Zisk – EQUITY – Fall – 2013
I. INTRODUCTION
A. Intro
A remedy is a solution to a problem/compensation for a loss.
Damages
Legal relief
Monetary relief designed to compensate a plaintiff for harm caused by defendant
Specific Relief
Equitable relief
Designed to do justice
**You only get them if legal relief is inadequate
Equity
The exercise of a wise and just discretion
Granting or withholding relief
Discretion of the court
Prudence and correctness of judgment that is just and fair under all circumstances
Equity is NOT fairness.
Its hard to get an equitable decision overturned because the discretion is given deference.
TAKE-AWAY: the court doesn’t have to follow the rigid rule of law. In its equitable discretion it can make a different decision.
RULE/TAKE-AWAY: court does have power in equitable power to not follow the rigid rule of law.
RULE/POINT: There is a way to avoid rigid rule of law, but you don’t have to. There’s no room in equity for compassion—its too “tender” an emotion.
Rule: An injunction, like any equitable remedy, does no issue “as of course.” It will issue only where the intervention of a court of equity “is essential in order effectually to protect property rights against injuries otherwise irremediable.
II. HISTORY OF EQUITY
A. The Origin
13th century England—we inherited all of our jurisdiction including equitable, from English.
Three Courts in 13th century England
1. The Kings Bench
2. The Common Bench/Court of Common Pleas
3. The Exhequer
more than a court of law
not just damages
took care of king’s money/treasury
Kings secretary of state – chancellor (if legal remedy unavailable). The maxims of equity were the chancellor’s rules.
Today we still need to distinguish between law and equity because of the scope of appellate review and the right to a jury trial.
Right to a jury trial is NOT required in jury trial
The scope of discretion and standard of review changes depending whether it’s equitable or legal.
“Equity Acts in Personam, Not in Rem” = Maxim
§ equity enforces its powers by means of coercing the person (through power of contempt). Traditionally, equity was unable to act directly upon a persons property. U
§ When the court of law could not help they directed the parties to the chancellor who could do different things. If plaintiff didn’t do what the court said then they were committed to prison until they obeyed.
§ Power of the Chancery = they can do nothing except order the party to prison until they obey. They can’t nullify an obligation or contracts.
§ Commanded obedience of suitors but that’s all it could do.
B. Merger of Law and Equity
§ Standard for Prelim Injunction
· Likelihood for success on the merits
· Irreparable injury in the absence of the injunction.
§ GMD v. Alliance Bond Fund, Inc. et al: GMD owed money to a lot of people and investment funds filed suit. They wanted a preliminary injunction to prevent GMD from transferring the assets (cause money was owed to them). The issue is whether or not the District court had authority to issue the preliminary injunction.
o No there cannot be a preliminary injunction here because the investment funds (Plaintiffs) had not gotten a judgment establishing the debt and without it a court of equity could not interfere with the debtor’s use of property.
Strank v. Mercy Hospital of Johnstown: a nursing student is kicked out for spending the night out. She’s not contesting being kicked out only that they aren’t allowing her to transfer her credits to a new school.
· Equity Claim: she has suffered great damages (2 years of schooling) and there is no adequate remedy at law…money wont fix it.
· The court says they have power in equity to reach the question because there isn’t an adequate remedy at law.
Modern Practice= in federal courts and most states law and equity are “merged”
§ The relief that follows a breach of contract claim is a LEGAL relief that’s not typically available in court of equity.
§ Restitution can be legal or equitable.
· It’s a legal remedy when ordered in a case at law.
· Its an equitable remedy when ordered in an equity case.
o Relief in the form of a constructive trust or equitable lien.
o Plaintiff seeks particular funds or property in the defendant’s possession
o Plaintiff does not seek to impose personal liability on the defendant.
· To determine whether its legal or equitable depends on
o The nature of the claim
o The nature of the underlying remedies sought.
§ Injunction:
· An injunction to compel the payment of money past due under a CONTRACT or specific performance of past due monetary obligation à not typically available in equity (Great West Life v. Knudsons)
o Great West Life & Annuity Insurance Co. v. Janette Knudson & Eric Knudson: essentially the case (when it gets to Supreme Court) is one to impose personal liability on the Knudsons for a contractual obligation to pay money under a reimbursement plan. They also requested restitution. In the end its found it’s a legal claim.
§ Its too late for a temporary restraining order and it would’ve been to compel payment under a CONTRACT anyways.
§ Recognition of Equity Decrees at Law (and Judgments in Equity)
· Mutual Life Insurance Co. v. Newton: There’s a mortgage and a bond and the bond is to protect the mortgage. The party who gave mortgage needs to be made whole. The court of chancery decreed and declared that the money was “still due and owing”. The decree was filed with the clerk and became a judgment.
· They cannot now bring the decree in equity as an action at law because of
· Res Judicata: a verdict and judgment of court of record or decree in chancery puts an end to all further controversy concerning the points thus decided between the parties to the suit.
· TAKEAWAY: this case should have been brought as a claim on the bond and in equity for relief-bring them at the same time.
C. The Right to a Trial by Jury
Its important to determine if the claim is one at law or equity because if it is one at law then you’re entitled to a jury trial.
To determine which type of claim it is look at:
1. The nature of the issues involved: compare the statutory action to 18th century actions prior to merger.
If there wasn’t a similar case at law then look to something analogous (Chauffers Terry)
2. The remedy sought: is it legal or equitable in nature.
The remedy of backpay sought for breach of fair representation is legal in nature and therefore jury trial (Chauffers Terry).
III. POWERS OF COURTS OF EQUITY
A. Enforcement of Equitable Decrees
i. Notice
· RULE: When there’s a court order and it remains in force it MUST be obeyed. PERIOD. It doesn’t matter if you think it’s a bad rule. You must obey it. (Cape May where they were informed of law via telegraph).
§ Sufficient Notice of court order
§ 1. Must proceed from a source entitled to credit; and
§ 2. It must inform the defendant clearly and plainly from what act he must abstain.
· In Cape May the notice informed them of the act prohibited and it warned them of the consequences of disobeying. Even their attorney told them to disobey it. SUCKS FOR THEM. Too bad. They are guilty of contempt.
ii. Persons Bound by the Decree
· RULE: An agent or manager of a person restrained who has knowledge of the order may also be restrained.
§ Lord Wellesley: “given his position and knowing duty”
· RULE: The only way people not party to the action may be bound by an injunction is if they have KNOWELDGE of it, provided they are servants or agents of the party OR act in collusion or combination with the party.
§ Doesn’t apply to the whole world (Rigas v. Livingston)
· Fed. R. Civ. P. 65: Every order granting an injunction “ is binding only upon the parties to the action, their officers, agents, servants, employees, and attorneys, /and upon those persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise”
§ Clarification: if you are an officer, agent, servant, employee or attorney, lack of notice is not an excuse (otherwise we could get done indirectly what we can’t do directly).
§ Whether or not you have actual knowledge doesn’t matter if you weren’t in active concert and participation (United Pharmaceutical Corp). No evidence th
and judge was not convinced and found her in contempt without hearing. The trial court found that the defiance was “flagrant” and had “permanently prejudiced the jury in favor of her client” and the prejudice could not be overcome”. Here contempt was needed to vindicate the court’s authority.
· Indirect: Occurs out of court. An act not committed in presence of court itself. Considerations justifying expedited procedures to do not pertain.
§ Absence of an attorney is not contempt by itself. “The absence of a valid excuse is an indispensable element of contempt”. It’s not direct contempt but indirect but its not within the presence of the court itself.
§ If contempt is indirect matter would be referred to another judge.
§ In re Yengo: the attorney didn’t show up because he was in Bermuda….the excuse was frivolous so the judge imposed a 500 dollar fine and the fine stood.
IV. THE INJUNCTION
· An injunction is an in personam order by the court to a defendant to do or to refrain from doing something.
§ To preserve the status quo, pending litigation
§ To prevent a threatened injury
§ Enforceable by the court’s power to punish for contempt.
A. Interlocutory Injunctions (they are mandatory too…)
· Temporary Restraining Order (TRO): An extraordinary remedy. It may be entered without notice. To obtain a TRO, plaintiff must show:
§ 1. That unless the restraining order issues they will suffer irreparable harm.
§ 2. That the hardship they will suffer absent the order outweighs any hardship the defendants would suffer if the order were to issue
§ 3. That they are likely to succeed on the merits of their claims
§ 4. That the issuance of the order will cause no substantial harm to public; and
§ 5. That they have no adequate remedy at law.
· Preliminary Injunction: Four part standard.
§ 1. Some likelihood of succeeding on the merits
§ 2. Plaintiff has “no adequate remedy at law” and will suffer “irreparable harm” if preliminary relief is denied.
…If plaintiff cannot show both of these first then injunction is denied…if they are both shown then court considers:
§ 3. Balancing of the harms.
§ Balancing the harm against the irreparable harm to moving party if relief is denied.
§ 4. Public Interest
§ meaning the consequences of granting or denying the injunction to non-parties.
§ Court weighs all the factors to “minimize the cost being taken”.
§ The test isn’t precise, but subjective and intuitive.
§ Abott Labs: infant pedialyte vs. ricelyte case. The supreme court found that a p.i. was unnecessary. There were less severe alternatives than complete taking the competing product off the market.
· POINT: Courts retain a great deal of flexibility. We want competition but FAIR competition.
· Rule 65(c): “No restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained” (Coyne-Delaney Co. v. Capital Development Board).
§ Most cases hold that a prevailing defendant is entitled to damages on the injunction bond unless there is a good reason for not requiring the plaintiff to pay in the particular case.
§ Good reason?
· Defendants failure to mitigate damages
· Change in the law
· Plaintiff’s good faith – By itself, does not defeat the entitlement to damages.
