Legal and Equitable Remedies Outline—Flanagan-Spring 2014
· Organized by function
o Compensatory—make whole
§ Substitutionary—money as substitute for what is lost
§ Legal remedy—tried by jury (if purely equitableà judge)
o Preventative/Coercive—i.e. injunction or specific performance
§ Enforced through contemptà power of the court
§ Specific remedy
o Restitutionary—restoring specific items to you
§ Constructive trust, equitable subrogation, rescission
§ Specific remedy
o Declaratory Remedies—declarative judgments
§ Substitutionary and preliminary
§ Economically efficiency
o Punitive Remedies
§ Legal remedy
Paying for Harm
· United States v. Hatahley (1958) pg. 11
o Facts: The Government tortuously rounded up and sold farm animals owned by Hatahley and other Indians. The district court determined a set amount of damages for each animal and multiplied that amount by the number of animals lost by each plaintiff. It also arrived at a sum for mental distress and awarded each plaintiff an equal amount. The Government appealed, contending the award was arbitrary and not based on substantial evidence.
o Holding: An award of damages based on the commission of a tort must be based on the principle that the injured party must be restored to the same position he was in had the tort not been committed. Reversed and remanded.
o Consider the replacement value—horses and burros
§ Replacement value and market value are different
· Need to have a market (didn’t exist in this case)
o Horses were unique—didn’t need much food/water
o Can’t replace horses
o Loss of use—improper measure of damages (arbitrary to use 50%)—failure to consider duty to replace the animals
o Mental injury– $3500 per plaintiff is arbitrary
o Can you figure out specificity of damages?
§ How much evidence is required?
§ Who should bear the burden?
o Larger issues:
§ Is the “rightful position” of the plaintiff achievable by awarding average damages?
§ Why should specificity in damages be preferred over average damages?
§ Would there be a problem if this case was the result of a jury verdict?
· In re September 11th Litigation (2008) pg. 18
o Facts: In April 2001, WTCP purchased 99 year lease for four of the World Trade Center towers. WTCP paid the New York Port Authority $491 million dollars at the closing in July of 2001 and would also pay rental payments to New York over 99 years. The value of those rental payments at the time of the closing was $2.8 billion. After the events of September 11, 2001, WTCP sued several airlines, security companies and the operator of Boston’s Logan Airport in federal court for negligence on the grounds their alleged actions that morning contributed to the terrorist attacks. WTCP seeks $16 billion in replacement costs. The district court issued this intermediate ruling of law on the amount of damages WTCP could recover in the suit.
§ How did Port Authority protect income stream?
· Required replacement if towers were destroyed
· And continue payments
o Holding: Recovery for property damage is the lesser of the replacement cost or the diminution of the property’s market value.
o General rule: Less-Of-Two Rule
§ Lesser of diminution of market value or replacement cost
· Fisher v. Qualico pg. 19
o Would create windfallà keep extra money
o Not economically viable
o Plaintiff wants replacement valueà is that the appropriate measure of damages?
§ Or should it be diminution value?
§ What’s the problem with replacement value?
· Not exact replacementà WTC built in 1912
o Replacement would be significantly different structure
· Could take replacement value—depreciated value of original
o Court decided not to do that—why?
§ Note 2 pg. 23—basically more complicated way to get to market value
o Loss of use (rental payments from time of destruction until replacement)
§ Value of rental rolled into present value
· Would create double recovery
o Buyer is obligated to continue to pay rents to seller and rebuild
§ Does that affect recovery?
· Palsgraf—need causation
o What is the airline responsible for?
§ Liability limited to loss of building
· Does NOT include obligation to rebuild
o Special Use Property (typically comes up with real estate—usually non-profits)
§ Not a comparable market—no ready market
§ i.e. Trinity Church
§ Need to use replacement value (market value doesn’t exist)
§ WTC was not special use
· Office spaceà not unique use
· Market exists, therefore has market value
§ What about personal property with sentimental value? Pg. 26
· Replacement cost < owner’s value
· Normally don’t get sentimental value, but there are exceptions
o Jury allowed to award reasonable damages for sentimental value
· Trinity Church v. John Hancock Mutual Life Insurance (1987) pg. 28
o Facts: Trinity Church was built in 1976 in Boston. It was constructed almost entirely of stone masonry, which cracks over time and cannot be repaired except by reconstruction. By 1968, the church had experienced settlement of four inches, but because the subsidence was fairly uniform, no structural damage or stress had resulted. During construction of the John Hancock Tower Building next to Trinity Church between 1968 and 1972, the foundation of the church was undermined by a failure of the excavation system at the Hancock site. Trinity Church’s foundation settled unevenly and produced cracks that affected the structural integrity of the church. Trinity Church sought compensation for the structural damages and quantified the damages based upon the percentage change in the structure in terms of the church’s ultimate “takedown” condition, the point at which reconstruction would be necessary. The jury awarded Trinity Church $3.6 million for the structural damage, and John Hancock appealed.
o Holding: Reasonable costs of reconstruction or replacement are allowed as a measure of damages where the diminution of market value of property cannot be determined.
o Special use found for church
o Look at declining value (In re Sept. 11)
§ i.e. depreciation
§ Was there a special use? Go to replacement cost (no market value)
· Sentimental value? Damages allowed if reasonable
o Should any recovery be discounted to present value if possible repairs will be in the distant future?
§ Does it make a difference if church needs repairs? NO
· Church can use money how it chooses
o Footnote 3 pg. 28
§ Entitled to interest from time of judgment to payment of judgment (pre-judgment interest)
o What happens when the value varies radically over time? (i.e. Enron)
§ Generally, value measured at highest point
· Determining Value—General Rule
o Value before – value after = damages
o Damages + loss of use = recoverable damages
Expectation v. Reliance Damages
· Neri v. Retail Marine Corp. (1972) pg. 35
o Facts: Neri ordered a boat from Retail Marine and tendered a deposit of $4250. After delivery, Retail Marine received a letter from Neri’s attorney indicating Neri could not go through with the purchase and demanding return of the deposit. Retail Marine refused and after several months resold the boat for the same price Neri agreed to pay. Neri sued to recover his deposit, and Retail Marine filed a cross-complaint for lost profits, contending it would have sold two boats in the absence of Neri’s breach. It also sued for consequential damages in the form of storage costs incurred due to the delay in sale. Liability against Neri was established by summary judgment, and the issue of damages was certified for appeal.
o Holding: Under the UCC, the seller of goods rejected by a breaching buyer may recover his lost profits and incidental damages caused by the breach.
o Types of damages:
§ Reliance—by dealer
· Storage (incidentals) $674
§ Expectation—by dealer
· Expected profit $2579
· None for dealer
o Unjust enrichment
o Practical aspects
§ Whenever possible, plaintiff will seek EXPECTATION DAMAGES because they are almost always HIGHER than reliance damages
§ Reliance damages become important when it is difficult to prove expectation damages
§ UCC damages pg. 37 (mitigate damages by sale)
§ Measure damages to plaintiff by value to defendant
o Suggests BAD LAWYERING
§ Was dealer really entitled to expectation damages?
timony that its cost to find reserves equivalent to those it had bought from Getty for $3.40/barrel was $10.87/barrel. Thus, Pennzoil’s “replacement cost” for the Getty reserves was $7.53 billion, which the jury awarded Pennzoil as compensatory damages. The jury also awarded Pennzoil $3 billion in punitive damages. Texaco appealed, arguing that Pennzoil’s damages were more accurately calculated as the difference between the market value of the Getty stock and its contract price at the time of breach, and that the punitive damage award was excessive.
o Holding: The plaintiff in an action for tortious interference with an existing contract is entitled to recover the full pecuniary loss of the benefit it would have been entitled to under the contract, as well as consequential and punitive damages.
o Stock value and value of the oil reserves were wildly different—why did the Court accept this measure of damages?
§ Purpose of the dealà wanted oil, not just the stock
· Stock was means to an end
o Why didn’t Court overturn damages?
§ Texaco didn’t use expert to challenge Pennzoil’s expert
§ Evidence supports jury—they get ultimate decision
o Discount to present value: what Texaco claims—Court rejects
§ But NOT future damagesà damages already sustained
· Doesn’t matter that it will take a year to extract replacement oil
§ General rule: damages measured at time of tort
· Consequential damages in torts tend to be more liberal than contract damages
o Why didn’t Texaco appeal to SCOTUS?
§ Didn’t put up bond on judgment (required to appeal damages: would be $10 billion)
§ Texaco still got a good deal (value of Getty > judgment)
Limits on Damages pg. 67-101
· Types of Limits:
o Exclusion of consequential damages: within contract, can specify remedy
o Liquidated damages clauses: instead of traditional lost remedy
§ Problems: would be hard to calculate loss
· Impose higher burden on breaching party
· Penalty unenforceable of non-breaching party gets more than it would have
o Avoidable consequences: mitigation
o Offsetting benefits: breach may leave plaintiff in better position (typically no damages)
§ Double recovery: i.e. health insurance isn’t subtracted from damages
o Collateral source doctrine: money received from other sources ≠ offset in recovery
o Subrogation: usually with medical expenses—if plaintiff recovers from tortfeasor, money flows to insurer for reimbursement
· Brunswick v. Pueblo Bowl-O-Mat (1977) pg. 118
o Facts: Pueblo, the owner of several bowling centers, sued Brunswick, contending that by acquiring and operating bowling centers which otherwise would have gone bankrupt, Brunswick had brought its deep pocket into the industry and decreased Pueblo’s profits. Pueblo contended that it was damaged by the amount of profit it would have realized if the centers were allowed to close down. The trial court granted treble damages and enjoined further acquisitions by Brunswick. The court of appeals reversed and remanded.
o Holding: Antitrust relief is not available in every case in which a large corporation takes over smaller businesses and causes readjustments in the market share of other participants.
§ Compare Pueblo’s situation before and after:
· Still have competitors: no injury
· Pueblo wanted monopoly
o Antitrust law: all damages are treble damages
§ Covers attorney fees (not normally part of damages)
· Unless contract or statute