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Remedies
West Virginia University School of Law
Bowman, Gregory W.

Remedies (Spring 2011—Bowman)

I. Introduction

a. Classifying Remedies

ROLE OF REMEDIES

-Remedy – anything a court can do for a litigant who has been wronged or is about to be wronged

**Means by which substantive rights are given effect**

**Remedies are substantive, but not truly procedural either.

· 2 most common: judgments that Ps are entitled to collect sums of money from Ds and orders to Ds to refrain from their wrongful conduct or to undo its consequences.

· Court decides whether the litigant has been wronged under substantive law; conducts its inquiry in accordance w/procedural law. law of remedies falls somewhere between substance and procedure, distinct from both but overlapping w/both

CLASSIFYING REMEDIES

-most important categories:

a. Compensatory: compensate plaintiffs for the harm they have suffered. Most important compensatory remedy is compensatory damages – a sum of money designed to make P as well off as he would’ve been if he never had been wronged.

b. Preventative: prevents harms before it happens through:

1. Coercive remedies: most important is the injunction.

-injunction is order from court to litigants ordering them to do or refrain from doing some specific thing

-specific performance decree, ordering Ds to perform their K, is a specialized form of injunction

-it’s the direct order and potential for punishing disobedience that distinguish coercive remedies from declaratory remedies.

2. Declaratory remedies: resolves disputes about parties’ rights, but don’t end in a direct order to D

-prevent harm to litigants by resolving uncertainty about their rights before either side has been harmed by erroneously relying on its own view of the matter

-most important declaratory remedy is the declaratory judgment, but also older remedies, e.g. bills to quiet title and cancellation of instruments.

-If a party violates a declaratory order, there is not wrong until that declaratory order is enforced.

**Look to Legislative Remedies as Preventative. Legislation to help prevent future harms from occurring again.

c. Restitutionary: restores to P all that D gained at P’s expense

*sometimes, restitution and compensation are identical

-in most ambitious applications, restitutionary remedies award P the profits D earned by conscious wrongdoing, even if profits exceed P’s damages

-restitution has traditionally been administered through variety of separate remedial devices, such as quasi-K, constructive trust, equitable lien, accounting for profits, rescission, and subrogation. (these are pretty much different labels for the same thing)

d. Punitive: intended to punish wrongdoers.

-might question whether punitive remedies are remedies at all; they don’t remedy anything in usual sense of correcting, repairing, or fixing

e. Ancillary: aid other remedies: fees and costs; a more unusual ancillary remedy would be a receivership. A court may not trust either party to manage the business or property during litigation so, it may appoint a receiver to do so.

SUBSTITUTIONARY AND SPECIFIC REMEDIES

-substitututionary remedies – P suffers harm and receives a sum of money

-include: compensatory damages, attorney fees, restitution of money value of D’s gain, and punitive damages

-Predominant relief in U.S. law

-2 hallmarks of Substitutionary relief. 1: P who recovers damages gets neither what he started with (his money) nor what was promised (goods conforming to the K. instead, gets defective goods and money to compensate for the defect). 2: sum of money he receives is based on fact finder’s valuation of his loss

-specific remedies – aspire to prevent harm, or undo it, rather than let it happen and compensate for it. Seek to prevent harm to P, repair harm in kind, or restore specific thing that P lost.

-include: injunctions, specific performance of Ks, restitution of specific property, and restitution of a specific sum of money

LEGAL AND EQUITABLE REMEDIES (pg 6)

-Remedies are still classified as either legal or equitable and the rule that the P cannot have an equitable remedy if a legal one would be adequate is still the rule

-Distinction is not a useful one to focus on or draw (Bowman)

-damages are most important legal remedy; in general, compensatory and punitive remedies are legal. Injunctions and specific performance decrees are most important equitable remedies; some of the specialized coercive remedies (mandamus, prohibition…) are legal.

-declaratory judgments not classified either way

-some restitutionary remedies are legal, some equitable, some both.

**Mertens v. Hewitt Associates – Equitable remedies are those that are typically available in equity.

-ex: Injunction (equitable); Mandamus (legal); and Restitution (legal and equitable)

*Remember the debate over whether laws have any moral force in the absence of remedies.*

-Bowman and Laycock both believe it does.

Policy:**Keep in mind, REMEDIES is about how we prevent wrongs from happening—go through common law or do we provide for more black letter rules (for prediction)—we stand right now with huge judicial backlogs.** How do we solve problems? – Remedies; How do we order society? – Legal Rules (need remedies for force)

Policy: The subject of Remedies is “GUT” (grand unified theory) – Less

-Other than “justice” or “fairness”

-Notion of remedies like a “tool kit”

-Final Thought: If remedies are about justice and fairness, then the remedies we choose for our legal system say a lot about our society and what we value.

b. Compensatory Damages

i. US v. Hatahley

1 Livestock of several Native American families were wrongfully taken and sold by the US government

2 Rule: the fundamental principle of compensatory damages is to restore the injured party to their “rightful position” (this is the rule adopted and encouraged by author—kind of rewords the rule but-for rule from Hatahley) (the “rightful position” is a place to start from—it’s a principle, not a rule)

3 Rule: compensatory damages is meant to put the injured party in the position they would have been in “but-for” the wrong of the defendant (Hatahley court)

4 “One-Satisfaction Rule”: Court here explains that a party can only recover for each item of damage one time, even if the party has multiple theories for each item of damage (no “double-dipping”)

5 Corrective Justice: plaintiff should not be made to suffer because of wrongdoing, and if we restore plaintiff to her rightful position, she will not suffer. To do less would leave part of the harm un-remedied; to do more would confer a windfall gain.

6 Efficiency: proponents of economic analysis argue that the purpose of the law is to maximize profit.

a. Pareto Theory: a transaction is efficient if one party is made better while the other party is not made worse off—this is the argument behind “efficient breach of K”

b. Classical Economic View: damages should be exactly equal to the harm inflicted, and then, if the expected profit form a tort or breach of K exceeds the expected damages, the actor should go ahead.

II. Value as the Measure of the Rightful Position

a. General Rule: the value of what you lost, not the value (cost) to replace

b. In Re September 11th Litigation

i. Plaintiff purchased the world trade centers from the state, and state accepted the plaintiff’s bid over several others in the world market

ii. “Lesser of Two Rule”: the plaintiff who has property that has been damaged may recover the lesser of the diminution of the property’s market value or its replacement cost

1 Exception to the Lesser of Two Rule: “Specialty Property”

a. Where the property is a type “seldom traded” and for which there is no “market price,” a different kind of valuation must be used. This property is considered specialty property and replacement cost is considered the proper measure of fixing damage. (Ex’s: churches, clubhouses, hospitals, spaces held by non-profit organizations)

b. Test: for valuing specialty properties without market value:

i. the improvement must be unique and must be specially built for the specific purposes for which it was designed;

ii. there must be a specific use for which the improvement is designed and the improvement must be so specially used;

iii. there must be no market for the type of property and no sales of property for such use, and

iv. the improvement must be an appropriate improvement at the time of the taking and its use must be economically feasible and reasonably expected to be replaced

c. Note: the time for determining whether or not the property is classified as specialty property is at the time of the tort.

iii. In the present case, Bowman thought the “loss of use” damages (future rentals) should have been awarded

iv. Court held that the property was NOT specialty property; court did not award loss of use, and only awarded the present market value of the consideration that he had just paid for the buildings;

re foreseeable and certain

1 -Sufficiently foreseeable and certain.

g. Sliding Scale/Graph of Reliance and Expectancy Damages (see notes 1/18/11)

h. Reliance Damages Serve as an Alternative to Expectation Damages (see slides)

i. Uncertainty as a limitation on damages (Rest K. 2d §349): “As an alternative to [expectation damages], the injured party has a right to damages based on his reliance interest, less any cost that the party in breach can prove with reasonable certainty the injured party would have suffered has the K been performed”

ii. Key Point: Party in Breach has burden to show damages would have occurred

1 Reliance puts you in position you would have been had there been no K.

a. Burden is on D to show that losses would not have been suffered even if there had not been a breach. Pre-K

iii. Contrast to Expectation: Position if K had not been breached. Post-K

iv.Policy: We would rather undercompensate than overcompensate, similar to that we would rather let a guilty person go, then imprison an innocent party.

i. Chatlos Systems, Inc. v. National Cash Register Corp

i. Facts: Breach of warranty, Computer seller promised a system to meet certain specs, and it did not meet the certain specs. It was drastically underpriced and the buyer was not satisfied.

ii. Benefit of the Bargain Rule

1 The correct measure of damages is the difference between the fair market value of the goods accepted and the value they would have had if they had been as warranted. UCC §2-714(2)

2 Buyer is awarded expectation damages, because it is owed the “benefit of its warranted bargain.”

a. Law does not protect you from a bad bargain. As long as no duress, inducement, or fraud.

3 Compare the value as represented to the actual value of delivery

iii. Here, there was mutual manifestation of assent and no mutual mistake.

iv. Counter/Argument—was it a windfall?

1 Could Chatlos really ‘expect’ that 46k system could do what a 200k was supposed to do

j. Smith v. Bolles

i. Facts: Buyer sues seller to recover damages for fraudulent misrep in the sales of shares of mining stocks. The shares turned out to be worthless.

ii. Expectancy damages are only recoverable in contract, not in tort.

iii. Tort/Contract Distinction when computing damages

1 Fraud requires deliberate misrepresentation or reckless disregard of the truth, but one is liable for breach of warranty even if his mistake is innocent and not even negligent.

2 But there is an important difference between tort and contract cases. In contract cases, plaintiff is seeking to recover an expectancy that is itself product of defendant’s promise—an expectancy that never would have existed but for the defendant. In the typical tort case, plaintiff’s expectancy is not derived from defendant. Plaintiff expected wages or profits from her own efforts, and defendant’s wrong disrupted that expectancy.

iv. Out of Pocket Rule

1 “Under that measure, damages are calculated as the difference between the actual—fraud tainted—transaction price and the true value of the security measured on the date of the transaction.”

v. The Restatement 2d of Torts §549 provides that the victim of fraud may always recover his reliance damages: the difference between what he paid and the value of what he received, plus any incidental reliance expenses. In addition, “The recipient of a fraudulent misrepresentation in a business transaction is also entitled to recover additional damages sufficient to give the benefit of his contract with the maker, if these damages are proved with reasonable certainty.”