REMEDIES OUTLINE
Charles Campbell
Modern American Remedies: Cases and Materials by Laycock; 4th Edition
INTRODUCTION
1. Remedy Classifications
a. Compensatory – compensate for harm suffered
i. Expectation Damages – Restore P to position if the contract were never made
ii. Reliance Damages – Restore P to position if the contract were performed
b. Preventative – to prevent harm before it occurs
i. Coercive – using judicial power to compel action or inaction
1. Equitable
a. Injunction
b. Specific Performance of a contract
2. Legal
a. Contempt
b. Mandamus
c. Prohibition
d. Habeas Corpus
ii. Declaratory – prevents harm by resolving uncertainty; but there is no order to act or omit
1. Declaratory Judgments
2. Bill to Quiet Title
c. Restitution – compensate plaintiff based on what the defendant gained at the plaintiff’s expense
i. Undoing Unjust Enrichment
ii. Disgorgement
d. Punitive – to punish wrongdoing
e. Ancillary – to aid other remedies or make them more effective
i. Court costs
ii. Attorney’s Fees
iii. Punishment for Contempt – to enforce payment of damages or compliance with an injunction
iv. Writ of Execution
v. Garnishment
2. Categories of Remedies
a. Substitutionary vs. Specific Remedies
i. Substitutionary – plaintiff is given something other than what was in the transaction
1. Compensatory Damages
2. Attorney’s Fees
3. Restitution of the value of the defendant’s gain
ii. Specific – plaintiff is given what he wanted out of the transaction. P is saved from harm, repaired, or restored to his rightful position
1. Injunction
2. Specific Performance
3. Restitution of Specific Property or Money
b. Legal vs. Equitable Remedies
i. Courts of Equity à Injunctions, generally
1. Only available when the legal remedy is inadequate, or
2. No other remedies are available
ii. Courts of Law à Damages, generally
1. Jury trials only for legal claims
COMPENSATORY DAMAGES: Paying for Harm
1. Rightful Position Rule
a. Put P in the position he would have been in but-for D
b. United States v. Hatahley (SCOTUS) – gov’t seized tribe’s horses and sold them to a glue factory
i. Rule – fundamental principle of damages to restore the injured party as nearly as possible to the position he would have been in but for the wrong
ii. Notes:
1. Damages must be Calculable – Not speculative
2. 2 Compensation Methods – Lesser of Two Rule:
a. FMV + Loss of Use
b. Replacement Cost + Loss of Use
i. Used when there is no FMV
2. Determining the Value of the Rightful Position
a. Special Purpose Properties:
i. For properties that do not have a market, thus no FMV
ii. Trinity Church v. John Hancock Mutual Life Insurance Co. – Church damaged during construction of adjacent building. Damage by deterioration vs. damage by construction?
1. Recovery = Cost of Reproduction – Depreciation
3. Expectancy and Reliance as measures of the Rightful Position
a. Neri v. Retail Marine Corp. – Neri purchased a boat but had surgery and could not pay, so he cancelled the order and demanded deposit. RMC sold the boat for a profit and still wanted to keep Neri’s deposit
i. Recovery = Deposit – (damages from breach + expectation damages)
1. Damages from breach – storage fees, etc…
2. Expectation damages – lost profits, etc…
ii. Notes
1. Loss Volume Seller – D must be able to show 2 sales to recover loss profits. If D could have sold both and worked both jobs, he wins
b. Chatlos Systems v. National Cash Register Corp. – P was promised a $207k machine for $46k. But it was worth $6k. Holding – $201,000 in damages awarded
i. Damages = Warranted/Asserted Value – Value Received
c. Recovery for Tort/Fraud
i. Smith v. Bolles – Bolles made false/fraudulent misrepresentation to Smith in sale of mining stock. Price was $6,000, Actual price was $0, and the FMV or promised price was $40,000.
1. Recovery = K Price – (reasonable FMV or actual) = $6,000 – $0 = $6,000
a. Basically the Plaintiff’s loss due to the deception
2. Notes:
a. No expectation damages
4. Consequential Damages
a. Overview
i. Damage that flowed from or resulted from D’s action on inaction
1. Ex – medical expenses, lost wages
2. Not General Damages – immediate result from D’s wrongdoing (P & S)
ii. Requirements
1. Flow From D’s Wrongdoing
2. Natural And Proximate Result Of Breach
a. Substantial Proof is required
b. D is not liable for damages that are remote or indirect
3. Reasonably Foreseeable Consequence Of Breach At Time Of Contracting
iii. Court’s Majority View
1. Hostile toward awarding special/consequential damages
2. Often not recoverable
3. Could P have exercised more care?
iv. You can Limit consequential damages through Mutual Agreement
v. Consequential Damages are only available when loss could not be avoided
b. Meinrath v. Singer Co. – Meinrath’s employment contract specified a bonus he never got. He sued for $300K in expectation damages and $770 in consequential damages since he was going to invest it.
i. Holding – P was awarded money owed, Not lost business opportunities
1. Too speculative
c. Tortuous Interference
i. Recovery = Loss of benefit under the K + consequential damages + punitives
ii. ***Different standard for consequential damages***
iii. Texaco, Inc. v. Pennzoil Co. – Pennzoil had merger agreement with Getty Oil. Texaco made alternative agreement with Getty Oil who then repudiated the Pennzoil agreement. Jury verdict of $7.52billion plus $3billion in punitive
1. Loss of benefit under the K = cost of finding equivalent reserves – cost of acquiring under the contract
5. Limits on Damages
a. Parties Can Specify/Limit the Remedy
i. Kearney & Trecker Corp. v. Master Engraving Co. – P bought machine from D that advertised “amazingly low maintenance.” Contract warranted defects for 12 months or 4,000 hours, excluded incidental/consequential damages, and limited liability to repair/replacement or return of the machine. It malfunctioned all the time and was inoperable a lot.
1. Holding – the two damage limitation clauses were separate and the invalidation of one clause did not invalidate the other
a. P got general damages under the UCC, but no consequential damages
2. Notes:
a. Unconscionable limits on consequential damages are void
b. Repair/Replace Remedy fails its essential purpose if the seller is unable or unwilling to repair or replace in a reasonable time
ii. Unconscionable to exclude liability for personal injury caused by consumer goods
iii. In Re Trans World Airlines, Inc. Rule – Liquidated Damages must be:
1. Proportional to the Real Damages, or
2. Bear Reasonable Relation to the Parties Expectation at Time of Contracting
b. Liquidated Damages à no consequential damages or none in excess of the purchase price
c. Underliquidated Damages
i. Upheld unless the agreement was unreasonable
ii. Northern Illinois Gas Co. v. Energy Cooperative, Inc. – gas prices dropped and K was breached. Liquidated damages allowed $13.5million but actual damages were $300million.
1. Holding – No actual damages, only LDs
2. Rule – Mutually agreed upon Liquidated Damage Clauses are an exclusive measure of damages in the event of default
d. Avoidable Consequences
i. P has affirmative duty to reasonably attempt to mitigate damages or harm
1. P can recover reasonable costs to avoid damages
2. Mitigation efforts do not have to be successful
3. Failure to mitigate due to financial reasons is an acceptable excuse
4. Burden of proof is on D to establish damages could have been lessened
ii. Landlord-Tenant Rule: some jd’s landlords do not have a duty to sublet if a tenant walks out
iii. Breach of Employment K: P must make reasonable efforts to find an alternative and accept that alternative if it is “substantially equivalent”
1. If P tried and can’t find an equivalent, using the same D exclusively is reasonable
e. Offsetting Benefits
i. D can reduce damages by P’s gain from D’s wrongdoing
1. Benefits must arise from the same interest that was harmed
f. Collateral Source Rule
i. Compensation P receives from a non-party is inadmissible and does not reduce the damages owed by D
1. D should not benefit from P’s foresight in seeking protection for herself
ii. 2 Forms
1. Substantive – D cannot reduce damages/liability based on a collateral source
2. Evidentiary – jury cannot hear evidence about collateral sources
iii. State-by-State Rule
g. Scope of Liability
i. Remoteness
1. No recovery for indirect economic harm
a. Does not apply to intentional torts
2. Pruitt v. Allied Chemical Corp. – ACC polluted water in the Bay causing indirect lost profits to restaurant owners, fishermen, marina owners, sea food sellers, etc…
a. Holding – only plaintiffs who harvested sea creatures could recover
b. Notes
i. Economic Harm Rule – P must suffer physical impact from D’s conduct to recover for economic harm
ii.
iv. Balance of Hardships favoring the plaintiff
v. Balance Public Interests
1. Advancement of public interests or no substantial harm to the public
ii. Permanent Injunctions
1. Requirements (Winter Test) – Difference in Preliminary and Permanent, P Shows:
a. Actual Success on the Merits, instead of a likelihood of success
d. Scope
i. Depends on the factual basis of the threatened or continuing harm
e. Enforcement
i. Issued In Personam – enforceable through D only, not through his property
ii. If court gets Personal Jurisdiction, it can retrain D from acting/omitting anywhere in the world
iii. Contempt of Court
f. Bond
i. A security requirement that the moving party must provide
ii. Protects non-moving party in case the injunction was erroneously/fraudulently granted
iii. If you disagree with the bond amount, cross appeal when the preliminary injunction is argued
1. Courts don’t want money to be a barrier if there is a good enough showing to proceed with the case
iv. City of Atlanta v. MARTA – the bond requirement is discretionary
1. Consider Ebay factors in determining this
v. Defendant is responsible for asking for a bond
g. No Injunctions Ordering You To Obey The Law!!!
2. Issuing Preliminary & Permanent Injunctions
a. Ebay Inc. v. Mercexchange, LLC (SCOTUS) – MercExchange sued to enjoin Ebay from infringing on its patents and using its intellectual property. Jury found that Ebay willfully infringed the patent. COA granted injunction based on its rule to always issue a permanent injunction against patent infringement absent exceptional circumstances
i. Holding – COA erred in issuing permanent injunction and remanded to DC to apply the:
ii. 4 Factor Permanent Injunction Test – P must prove:
1. Irreparable Injury
a. Extraordinary and based on a clear showing of entitlement
2. No other adequate remedy
3. Balance of hardships between plaintiff and defendant
4. Public interest would be dissolved by a permanent injunction
iii. P’s Award = Injunction + Payment of Per-Unit Royalties
b. TFT v. Warning Systems (Alabama Supreme Court) – to get a permanent injunction P must show:
i. Success on the merits
ii. Substantial threat of irreparable injury
iii. Threatened injury to P outweighs the harm the injunction may cause to the D
iv. Granting the injunction will not disserve the public interests
c. Winter v. Natural Resources Defense Council, Inc. (SCOTUS) – Navy scheduled 14 exercises and sonar caused whales to die. DC granted the injunction. COA said the Navy could use sonar but had to mitigate the harm to marine animals. Navy appealed. Injunction denied
i. Rule – Cannot grant preliminary injunction on the possibility of irreparable injury
1. Irreparable injuries must be likely in the absence of an injunction
ii. Notes:
1. P must show standing: an irreparable injury to them, such as whales will not behave the same and P will not be able to observe/research them
2. ***eBay/Winter Hybrid Test***
a. likelihood of Actual Success on the Merits
b. possibility of Irreparable Injury if PI is not granted
i. In intellectual property cases, irreparable injury is presumed
c. Inadequate Legal Remedy – damages cannot fully repair
d. Balance of Hardships favoring the plaintiff
e. Balance Public Interests
i. Advancement of public interests or no substantial harm to the public
