Commercial Litigation Notes (Edit)

8/3/2019 Commercial Litigation Notes (Edit)

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I.GENERAL OUTLINE (WHAT CAN THEY GET, AND HOW MUCH?)

A. The Remedies Question:1.Availability (Choices)

a) Claim Dependence (e.g. no punitives for breach of K)b)Context Dependence (e.g. timing, culpability, uncertainty, burden)

2.Scope (Bottom Line)

a) Money How high?b)Decree or declaration how broad?

B. Where Do Remedies Come From?1.Entitlement (Legally-Protected Interest)

a) Right to Use, exclude others from, sell, keep, or get back a resourceb)Resource: any form of tangible or intangible prop, money, services, promised Kualperformance, or combination of these

2.Violation

a) Deprive: destroy, take, not deliver/pay as promisedb) Impair: damage, disrupt, provide deficient/delayed/incomplete promised performancec) Infringe: use w/out permissiond)Retain: fail to pay for or return

3.What to do?

a) Prevent

b)Avoidc) Undo (do-over?)d)Restoree)Compensate harms causedf)Capture benefit receivedg)Deterh)Punish

4.The Bulls-Eye

C. Remedies Menu1.Compensatory Damages

a) Cost-based

(1) General Damages Formulas(2) Reimbursement of actual expenditures to replace (acquire a substitute, repair,or reproduce

b) Impact-Based(1) Wasted Expenditures

(2) Lost Gains (e.g. lost profits)(3) Other consequences

c) Cost Plus Impact(1) Delayed Replacement(2) Inferior Replacement

2.Specific Relief

a) Preventative and reparative injunctionsb)Specific Performance

c)TRO and Prelim Injunctions

d)Restitutionary Specific Relief(1) Recission and Specific Restitution(2) Constructive Trust

3.Declaratory Judgment

a) Offensiveb)Defensive

4.Restitution

a) Restitutionary Specific Relief (above)b)Monetary value of benefit receivedc) Use value of Ps Propertyd)Consequential Gains (e.g. Disgorgement of profits)

5.Punitive Damages


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D. Framing Remedies Issues1.Plaintiff

a) Owner Hatahleyb)Seller/Provider (output)c) Buyer/Payer (input)

2.Harms (Damages) and Benefits (Restitution)

a) But-for thinking (counterfactual)(1) If we didnt have X, things would have been a lot worse etc.

(2) What is Loss - In but/for terms, loss includes how much worse off you arethan where you would have been but for the violation(3)

b)Basic Causationc) Defining the scoped)Measuring the Consequences

3.Alternatives

a) Plaintiffs Mitigationb)Defendants Same thing Different way

4.Market vs. Party-Specific Inquiry5.Time

a) Violation is future possibility, likely to happen, ongoing, over and done, or toolong ago

b)Ex Ante looking forward from the violation(1) At trial, look at situation back at time of violation (expected profits back then vs.expectation w/out violation

c) Ex Post at trial, look at what we know now6.Culpability

a) Defendantb)Plaintiff

7.Substantive Policy behind violated entitlement8.Process

a)Judicial Discretionb)Feasibility and burden on the Ct.c) Uncertaintyd)Effect on D

I.COMPENSATORY DAMAGES

A. Measures of Property Loss1.Hatahley (1958) Market Value of Navaho horses

a) Facts(1) U.S. rounded up Ps unique horses and made glue without giving Ps propernotice. The Dis ct. awarded damages for each horse and uniform amounts for Pspain + suffering.(2) CoA sent back to different dis judge for more precise award of damages.

(3) Ps live in a barter economy, but unique horses can be traded for other animalsw/ market value.

b)Why CoA remandedquestion is what to do on remand.

(1) CoA thought judge wasnt using mkt value, so std of putting P in R ightful Positionwasnt met.(2) CoA also says shouldnt have homogenized Ps EMOTIONAL DISTRESS.

c) ONE-SATISFACTION RULE: P can only recover for each item of damage once,even if he has multiple legal theories against multiple defendants.

(1) PRO TANTO: nonsettling Ps get $-$ credit for settlement toward dmgs(2) PROPORTIONATE FAULT: each P liable for % dmgs matching % fault

d)Class Notes(1) Calculating Remedies:

(a)Value Comparable Sale at time of taking (Like animals in theimmediate vicinity)

(b)Problem Specific horses were Navaho-trained market for that?Navahos didnt participate in that market


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(c)Ct. Response You can train the horse you get (not happy w/ that)(2) Hatahleys rule fundamental principle of damages is to restore the injuredparty as nearly as possible to position he would have been in but for the wrong isthe essence of compensatory damages.

(a) Calculated by what is equivalent to PLAINTIFF, not RP or otherwise

2.In re September 11th Litigation

a) Facts(1) P companies entered into net leases on 4 of WTC towers less than 2 monthsbefore attacks, (destroyed 4 towers on which PP had net leases)

(2) Ps Entitlement Net lease - Lessee is responsible for paying rent andoperating expenses of building andproperty tax andinsurance

(3) What did Ps Lose ? P didnt lose their net leases; lost the SPACE they couldhave rented out and used to pay off the port authority

b) Issues(1) What was the PP asserted entitlement? (didn't own the buildings)

(a)F our net leaseholds , protected interests,(2) What did they lose?

(a)99 year net leases , (leases were not destroyed)(3)They didn't lose leases, didn't lose buildings. So what did they lose?

(a)Ability to make profit through use of buildings (input in their business)

c) D/R(1) PP still had net lease on buildings that were destroyed by negligence

(2) Court is valuing the lease ($2.8 billion, what they paid for the lease)(3) Court is valuing replacement cost of the building

(a) Market value of towers is destruction, but the PP are not there for thedestruction - net leases were not destroyed

d) Class Notes(1) Assume PP own the towers

(a) Court refers to replacement value/replacement cost(b) Going into the market to buy a substitute property is different from goinginto the market and buying everything necessary to put together a propertylike the one I lost

(i)Very similar to Hatahlay- reproduction cost(ii)Distinction between replacement costof buying a substituteand replacement cost ofbuilding one like the one you lost

(c)Rebuilding b/c this is the one they wanted! That's why they leased it!

Value to owner is higher than market value(d)But they use market value, because they can't delve into "value to you"

(2) Ct says you can't recover cost of loss rents (similar concept to loss of usein Hatahlay). Formula says they get FMV on the date of loss = $2.8B(3) If you say you suffered loss of use after the date of the loss?

(a)Formula stickler: Doesn't matter - formula says you get $2.8 billion(b)Judge in this case: Absurd! If P recovers market value, it necessarilyrecovers value of lost revenue streams. WTF? Would P still have paid 2.8billion if they knew their revenue stream would be gone for 10 years? No!

(4) COURT IS WRONG - All of these formulas assume IMMEDIATE replacement, andthis takes 10 years to replace the building

(5) Fair Market Value Willing buyer and a willing seller agree

SECTION II COMPENSATORY DAMAGESI.INTRO

A. Remedies See opening outlineB. Measure of Property Loss (The Barge Cases)

1.King Fisher (Sunk Barge replacement value of 8x cost)

a) F: PP bought barge, lost the barge two days later and sought 8x damages forwhat he paid for the barge

b)D/R:HE WON! WTF.(1) When vessel is lost, usually look to market value at time of loss(2) If no market value look to replacement cost, depreciation, experttestimony, etc.


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(3) Must look to the Value to the Owner (specific) b/c barge was worth a lot moreto the purchaser

(4) Market value is established by other peoples needs Not Ps needs(5) Market-based compensation = private eminent domain (not good!)

c) Market value v. Value to the owner (VttO)(1) difference b/w mkt value and VttO can exist in completely mkt context

2.Class Notes

a) Value of Barge(1) As a barge $30K

(2) As an input to a Drydock Business

$200K(3)To build another barge $1million(4) Willingness to pay vs. Willingness to accept

(a)Econ VttO is minimum willingness to accept not market value(b) Ps willingness to accept was at least $200k

b)KingFisheris SO RARE! For the most part, you won't get higher than market value,more than someone is willing to pay. In KingFisher, the market value of the barge he wouldhave needed is $600k - $1m, and he was willing to accept $233k. In most cases, the 's"willing to accept" is higher than the "willing to pay" (market value) so they don't get VttO

c) This is why the Victorian home was awarded w/ less than owner would accept;it was market value not value to owner, but why KingFisher was awarded withmore than owner paid because market value for that barge at that use was more.

3.O'Brien Bros (Sunk Barge Case 2)

a) Summary:Another measure of damages not based on the cost of buying in the market,glimpse of another way to derive market values for damages purposes

b)F: Barge owner in WWII went out-of-pocket to remedy D's wrongful conductc) D/R: Damage Amt was not established by evidence.

(1) 2nd Cir didnt want to grant damages to reimburse what he spent out of pocket

(2) Didnt establish mkt value just established repair costs (not enough)(3) What SHOULD they have done?

(a)Capitalization of earnings - Start w/ operating receipts of $101/day(b) Find Cost of Repair and compare to Diminished Market Value

d)Class Notes:(1) Why is O'Brien different from KingFisher?

(a)In KingFisher, they couldn't find the barge(b)In O'Brien, they knew where the barge was and they could bring it up

(damaged)(2) O'Brien - similar to WTC, but owner had 2 avenues after the wrong

(a)Fixthe barge (damages = cost of repair)(b)Selldamaged barge and buy an equivalent barge (damages =diminished market value)

(3)Translates to 2 formulas for measuring damages in damaged prop case(a) Cost of repair

(b)Diminished market value of property(4) Standard Rule:

(a)You get the lesserofCost of RepairorDiminished Market Value(i)Usually the same amount

(b)Totalled Car Cant spend $10k fixing car worth $5k and get $10k(5) P has burden of proving cost (repair or market value)

II.Measures of Transactional Loss: Breach and Fraud

A. SUMMARY1.For measures of transactional loss, have familiar market value formulas

a) Measured from date of breach (if breach of K) or date of exchange (if fraud)2.But, transaction loss if different from property loss

a) W/ Property, baseline is status quo ante (restore like it never happened)b)W/ Transactions,people enter K to change status quo, so harm might be a lostbenefit(tough to prove) So Measure loss in a forward looking way

3.Peevy house Lesser of formula doesnt work as well in a transactional setting

a)Allows one party to retrade the deal4.Materiality Important issue


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a) In Fraud, must prove materialityb)Breach can be material, which can allow other party to cease following K

(1) Lead to damages that are based on getting a substitute transaction

c) Partial Breach(1) Something was wrong with the Ps performance(2) Damages broken down

B. Breach: Expectancy Damages1.2 But For Tests for transactional harm measures of damages

a) But for the Breach Expectancy Damagesb)But for the KPut P back in original position

2.Under UCC K price Cover price = Damagesa) Buyers Cover Remedy

(1) If Cover is higher than K price, recover the difference

(2) Argument in KGM is that he passed on added cost to another party, so shouldlimit recovery to actual losses (but ct rules the other way theres a formula, dontcare what happens down the line)

3.Rule: Cost Plus K (Actual Loss) doesnt limit damages (KGM Harvesting)

a) F: Lettuce K Breach; buyer sold on cost plus, so made money b/c of breachb)D/R: Dont limit recovery from actual loss stick to formulac) Covering and Actual Loss:

(1) If Seller breaches, buyer can Cover by buying comparable products

(a)Recovery = (Cost of Cover) (K price) + Damages(b)OR , Recovery = (Market price) (K price) + Damages(c)Always Add Incidental and Consequential Damages

(2) 3 Conditions Must be present to limit recovery to Actual Loss(a) Seller knew buyer had resale K(b) Buyer hasnt shown it will be liable in damages(c) No finding of bad faith on part of seller

4.Expectancy Damage: Limit damages to value of performance, not cost of performance if itsINCIDENTAL to the K(Peevyhouse) Mine Cleanup breach;

a) Basicallylesser ofDiminution of Value and Cost of Performanceb) Prof hates this case (thinks its wrong)

C. Breach: Reliance Damages1.Rule: Reliance damages recoverable if lost revenues from failure to deliver product are unknown(Security Stove) But for the K standard

a) F: D didnt deliver furnace; P received reliance damages2.Reliance Damages: Rest (2nd) of K - But for the K standard

a) Put you financially in position as you would be if a K did not existb)Get expenditures if you cant prove future revenues/profits, UNLESS there would havebeen any LOSSES on the K (only forward-looking aspect of the rule)

3.Rule: Wasted Expenditures BEFORE K FORMATION w/in contemplation of parties RelianceDamages(Anglia T V v. Reed) double-booked actor in play

a) F: Famous actor (Reed) who broke K to appear in play in England; P suedb)D/R: if expenditures incurred before parties entered into K were reasonably w/in thecontemplation of the parties as likely to be wasted if the contract were to be broken, that

expenditure is recoverable.(1) When lost profit cant be proved, P can recover reliance damages

c) Notes:(1)Takes a different view of Harm

(2) Theory of Harm Effect of the Breach = expenditures devoted to K werewasted due to the breach(3) 2 Possibilities

(a)Expectency(b) Reliance (PARTIAL EXPECTANCY): But for breach, my expenses wouldhave been recouped (D has to prove they would not have been recouped)

D. Fraud Damages1.Class Notes


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a) Fraud Damages Generally(1) Focus on fraud inducing exchange b/w parties (assume fraud by seller)

b)2 Formulas for Fraud Damages(1) Out of Pocket But for K (Buyers loss Sellers gain on exchange)(2) Benefit of the Bargain But for falsity (value repd Actual value)

c) Expectency Cap should there be a cap on out of pocket expenses?(1)Yes would be a windfall to P(2) No it was fraud, so D shouldnt be able to keep any windfall from

d)Current Rule: P chooses b/w Out of Pocket vs. Benefit of Bargain

(1) Deterrence - Most cts go with benefit of bargain (no deterrence if only out ofpocket damages are awarded)

2.Out of Pocket Rule Damages = Actual (fraud-tainted) price Mkt price then3.Smith v. Bolles (1889) Worthless mining stock Measure of damages = amt lost in fraud, notamt expected to be gained in value of fraudulent stock4.Notes on Expectancy in Tort:

a) Expectancies in Fraud: Expectancy damages are recoverable in K, not in Tort(1) Rest (2nd) Torts Rule Defrauded person can get Reliance Damages, but alsoadditional damages for benefit gained by D through fraud

b)Dura and Impact(Loss Causation)(1) Loss Causation P must prove and plead loss was caused by misrep

5.Benefit of the Bargain Rule Kendrick v. RyusFraud mine purchasea) D/R: Damages = Purchase price actual value of prop

(1) P Lost more than just the money he spent lost the opportunity to enter a validbargain, or NOT ENTER INTO AN INVESTMENT AT ALL

6.Rest (2nd) Torts - gives Benefit of Bargain for Fraud Damages

III.Consequential Losses

A. What Are Consequential Damages?1.Generally: Includes everything else that might have been damages to P but must beReasonably Forseeablearise naturallyfrom breach or w/in contemplation of parties attime the K was made2.Class Notes:

a) Commercial litigation Consequential Damages is where the money is.b)P-specific (uncertainty burden on ct)

c) Impact of not having entitlement or immediate or suitable replacementd)Reliance andConsequentialdamages are very close cousins

3.Foreseeability: Rest (2nd) K - Damages formula normally follows normal course of eventsRequires damage to be foreseeable (inability to find a replacement, etc)

a) Foreseeable if:(1) Normal course of events(2) Special circumstances D was aware of

b)Recovery Can be limited by the Judge

4.Rule: Can recover consequential damages for reasonably foreseeable losses due to breach -Buck v. Morrow(1893) Rancher kicked off land, gets expenses

a) F: rancher kicked off ranch after 2 years found replacement pasture after 5 monthssued for expense over 5 months

b)D/R: app ct gave special damages on top of trial cts actual damages(1)This is Loss of Use Case (like Hatahlay) Consequential Damages(2) Not always allowed

5.Rule: Foreseeability test applies to type, not amount of damages - F L Power & Light v.Westinghouse Electric, (1984) Nuclear reactor huge damages

a) F: 1980s, Spent nuclear fuel case; builders didnt dispose of fuel properlyb)D/R: Theres no way to have foreseen the damages

(1)This is the cost of something D promised to do

(2) Foreseeability All that matters under Rest is that the kind of loss wasforeseeable its not required to foresee theAMOUNT

c) Note: Not consequential **Law is slippery on this topic


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6.Union Carbide (1986) [See Chart and other outline]

a) Class Notes(1) F: Buyer broke K in falling market; market-based damages was 120; sellerwanted to recover $1.2Mill;

(2) Damage suffered b/w two parties to K expectancy damages (called lostprofits) are not consequential damages. Its not being suffered outside of boundsof K plus, its foreseeable

(3) I: Do we measure damages based on cost of replacing consumer purchases inthe market?(4) Another to consider:

(a)Additional Consequential Damages - B/c consumer breached, P wasliable to Petrostar for not buying from them (it settled, but so what)

(b)Incidental Damages Ct called(5) Bottom Line: Whats the difference b/w consequential and non-consequentialdamages? Theyre usually downstream of the K

IV. Consequential Losses (Continued)

A. Formulas versus Consequences1.Rule: No consequential Damages for failure to pay money even w/ actual notice ofbusiness venture losses unrelated to K Meinrath wanted bonus $$

a) D/R: SJ for D; No consequential Damages(1) Damages for delay payment of money = withholding + interest (period).(2) P could have bargained for those liquidated damages in the K w/ D

b)Class Notes(1) Completely outside K, so definitely consequential

(2) D had actual notice of consequential damages(3) Ct rejected consequential damages for formula

(a)IRRECONCILABLE W/ REST 351(b) Essentially says forget about foreseeability and rightful possession(c) Ct goes off on process would allow too much evidence in other cases

B. Damages to Crops1.Wrong Rule: Damage crop consequential damages = value of crop at sale (after maturity)Decatur v. Young (1980) Ct decides when to measure dmgs

a) D/R: Ct allowed to measure damages to crops (time of sale good enough)(1) Made the formula OPTIONAL value in this case was the value to Young

after having it, holding it, and selling it in the Spring (which he always did nouncertainty)WRONG!! (Reversed in next case)

2.Right Rule: Damaged crop consequential damages = value of crop at maturity APPLYFORMULA Decatur v. Young, (1981) Measure dmgs when market exists

a) D/R: Reversed for D; measure value at time of crop maturity(1) No market for crop when damage occurred must measure damage when amarket exists (first value exists at time of crop maturity)

(2) Dont care what P did with crop after damage thats speculation

b)Prof Correct rule b/c P could have bought 342 bushels from his neighbor, held it, andthen resold it for the additional profit he was seeking

3.No Passing on Defense (like in KGM) for illegal overcharge Hanover Shoe, (1968) Shoemaker anti-trust overcharge treble damages awarded byClayton Act, even if P Passeddamages on to the customers by raising price

a)Alleged D monopolized machinery industry in violation ofSherman ac tb)D/R: Affirmedtreble damages for P, Cts rejected this passing-on defense

(1) Damages = Amt Paid in Rental Amt of Sale (if D had been willing)(2) If P shows price paid is illegally high and shows amount of overcharge = primafacie case of injury and damage (what happens after is irrellevant)

(3) P assing on defense would require a convincing showing of a bunch ofunascertainable figures task would be insurmountable.

(a) *-shoe buyers unlikely to bring suit antitrust law violators would retainfruits of illegality because no one was available whod bring suit againstthem

(4) Note: situation may be different in a cost-plus contract

c) Class Notes


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(1) Landmark SCOTUS anti-trust case

(2) F: P simply paid too much;(3) In price-fixing case, how do we define injury under the statute?

(4) I: How do you define harm of anti-trust (like tort) and whether (like in MeinrathandYoung) ct will use a formula to close the books and exclude evidence

(a)If Ds are monopolies/co-conspirators, private parties can sue fordamages for reason of anti-trust violation (statutory provision overchargedamages)

(5) Ds Theory on Measuring Damage

(a)Ps hadno injury, b/c theypassed the cost to consumers

(b) Ds WANT CONSEQUENTIAL DAMAGES (to make damages golower)

(6) Cts Reaction

(a)Ct didnt care about that said the statute allows for trebledamages, so threw up their hands(b) Damages = price of what it was what it should have been (period)

C. Causation1.Scope of Liability (pp. 106-7)

a) Proximate Cause vs. Cause in Fact(1) Ex: IHS Cedars Psych ward releasing patient who has a psychotic episodewhile driving the next day and injures P not liable

b)Substantial Factor and its Alternatives

(1) Substantial Factor rejected as too confusing by Rest (3rd

)(2) Rest (3rd) Def: Cause-in-fact = But-for Cause(3) 2 Rules proposed

(a)1) Liable for harms resulting from risks that made conduct tortous(b)2) Not liable for harm when tortious aspect of conduct would notgenerally increase risk of that harm

2.Causation and Scope of Liability: Rest ( 3rd ), Torts: Liability for Physical andEmotional Harm

a)26 Basic But-for Causation first step in getting into damages(1) But-For Cause test does not depend on extent of actors action that led toharm (just ask if harm would have occurred without wrongful conduct)

(a)Ex: negligently put straw that breaks camels back, negligent for back

b)29 Extent of harm does not have to be foreseeable(1) King Fisher is extreme (liable for lots of damages for little damage)

3.Rule: Consequential damages allowable if proximate cause ofidentifiable professionalopportunities (Not sufficient in this case) - Redgrave v. Boston Symphony Orchestra, (1988)Moviestar seller of services, wanting consequential damages for narration K breachCt ruled No Harm to reputation

a) D/R: P may receive consequential damages if proves breach of Kproximatelycausedloss ofidentifiable professional opportunities

(1) P must show facts for jury reasonable to infer P lost wages/ opportunities, thatsuch losses were result of BSOs cancellation rather than result of other factors, andthat damages for such losses are capable of being ascertained by referring to somedefinite std, either market value, established experience or direct inference fromknown circumstances.

(2) Ps evidence wasnt sufficient to support damages greater than $12K,

less expenses (other independent factors present)b)Class Notes:(1) Main issue is CAUSATION was it b/c of breach or her political views?

4.Rule: Cant get damages for denied anticipated increase in mkt shares b/c D simply stayed inbusiness and increased competition -Pueblo Bowl-O-Mat (1977)

a) F: D acquired bunch of bowling alleys; D claimed anti-trust b/c they were so bigb) I:AreAnti-trust Damages available when sole injury is that competitors continued inbusiness, thereby denying P of anticipated increase in market shares?

c) D/R: No, not available; case Dismissed for D (didnt decrease competition)d)Class Notes

(1) Anti-Trust Injury Limitation on Damages Created - There was a but-for


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cause BUT violation not related to reason they suffered harm not an anti-trustdamage

(2) Idiot Hunter Example: Idiot Hunter hands child a gun child drops gun onfoot and breaks foot. Negligent?

(a)Ps Argument: Clearly tortious conduct but-for cause.(b)Ds Argument: Handing child gun did not create risk that led to harm

(3) 29 n. (d) Harm different from harms risked by tortious conduct

5.Rule: Must be a direct Victim of RICO to get damages -Anza (2006) Indirect victim, such asinvestor after NY City relied on false info given by D, cant recover damages are too remote tocalculate (no proximate cause)

a) F: D didnt charge NY sales tax to customers; NY relied on fraudulent tax returns. Pcompetitor claimed was suffering b/c D was taking competition

b)D/R: NY was victim, not P (even though P harmed, no prox. cause)(1) Directness Test Prices themselves were not illegal so

(a) had to make multiple steps to get to damage:

(i)Fraud to NY b/c no tax Lower Prices Take customers from P(b)Other Factors were affecting Lower Prices and Ideals lost sales

c) Dissent no risk of double-recovery Ps damages are not indirect

D. Quantification1.Rule: Compensatory damages ok under anti-trust- Bigelow (1946) Movie release date

conspiracy Awarded lost profits even though not exacta) F: Conspiracy among film companies re: release dates to preferred theatersb)D/R: Reversed for P Dont have to be exact when calculating damages

(1) 2 Possible Methods for Calculating Damages proposed by P:(a)Yardstick Method Compare earnings of Ps theater to competitor

(i)Problem here yardstick was a beneficiary of the conspiracy.Want to ISOLATE effect of conspiracy

(b)Before and After Method showed a drop-off of profits for 5 yearsafter conspiracy (method adopoted by trial ct)

(i)Same method used in Hatahley(ii) Also gives real world data (different context): Ps ownperformance

(2) Imprecise verdict for P ok so long as jury made a "just and reasonableestimate of damage based on relevant data".

c) Class Notes(1) Issue = Proof of Amount of Damages

(a)Problem uncertain (all hypothetical and counter-factual)(b) Methods

(i)Ex Post: What P would have experienced over time(ii)Ex Ante: What prospects would P have but for the act

(2) Test/Standard of Proof for Anti-Trust Damages (said CoA too strict)(a)Jury cannot base the verdict on Speculation and Conjecture(b)P must provide evidence forJust and Reasonable Estimate

(3) Other factor P started showing double features so ct doesnt have a no-violations period in the real world to make a basis for judgment

(a)Response Risk falls on wrongdoer for uncertainty of amt of harm(b)Why? More extensive (longer-running) wrong would benefit from

creating a lot more uncertainty(4) TIP: Keep But-for conduct as close to wrongful conduct as possible.

d)Requirement of Reasonable Certainty(1) Uncertainty ok, but requires reasonable certainty (?)

(2) Lack of proof 2 rules of looking at risk of uncertainty (inconsistent?)(a)Ds mustbear the risk of uncertaintyin theAMOUNT of damages(b)However, Ps must prove w/ reasonable certainty the CONSEQUENTIALdamages and they cant base it on speculation

(3) Failure of ProofGlendale (1999)- Bank proved lost profits when USreneged on accounting fiction K, but ct held they couldnt prove amount, so awardedno consequential damages

(4) Success of ProofBrinks (1983) Meter collection company workers stole


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change collection went up after switched companies; sued original company;consequential damages awarded based on evidence and expert witness, eventhough lots of other factors present

(5) K vs. Tort Standards of Proof Glendale was K, Brinks was Tort standard of proof usually higher in K

e)Notes on Litigating Commercial Damages(1) Going-concern value of lost profits

(a)Depending on the method, it can yield significantly different damagesvalues in the same case b/c the harm changes the future! (ex: 9/11)

(b)Ex Ante : If corp lost customer, look @ value before/after, note change

(c)Ex Post : look at all data after the wrong to assess damage over time.(d)9/11 Case Ps wantEx Ante, but Ds wantEx Post(not always true)(e)Discounting Hindsight adjustment;

(i)Note: Doesnt work well w/multiple harms overlong period(a)Economists hate Ex Post b/c theyll say P DIDNT TAKETHE RISK for the business AND P would not HAVE to sue ifD actually SAVED them a lot of money

(f) Out of Business Rule : If P is OUT OF BUSINESS, some cts dont allowex-post must be Ex Ante (including in TX)

2.Energy Capital (2002) Gvt breach on accounting fiction

a) F: P was allowed to lend out money by Gvt (D) under affordable housing legislation(AHELP) GVT reneged, although P didnt issue any loans. However, there had been over100 applications for loans under program.

b)PH: Trial Ct awarded $10Mill lost profits using risk-free discount ratec) I: Were damages calculated correctly?

(1) (1) What discounting date to use (date of judgment or breach)?(2) (2) Use risk-free discount rate, or risk-adjusted discount rate?

d)D/R: Remanded for P recalculate damages(1) (1) use date of BREACH for discount/damages calculation(2) (2) Should use risk-adjusted rate

e)Class Notes(1) Gvt was giving an input in form of lifting reg restriction on lending

(2) Direct Modeling Consequential damages case damages downstream(3) Formula = look at date of the breach this case was over course of K

(a)Start discounting at date of judgement (ex post) or date of wrong (ex

ante) look for biggest value. In this case, P wanted to go ex post, b/c thecorp lost money before judgment

(4) Lost profits use risk-adjusted rate (higher rate for riskier businesses)

3.Celebrity Cruises (2007) Legionnaires disease on cruise ship

a) F: Faulty filters; P soughtlost profits andlost enterprise value in sale of lineb)D/R: Yardstick method approved (errors and all)

(1) Lost Profits Case 3 types of evidence(a) Stigmatization of P in market(b) Perceived effect on bookings(c) Expert testimony quantifying lost profits

(i)Difference b/w Earnings (EBITDA) they could have reasonablyexpected, and what they actually got

(d) **Used Yardstick Method w/ 3 comparables**

(2) Lost Enterprise Case Projected cash-flow had outbreak not occurred(3) Ct says yardsticks help prove causation

E.Mitigation1.Class Notes

a) Expectation Ps will go to market to find suitable replacementb)Question becomes Has P properly minimized its loss?

(1) Alternatives may have been there because of the breach; or(2) Alternatives may have always been there

c) Ds failure to mitigate; or P being unable to prove causation of the loss;Unclear Conceptual boundary

(1) Ds argument may be to prove a lack of causation (Ps failure to mitigate =


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intervening cause after the wrong)

(2) Hathaley Determined it was a causation case, but Gvt could have arguedfailure to mitigate by not buying more horses for 5 years

d)Cost of Mitigation = type of damages recoverable (must be reasonable)

2.Failure to Mitigate Rule: Money Market not sufficient mitigation for experienced investor -Prusky (2008) Market Timing traders cant swap to money market

a) F: Investment advisors specializing in market-timing trades (not available elsewhereb/c almost illegal); D breached K and wouldnt allow trades, P mitigated by puttingmoney from mutual funds into money market account

b)D/R: Mitigation was NOT PROPER Should have used alternative method ofperforming trades w/out market timing ($100K in damages)

(1) Mitigation Affirmative Defense; to overcome, D must show:(a)What P SHOULD have done(b) That those actions would have reduced damages(c) Amount by which damages would have been reduced

(2) Followed FishmanNBA purchase Case cant use 3-month treasury rate asnext best alternative to risky equity invest in NBA team

(3) An experienced investor would not be content leaving $7Mill in a moneymarket account for multiple years (not next-best alternative)

(4) Ex-post reasoning is required, unfortunately

c) Concurrence Judicial ruling not clearly erroneous this was not a de novoruling. However, Ps actions were reasonable

(1) Law doesnt require next-best alternative

just reasonable altd)Class Notes(1) Ds but-for world Analyze via but-for failure to mitigate

(a) Decreases, but does not eliminate damages (unless immediateequivalent replacement for what was lost)

(2) P creates uncertainty, but is not a wrongdoer, so D must prove(3) Ex-Ante and Ex-Post in Mitigation

(a)Ps Claim of Damages (Ex Post) diff b/w money market amt andhypo value of accts if allowed to continue trading

(b)Damages Calculation vs. Decision to Mitigate Use info available attrial for damages HOWEVER, decision to mitigate is made Ex-Ante

3.Rule: Once P proves damages, burden in proving amount of damages relaxed Pierce v.Ramsey Winch (1985) Winch resale Price-fixing; Mitigation Reasonable

a) F: Winch resaler bought in bulk and sold cheap; other sellers complained; D terminatedK; P sold different winches, changed marketing strategies to mitigate

b)D/R: Mitigation reasonable; affirm for P w/ treble damagesc) Class Notes

(1) Consequential Damages replacement was not as good as entitled to(2) After Breach, profits went up, but would have been doing a LOT better

V.Prejudgment Interest (pp. 193-200)A. Interest on Past Damages

1.Rule: Prejudgment interest can be awarded despite good-faith dispute + mutual fault -Milwaukee v . Natl Gypsum (1995)- Sunken ship; both at fault,

a) F: Dis Ctfound both parties negligent, apportioned liability primarily to D, and entered a

partial judgment for stipulated amount of D's damages, excluding prejudgment interest.CoA held mutual fault cant deny prejudgment interest.

b) I: Does fact that P's loss primarily attributable to own negligence, together with theexistence of a genuine dispute over liability, justify departure from the general rule thatprejudgment interest should be awarded in maritime collision cases?

c) D/R: No, affirm for P; prejudgment interest awarded(1) Calculating the amount of the loss for which the relatively innocent party isresponsible denial of prejudgment interest on basis of mutual fault would unfairlypenalize a party twice for same mistake.

2.Notes on Interest

a) Class Notes(1) No settled law re: prejudgment interest in country

(a) No underlying rationale


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(b) No method of calculating which rate

(2) Purpose of Prejudgment interest: Compensatory, not punish/award(a) Compensation w/in litigation itself for delay of compensation

(b)Also used as incentive to D to hurry up the litigation(3) What should prejudgment interest be doing pending the judgment?

(4) Formula: Legal Rate of Interest (avoids risk and party-specific stuff)(a) Avoids party-specific formula(b) Avoids any risk of coming up w/ interest rate

(5) What do economists recommend to find prejudgement interest?(a)Economists Agree on the following:

(i)Choosing arbitrary legal rate is not appropriate(ii) Interest rate should be compounded(iii) Should be some recognition ofriskwhen you set interest rate

(b) 3 Different Camps among economists

(i)Ascertainability Argument -Interest rate is P borrowing cost(a) Because it doesnt have Ds money right away, itll haveto borrow more or pay down more debt than it otherwisewould(b) Problem: sounds like impact

(ii)Involuntary Creditor View Interest rate is Ds borrowingcost P is an involuntary creditor of D

(a) Majority View(b) The way the money was actually used was that it was inDs pocket instead of P, so that amt of money is owed (and

has been owed) since time of injury(iii) Risk-Free Rate (a) Most dont follow this(b) Cant use Ps borrowing cost, b/c D didnt cause that

B. Case Studies1.9/11 Litigation

a) Class Notes(1) Consequential Damages Injury affect their output market (selling/rentingcommercial space)

(a)$3.9 Billion + $8.4 Billion (cost to replace very limited recovery)(i)Gets put into formula: lesser-of mkt value or cost to reproduce(ii)P treats cost to rebuild (and lost profits) as cost of

business(2) Status Conference

(a)P wants DAMAGES for loss, not value(b)Judge responds that no, this is for the loss in Value of the lease

(i)If you had walked away from the lease, you would have just lostthe value of the lease, right?

(ii)Prof: Thinks this is wrong shouldnt apply this way(3) Ps Opposition to Ds MSJ

(a)Specialty Property Argument - Ps made argument that theyreentitled to cost to rebuild b/c its specialty property

(b)Prof Thinks this is a mistake(c)If prop is damaged and therefore you cant rent it out, you cancollect for loss of use BUT if the building is totally destroyed, you getMarket Value and nothing else (criticizedSandoro case)

b) *****Look at full class notes for (bad) 9/11 case study notes******

2.Fantastic Yardstick Case **********SEE FULL NOTES********

SECTION III INJUNCTIONS AND SPECIFIC PERFORMANCE

I.A.Preventive and Reparative Injunctions: Timing and Scope

A. Intro (Specific Relief)1.4 Differences b/w Damages and Specific Relief

a) Real Time When asking ct for specific relief, need ct to act in real time (unlikedamages, which can litigate at your leisure (comparatively))


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(1) Ripeness of Case Matters Shelf life is limited

b)Real World Ct is being asked to intervene in real world(1) Regulate Ds conduct (Cts authority is on the line)(2) Lots of process concerns (Cts are scared to use it)

c) Maybe Yes, Maybe No Ct has discretion to grant specific relief(a)Not default remedy (damages is) under abuse of discretion std

d)No Numbers Dont have to quantify/value anything (necessarily)(1) Ex: VttO doesnt have to be calculated (can protect value literally)(2) As close to rightful position bullseye as possible

B. Scope of Injunctions1.Preventing Wrongful Acts

a) GITMO Rule: No injunction if evidence of future injury is based on remote andspeculative evidence - Almurbati (2005) - transferring detainees

(1) F: Detainees fear being sent elsewhere based on credible news repts(2) D/R: Rule for D; No injunction (Fear of transfer remote/speculative)

(a)Uncertainty about future no relief(3) Notes

(a) Injunctions, Ripeness, and Rightful Position

(i)Ripeness Rule Must show threat of injury is ripe(ii)Violation = Contempt in Ct(criminal or civil)

(b)Ds Intent

(i)Must show D has specific intent(Lyons case police choking; Pcouldnt prove cop would do it again SCOTUS said no injunction)(c) Scope of Injunctions to Prevent Wrongful Acts

(i)IP Examples Injunction must be limited to devices previouslyadmitted or adjudged to infringe, and to other devices which are nomore than colorably different and clearly are infringements

(4) Ripeness - Class Notes(a)Type of evidence that Ps can use to support claim of ripeness

(i)Announced Intention to commit act(ii)Previous Conduct (or current conduct)(iii) Evidence of planning to commit act (press)(iv)Necessary preparations (their behavior would be a completewaste of time if they were not going to do X)

(v)Response of D that there is no prohibition on expected conduct

(vi) Imminence (not required)(vii) Propensity (Prof prefers Probability of future act occuring)(viii) Incentive of D

(b) Type of evidence Ds can use to rebut claims

(i)Lack of imminence (other necessary steps required first)(c)How probable does it have to be? More than mere possibility,but otherwise no numbers assigned to it ct discretion

(d)Severity of harm Shouldnt matter (logically), but it does

2.Preventing Lawful Acts that might have Wrongful Consequences

a) Prophylactic Injunctions(1) Limited by 2 principles:

(a)Must be aimed at a legally cognizable harm idd in the case(b)Factual connection b/w prophylactic order and legally relevant harmmust be sufficiently close to justify inclusion of conduct in cts order

3.Repairing Consequences of Past Wrongful Conduct

a) Reparative Damages Rule: Cannot receive damages for past wrong and reparativeinjunction to fix the wrong if causes Double Recovery- Forster v. Boss (1996) (295) Lake property claim (breach of K/fraud already occurred)

(1) F: Ps bought property on lake from Ds. Ds told them they could get a boatpermit, which turned out to be false. Ds also told P they would remove swim dock,but didnt. Ps brought suit for fraud and breach of K.

(2) PH: C ompensatory & punitive damages for boat dock fraud, andcompensatory damages for swim dock. Ps also got permanent injunction sordering Ds to remove swim dock, and issued a permit

(3) D/R: Reverse for D Damages + Injunction = double-recovery


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(4) RULE - P can get damages and an injunction if no double recovery(5) Concurrence: Ps already elected the injunction as their remedy (shouldnt beable to give up the injunction)(6) Notes

(a)Reparative just prevents some of the harm from past violation(b)Reparative injunction appropriate when P will suffer additional harm infuture, and when its possible to prevent additional harm from happening

b)How much Harm Should Injunctions Prevent? -- Undo?(1) IP Preventative Injunction Should only issue injunction for appropriate

period after D used trade secret - Winston v. M N Mining (1965) (300) 2-yrinjunction from selling product they built using illegally-optained info (delay putsD in position of other competitors)

(a)D/R Rule for P; 2-yr injunction against using product(i)Cts will not issue damages where P has not been damaged and Dhas not been unjustly enriched(ii) Appropriate Injunction period is that which competitors wouldrequire after public disclosure to develop a competitive machine

(b)Applied Here (i)P ermanent injunction inappropriate public interest to allow R&D(ii)2 year injunction deprives D of benefit from unfair advantage(iii) No money damages as Ds didnt sell anything, so no injury,evidence of possible future profits were speculative

(c)Notes

(i)Is this Reparative or a Preventative Depends on how youcharacterize the wrong

(a)Ifwrong = stealing trade secrets injunction isreparative

(b)Ifwrong = selling prods made w/ TS preventative(d) Class Notes

(i)Ct is in a position in Real Time to do something about Psproperty.

(ii)This is for a Permanent Injunction (not perpetual)

c) Rule: Permanent prophylactic Injunctions allowed if recurrence of harm likely, and Dshave acted in serious bad faith - Bailey v. Proctor (1947)(276) Liquidate fraud-filledcorp, even after solvency (Counterpoint toWinston)

(1) D/R: Yes, Ct liquidates, everyone gets money back, and trust is no more(2) RULES (a)Ct of equity has inherent power (jurisdiction) to appoint a receiver toliquidate corp/investment trust where fraud, mismanagement or abuse oftrust is present (whether or not insolvent)(b) Liquidation, being a drastic remedy, will only be decreed in anextraordinary case or where special and peculiar circumstances exist

(3) Applied Here

(a)trust was insolvent and was gross abuse of trust justified jurisdiction(b)Strong likelihood of similar events occurring again (solvency irrelevant)

(4) Notes:(a)receivership is an equitable remedy

(5) Class Notes:

(a)This is a big example ofEquitable Discretion Went beyond scope(b)Ct cant just fix the problem like in Winston. Cant make sure capitalstructure doesnt create excessive risk. Could only liquidate (lawful) trust

II.B.Irreparable Injury

A. Injunctions1.Class Notes

a)Availability of Specific Relief(1) Necessity for even probable future conduct Is it necessary to enjoinconduct when P could wait to see what happens, etc (and then sue for damags, etc).

(2) Regulates that choice Could be read to prefer damages after the fact

2.RULE - injunction necessary when its the only thing to keep P in rightful position (ct wont grant


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equitable remedy if legal remedy would be adequate) - Pardee v. Camden Lumber (1911) (375) Injunction necessary to prevent D from cutting down Ps trees legal remedy insufficient (no needto show insolvency)

a)Applied Here: Injunctions dont require D to be insolvent; P has right to control hisproperty if P can demonstrate uniqueness of real property such that money damageswould be inadequate, then injunction is ok

(1)Timber has become a scarce resource, moreover, once timber is turned

into lumber, cant be converted back to normal state

b)Class Notes:(1) Adequate Remedy if damages can be used to substantially replacedamaged prop w/ adequate or just as good stuff (think stolen horse)

(a)Law seems to turn on quality of replacement goods Replacement mustbe very thing lost, but how similar do they need to be?

(2) Another Approach (Pro-injunction, minority): When mkt value of good isless than its worth to P, mkt-based damages are insufficient

(a)Suggests you can get an injunction unless you can immediately get anequivalent replacement after damage

c) Notes:(1) Why do we have an irreparable injury rule?

(a)Injunctions have greater burden on ct to enforce over time(b)injunctions impose greater intrusion over Ds property requires aparticular type of conduct (damages allow D to continue but pay)

(c)sometimes timing is an issue, when preventing something(2) Laycock argues that irreparable injury rule is dead:

(a)Def of adequacy for legal remedies: legal remedy is adequate only ifis as complet e, p ractical and efficient as equitable so always gives way toequitable relief (legal remedies almost never meet adequacy standard)

3.Reasons for Irreparable Injury Rule

a) Modern Justifications: Burdens on Ct, Ds Liberty, Jury Trial, Timingb)Econ Analysis: Preference for voluntary transactions, transaction costs, Prop rights?,Efficient theft?

4.RULE Where there is in fact harm, the fact that its hard to calculate or establish economic harmsupports proposition that damages would be inadequate, thus equitable relief is better Continental v. Intra Brokers (1994)(387) D sold discount tix to travel agents for resale to

customers; injunction ok not just b/c harm would be difficult to calc D was damaging Pspower/control of business

a) Class Notes:(1) Ct says P must argue damages are beyond calculation to get injunction(2) Problem if you argue this and lose, throwing damages claim out

5.RULE - Specific performance warranted when legal remedy would be inadequate inadequacy isa case-by-case analysis - Campbell Soup v. Wentz (1948)(391) Sale of Chantenay carrots;Cant just breach in rising market for specific goods

a) Class Notes:(1) Other carrots were not equivalent b/c they no uniform appearance(2) W/out injunction, would have had to sue for consequential damages re: lostprofits and harm to the brand itself. No more efficient breach

b) Notes:(1) The Cover Principle inability to cover is strong evidence of other propercircumstances in which SP is appropriate

(2) Specific performance for ordinary goods - Allowed when:(a)there is a scarcity(b) time constraints

(c)or the size of the order

6.Rule: S pecific Performance is properly denied where damages are adequate remedy andequitable relief would impose disproportionate burden on D Van Wagner (1986)(402)Billboard

lease Efficient breachNo SP (damages sufficient)

a) D/R: Limit to damages; No SP b/c not unique enough, SP would be inequitable(1) Value of the unique qualitiescould be fixed with reasonable certainty


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and without a high risk of undercompensating P

b)Notes(1) Old rule: damages are nt adequate remedies for loss of real estate(2) Right to use side of building for billboard is a moderate interest but goodexample of proposition that every real estate parcel is unique

c)Prof thinks this goes too far sometimes damages are more adequate than specificrelief! (at least compared toPardee)

a) Irreparable Injury Summary

(1) 2 Pieces:(a)Damages are an adequate remedy and specific relief must be denied if:(i)(1) Damages will be recoverable, AND

(a) Not speculative(b) Pass standard of proof

(ii)(2) Damages must be collectible from this D(iii) (3) (Hard Part) Good Enough Replacement

(a) Damages claim will fund or reimburse the cost of gettinga good enough Replacement

(i)How immediate? How close?

(ii)PURE Consequential damages are usually here(b)Damages are inadequate and SP will be allowed if

(i)Not Recoverable , OR(ii) Not Collectible

(iii) ThenNot Good enough

7.Class Notes Consequential Damages Generally

a) Consequential damages are not cost of getting (eg.FL Power and Light)b)E ffect of not having entitlement, or immediate and equivalent replacement

(1) Replacement can be delayed, and P can suffer loss of intermediate use, andreplacement may be detrimental to P in long term (all consequential)

(2) May be able to claim damages for cost of getting replacement, or cost ofmaintaining the replaced good

c) If there is no replacement, loss is entirely consequentiald) Direct Damages Not consequential

(1) Reliance Damages for Breach of K measure actual effect of breach(2) Sellers lost gain (cant resell) like measuring actual effect of breach

e)Consequential DamagesKey actual effect of P in dealings w/ 3rd

parties(1) Typical settings:

(a)Owner is deprived of input and business, hurts downstream market(i)(WTC, Buck, Bigalow, Pierce, etc.)

(b)Input is provided that is somehow deficient Buyer suffers damages indownstream market(Celebrity Cruiselines; rejected inYoung).

(c)Sellers output market disrupted by conduct(Anza, Yardstick Case)(2) Atypical Settings

(a) Buyers breach causes disruption in sellers downstream market

(b)Seller liable to supplier b/c buyer wont take delivery(Union Carbide)

f)But-For logic: would P be better off but for violation, then, if D can show there really wasno impact no harm (Redgrave)

g)Discounting Present Value(1) How to derive that number:

(a)Use discount rate applied to future numbers (represents rate of return)(b) Takes into account inflation and risk

B. Burdens on D (Whitlock) or the Court (Argyll)1.Class Notes

a) Now were protecting wrongdoersb)What sort of burdens? Inconvenience of complying with court decreec) 3 types of burdens:

(1) Out of pocket expense of honoring entitlement to P (very large vs. what P willget out of performance) (Whitlock)

(2) Consequential losses if have to comply w/ specific relief (Argyll)(3) Loss of Consequential Gains if allowed to breach (Van Wagner)


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d)Holding Out Dark side of SP litigation in the case of deliberate breach(1) Bilateral Monopoly - Exploit Ds willingness to pay (laches) to get more thanequitable entitlement (D would pay more than P would accept)

e)Strange Rule from Van Wagner: Enormously Profitable Wrong will be successful, buta moderately profitable wrong will not be successful

(1) Odd case b/c Ddeliberately violated (shouldnt be able to invoke unduehardship, but does, citing a disparity)

(2) Private Eminent Domain (ct says go ahead and break K)(3) Escape Hatch if sufficiently culpable, no undue hardship defense.

2.Rule (Burden on D): Intentional wrongdoers cant use undue hardship defense -Whitlock(1999) Intentional encroachment injunction (no balancing hardship)

a) D/R: Reversed for P Injunction granted(1) Normal Rule: If Ds burden is high and Ps benefit is low damages(2) Distinction: if encroachment is intentional, injunction may issue w/outbalancing h ardships .

(a) "One who knows of a claim to land that he proposes to use as his ownproceeds at his peril if he goes forward in the face of protest or warningsfrom the owner and places a structure on the land."

b)Note: Courts will consider:(1) Undue burden on the D(2) D s culpability (and intent)(3) Relationship b/w parties

(4) P s diligence (laches defense?)c) If ct denies injunction because of undue hardship, usually give damages.

3.Rule (Burden on Ct): Usually no specific performance for D to carry on a business- Argyll(1997)(416) No SP to require D to keep supermarket open (Burden on Ct to monitor D after theorder)

a) D/R: No SP, Public Interest damages end litigation(1) Public interest against requiring someone to operate a business at loss undueburden on D

(2) Burden on ct to have to supervise performance for so many years(3) waste of resources and prolongs the battle(4) Damages brings litigation to an end

III.(D) Preliminary InjunctionsA. The Substantive Standards for Preliminary Relief

1.Class Notes

a) Before trial P may or may not win on merits, and its an interim remedyb)Should be harder to get this b/c

(1) Risk of error is higher(2) No complete record(3) Have to decide quickly(4) D has not been adjudicated a breacher/wrongdoer

c)Aggressive SP Potentially a problem for system and Dd)4-factor balancing test (see below)

(1) Is irreparable injury the same as in permanent injunction context?(2) No Ifdamages are available in case of brief, ct will typically not act

(3) In Winter, balance of equities favors P; however, its not the same analysis of apermanent injunction analysis (bigger hurdle)

e)Preliminary Injunction Bonds Coyne covers any harm that D suffers b/c ofpreliminary injunction if it was wrongfully enjoined

(1) D has to win on the merits(2) Even if D does win, D has to prove he was actually harmed by injunction(3) Bond is surety for P, so after the fact, D can go after the bond

(a) D may be able to collect more than bond

2.Rule: Preliminary injunction requires 4-factor balancing Test - Winter (2008)(440) Noinjunction for Possible Harm due to naval excercises must be likely

a) D/R: Rule for D; No injunction issued


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b)RULE - Preliminary injunction 4-factors P must show (balancing Test):(1) Likelihood of Ps success on merits(2) Possibility of irreparable injury to P if preliminary relief not granted(3) Balance of hardships favoring P(4) Advancement ofpublic interest

3.Notes on Preliminary Relief

a) basic function of preliminary injunction is to preserve the status quob)R isk of harm must be sufficiently irreparable to override the risk of error.

(1) Leubsdorf-Posner Test: Grant Prelim reliefIF:P x Hp > (1 P) x Hd

(a)In other words, Grant Prelim relief if harm to P (if injunction is denied),multiplied by probability denial would be an error (ie P will win at trial)exceeds harm to D (if the injunction is granted), multiplied by probabilitygranting injunction would be an error (ie D will win at trial)

c) NFL Example NFL (1980) Raiders wanted to move to LA, NFL wanted to blocktransfer through leagues Bylaws. Dist. Ct. granted a preliminary injunction prohibitingleague from preventing the transfer. NFL appealed. 9th Cir. Reversed

SECTION IV DECLARATORY JUDGMENT - Non-Coercive RemedyI.Declaratory Judgment: Federal Statute & Federal Rule

A. 28 USC 2201(a) Creation of remedy1.In a case of actual controversy w/in its jurisdiction, except wrt certain statutory proceedings, anyct of US may declare rights and other legal relations of any interested party seeking such

declaration, whether or not further relief is or could be sought.B. 28 USC 2202 Further Relief

1.Further necessary or proper relief based on declaratory judgment may be granted, afterreasonable notice, against any adverse party whose rights have been determined by such judgment

C. FRCP 57 Declaratory Judgment1.Existence of another adequate remedy does not preclude declaratory judgment thats otherwiseappropriate; ct may order speedy hearing of declaratory judgment action

II.The General Case

A. Class Notes1.Its a declaration not coercive (milder remedy)2.Not specific relief, but similar

a)4 Characteristics of specific relief (and compare to DJ)(1) Real Time (same with DJs)(2) Real World (less dramatic supposed to affect real world behavior)(3) Discretion (same)(4)Timing is important (too early, too late, etc. are all the same)

3.2 Contexts for Seeking DJ

a) Offensive: Brought by traditional P (has a cause of action)b)Defensive: Brought by prospective D (no CoA, and is contemplating conduct thatsomeone else might think creates a CoA against them)

4.Jurisdiction: Still need to satisfy Case or Controversy requirements

B. Case or Controversy Requirement1.RULE -There must be a case or controversy (rights affected by someones actions) in order for a

court to issue DJ Opinion. No advisory opinions - Wallace (1933)(573) State tax invalid under14A DJ issued (case/constroversy ok)

a) F:Appellant brought to secure a judicial declaration that a state tax was invalid underthe commerce clause of 14th Amend.

b)D/R: Affirm for P.c) Note

(1) DJs aren t advisory opinions, more like a watered down injunction, while ctshave no coercive authority, still preventing future harm

(2) Dont have to show irreparable injury to get a DJ.(3) S carecrow patent where potential Ps assert claims without filing suit(4) 2 things you can do to avoid it:

(a)sue first for a DJ or file counterclaim for a DJ


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(b)sue to enjoin a suit but you must show irreparable injury

d)Notes on Declaratory Judgments and Tactical Advantage (1-4 on 586)

C. Declaratory Judgment Case Study: Hexion v. Huntsman (2008)1.Case Brief

a) F: Hexion agreed to buy Huntsman;was going to do it w/ borrowed money(1) Bank Required certificate of solvency of new entity, to include all new debt(2) D required to pay $325 million if couldnt get financing(3) If knowing and intentional breach, damages could go up to $3 BILLION

(4) However, if MAE before closing, D could walk from the dealb)D filed Declaratory Judgment action in DE before closing of the deal

(1) Defensive DJ action trying to find out about liability if entity is deemedinsolvent and cant get financing

(2) Effect It worked; Gave Hexion opportunity

c) I: In case of default, and absent Material Adverse Effect (MAE), is Ds liability capped at$325 Million under the K, or is it uncapped?

d) I2: Did D knowingly and intentionally breach covenants in Merger Agreement thatcaused damages above the K amount?

e)D/R:SP Granted to P; had to go through w/ merger;(1)Acquiror (Hexion, D) knowingly and intentionally breachedits covenantsunder merger agreementto use reasonable best efforts to obtain financingand antitrust approval.

(2) R ejected Ds claims that P sufferedmaterial adverse effect(MAE).(3) Remedy Ct grantedSP and warned that buyer (D) could be subject touncapped monetary damages if merger did not close.

SECTION VRESTITUTION

I.Restitution Causes of ActionA. Introducing RestitutionMistake

1.Class Notes

a) Exotic Flower of Remedies (Vocabulary is unsettled)b)3 Parts of Restitution

(1) Substantive gives someone a cause of action who doesnt have a CoA in tort

or K (Freestanding Restitution Pt. V(A) of syllabus)(2) Remedial Party who has a CoA in tort or K, and one of choices given to partyis a restitutional remedy(3) Restitutional Devices

(a)Constructive Trust eg. Blue Cross (infra)(b) Accounting of Profits

c) Thus(1)Judgment in restitution looks a lot like damages

(2) Restitution can be a specific form of relief (can order D to do something)(3) No Double Recovery - Cant recover Ds gain and Ps loss from same act

d)Remedial Restitution(1) How does monetary restitution compare to damages?

(a) Monetary restitution = mirror image of damages

(i)Damages are about harm and loss (compensating P)(ii)Restitution is about benefit and gain (enrichment of D)

(2) Rescission Undoing K w/out measuring benefit (may = winfall for P)(3) Why does restitution matter? It matters when gain > loss

(a) This is an option for P re: which path of recovery theyd pursue(b) D may be more efficient than P, so might just want to go after Ds gain

(c) If recovery is limited to damages, D may go ahead (efficient breach)(4) Why do we do this? Deterrence(5) Restitution vs. Damages (continued)

(a)Objective (bullseye for D): Making D indifferent b/w committingviolation and having to pay gain vs. not committing violation at all.

(b)Problem: If D believes hes not wrong No incentive issue

e)2 Parts of Measuring Damages:


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(1) Getting (substantive damages)(a) P Side = cost incurred (Getting After violating entitlement)(b) D Side = benefit gained by not asking permissing (getting before action)

(2) Not Having (consequential damages)(a) D Side = impact of D having (consequential gains)

2.Rule: Cant keep money meant for someone else; P gets restitution regardless of fault - BlueCross (1990)(619) Mistaken med insurance payment

a) F: Discovered error 3 years later; D and family/businsess cashed checksb)D/R: Reverse for P; Restitution = Remedy for Payment by mistake

(1) Doesnt matter if caused by Ps lack of care or inadvertence(2) Ds may have had some fault, but Restitution is simpler claim(3) No Affirmative Defenses

(a)Contributory Negligence No, b/c mistake = restitution regardless(b)Change of Position Can act as Affirmative Defense, but not here

(i)Burden is on D to show change from payment was so dramaticthat requiring restitution would be unjust (time passing notenough)

(ii)Notice = reasonable person would have made further inquirythat would have revealed the truth

3.Intro Notes on Restitution

a) Distinction from Damages

(1) Alternative measure of monetary recovery(2) Damages recovery for Ps Loss(3) Restitution recovery for Ds Gain

b)Measuring Restution(1) Interest - runs from date D had notice of Ps rights

c) Claim for unjust enrichment is often available in cases of:(1) intentional tort or breach of fiduciary duty,(2) in cases of statutory torts such as infringement intellectual property,(3) and sometimes in suits for breach of K

d)Rest (3rd) of unjust enrichment enrichment that is legally unjustified(1) Enrichment or gain that lacks an adequate legal basis it results from a transferthat the law treats as ineffective

4.Examples of Unjust Enrichment

a) Mistakes receiving money or property by mistake is unjust enrichment(1) Overpay bank for debt, mistakenly convey property or perform service

b)Actual or supposed Ks Quantum meruit, party who performs partially can recoverbenefits conferred even if statute of frauds or impossibility voids K

c) Judgments money paid from judgment, if reversed must be refundedd)Emergencies reasonably provide essential goods/ services in emergency excusedfrom not securing promise to pay

e) Joint obligations pay more than share of joint obligation restitution from otherobligors (Roommates, one pays for others share of rent sue for rent)

f)Wrongful acts acquire benefit from theft, conversion, fraud, etc. restitutiong)Examples of restitutionary labels - Rescission, equitable liens, indemnity, accountingof profits, constructive trust, quasi-K

B. Unenforceable Ks and Quantum Meruit1.Rule: measure of recovery under quasi-K isnt amt of enrichment, but amt of unjust enrichment- Anderson v. Schwegel (1990)(638) Misundertood restore Car work unjust enrich = costto perform, not just prop enhancement)

a) D/R:Affirm for P; D must pay for additional benefit(1) Agreed to work performed, so a Quasi-K

(a)Quasi- K(assented to) unjust enrichment(b)Quantum Meruit(no assent) reasonable value of services rendered

(2) Thus: P entitled only to value of property enhancement

b)Rule: Mistaken improvements = restitution (includes enhanced property value)c) Rule: When improvements are assented to damages include unjust enrich


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d)Class Notes - D wanted to just pay the added benefit (vs. cost of performance)

2.Measuring Restitution from Innocent Ds

a) Rest (3rd) 49 Measures of Enrichment(642)(1) 5 potential Measure (4 for innocent Ds): No guidance on which to use

(a)Value in advancing purposes of DPotentially lowest amt(i)demonstrable value to P, based on what we know of situation

(b)Cost to P Straightforward, Out of pocket expense (2ndhighest amt )(c)Market Value Quantum Meruit (3rdhighest value )(d)Agreed Price In a defective K (wildcard most accurate)

(2) Note

(a)If D hadRequested services focus on Mkt value and Agreed Price(b)Ifnot a requested service receive LEAST of first 3 ((a), (b), or (c))

(3) Hypo Painter accidentally paints your house(a) Possible Valuations

(i)Mkt value = $1200(ii) Ps cost = $800

(iii) Price in other K = $1000 (Cant argue for this)(b)Arguments

(i)Depends on facts probably going to be the lowest of three

b)Rest (3rd) 50 Innocent Recipients (Rules for which in49to apply)(1) Benefits conferred at Ps request market value or agreed price(2) Nonemergency conferred w/out request no recovery (or smallest amt)

II.Capturing Wrongful Gains

A. Disgorging Profits of Conscious Wrongdoers1.Basic Principle

a) RULE If D (tortfeasor) benefits from wrong, P may waive tort action and bring suit inassumpsit for restitution Ie. P may elect to disgorge Ds profits as a remedy for unjust

enrichment -Olwell (1946)(649) Egg washing machine P may collect restitution for

gains Disgorgement

(1) D/R: Rule for P, Conscious wrongdoer disgorge price of next best alt(a)P had right to sue in tort or assumpsit (his choice b/c conscious wrong)(b)Here there is a K for who owns machine P can choose b/w tort orQuasi-K (like lease - D must pay $10/week cost of labor w/out machine)

(2) Notes

(a)DISGORGEMENT if he was conscientiously tortious in acquiringbenefit, he is also deprived of profit from subsequent dealing with it

(b)Ds culpabilitydecides whether he is liable for all profits(i)Conscious wrongdoer liable for all profits(ii)Negligent, illegal but in good faith only liable for FMV ofit

(c) Look at which measure of recovery will give you the greatest recovery

(d)Ex: C ave Case Edwards (1936) (infra): cave tourist attraction. Cavewent under Ps land but P couldnt access it. Ct awarded P part of profits

(i)Even though restitution generally measure recovery based onwhat D gained, also see restitution resembling damages awardmeasuring recovery based on mkt value (unintentional wrongdoer relaxed stds)

(3) Class Notes

(a)Ct awards $1,560 ($10/week for 3 years)(i)$1.43/hour for 7 hours a day, 1 day a week(ii) No explanation for why $1.43/hour(iii) 2 possible measures of gain:

(a)Impact Model - Based on D not having the machine andhaving to hand-wash

(b)Quasi-K - Based on D getting permission to use machineand paying rental fee (would have been higher amount)

(b)D Argues damages should be based on Ps loss, which was nothing(c) Ct responds to Ds argument that P wasnt going to use themachine by saying property = right to exclusive use eff off.(d) Ds State of Mind Conscious Wrongdoer

(i)D cant claim undue hardship or irreparable injury


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(e)Olwellian Worlds Handout (calculating gains)

(i)If no alternative to Ps machine (indispensable) no profits(ii) If $0 in actual gain (just turned on machine b/c liked it), then FMVof rental would be higher (and most appropriate, even though itd belike private eminent domain)

(iii) Restitution IS NOT PUNITIVE just recover the gain attributableto conduct cant recover additional gains just b/c business wastainted(iv)D has to pay the higher of gains or rental cost

2.In Trademark Casesa) Rule: If D deliberately infringes TM P can collect ALL of Ds profits (even if nodamages) - Maier Brewin g (1968)(658) Whiskey TM award restitution

(1) PH: D deliberately infringed on TM . No competition b/w products, butconsumers might get confused a warded accounting by Ds of profits .

(2) D/R:Affirm for P; 9th Cir. awarded profits(3) RULES concept of unjust enrichment, utilized subject to the principles ofequity will be applied to trademark infringement remembering that the trademarkinfringement must remain unprofitable

(a)If infringe but no direct competition accounting of profits based onunjust enrichment is appropriate removes motive/deters infringement

(b)Infringe = knowing/deliberat e accounting of profits appropriate(c) If infringement is innocent injunction would be appropriate

3. More Class Notesa) Specific Relief Key Points

(1) What is it?

(a)Real time, real world intervention by ct(b) Ct has wide discretion whether and scope of specific relief

(c)Dont need to quantify anything protects value to owner(2) Practicalities

(a)Irreparable injury and legal remedy same question(b)Ps dont have to dump on their damages claim when trying to get DJ

(3) Indifference Principle(a) Should grant relief only if P would be indifferent to that or alternative

(b)Ideal position should be granted if and when it matters(4) Undue hardship to D

(a)May overrule or refuse to grant specific relief if inequitable(b)If D was deliberate in action, this rule does not apply

b)Declaratory Relief(1) O ffensive

(a) Doesnt add a lot to damages, etc. re: past acts(b) Threatened future harm usualy inferior to injunctive relief

(2) Defensive(a) Ppl who profess to have claims otherwise have complete control overwhether theory gets challenged in ct

(b)Ripeness Cant have complete uncertainty must make some choicesbefore going to ct

(i)P also must have taken some action (threaten suit, etc)

B. Measuring the Profits1.Apportionment: Separating profit from wrongdoing and lawful activity2.Rule: Only Reasonable Approximation necessary to apportion wrongful gains in infringecases - Sheldon (1940)(665) Infringing Play 1/5th profits awarded

a) I: Should profits be apportioned, and if so, how?b)D/R: Affirmed; 1/5th of profits apportioned, not all. Other factors presentc) RULE under equity, need compensation for wrongful acts, not penalty by giving to proprietor profits not attributable to the infringement APPORTIONMENT is appropriatethen and only a reasonable approximation is needed (demonstrated by expert testimony)

(1) Only when the d portions are so intermingled with the rest of the piratedwork, then entire profits should be given to the P. See Callaghan v. Myers(activities were so blended that it was impossible to separate out the works D hadto live with consequences)


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d)Class Notes(1) Statute can collect all profits attributable to d work(2) Attributable To brings in apportionment(3) Real world evidence of what D was willing to pay for permission?

(a) Had agreed to $30K deal

(b)T oo speculative to use as a basis for restitution(c)Plus Ds were deliberate wrongdoers

(4) How to calculate apportionment?

(a)Gain for next best alternative? no yardstick or incremental approach

(b)HELD: Pro Rata Approach (really just a guess of % impact)(i)Weighing actual contributions of various inputs

(ii)Find % of impact of different impacts(a) Plagiarised material(b)Star power(c) Advertising(d)Etc.

(iii) In this case apportioning revenues(a)No real standard Decides 20% really just a guess

(5) Issue:Reduction of overhead for net profit?(a) Ct deliberately apportions net profit(b) Incremental Approach

(i)Say movie took in $1.6Mill and actors/etc. cost $500K(ii) $1.1Mill would be gross profit (incremental method)

(iii) w/ $500K overhead (woulda been there regardless of movie)(iv) Then youd have $600K for NET PROFIT (allocate overhead interms of the corporate entity as a whole)

e)Notes(1) Sheldon is often applied to music cases CDs distinguished from cookbooks

(a) manner in which they are marketed

(2) usually 2 types of fights(a)Revenue fights while we made some revenue from infringement, wealso made revenue from things we legally did

(b)Cost fights b/c profits = revenue costs, Ds want costs to be high(3) 2 ways of look at the apportionment of profits :

(a)Pro rata method: when you have to figure out relative importance of

infringing product. Infringing product generally separate entity. (Sheldon)(b)Actual profits method: looks at all the revenues and expensesattributable to the infringing product (Hamil).

(4) Fed rule is that conscious wrongdoer gets no credit for income taxes paid ondisgorged profits.

3.Apportionment Rule: Can apportion wrongful profits based by % ownership in land - Edwards(1936) Cave Case, % of cave under P = % profits apportioned

a) F: D found an entrance to a cave on his land and turned it into a tourist attraction. Thecave went under Ps land but P could not access it.

b)PH: Ct awarded P part of the profits according to % of cave on Ps landc) D/R:Affirmed; fair determination of benefits accruing to D from use of Ps prop

(1) restitution resembling dmgs measuring recovery based on market value(2) see this in innocent, negligent situations, unintentional wrongdoer

d)Concurrence Proposes joint ownership model, since Ps portion of cave wasworthless w/out entrance on Ds land same apportionment though

e)Class Notes(1) Survey Assignment

(a)Attribution questions - Why did you go? most important(2) What they did in this case Ct had a great proxy in the advertising

(a)Why? in sellers interest to know what buyers are influenced by

4.Incorrect Rule: Deduct overhead expenses in apportionment gains -Hamil v. GFI (1999) (611) Dress infringe Case; Incorrect decision!!

a) RULE - Equity calls for compensation due to wrongful acts thus overhead which doesntassist in the production of the infringement should not be credited to the infringer, and that


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which does, should be a question of fact in all cases

(1) 2 step procedure for deducting overhead from infringers profits(a)determine what overhead expense categories are actually implicated byproduction of infringing product and that theres sufficient nexus b/wcategory of overhead and production or sale of infringing product

b)Class Notes(1) THIS CASE IS WRONG!!!

(2) Burden is on D to seek apportionment but ct reads it to mean something elseand doesnt use apportionment at all

(3) Argument : infringement enhanced demand for dresses

(4) Wrongful Gain : Incremental vs. Net Profit (chart on TWEN)(a)Incremental? Allocate % of overhead to net profit? chart showsshouldnt (allows D to use some unlawful gains to cover fixed expenses)

C. Class Notes (REVIEW)1.In this area of restitution, its about putting D in Ds rightful position2.Hierarchy of remedies w/ that objective (for D committed a wrong and to what extententitlement is protected):

a) Injunction (highest protection hypo world = real world)b)Apportionment Ex-post award P after the fact

(1) Pro Rata Sheldon(a) Involuntary partnership(b) Doesnt try to figure out next best alternative

(c) Shows profit D actually made, and then portion out based on all inputs(2) Incremental Olwell

(a) Ds rightful position is they have to use the next best alternative(b) In cave case in hypo world, what would profits have been if they hadshut off Ps part of the cave?

c) Reasonable Royalty Ex ante measure(1) Assume they figured out licensing agreement before(2) Party-specific (subjective)

d)Market Value (seller becomes involuntary seller private eminent domain)(1) Ex-ante what they would have paid before (objective measure)(2) Non-deliberate wrongdoer

III.C. Transactional Restitution: Breach and Fraud

A. Rescission1.Generally Rescission cancels the transaction and reverses all benefits

a) Insured P gets money back w/ interest; insurer released from policy obligations2.3 Pieces of Rescission

a) Nullify transactionb)Actual physical return ofperformancesc) Mutual accounting of value of benefits exchanged that cant be retured

3.Specific Remedy (ie. specific unperformance)

a) Court has to make an orderb) Intervening in real timec)Gives greater value to promisee

4.Rescission Rule: Entitled to restitution after D breached, even if K performance is impossible -Mobil Oil - (2000)Oil Drill Leasing; Gvt passed law performance by P impossible P stillentitled to restitution b/c D breached

a) Rescission is available in the event of (1) fraudulent material misrepresentation,(2) innocent or negligent misrepresentations,(3) undue influence

(4) substantial breach,(5) mutual mistake of fact,

(6) duress(7) Mutual mistake of fact(8) Unilateral mistake, not relied on

b)Misrepresentation is material if knowledge by insurer of facts misrepresented, would


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have led to a refusal by the insurer to make such K

c) Notes(1) Rescission for FRAUD Cherry v. Crispin (688) Termite Case, sellersfraudulently concealed fact that house was infested with termites Ps get backwhat they exchanged, and Ds get back what they exchanged (restoration for bothsides) no disgorgement

(a)D/R: Rescission for Fraud granted(i) If transaction is fraudulent, unlike breach, both a seller and abuyer can get rescission of a partially or even completely performed

K(2) Breach Rule: P can choose b/w Reliance damages or Restitution in case ofbreach - Bush v. Canfield(1818) rescission breach of K case.

(a)F: P paid in advance for flour. Price of flour went down. But seller stillbreached (didnt deliver). P looking at losing K, but wants $ back

(b)P can choose remedies (1-Way Option)(i)Reliance Recovery Better if K would have created a gain(ii)Restitution Recovery Better if K would have created a loss

(3) Restitution and Ks

(a)Issue ofrestoration vs. restitution - Trend is to give P back onlyrestoration rather than restitution (breach of K isnt that bad)

(4) P can choose whether to sue for rescission or damages(5) Grounds for rescission - varied, but recurring theme is that grounds must besubstantial to justify giving P this option to enforce or undo the K.

(6) General Rule: If you have a K thats enforceable, restitution should not be used(This case is an EXCEPTION)(7) Sellers Damages (Chart)

(a) Expectency = Price Savings(b) Reliance = Spent Loss

(c)Restitution = Value of Benefit (Boomer)(8) 38 Performance-Based Damages for Breach (sup. 90)

(a) If this situation takes place, the only remedy is damages(b) READ THIS!!!

B. Quantum Meruit1.Generally: Rescission where parties cant physically give back what they put in.2.Laycock 692-94: Losing Ks Where Benefit Cannot Be Returned

3.Performance-Based Damages for Breach: Restatement (Third), Restitution and UnjustEnrichment (Tentative Draft)

C. Disgorgement1.Class Notes

a) Disgorgement Generally - P in K case getting the gains D would not have derived hadhe not breached the K

(1) Not restoring anything(2) P is going to gain something it never had and never promised, and wouldnt beable to argue that it could have had because of the breach

b)Restatement: no disgorgement remedy for breach of K claims(1) So why are we studying this?

1.RULE D isgorgement appropriate where P has suffered an irreparable injury or where D is anintentional wrongdoer - Snepp v. United States (1980)(678) NoCIA book approval Disgorgement(unusual case. forfeiture, not disgorgement)

a) D/R: Constructive trust reinstated; breach of fid duty Disgorgement(1) Irreparable harm was done through Snepps failure to submit his material forprepublication review possibility of compromising information and other agents

(2) it wouldve been speculative to calculate damages, the trial couldve revealedsensitive information, and thus difficult to quantify damages

(3) constructive trust protects both govt, and agent from unwarranted risks conforming relief to the dimension of the wrong:

b)Class Notes(1) No But-For Causation D would have made same profits even if hadntbreached. the book would have been the same


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(2) Publishing of book was unauthorized by CIA (like Olwell egg washingmachine) Need a deterrant from bypassing the market?

(a) Get the greater of the gain received or the fair market value of rental

(b)Answer in this case: b/c no gain from the breach, and no rental value forCIA approval, so D had to give over all his profits

2.Rule: If D Sells Land and then sells fill on land to 3rd party Disgorgement, not damages forproperty lost value -May v. Muroff (1986)

a) F: Landowner sold land, then, before changing hands, sold fill (dirt/rocks/etc) on landto 3rdparty. Purchaser claimed profits

b)PH: Trial ct awarded damages for the lost value to propertyc) D/R: Held for P; changed damages to disgorgement (more than damages)

(1) Deliberate Wrongdoer P entitled to value of materials moved(2) D should not be allowed a winfall from deliberate acts

3.Notes on Disgorging Profits from Breach of K

a) Rest (3rd) 39 (General Rule) Ifdeliberate breach of K results in profitandavailable damage remedygives inadequate protection to Kal entitlement, promiseehas claim to restitution of profitrealized by promisor in breach

b)Basically 3 Requirementsc) Profitabled)Deliberatee)Damages = Inadequate Remedy

IV.Restitution Case Study: Conoco v. United States A. Bottom Line: SCOTUS awarded bonus amt paid for leases, but not rentalpayments or exploration expenses

B. Class Notes1.Takings Claim Argument

a) Gvt Activity was a regulatory takingb)Thus, P entitled to just compensation

(1) What is this? Compensatory damages (expectancy dmgs specifically)

c) Need a value of the taking(1) Dates of taking

(2)Market value changed from date of purchase

(3) Must evaluate value of leases at date of breach much different

d)Note this was a losing K for the P(1) NC wouldnt have been able to drill anyway, so no expectancy dmgs

2.Restitution Argument - Once you establish liability, you just add up the dollars3.Bottom line - Often better for rescission claim b/c its way more complicated to seek expectancydamages

C. Rescission Arguments1.Bonus payments

a) D (Gvt) P wasnt harmed at all for 9 years out of the 10 years in the K should only beentitlted to 1/10th of bonus payments

b)P (winning argument) This is a 10-yr option to drill the way the market works inthis case is to give rights to any producing well for the period (would have gotten all gains in10th year)

(1) Restitution Terms P did not have to prove gains2.Rental Payments

a) P same argument as aboveb)D (winning argument) each rental payment was for the previous year receivedmaterial benefit for each year P got what it paid for

3.Expenditure Expenses (reliance damages not paid to the gvt.)

a) Problem w/ reliance damages Expectancy cap(1)They were never going to be able to explore those wells

(2) Breach did not waste those expenditures P would not have been able to drill,so breach didnt deprive them of chance to regain expenditures

SECTION VI. DEFENSES


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I.Unclean Hands / In Pari DelictoA. Generally/Class Notes:

1.Rules regarding in pari delicto- raised to bar recovery by P, when P has engaged inwrongdoing as well thus he cant recover

2.Remedies against P haphazard remedy b/c wont know if itll be imposed, and damageslimitation is absolute (bars case), so not related to amt gained

B. Case Example1.RULE No recovery if unclean hands Institutional concern (cts dont want to get involved inillegal Ks)Pinter v. Dahl(1988) (935) unregistered securities in worthless oil wells; P waspromoting same unregistered securities, so cant recover

a) In pari delicto defense available where:(1) From own actions, P bears at least substantially equal responsibility forviolations he seeks to redress, and

(a)careful sometimes people make mistakes with this rule, Pswrongdoing must somehow relate to the harm at heart of the issue

(2) preclusion of suit would not significantly interfere with the effective enforcementof the securities laws and protection of the investing public

(a)2nd prong generally stated, would preclusion of the suit interfere withgeneral public policy concerns? these defenses are created in equity, thuspublic policy is usually involved

1.Note -Another nuance Ps behavior must be directed towards D Beelman v. Beelman Pand husband fraudulently convey prop to brother in law, husband dies, brother doesnt give back, ctnevertheless imposed a constructive trust, as fraud was directed towards the IRS, not the D

II. Laches (957-66)A. General/Class Notes

1. Only works for equitable remedies

2.Once ct finds Laches, regardless of merits, case is barred3.Key Elements of Laches

a) Delay -Doesnt have to be deliberate (ie to exploit D)b)Prejudice

4.Seen Before?

a) Whitlock(encroaching wall case) exploiting D?(1) If D deliberately encroaches, but P allows encroachment, will laches be allowedas defense? (before adverse possession) Prof doesnt think so

B. RULE Doctrine of Laches bars reliefto those who delay assertion ofclaims for unreasonable time;Laches applies in disparagement cases - Pro-Football, Inc. v. Harjo(2005) Indians barred from cancelling Redskins TMin NFL b/c of laches (to include very young Ps)

1.F: Delayed 8 years b/w reaching age of majority and filing suit (Link:http://businesslawbrief.com/pro-football-inc-v-harjo/)

a) Lanham Act - Disparagement case can be brought at any timeb)HOWEVER , this is a SOL issue, not a Laches issuec) RELIANCE issue but for laches, what would D have done?

(1) Redskins spent a lot of money in the interim period promoting the TM

(2) Ct let Redskins off easy on this issue found economic prejudice

d)3 affirmative requirements to claiming laches(1) substantial delay by a P prior to filing suit(2) Ps awareness that the disputed trademark was being infringed, and(3) reliance interest resulting from Ds continued development of goodwill duringthis period of delay

e)F actors may negate invocation of laches by excusing the delay(1) ongoing negotiations

(2) conscious fraud or bad faith by D

f)L aches may bar injunctive reliefwhen D established a substantial reliance interest investing substantial labor and capital that builds TMs goodwill

g)MERE DELAY IS NOT ENOUGH
http://businesslawbrief.com/pro-f

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