Civil Procedure Spring 2009 Outline – Shipley
Chapter 5: Incentives to Litigate
· Why Litigate?
o Statistics:
§ Only 3% of cases actually make it to trial; most settled/abandoned, default judgment
· 70% Jury Trials (probably tort), 30% Bench Trials (probably contract)
§ Ps win 49% of tort cases and 62% of K cases
§ Median recovery: K ($48K), Torts ($37 K)
o Fees:
§ American Rule – Each side pays their own fees; English Rule – Loser pays
· Remedies:
o If the complaint does not seek damages, there are several actions Ds can take:
§ Wait for Rule 26 Disclosures
§ File Interrogatories
§ If there is no proof of damage, move for summary judgment or directed verdict
Replevin;
Ejectment;
Mandamus;
Habeas Corpus;
Damages
Injunction;
Reformation;
Rescission;
Quiet Title
Damages
Clean-Up;
Damages;
Constructive Trust;
Accounting
Specific
Substitutionary
Equitable
Legal
o Substitutionary – Where the harm cannot be directly remedied (Usually $$ dmgs):
§ Compensatory:
· May include economic losses, and non-economic damages which are more difficult to calculate: pain and suffering, emotional distress, loss of consortium, humiliation and harm to reputation
o Non-economic losses are harder to prove, so an attorney should be creative, possibly asking the jury to place a dollar amount on one day of D’s pain and then multiply by life expectancy
· Interest: Prejudgment interest may be added for contractual obligations and tort where (taking property, other pecuniary harms; not bodily injury, emotional distress, or reputation), and post-judgment interest may be added to substitutionary remedies
· Don’t forget Duty to Mitigate damages, but remember that it only requires mitigation where they have the means to do so
§ Liquidated, Statutory and Punitive:
· Liquidated: damages which are forfeited in the event of a breach
o UCC § 2-718(1): Damages may be liquidated in a reasonable amount if they otherwise would be difficult to calculate
· Statutory: damages that are fixed by law
o Copyright Act: If the aggrieved party cannot prove lost profit, damages will be between $500 and $20k
o Truth in Lending Act: sometimes in small truth in lending claims, attorney’s fees are granted by statute so as to encourage the suit
· Punitive:
o Damages added to compensatory to punish the DEF for abhorrent behavior (contrary to gen. purpose of damages to compensate P)
o Due Process claims become the biggest obstacle to punitive damage recovery (taking property without due process, and likened to criminal punishment without heightened standard of “beyond a reasonable doubt”)
§ As a rule, punitive damages are only available in the rarest of contract cases, more typical in tort cases and in general LIMITED TO CASES OF NON-ECONOMIC LOSS
§ Browning-Ferris Indus. V. Kelco Disposal: SCOTUS says that the 8th Amendment does not forbid punitive damages (not cruel and unusual punishment), but due process may be
§ 2 approaches to limiting punitive awards:
1. Punitive damage awards are reviewed DE NOVO: Ensure award based on law rather than on arbitrary decision-maker bias
2. BMW of North America v. Gore – 3 Part Test for Reviewing Punitive Damages (Gore Guideposts):
1) The degree of reprehensibility of the D’s misconduct: (Factors: phys. V. economic dmg; indifference/reckless disregard of health/safety of others, financial vulnerability of P; repeated actions or isolated incident; result of intentional malice, trickery, or deceit or mere accident)
2) The disparity between the actual or potential harm suffered by the P and the punitive damages award; (Single-digit ratio (Campbell)
3) The difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases
§ State Farm Mutual Automobile Insurance Co. v. Campbell: P filed a bad faith claim against his insurance company for not settling for the full amount with the people he injured in a car accident (de novo review here)
· The jury considers evidence of a “nationwide scheme” of refusing payouts when finding $1 mil in actual damages and $145 mil in punitive damages (due process claim follows on appeal)
· There is a general rule that punitive damages cannot be awarded for conduct outside of a state’s jurisdiction, and further, the conduct in other states might well have been legal in those states. It was a violation of due process for the UT courts to essentially rule against the D in hypothetical claims of individuals not present
· No bright-line rule, states that a single-digit multiplier probably be considered a more appropriate award (1:1 is typical, 10:1 and higher will probably be overturned)
· Policy: Punitive damages cannot be awarded for injury to non-party strangers … courts do not adjudicate merits of other hypothetical claims (conflict w/ issue of reprehensibility [pot. for harm to others])
o Specific Remedies – Where the harm can be directly remedied:
§ Rules of Priority: Must prove that remedy @ law inadequate or irreparable harm to justify equitable relief
§ Sigma Chemical Co. v. Harris: D employee Harris signs a non-compete as well as trade secret clause when joining Sigma, but then leaves P Sigma to work for a competitor ICN. The non-compete was enforceable since it was reasonable [temporal/geographic scope].
· Balance of Hardship: Harm to P’s of having D use his knowledge for their competitor would be greater than harm to D by making him work in a different department of the competitor => grants injunction
· Appellate: Denies P’s request to enjoin D entirely (Softens restrictions of K) from working and grants D’s appeal
§ Remember that money can be both substitutionary and specific (???)
· Hecht v. Bowles: P (govt. price administrator) seeks injunction to restrain D from violating the Emergency Price Control Act
o District Court: Where violations were (1) “good faith” mistakes (large # transactions, misunderstanding of regulation, complexity, absence of adequate records) and (2) vigorous efforts were undertaken to prevent recurrence (tried to repay overcharges, donated to charity, offered to be testing => no injunction
o The Supreme Court orders remand of the Appellate Court’s dismissal stating that there is a presumption that a trial court has discretion unless otherwise clearly indicated by stat
ion) => declaratory judgment OK
· General issue regarding sufficient “degree” of adversity
· FINANCING LITIGATION: Who is paying? How is it made? How does it affect litigation?
o American – Each party pays its own legal fees, Ps w/ less-than-certain cases and limited finances can invoke legal system w/o fear of further loss; significant role in country’s political system and protecting constitutional rights (encourages “law reform suits” and discourages strong “low damages suits”)
§ Rule 54(d) and 28 USC § 1920 (taxation of costs). Fee shifting
§ Rule 68. Offer of Judgment
o English – Fee shifting (loser pays); encourages strong “low damage” suits and discourages high-cost “law reform” suits
o “Retainer letter:” (req. deposit from client); hourly (D) v. contingency (P) v. flat rate (wills)
o Insurance: Duty to indemnify and defend; power to settle, cannot unreasonably refuse to settle; fees covered by other policyholders via subsidized premiums
o Contingency: Lawyers act as creditors and may get bank loan (“human capital”)
· PROVISIONAL REMEDIES – Relief pending final adjudication of the suit (Rule 65):
o When should court decide whether to grant temporary relief when all relevant info is not available? (Sliding scale)
o When does curtailment of ordinary procedures in granting “provisional remedies” amount to denial of due process?
o Rule 65(c) – Security: requires that the moving party post a bond in the amount the court determines the damages or costs to the adverse party to be in the event the injunction or TRO is later found improper
o Preliminary Injunctions – Rule 65(a):
§ May be granted after a full hearing (right to jury trial reserved)
§ There must be notice to the adverse party
o Temporary Restraining Orders – Rule 65b:
§ 65b1: May be issued without any hearing or even notice to the adverse party IF:
· A) Immediate and irreparable harm would result if denied; AND
· B) The movant’s attorney reports efforts made to provide the other party with notice and reasons for the inability
· Probably only appropriate without a hearing in areas of a substantial state interest (as in the case of a restaurant that should be shut down for food poisoning) … very hard to prove
§ 65b2: The TRO granted without notice may only last at the most 10 days
§ 65b3: If issued without notice, the court must schedule a hearing on the TRO as soon as possible
§ 65b4: On 2 days notice to the party granted the TRO without notice, the adversely affected party may move and be heard to dissolve the TRO
