

G. DISGORGING THE PROFITS FROM OPPORTUNISTIC BREACH OF K 1. Disgorgement is available in K, if consciously wrongful breach

(i) Disgorgement is attractive remedy where D withholds portion of what he promised under the K but damages to P small

2. Opportunistic Breach = where D benefits more to breaching K w/P (either better offer or found something better to do w/property)

(i) Courts lean to disgorgement in these situations, willing to give P more $(ii) Restatement (Third): If a deliberate breach of K results in profit to the defaulting

promisor and available damage remedy affords inadequate protection to the promisee's contractual entitlement, the promisee has a claim to restitution of the profit realized by the promisor as a result of the breach.

a. Unavoidable breaches: are the opposite. They are where D doesn’t have choice but to breach K. No profits gained by breach. Ex/crop destroyed in drought.

a) Snepp v. United States (1980) (678) –i. Facts : As an express condition of his job at CIA, he pledged not to divulge classified

information and not to publish any information without prepublication clearance. He published an account of his experiences in South Vietnam without prepublication clearance but there was no classified information disclosed in the book. The district court awarded a constructive trust of all profits he might earn on the book. Appeals Crt reverses constructive trust.

ii. Issue : Whether the government is entitled to a constructive trustiii. Holding : Agent intentionally breached K w/CIA – since told CIA (prior to book

release) that would clear book prior to publication. (i) Damages to CIA are too difficult to measure since:

1. national security hard to measure in $$$. So go with constructive trust. 2. If prove gov would have to disclose classified information to prove

damages – since discovery can be broader than material at issue 2 prove infringement

3. Damages won’t stop others from disclosing classified info since can infringe n’ just give $ later

(ii) Court may order disgorgement when P has suffered an irreparable injury. Crt may also order where D is intentional wrongdoer.

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1. Irreparable injury occurred when Snepp failed to submit material for prepublication review – possibility of compromising info & other agents

(iii) A constructive trust protects both the government and the former agent from unwarranted risks. The remedy is the natural and customary consequence of a breach of trust. If the agent publishes material that has not been reviewed in violation of his fiduciary and contractual obligation, the trust remedy simply requires him to disgorge the benefits of his faithlessness.

iv. Dissent : If only published unclassified info then can be no unjust enrichment – has constitutional right to publish

b) May v. Muroff (Fla. Dist. Ct. App. 1986) 683i. Facts : D sold land to P then seller D improperly sold fill from the land to 3rd party for

$240,000. Trial court found value of land ↓ by $122,067.ii. Issue : What is the purchaser entitled to recoveriii. Holding : The seller's breach was deliberate so shouldn’t profit from D’s wrong and

enjoy windfall profit of $117,933. P purchaser, under TOC, is entitled to the fruits of this wrongfully received windfall. P purchaser entitled to the value of the materials removed, determined from record, at $240,000. D breached K. The trial court erred since measuring the P's injury --restitution awards what D earned by selling the fill (his "unjust enrichment").

F. RESCISSION 1. Rescission Defined : A remedy for Ds who “substantially” [Third Restatment “materially”] breach K

court cancels K & gives back each party what they initially gave2. Election -- P’s Choice : P may pick to rescind K or to get damages

i. EXCEPTIONS : (i) value changed of exchanged property – then P can only rescind K if P would lose $ by

performing K (ii) generally P may not rescind Ks where P is $ lender or Creditor -- and debtor fails to pay

a. assumes unsecured transaction – therefore there is no collateral attached to loan so can’t take D’s property i. K FULLY PREFORMED & ONLY OWED $$ - can’t rescind

b. If secured transaction - could take collateral since D preapproved (iii) P cannot rescind part of contract – all or none (iv) P cannot rescind if breach was not “substantial” or in Restatement Third breach was not

“material” (v) If property exchanged fluctuates in value P must request rescission promptly after

learning grounds for breach – w/other property still crts are less likely to grant the longer P waits to demand after breach

3. Why Choose Rescission : simplicity (in most cases don’t have to determine value of anything), person’s preference may not be reflected in $$ terms, P lost confidence in D & transaction (exception w/$ - see below) – helps parties where risk involved & want to walk away from deal

i. Other Grounds for Rescission (since in Restatement Third)(i) Fraud(ii) Undue influence(iii) Mutual mistake of fact(iv) Unilateral mistake not relied on(v) Duress

a) Mobil Oil Exploration & Producing Southeast, Inc. v. US (U.S. 2000) 686

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i. Facts : 2 oil companies paid government $156M in return for lease Ks which gave them rights to explore for and develop oil off the NC coast at a later date. Sometime later, Congress passed a statute which disallowed oil companies to drill off NC Coast. The two oil companies now seek restitution for $156M. Gov acknowledges breach but says oil companies not injured (since clause in pre-existing law NC could veto any drilling anyway) so shouldn’t get $ back.

ii. Issue : Whether the government is subject to rescission remedy? iii. Holding : Gov made “total” breach [not “material’ breach] of their K w/P. Therefore, P has

right to elect to rescind K and get back $ they gave gov. Therefore, irrelevant whether P injured or not.

1. Note: P could’ve gotten reliance damages but problem is that the pre-existing law gave NC veto power over K so P wasn’t really damaged

2. P here would lose $156M if had to “fulfill” K since risk of not being able to drill (NC veto power) now is nearly certain so value of what received – right to drill oil – changed significantly

Example of Risk – Termite Houseb) Cherry v. Crispin (Mass. 1963) 688 note #3

i. Sellers fraudulently conceal house they sold P’s had termites. Few days later P’s discover termites and demanded rescission. Property was not really damaged by termites (only $1000 to get rid of). Crt orders rescission of K.

ii. P’s got $ paid for house – rental expense for time in house. Seller gets house + rent for amt time P’s were in house.

Example of Bad K – P gained on D’s Breach c) Bush v. Canfield (1818) 688 note #4

i. K was 2,000 barrels of flour delivered to New Orleans for $7/barrel. Flour priced then ↓ to $5.50/barrel. However, seller failed to deliver flour. Crt rescinded K. P gained on D’s breach.

Losing Contracts Where the Benefit Cannot Be Returnedd) Boomer v. Muir: pg 692 note #1

i. Damn was 95% complete when Boomer (sub contractor) abandoned K – however only did so after Muir (gen contractor) failed to deliver the supplies to complete damn. Jury found that Muir breached K when failed to deliver supplies. (i) Boomer was to be paid $333K for completed damn. However, Boomer’s expenses for

completing damn were well above that, he would’ve lost $267K upon completing damn. ii. CRT: K rescinded since Muir substantially breached. Boomer gets back expenses put into

damn. Muir gets value of damn – expenses if damn completed. 1. BOOMER RULE: P seeking restitution rescinds K and sues in for the value of

benefit D received (value of cost of 95% finished damn – which is measured by the cost it took to build (actual value)). D can’t rely on K price value because K has been rescinded.

2. EXCEPTION TO BOOMER: If P has fully performed and D owes only money, P is limited to the K price and cannot recover rescission.

3. BOOMER OUTCOME IMPOSSIBLE W/RESTATEMENT THIRD – note #7 pg. 694 – a. Right to performance based damages is measured by either reliance

damages or value of uncompensated K performance but maximum value cannot be > K price. Consequential damages for loss caused by breach may be added to either one.

E. CONSTRUCTIVE TRUSTS [remedy gives restitutionary rights in specific property]1. Constructive Trust is a Remedy for Unjust Enrichment (coa)2. The purpose of a constructive trust is to give restitution to P 4 D’s unjust enrichment D received as

result of taking P’s property

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i. Any claim that arises in unjust enrichment can support a constructive trust if the enrichment is received in the form of identifiable property or if it remains identifiable as the proceeds of such property.

1. EXCEPTION: Bankruptcy – D must be intentional wrongdoer, fraud – not just mistake a. So doesn’t protect property in constructive trust from all claims of unjust

enrichmenti. CAN FILE B4 BANKRUPTCY OR JOIN PROCEEDING

3. The irreparable injury rule (must be no adequate remedy at law) is commonly ignored in constructive trust cases.

4. WINDFALLS (appreciation/profit amt) TO P IN CONSTRUCTIVE TRUST i. There is a potential for P’s to get windfall (appreciation/profit amt) in property held in

constructive trust since remedy for unjust enrichment – this is determined by court – acting within their discretion – through a balance of equities analysis

1. Intentional Wrongdoer – most likely to get all or some of windfall/appreciation i. However – if D put lot of work into getting appreciation of asset- may not

give or may give only a little (balance equities)2. Mistake – less likely to get windfall3. Bankruptcy – also less likely to get windfall of appreciated asset – more likely just to

get value of assetii. If get windfall can only get windfall amt proportionate to what was invested

(i) Ex/if had $20K taken, D invested $30K – now investment worth $50K – can only get windfall amount proportionate to your interest/pro rata interest of $20K

iii. RESTATEMENT 3rd = tracing “may be limited” where the property traced is “grossly disproportionate to any loss on which the claimant’s right to restitution is based” § 58(3)(c)

5. BURDENS OF PROOF :constructive trust P must trace the property taken from herself to the fraudster to the identifiable property she wants to claim in constructive trust.

6. Identifiable Property Rule= For a constructive, you must be able ID property that should be subject to the trust

7. Tracing principle= proves P is “equitable” owner of property – so property will be excluded in bankruptcy proceeding of person in possession of property – allowing P in restitution to go after D’s unjust enrichment when property in hands of another party or D’s, when property has changed form

i. Tracing Requirements1. Unjust Enrichment (COA)2. Identifiable Property

ii. Tracing Fictions 1. D spends own $ on intangibles first on all non-investments & “saves” P’s $ in

accounta. P CAN REBUT THIS IFF by clear & convincing evidence (would do if

more $$ came into account)2. Lowest intermediate value

i. Assumes D uses its own $ to replenish account so P gets lowest intermediate value in account from initial deposit to current date

ii. Unless – P proves put more P’s $ in account then P entitled to that too (clear & convincing evidence P proves)

iii. In Investments – P can only claim portion of investment = to what lowest intermediate balance was before investment

3. D spends P’s $ first on all investments & leaves own $ in account4. D admits to using P’s $ to replenish account – P gets all money D admitted to

8. Defense to Tracing: Bona fide Purchaser for Value [BFPV] = If asset is in the hands of a bona fide purchaser for value, tracing stops, and you can't get the asset.

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i. BFPV Requirements:1. Consideration (you have to pay a “reasonable” amt for property)

i. Property can’t be gift ii. Property can’t be purchased unreasonably low

2. Must act in good faith (you can't be a part of the conspiracy)i. Can’t know or have “constructive knowledge” (reasonably should’ve

known) person who gave you property was not rightful owner Newton v. Porter

ii. BFPVs who meet requirements win/have superior rights to property to P and don’t have to give their property to P

1. VIP CASH/Cash Equivalents ARE NOT TRACEABLE – BFPV always wins if property taken from P was cash/cash equivalent – even if obtained in theft/knew about theft etc. – no exceptions to thisa. Cash equivalent = bonds, etc.

9. Equitable ownership rule = P who traces her property to identifiable asset is entitled to an ownership interest in the asset, and not just to a judgment for her share of the value of that asset.

i. Court puts property taken from P in a fictional trust so P is equitable owner of assets held by D.

ii. D can’t get rid of assets by giving away since P owns the assets (via constructive trust) iii. EXCEPTION TO THIS RULE: Bankruptcy

10. Equitable Lien = D keeps title to identifiable property but P has a lien on property and once D sells property P will get a fixed value in property (up to 100%) given through P’s fictional lien process

i. Any P entitled to a constructive trust can choose an equitable lien instead.ii. Lots of times courts force D’s to sell property if don’t pay P by certain date (based on state

statute)11. Bankruptcy

i. Std public policy – once bankruptcy begins there is an automatic stay 1. Automatic stay = no more litigation against debtor until proceeding commences or

jump in bankruptcy proceedingii. Hierarchy of Asset Entitlement in Bankruptcy Proceedings

1. Secured creditors – get paid before anyone below 2. Administrative Preference – people who statutorily get greater preference

i. (written in statute – ex/lawyers in bankruptcy proceedings get preference, labor union employees get unpaid wages preference)

3. Unsecured Creditors – everyone else i. last to be paid – so if an assets left – get pro rata share/interest on whatever

left ii. if don’t have constructive trust then P becomes unsecured creditor

iii. EXCEPTION: Property held in constructive trust – due to fraud, or intentional wrongdoer – can’t just be mistake [so doesn’t protect property in constructive trust from all claims of unjust enrichment]

1. Why? Court trying to balance the equities to give others who are owed $ in bankruptcy proceedings what they are owed as well. Don’t want to give too much of the pie away to 1 party if bunch owed

2. Would never say property held in constructive trust takes priority over unsecured creditors since – treated as P’s property therefore not entitled to go into bankruptcy proceeding

iv. EXCEPTION 2 EXCEPTION: 6th Cir won’t allow property to go against bankruptcy claims if filed constructive trust after bankruptcy proceeding

1. Must other circuits don’t follow this rule and all if intentional wrongdoer, fraud

Paoloni v. Goldenstien – must ID property getting constructive trust Fraud by Doggett (purchasing life insurance contracts) $$$ deposited in Chambley corp which

deposits into Iglesias family trust trust purchases condo where Doggett lives

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No evidence trust was BFPV since evidence trust knew that it was purchase w/fraudulent funds since created to hide fraud.

Investor P’s get condo via constructive trust Dockett must pay rental value for time spent in condo If proportion of fraud $ traced to condo would get %age of property ownership in property therefore get

equitable lien P’s get equitable lien & permanent injunction on property so D barred from disposing on any property

connected w/trust

TRACING BETTER THAN DAMAGES – allows you to get actual property taken from you don’t have to wait to get your $$

(1) unjust enrichment + (2) identifiable property =

Ruffin v. Ruffin – LOTTERY TICKET CASE – NO IDENTIFIABLE PROPERTY FACTS: W files for divorce Sept 20th Crt orders H to pay $200 wk in child support for remainder of

divorce proceedings H never pays sept 28th H gets lottery ticket then wins lottery W wants $$ from lottery ticket profits since says H bought w/$$ owed in child support

CRT: W can’t trace $4.9M lottery winnings so doesn’t get no evidence $$ used to purchase lottery ticket was $$ owed in child support. Also, H bought lottery tickets throughout marriage so nothing unusual/out of ordinary to link to W’s child support owed

o Property must be “distinctively traced” o Would be different if could show the only reason didn’t pay child support was cuz bought

lottery ticket

SIDENOTE: Even if could trace $$ to H’s lottery ticket W probably would just get %age of profit owed – since getting all winnings would result in windfall to P since GROSSLY DISPORPORTIONATE

RESTATEMENT THIRD § 58(3)(c)GROSSLY DISPROPORTIONATE – new Restatement Third coming out – P’s right to property ‘may be limited” where property traced – when gain “grossly disproportionate to any loss on which P’s claims right in restitution”

--------- Grossly disproportionate not defined so can mold meaning to your case ---------

D saves $$ instead of paying debts – can be a form of restitution owed to P

In Re Leitner FACTS: Leitner embezzled large sum of $$ from Wetherhill & L.G.W. who claimed beneficiaries to

constructive trust since Leitner got $$ to purchase home from wrongdoing but didn’t take to court until after Leitner filed bankruptcy

CRT: Constructive trust = when date of transaction gives rise to trust NOT DATE OF JUDICIAL DECREE

o According to state law constructive trust = date of wrongdoing (totally depends on state)

In Re Erie Trust Co. – LOWEST AVAILABLE BALANCE Estate $$$ 23.5M wrongfully obtained by executor of dead person’s estate put it into Erie trust

which became insolvent Erie Trust became insolvent Receiver (bank) appointed by court (who controls/possess company receivership) Erie (D) bankrupt so Ps (beneficiaries of estate) sued receiver who possesses company want priority in estate

CRT: although P’s couldn’t trace $$ into particular fund or bank account still entitled to lowest level of cash (or cash items in account) FROM TIME CONVERSION OCCURRED & WHEN SECRETARY TOOK

NEGLIGENCE NOT ENOUGH NEED SOME TYPE OF TORT = FRAUD/CONVERSION/MISREPRESENTATION

Rogers v. Rogers --- Bonafide Purchaser of Value

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H gets LE insurance policy n’ makes W1 beneficiary part of settlement in divorce W1 would remain beneficiary of H LE policy H gets married W2 cancels W1’s LE policy n gets new policy for W2 then dies W1 claims beneficiary – instead of W2

CRT: W1 possessed equity in asset of W2 because policy 2 was a replacement for policy 1 and therefore is traceable.

o Courts could go either way usually pick which result is more equitable

In Re-JD Services Subsidiary deposited $7,250 check in Bank of America account. BofA improperly coded check for

725,000. Debtor noticed this and transferred $800K into a separate account. Parties agreed extra $$ was put into account NOT IN BAD FAITH shortly after BofA discovers error places hold on debtors account (now $ 717,000). Debtor added $6.5M in new $$ in account

Issue: What is correct measure – collectible balance or available balance? 2 ways to measure $$

o Collective Balance: look at amount available on deposit (even those can’t withdraw yet cuz have holds)

This would give BofA $717,750o Available Balance: actual funds available which can be withdrawn

This would only give $394,460.47 CRT: Available balance more accurately reflects/traces funds in account rebuts tracing fiction

[what court really trying to say is that $$ isn’t there for D to spend since there are holds on it so debtor not really spending his own $$]

o NOTES: this rebuts fiction that D spends $$ first since hold on new $$ initially placed in account so effect is lowest intermediate balance

D can spend BANCRUPTCY CASE n EXTRA $$ in ACCOUNT BY “MISTAKE” SO INOCCENT

D Therefore requires higher threshold & only a mistake – so $$$

In Re Mesa Debtor Mesa & McKay buy home in FL debtor Mesa places his ½ interest of home as exempt

property under homestead laws in FLo Then Mesa took out loan on home for home improvements but used $$ to finance new business

then McKay (who worked for Travelers insurance) fraudulently use Traveler’s checks & wrote checks to mother & construction contractors

o Mesa testified that got on stand said didn’t know about McKay’s fraud CRT: Finds debtor Mesa knew about fraud

o Traveler’s gets equitable lien rather than constructive trust 4 improvements made 2 house w/unjust enrichment since those were traced to home improvements rather than for mortgage on home

o BUT didn’t buy house w/wrongfully acquired funds so no constructive trust o = get equitable lien 4 value of improvements

DISGORGEMENT – vs. – CONSTRUCTIVE TRUSTS Disgorgement – must show P earned profits from fraud = causation – profits derived from fraud BUT

DOESN’T NEED TO SHOW WHAT HAPPENED 2 $$ Constructive Trust – must trace property from herself to fraudster to property wants to claim

F. EQUITABLE SUBROGATION = SUBSITUTION

Subrogee Subrogor 1st Debtor (debtor owes subrogor 4 $ debt) 2nd subrogee pays off subrogor 4 amt of debtor’s debt then steps in as party owed for debt $$ (rights to debt)

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SUBROGATION1. Subrogee made payment to protect his/her own interest2. Subrogee not a volunteer 3. Subrogee was not primarily L for debt 4. Subrogee paid off entire debt 5. Subrogation would not work any injustice to rights of the junior lien holder

Mort v. US IRS filed notice for tax lien of $33,083 w/county to collect for Myers’ unpaid income taxes Property put

in a trust Belmont made a loan 2 trust (which was secured deed) & $$ used to pay the original loan the remainder was used to pay slightly more than $2,000 of tax lien

Belmont purchased property w/o knowledge of lien, title company did not uncover as well. Then Belmont sold property to Mort Mort learned about IRS lean few months later. IRS seized land .

CRTS : claim dismissed Morts should sue title company 1st 4 malpractice (since Morts are equitable subrogation since took over title)

o MORTS (subrogee) Belmont (subrogor) Myers (debtor) o Then Morts (subrogor) Myers (debtor)

So have superior claim to debt of Myers than IRS Belmont/Myers transaction pre-dated IRS lien so Morts step in for Belmont and priority over Myer debt

EQUITABLE SUBROGATION – person who pays off incumbents lien gets same priority position as previous holder

NOT VOLUNTEER want to get something out of stepping in for debtor

National Bank & Trust Co. v. Weyerhaeuser Co.

State of Illinois used bank 2 manage its investments. Someone mishandled state’s $$, offering it to Weyerhaeuser in exchange for company’s shares. Mistake cost $70K. Either bank or Weyeraeuser made mistake

Bank paid debt for state IL then stepped in and sued Weyerhaeuser claiming had right as bank’s subrogator to sue Weyerhaeuser for breach of K Crt upheld allowing bank to sue (as if state of IL)

G. DEFENSES & RIGHTS OF THIRD PARTIESNewton v. Porter – Bonafide Purchaser of Value

FACTS: thieves stole $13K bonds cashed them 1 thief Warner invested $2K in bond & mortgage which he assigned to his wife

Thieves can convey title or items that are like cash bonds BUT IF BFPV give CASH person who had property stolen can’t get cash traced BFPV NEW OWNER OF CASH – CAN’T TRACE CASH

However, lawyers in this case given cash by thieves for legal services can get cash/bonds from lawyers since Court doesn’t believe BFPV.

EXCEPTION – lawyers in this case – CONSTRUCTIVE KNOWLEDGE = reasonably should’ve known what was going on

Banque Worms -- Payment for Value FACTS: Bank mistakenly wired $1,974,267.94 on behalf of Spedley into account of Banque Worms

Spedley initially asked Bank to wire $$ into account Banque Worms then asked Bank to stop payment and re-route $$ to Natewest bank. Bank mistakenly disregarded 2nd Spedley request and transferred to Banque Worms account. THEN Bank (that afternoon) wired another $1,974,267.94 to Natwest. [so paid double since paid funds to both banks from Spedley’s account]

RULES: Two Ruleso MISTAKEN FACT DOCTRINE = $$ paid under mistake of fact may be recovered unless

receiving party of payment can show caused detrimental reliance/changed position to their own detriment +

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o DISCHARGE OF VALUE RULE = only have to show you received $$$, 3rd party who receives $$ as result of mistake of 1 or both parties to original payment of debt transaction in good faith in ordinary course of business

If other person gets $$ cuz of debt you owe you have to suffer consequences can’t recover payment

CRT: Bank must pay for wrongful transfers since were asked not to transfer so must pay for $$ transferred when asked not to

THIS CASE DIFFERENT THAN BLUE CROSS CASE BLUE CROSS NOT DEBTOR

H. ANCILLARY REMEDIES –CONTEMPT

Ancillary Remedies = D’s often don’t perform so don’t pay damages awards, don’t comply w/injunction so ancillary remedies force D’s into compliance

CONTEMPT1. Civil Contempt – notice and opportunity to be heard is all that’s required

a. Compensatory civil contempt = if D fails to pay – judge orders D to pay P’s injuries incurred from D’s noncompliance (damages = amt fine 4 noncompliance)

b. Coercive civil contempt = D disobeys court crt punishes by giving fine or jail to force compliance however – D must be allowed to get out of if want – can be fine schedule

1. Party must have ability to purge 2. D disobeys court injury to court/state

2. Criminal Contempt – notice, opportunity 2B heard, jury, beyond a reasonable doubt, need formal indictment

a. D’s disobedience treated as a crime [via statute] criminal sanction in form of fine or criminal penalty noncompliance is crime under state/fed law)

i. Could be fine or incarceration but disobedience treated as crime to state ii. No ability to purge

iii. DIRECT CONTEMPT = don’t necessarily need to have right to procedural crim procedure if violation happened in court

International Union , United Mine Workers v. Bagwel indirect crim contempt (applied narrowly) Court entered injunction against union, prohibiting from obstructing the right of people to come and go.

Union continued to ignore injunction – sometimes using violent means. Crt levied $64M in fines for contempt, $12M which went to company. Eventually company & union settled, fines vacated. VA crt refused to vacate its portion of fines.

ISSUE : Were fines coercive contempt? CRT : How to determine which is which

o Turns on “character and purpose” of the sanction involvedo Contempt sanction is considered civil if “remedial & 4 the benefit of the complainant” o Contempt sanction if it’s “punitive, to vindictive the authority of the court”

FIRST – inability to purge o Although fine schedule was imposed not coercive civil contempt since so no ability to purge

can’t avoid fine through further compliance EX/If court just had hearing & had proceeding that had all criminal procedure that would

be due then could be okay to have criminal SECOND – indirect so need either jury (if criminal) or judge (if civil) to determine facts

o Direct Contempt violation happens in court – if judge delays in punishing until completion of trial due process requires D’s right to notice & hearing are respected

o Indirect Contempt happens outside court – if have indirect judge needs to determine facts so if criminal then need jury to determine facts Discrete, readily ascertainable acts, such as turning over a key or payment of judgment

Fines not coercive since D’s had no ability to purge once fines were imposed

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NOTES: 1st injunction is issued and D found in contempt of injunction then sent to jail since not for acts in

future, not future punishment but instantaneous, every second in jail is second decided not to comply, second decides to comply out of jail

School teachers Middletown NJ teacher’s strike 3 judges summoned teachers in alphabetical order & gave them choice of returning to work or going to jail more than 200 were sent to jail some as long as 4 days

US v. Yonkers Board of Education coercive contempt (1) could judge go too far in enforcing contempt? (2) how far can noncompliance go?

Crt held that city had built all its public housing in black neighborhood and did so for purpose of maintaining residential segregation

o ORDER: city must designate sites for 200 units of public housing in white neighborhoods

o City negotiated w/court for 1 year then consented to building 200 units – political pressure after that and asked court to revoke decree to consent court would not

o Judge ordered city to enact ordinance that paralleled consent decree and ordered $500/day fine imposed on every council member would failed to vote for the consent decree based ordinance(fines totaled $26.8 billion in 4 wks)

o City council voted against 4/3 and court found 4 to be in civil contempt o SC – refused to reverse fines went back to trial court – had to pay

fines as incurred. City eventually got support from citizens to comply as workers began to be layed off in order to pay fines incurred by noncompliance

Anyanwu v. AnyanwuNigerians who lived in US for 20 years had 2 children dual citizenship in Nigeria W claimed domestic violence H filed for divorce in Nigeria went back to Nigeria H refused to let kids go to US W goes 2 USA wants to get kids W gets court order to bring back children, H didn’t want to comply

Court threw H in jail for contempt until complied and brought back kids. 4 years later H claims duress since can’t produce kids, since in jail BURDEN OF PROOF ON PERSON IN JAIL 2 PROVE ONGOING CONFINEMENT NO LONGER

SERVE ANY COERCIVE PURPOSE Perpetual Coercion = substantial likelihood confinement will result in compliance

Will further confinement coerce compliance?o (1) more than just being in jail a long timeo (2) out of job/out of liberty

Sometimes courts require showing an attempt to comply or reasons why won’t comply

FEDERAL WITNESS – noncompliance of federal witness fed court cases 18 month max in confinement (if refuse to testify)

Chadwick v. Janecka divorce case, had $$ in offshore accounts, refusing to give $2.5M to W. Was ordered in contempt until gave $ back to W sat in jail 14 years then court decided sitting in jail has no coercive effect Griffin v. County School Board -- Anticipatory Contempt Griffin was D in Brown v. Board 9 years prince Edwards county closed public school & gave tuition grants to private schools

Crt ordered county to re-open public schools & stop issuing grants for private school. Court failed to order not to issue checks for next year’s grants so county worked around clock and sent out all grants for next year

COURT FINDS COUNTY IN CONTEMPT even though no injunction ordered under 18 U.S.C. § 401(3) federal contempt statute remaining subject matter of litigation is disobedience 2 court

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Why? Anticipatory Contempt removing the subject matter of the litigation (which would probably be enjoined) before court makes order is disobedient to court’s lawful writ, process, rule, order, decree or command

o Ballsy of court could’ve just ordered restitution

Kliener v. First National Bank Judge was under advisement to determine if communications between bank & class action P’s should be forbidden. During that time bank talked to P’s and Bank’s lawyer said judge probably wouldn’t like it.

Judge voided opt out agreements, assessed costs & attorney’s fees to the Bank, and fined & disqualified the lawyers

Walker v. City of Birmingham -COLLATERAL BAR RULE (this doesn’t apply to civil contempt)Collateral Bar Rule = Injunction is deemed to be valid even if later found 2B invalid cannot collaterally attack the injunction Can’t disobey and then go to courts to challenge – allege unlawful UNLESS injunction is invalid on its face

devoid of law its face OR court lacks jurisdiction Once clear injunction is unconstitutional – Walker – injunction cannot be attacked in a prosecution for

criminal contempt. The criminal offense is complete when D defies court order. It doesn’t matter whether court right or wrong – offense is not undone if the injunction is later reversed

Planned Parenthood Golden Gate v. Garibaldi (Cal. Ct. App. 2003)Courts created buffer zone an injunction was entered against Operation Rescue of CA (ORC) & Robert Cochran. Court created buffer zone “amt feet must stay away from clinic”

Lower court specifically named D’s & all persons acting in concert w/D’s & all other persons w/actual notice

Appeals Court: strikes down “all person w/actual notice” since wants to avoid enjoying all people

NEED NOTICE = can’t just enjoin everyone must show acting together look for evidence who is acting in concert w/D actual notice provision is not enough

V. REMEDIAL DEFENSESRemedial defenses shifts to whether remedy available at all shifts to party in defense of remedy most defenses are available – laches limited to equity UNSCIONSABLE = courts of equity won’t enforce unfair deals outside of sale of goods only available in equity if sale of goods in legal damages or equity

Muhammad v. County Bank Lower court finds adhesion K since prohibited class action claims in arbitration & class-action claims in

court since other party involved has no ability to negotiate its terms Arbitration clause had class arbitration waiver crt found unconscionable but said clause is severable

from rest of agreement so rest of K okay Interest rate really high BUT since had to pay back in 6 months Rule : Arbitration agreements covered by the Federal Arbitration Act shall be valid, irrevocable, and

enforceable save upon grounds as exist at law or in equity for the revocation of any K. o Generally applicable K defenses, such as fraud, duress, or unconscionability, may be applied to

invalidate arbitration agreements. Holding : Not inherently unconscionable on its face -- As a matter of generally applicable K law, it was

unconscionable for Ds to deprive P of mechanism of class-wide action, whether in arbitration or court litigation.

o Spirit of Bargaining Power = bank & person so uneven bargaining power o Economic Duress = compelled economically since payday loan o Public Policy = under public policy class arbitration is unconscionable since amount $ involved

charged at very high interest rate but time to pay back quick so get little $$ per person = no one would go to court 4 little amount

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SUBSTANTIVE K TEST Courts look at take -it-or-leave-it nature or the standardized form of document &:(1) subject matter of the contract,(2) parties' relative bargaining positions,(3) degree of economic compulsion motivating the "adhering party," and(4) public interests affected by the contract.

This factor requires the determination of whether the effect of the class-arbitration bar prevents P from pursuing her statutory consumer protection rights & 2 shield Ds from compliance w/law.

Adhesive Ks there will always be procedural so must analyze that THEN go 2 second substantive 4 part test

Unconscionability = usually have both procedural & substantive Procedural = had K made – could u negotiate? Was K overall unfair/unenforceable? Substantive = adhesion – subject matter unfair substantively bargaining power, public interests

Pinter v. Dahl – UNCLEAN HANDS OPPOSITE FROM EQUAL FAULT Securities Act requires registration of securities Pinter was oil & gas producer who agreed to acquires leases to drill wells on leases on behalf of Dahl & other investors & to operate wells – Dahl invested $310K of his own $$ & then got 11 other friends to invest $7.5K each. Wells turned out to be worthless. Dahl & other investors sued Pinter seeking rescission on ground investment hadn’t been registered w/SEC.

Registration of SEC depended on whether the securities had been sold as part of public or private offering ISSUE: whether the in pari delicto defenses applies UNCLEAN HANDS DOCTRINE: P’s participated in some of same sorts of wrongdoing as D SC Not Pari Delicto need to see if can raise in securities law since securities case law can deter

D’s but if P’s will also be deterred from brining suit & would ↑ harm to public THEN apply 2 factors below

CAN RAISE PARI DELICTO WHEN: o (1) – if P’s actively participated – P bears at least = responsibility for violations (if yes then check

#2 factor) o (2) – preclusion of suit would not significantly interfere w/effective enforcement of the securities

laws & protection of investigating public

Wrongful conduct must be directed at D not 3rd party to be barred from unclean hands Beelman v. Beelman = P & H fraudulently transferred their house to his brother 2 save from a tax lien. After H died IRS went away P asked house back. Brother-in-law refused court imposed constructive trusts. P wasn’t barred against unclean hands cuz fraud was against IRS not brother-in-law

Illegal Ks Crts won’t enforce K’s no unclean hands – just won’t enforce at all

Co-Conspirators court will not serve referee between co-conspirators

Geddes v. MillCreek County Club Inc. FACTS: P’s sue for golf-balls coming on their property which off 5th whole Facts: A golf course was planning to adjoin Ps' property. The designer changed the plan so that, instead of the plaintiffs' house facing other houses, it would face a fairway. Ps agreed to this plan, designer altered his plan.Issue: Whether estoppel is an available defenseRule: Where a person by his or her statements and conduct leads a party to do something that the party would not have done but for such statements and conduct, that person will not be allowed to deny his or her words or acts to the damage of the other party. To establish equitable estoppel, the party claiming estoppel must demonstrate that:

(1) the other person misrepresented or concealed material facts;(2) the other person knew at the time be or she made the representations that they were untrue;

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(3) the party claiming estoppel did not know that the representations were untrue when they were made and when they were acted upon;(4) the other person intended or reasonably expected that the party claiming estoppel would act upon the representations;(5) the party claiming estoppel reasonably relied upon the representations in good faith to his or her detriment; and(6) party claiming estoppel would be prejudiced by his or her reliance on the representations if the other person is permitted to deny the truth thereof.-Although fraud is an essential element, it is sufficient that a fraudulent or unjust effect results from allowing another person to raise a claim inconsistent with his or her former declarations.

Holding: D's estoppel claim is meritorious. Injustice would result in allowing Ps to bring these claims. Ps, by their conduct, induced or encouraged Ds to design and build the 5th hole. For Ps to assert these claims now would be inequitable and damage Ds.-Estoppel Rule:

(1) An act, statement or omission that is inconsistent with a right later asserted; and(2) other party acted in detrimental reliance.

Waiver = everything in #1 w/o detrimental reliance

Carr-Gottstein Foods Co. v. Wasika Inc. – WAIVER Safeway taking over lease w/prior grocery store safeway sought/got assurance from landlord that no violations of lease Then landlord files suit 4 violations in lease relinquished in right

SIDENOTE : Some courts require waiver to be explicit, not implied o Waiver = if involving constitutional rights – must be explicit & knowing intentional waiver that

you are giving up your constitutional rights o This case also could’ve claimed estoppels since Safeway acted in detrimental reliance

LACHES Party who delays bringing claim can be barred from equitable relief

o (1) unreasonable delay in bringing suit o (2) prejudice 2 D as result of delay

2 types of prejudice: Evidentiary prejudice: delay makes different for D 2 defend itself since

evidence available ↓es the longer delay in bringing suit Economic prejudice: D invested time, energy, $$, expertise P now wants 2B

enjoined -Excuses for Delay

o -Settlement negotiationso -Concealment of infringing conduct (wrongful conduct hidden from P)

Remember: delay must be UNREASONABLE! Not knowing that you had a lawsuit is not an excuse.

Pro-Football Inc. v. Harjo Lanham trademark act allows anytime can bring suit of trademark infringement. Native Americans brought suit against redskins trademark. Redskins said prejudiced. Lower court -- Date requirement – redskins trademark disparaging to Native Americans only from date initially filed & evidence prejudice no one who was initially disparaging, economic prejudice since football team would not have trademark prejudiced since invested lots $$ in trademark

Pro-Football, Inc. v. Harjo (D.C. Cir. 2005)Rule: Laches is founded on the notion that equity aids the vigilant and not those who slumber on their rights. This defense requires proof of (1) lack of diligence by the party against whom the defense is asserted, and (2) prejudice to the party asserting the defense. Pro-Football, Inc. v. Harjo (D.C. Cir. 2009)

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Issue: Whether laches was an available defenseHolding: A finding of prejudice requires at least some reliance on the absence of a lawsuit. Laches requires only general evidence of prejudice, which may arise from mere proof of continued investment in the late-attacked mark alone. The lost value of these investments was sufficient evidence of prejudice for the district court to exercise its discretion to apply laches, even absent specific evidence that more productive investments would in fact have resulted from an earlier suit.

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STATUTE OF LIMITATIONS: statutory period for filing suit, you have to file b4 period over question: how to know what date is? To measure, know when it begins… usually when COA accrues,

when the facts give rise to an actionable cause, then that’s when clock starts doing. o when wrongdoing happens but injury doesn’t manifest until later, some instruments help

(Disc, or continuing violations) Most courts say to look at similar statute of limitations Courts have created doctrines that try to make it fair for plts in situations Continuing violations – what if plt didn’t bring suit, but there is continuing violations? courts say that

plt can assert the last violation Discovery rule – go to doctor and they don’t diagnose a cancer. SOL for MedMal are short. May be

time barred. So court created discovery rule. Fraudulent concealment – what if they hide the fraud? SOL doesn’t accrue until find out.

← Klehr v. AO Smith

o Federal Statute case. RICO has no SOL in case, so court used SOL from simiar act. (4 yr SOL)

o Def engaged in wire fraud by selling silo to plt, sayin silo would limit the oxygen exposure. Didn’t live up to it→ mold→ cows ate mold food.

o The silo sold in 1974, suit not till 1993. o CONTINUING VIOLATIONS RULE – On x date you have wrong occurred; so long as

there is violation continuing, then you have a claim. with every new violation there is a new window for claim. Def engaged in continuing violations (ie the mail and wire fraud)

o SCOTUS RULE: If there was no injury in the time you filed, you cannot recover… And for all the continuing violations that occurred, you can only recover from the 4 year SOL period.

continuing violation must have continuing harm.o Note:

Cumulative violations: sometimes takes many violations to breed cause of action. ex. hostile work environments – where over time many violations cause an act. SOL for this is 300 days. Federal Emp discrimination allows for recov for up to 3 years. But must file within 300 days.

Period of embezzlement: 7th circ says that’s not cumulative violation. Pay in Equity – b4, each paycheck was new SOL period. Overruled→ first

paycheck is when you have to file. continuing duty: everytime def doesn’t repair harm, SOL renews as long as there is

continuing injury Continuing injuries w/o continuing violation?

not enough then. Congress, for any statute violation, 4 years (not important)

Discov rule: Tolling doctrineo Definition - Even though the facts have occurred, the SOL does not run unless person

discovered or should have discovered facts necessary to make out cause of action. Plt doesn’t notice bc nature of injury doesnt occur yet.

o But what if you get conflicting reports? (next case) if doctor says you don’t have the thing, reasonably rely on the opinion of the

professional. Penn law: if the doc says you don’t have thing, reliance might be unreasonable.

Discovery Rule: Debiec v. Cabot corp.o People lived /worked near a beryllium plant, many died, which was traced back to Chronic

Beryllium Disease. o Penn has 2 yr SOL for PI and Wrongful death that usually starts from the injury; but there is

the discovery rule exception.

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to use discovery rule, plt must exercise due diligence in investigating her physical condition; “whether the the knowledge was known or, through the exercise of diligence, knowable to plt.

plaintiff reliance on doctor assurances is reasonable as long as the plaintiff retains confidence in doc’s professional abilities.

o lady lived near beryllium plant; died from some lung disease that was latter beryllium exposure. plt filed

← Fraudulent concealment (TOLLING) : if a defendant fraudulently conceals the natures of the injury,

then the SOL tolls.

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