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Henry Smith for Remedies (Winter 2015)

I. Introduction to Equity, Maxims, Merger

A.Features of Equity: Discretion; In personam; Notice; Good faith
1. Valco Cincinnati - permanent injunction to enjoin D to make P whole and punish D
for unjust enrichment
2. Weinberger (SCOTUS) - Injunction was improper since no “irreparable harm” shown,
notwithstanding violation of Act.
Contrast TVA v. Hill (snail-darter case, in which Court found that Congress
clearly intended to supplant common law equitable requirements for an
injunction).
3. Riggs - No one shall be permitted to take advantage of his own wrong
4. Newton - Res judicata bar to subsequent legal action following equitable action
5. J.R. v. M.P - classic in personam equitable jurisdiction case; Here there is a “right,”
but the “remedy” is frustrated since j.r. chose to stay in jail rather than let the ds out
of their obligation [inherent limit to traditional equitable remedies]
B. Types of Remedies
1. Compensatory remedies (e.g. K damages, “efficient breach”)
2. Preventive remedies
i. Coercive (e.g. injunction)
ii. Declaratory
3. Restitutionary remedies (cf. unjust enrichment)
4. Punitive damages (from ex ante perspective very similar to preventive)
5. Ancillary remedies (execution)
C. Jurisdiction of court in equity
1. Lewis - when D in bill in equity disenables himself to comply with order for specific
relief, court will compel compensation to be made
2. Grupo - NO EQUITY “JURISDICTION” -- Scalia, for the majority, looked to the
state of the law in 1789, at the time that the Constitution and Judiciary Act of 1789
went into effect. At that time, a legal judgment fixing a debt was required before a
court of equity would interfere with the debtor’s use of its property. Thus, majority
refuses to permit such a federal court equitable remedy in 1999.
3. Strank - Jurisdiction extends to duties that arose from customs and usages;
measurement of damages speculative and thus inadequate at law
II. Equitable Decrees and Contempt, Injunctions
A. Basics
1. Requirements
i. Duty to obey
□ Persons Bound by the Decree
a) Persons named. Especially parties.
b) Agents (Lord Wellesley)
c) Those acting in concert with named parties. (Unlike in Rigas)
□ Rigas - To the extent that the injunction decree purported to restrain anyone
with knowledge of the injunction, that portion was void
□ BUT Hall
 Non-party who has no relationship with a party but contempt
 Hall’s actions “imperiled the court’s fundamental power to make a
binding adjudication between the parties properly before it.”

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 Inherent authority of a court to issue orders that “protect” its present

judgment and future judgments.
ii. Notice
□ Notice must (i) proceed from a source entitled to credit and (ii) it must
inform the D clearly and plainly from what act he must abstain.
□ Can be constructive notice
2. The Collateral Bar Rule
2. The Collateral Bar Rule
i. Cape May case (NJ 1880s) as well as Supreme Court‘s decisions in UMW
(1940s) and Walker (1960s) - Once a party gets notice of injunction, they can’t
defy it and then defend in a criminal contempt case on the ground that the
injunction was unconstitutional or that the district court lacked authority to
issue the injunction
ii. Exceptions:
□ “transparently invalid” orders
□ Where the alleged contemnor challenges the order in the courts before
disobeying, but is met with delay or frustration of their claims
3. Defenses include unclean hands, estoppel, and laches.
4. Injunctions are tied to a trigger. On-off remedy. Sanction - people aren't sensitive to
little changes (Cooter article)
B. Temporary Restraining Order
1. Notice required for a PI, usually informal notice for a TRO
i. Can be issued ex parte (unlike PI)
2. PIs are usually easier to appeal (in the federal system always; but TRO only under
interlocutory appeal statute)
3. Duration is less for TRO; in fed. system, 10 days renewable; maximum 20 days
without notice.
4. Standard for TROs under FRCP 65 (not spelled out there):
1. that unless the restraining order issues, they will suffer irreparable harm;
2. that the hardship they will suffer absent the order outweighs any hardship the
defendants would suffer if the order were to issue;
3. that they are likely to succeed on the merits of their claims;
4. that the issuance of the order will cause no substantial harm to the public; and
5. that they have no adequate remedy at law.
C.The Contempt Power: Civil v. Criminal Contempt
1. Difference between civil and criminal contempt
i. civil contempt is coercive/compensatory in nature, while criminal contempt is
punitive in nature – this distinction discussed in Supreme Court’s 1994 Bagwell
decision – Civil contempt can be “purged,” at least where it is coercive in nature
2. Due process concerns
i. Serious criminal contempt cases – involving penalties of more than 6 months
incarceration – require right to jury trial and proof beyond a reasonable doubt.
“Civil” contempt only requires notice and opportunity to be heard (basic
elements of due process) by judge.
3. Criminal contempt – may be imposed as a sanction for WILLFULLY violating a
court order (usually an injunction) party or his agent or one acting “in concert or
collusion” – Lord Wellesley, Rivas

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D. The Test for Permanent Injunctions

1. eBay test
i. irreparable harm
ii. inadequacy of the legal remedy
iii. balance of the hardships (equipoise (Chesterton) or gross disparity?)
iv. public interest (effect on third parties)
2. Chesterton test
i. Ps prevail on merits.
ii. Irreparable harm
iii. “[T]he harm to the plaintiffs would outweigh the harm the defendant would
suffer from the imposition of an injunction”
iv. Public interest would not be adversely affected.
3. Traditional test
i. Would the nonmoving party suffer disproportionate hardship from the
injunction – gross imbalance of the hardships.
E. Preliminary Injunctions
1. Test
i. Likelihood of success on the merits.
ii. Irreparable harm (Inadequacy of the legal remedy). iii. Balance of
the hardships (harm to D if injunction granted v. harm to P if injunction denied).
iv. Public interest would not be adversely affected.
2. Abbott Laboratories - if 1 & 2 met, then move on to 3 & 4
3. Coyne-Delany - D, who had been wrongly damaged by PI that was later reversed, is
not entitled to damages above bond amount absent bad faith (should've appealed to
increase bond amount)
F. Finality
1. An “ambulatory” equity order like injunctions – as in Ladner – could be revisited by
the court in its discretion:
i. if, in its discretion judicially exercised, it believes the ends of justice would be
served by a modification; OR
ii. where the law, common or statutory, has changed, been modified or extended
(Sawyer -statutory; Jefferson - judicial interpretation); OR iii. where
there is a change in the controlling facts on which the injunction rested.
III. Equitable Causes of Action
A. Quia Timet Relief ("because he fears")
1. If no actual injury is proved, then proof of imminent danger, that if it happens will be
very substantial.
2. Almost like irreparable injury, and the idea is that once the injury happens it will be
too late for P to protect itself.
3. Escrow Agents - allows surety to prevent principal from dissipating those funds that
surety knows it will be called upon to pay (legal remedy inadequate because can sue
debtor only after surety has padi to creditor)
B. Bills of Peace
1. Equity’s jurisdiction over prevention of multiplicity of suits at law.
2. Requires a common bond or interest between claimants.
i. Majority - common factual/legal basis for claimants’ claims for relief 1)
Yuba - yes common questions of law and fact.
ii. Minority - legal “privity” between claimants

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3. Yuba - Key is whether P has an “adequate remedy at law”. Because equity is

discretionary, court must consider totality of circumstances.
i. Mere fact of multiplicity of lawsuits not enough to get equitable relief.
ii. Ct. must consider fact that plaintiffs’ right to jury trial in state cases would be
lost if case is removed and consolidated in federal court in equitable action. iii.
Also, ct. must consider adequacy of legal mechanisms for
joinder/consolidation.
iv. 9th Cir. vacates and remands for reconsideration by federal dist. ct.
C. Bills to Quiet or Remove a Cloud on Title
1. Bill to quiet title protects owner of legal title from being disturbed in his possession
from persons setting up unjust and illegal pretensions
2. Wathen - P’s remedy was either to prove that P was in actual possession (for equity
action) or an action at law for ejectment.
1. For equity - P must either allege actual possession OR that the lands are vacant
and unoccupied (constructive possession)
i. If possession is held by another, the action is one of ejectment, which is a legal
remedy
D. Declaratory Judgments
1. No direct remedy but because of res judicata it is very important.
2. Declaratory relief is very characteristic of equity – and is characteristically
discretionary.
3. Doesn't happen unless you show a live case or controversy
i. Nashville - declaratory judgment against state officials that state excise tax on the
storage of gas was an nconstitutional violation of the Commerce Clause
IV. Equity and Contracts, Torts
A. Contracts
1. Specific Performance
i. Inadequacy of the legal remedy (irreparable harm) is the big issue - usually when
damages hard to assess
1) Tower City Grain - NO; Denied specific performance for fungible good.
Legal remedy is adequate.
2) Laclede Gas -YES; Specific performance is appropriate when the terms
of the contract are express, so that the court can determine what specific
performance should be, the contract has a definite end, and remedy at law
is inadequate.
3) Rubinstein - YES; For liquidated damages to be the exclusive remedy,
agreement must say so clearly (clear statement rule). Legal remedy is
inadequate because damage award can’t sever the parties’ relationship,
which was the principal aim of the agreement. ii. Restatement
(Second) of Contracts § 360 gives 3 factors affecting the adequacy of
damages
1) the difficulty of proving damages with reasonable certainty
a) Parties can create uncertainty
2) the difficulty of procuring a suitable substitute performance by means of
money damages
3) likelihood of collecting on an award of damages iii. UCC § 2-716
provision for specific performance

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1) Specific performance may be decreed where the goods are unique or in

other proper circumstances.
2) The decree for specific performance may include such terms and
conditions as to payment for the price, damages, or other relief s the court
may deem just.
iv. Land
1) Specific Performance is (almost) automatically available for contracts
involving land.
a) Kitchen v. Herring - land is always unique; grants specific
performance
b) But Van Wagner Advertising - rule of thumb isn't iron clad; lease,
not sale; reasonable valuation is possible; no specific performance
B. Tort
1. Trespass
i. Intentional physical invasion of the column of space as defined by the ad
coelum rule. No de minimis exception in trespass. ii. Injunction - touchstone is
inadequacy of the legal remedy of damages.
1) Continuous, repeated, and threatened trespass (Wheelock - rock; Lucy
Webb hospital). iii. Building Encroachments
1) Archambault - injunction; encroachment area is significant
2) Kratze - NO injunction; balance of hardship
3) Lindsey - NO injunction; he who seeks equity must do equity
2. Nuisance
i. Restatement approach
1) Nuisance is a substantial nontrespassory interference with use and
enjoyment of land that is caused either by
a) Negligent, reckless, or ultrahazardous activities, OR
b) Intentional and unreasonable activities
ii. Other Approaches
1) Bads/Invasions (cut-off), sometimes based on custom and context
2) Becoming worse (movement), usually involves changes in scale or nature
of complained-of operation.
3) Cost-Benefit (anywhere on distribution), some inquiry into the value of
the uses, and maybe generalized balancing à la Restatement
iii. Injunctions
1) Campbell - Ct. finds irreparable damage here – “continuous” nuisance
(even if only “occasional”) (cf. continuous trespass) and money damages
not adequate remedy at law
2) Sawyer v. Davis - injunction for early bell ringing but change in
legislation allowing that -> dissolution of injunction
3) Balancing hardships
a) Boomer - The total damage to plaintiff’s properties is . . .
RELATIVELY SMALL in comparison with the value of
defendant’s operation and with the consequences of the injunctions
which plaintiffs seek.”
4) Coming to the nuisance - If you come to the nuisance, can't complain
about it

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a) Spur - But, so many innocent residents substantially injured. In view

of the “public” interest at issue, injunction would be granted.
However, ct. requires developer to INDEMNIFY the developer as a
condition of equitable relief.
iv. Calabresi & Melamed
Property Rule Liability Rule

Victim Rule 1: Rule 2: Boomer, etc. (injunction that will

Entitlement Injunction be vacated upon the payment of
permanent damages.)
Injurer Rule 3: No Rule 4: Spur (foreseeably created the
Entitlement liability right to need for an injunction, it must indemnify
pollute? Spur for its damages)
1) Property rule is backed up by sanctions. But holdout problem.
2) Liability rule prevents holdouts but risk of under-compensation.
3. Equitable Replevin
i. Burr - Court may enforce the delivery of a specific chattel that has peculiar
subjective value to the party seeking delivery where pecuniary compensation is
an inadequate remedy.
□ Contrast REPLEVIN: remedy at law – sheriff must seize property,
which D can get back by posting a bond —> frequently viewed as an
inadequate remedy at law
V. Equitable Defenses
A. Types
1. Unclean hands
2. Laches
3. Estoppel 4. Fraud
5. Illegality
6. Failure of consideration
B. Statute of Limitations
1. In re Swine Flu - D's SOL defense turns on whether P failed to exercise due diligence
2. Requirements for equitable tolling
i. timely notice, lack of prejudice to the D, and reasonable and good faith conduct
on the part of the P (Addison - yes tolling)
ii. Concealment by the D will also point to tolling – especially important in fraud
3. Tolling in effect extends the statute of limitations.
C. Laches
1. Two elements of laches: (1) P’s unreasonable delay and (2) undue prejudice to D
(Environmental Defense Fund - barred by laches)
2. In effect, shortens statute of limitations
3. Laches apply only to equitable remedies (often tracks the statute of limitations).
i. Laches may still be applied even if cause of action falls within S-O-L period if
D shows undue delay by P and prejudice to D —> in such cases, laches will bar
equitable relief and D will be relegated to an action at law for damages

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D. Estoppel
1. One is not allowed to change one position, contradict a prior representation
(including silence where there is an obligation to speak), to the prejudice of someone
who reasonable and in good faith relied on it.
i. Core of this is fraudulent deception, but not always required
ii. Barry v. Donnelly - Essential elements: absent a showing of fraud and
deception, a representation, reliance, a change of position, and detriment
2. Estoppel competes against the Statute of Frauds
i. Gilbert - traditional precaution in use of estoppel; require fraudulent purpose
ii. White - acted to his detriment solely in reliance on an oral agreement, an
estoppel may be raised to defeat the defense of the Statute of Frauds
3. Estoppel is a very robust notion but good luck getting it against the government
(Office of Personnel Management)
E. Change of Position
1. Defense to liability in restitution
2. Woolsey - no restitution for mistaken payment; wouldn't have spent money otherwise
F. Clean Hands
1. Equity courts will not come to the aid of someone who makes a legal contract but
obtains it through sharp and unscrupulous practices, by overreaching, by concealment
of important facts, even though not actually fraudulent (Carmen; Claire)
2. A man must come into a Court of Equity with clean hands,’ ‘it does not mean a
general depravity; it must have an immediate and necessary relation to the equity
sued for.’
McCune - unclean hands didn't injure daughter invoking the defense
G. Fraud, Mistake, Hardship, Inadequate Consideration
○ Sliding scale: More disparity or unfairness can lead to a stronger presumption of
“constructive fraud.”
○ Fraud
Kelly - Claim of “fraudulent inducement” to contract (which may be pleaded
affirmatively as a tort); P’s fraud was sufficient to bar his equitable action for
specific performance; Ct. notes that, when fraud used defensively, D need not
show that he was harmed by fraud
○ Mistake
 Panco - denies rescission because unilateral mistake but K price way less than
actual
 Double AA - no specific performance because K wasn't fair, just, and reasonable
○ Hardship
Patel - refused specific performance for unforeseen extreme hardship
○ Inadequate Consideration
 Seymour - no specific performance; village lots worth lot less than country
farms
 Panco - gross inadequacy of price can defeat specific performance; money
damages only
VI. Restitution and Unjust
Enrichment A. Basics
1. The basic elements of an action for restitution are:
i. (1) an "enrichment" of the defendant;
ii. (2) at the expense of the plaintiff;

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iii. (3) under circumstances that are "unjust."

2. Probably most accurate view that is consistent with terminology is that substantive
restitution is always based on unjust enrichment but that “restitution” is also used to
describe a remedy which can relate to contract, tort or unjust enrichment.
i. For unjust enrichment the remedy is typically restitutionary, whereas
restitutionary remedies are but one of the approaches in contract and tort.
B. Mistaken Payments
1. Pilot Life Ins.: Entitled to recover the money.
2. Defenses
i. Change of position
ii. Discharge for Value (Banque Worms)
1) A creditor of another who has received from a third person any benefit
in discharge of the debt or lien, is under no duty to make restitution therefor, although the
discharge was given by mistake of the transferor as to his interests or duties, if the transferee
made no misrepresentation and did not have notice of the transferor's mistake. C. Restitution
of taxes wrongfully paid.
1. Particularly easy for the government to get restitution of mistaken payments.
2. Paramount - Ct. holds that payment of fee “not involuntary” and denies restitution.
State acted in “good faith” in implementing statute later declared to be
unconstitutional. State also did not put fees into general revenue fund. Instead, used
to administer licensing scheme. No real “benefit” to State
D. Unsolicited Benefits
1. Recovery for efforts at saving another’s property is narrow (Trott):
i. (i) there is an imminent danger,
ii. (ii) the claimant has reason to believe the owner would want the service
performed, and
iii. (iii) there is no practical way to negotiate in advance
2. Concern about market bypasses
3. Payment for Another: Indemnity
i. One rule is that a voluntary payment cannot be recovered. The other is that
one who is compelled to pay what by law another owes, is entitled to be
reimbursed by the latter.
1) Owen v. Tate - no restitution; wasn't compelled to assume obligation;
acted officiously ii. Seegers - no recovery since no unjust enrichment
E. Quantum Meruit
1. Quasi-contract type of unjust enrichment requires:
i. A benefit conferred upon the D by the P
ii. Appreciation of the D of the fact of such benefit
iii. Acceptance and retention by the D of the benefit, under circumstances such
that it would be inequitable to retain the benefit without payment of the value
thereof
2. Kossian - unjust enrichment; entitled to reimbursement
3. Earhart - restitutionary damages for work on 3P's property as well; based on
promissory estoppel-like notion; quasi-contact measure of damages (compensation
for value of benefit)
F. Contracts
1. Failed Contractual Situations
i. Statute of Frauds

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* sale of land, certain sale of goods (originally 10 pounds = $15) or

actions/services that cannot be performed within one year * must be a
“memorandum in writing” that is “signed by the party to be charged therewith”
1) Farash - entitled to recovery under promissory estoppel, whether or not D
in any economic sense benefited from performance
2) Bradkin - quasi-contractual obligation is imposed on D to assure a just and
equitable result
3) Gilbert - no fraud as a basis to get around S-O-F; Ct. distinguishes
situation of a promisor’s lying at time of oral agreement with the intent
never to carry
out the agreement (fraudulent inducement or promissory fraud). No
proof that dad did that here. ii. Contracts that are unenforceable for indefiniteness
iii. Mutual mistake
1) Renner - When a party rescinds a contract on the ground of mutual mistake
he is entitled to restitution for any benefit that he has conferred on the
other party by way of part performance or reliance
2. Disgorgement of Profits
i. In general contracts, don't do that. ii. Ocor - disgorgement of profits if D was
unjustly enriched (either through a wrongful act or by passively accepting a
benefit that would be unconscionable to retain)
G. Constructive Trust
1. In the most general sense a constructive trust requires:
i. Violation of a fiduciary duty, confidential relationship, or other wrongful act
(for some courts, requires more than simple breach of contract)
1) Cook County - county's entitled to bribe money obtained by
official
2) Kosmalski - constructive trust on woman's property if reliance
and unjust enrichment ii. Specific property acquired by the wrongdoer
that can be traced to the wrongful behavior, OR
1) Snepp - constructive trust on D's profits from the book; imminent harm
to US and inadequate remedy at law (actual damages to Gov’t “unquantifiable” and
punitive damages “speculative”) iii. Violation of equity if the wrongdoer is
allowed to keep the property
2. As an equitable remedy, it is subject to the irreparable injury requirement and
equitable defenses, which are implicit in (iii).
H. Measures of Restitution
1. Recovery may be greater than the harm to the plaintiff.
i. Why base restitution on the gain to the defendant? Possibly protecting property
rights
2. Sliding Scale of Wrongdoing
i. Contrast the hand-washing benchmark in Olwell with the treatment of the hotel
business in Edwards.
1) Olwell - Measure of restitution is determined with reference to
tortiousness of D’s conduct
2) Edwards - P's recovery didn’t include profits from the hotel
3. Mistaken Improver
i. Somerville - Improver of land owned by another, who acted on reasonable
mistake of fact and in good faith, is entitled to recover value of improvements

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from landowner OR purchase land upon payment to landowner (here, D

intended to use the building)
ii. Shick - Allow removal of improvements in equitable proceedings whenever
that course can be followed without substantial damage to land
I. Constructive Trusts, Equitable Liens, and Tracing
1. Tracing allows the unjust enrichment plaintiff the benefit of whatever presumption
would be the most advantageous, in hindsight, within limits.
2. Constructive trust treats the restitution claim as relating to a beneficial res (increase is
included) whereas an equitable lien makes property of the D stand as security for the
restitution claim (an amount rather than a res or a share).
i. Brown - constructive trust to compel one who unfairly holds property interest
to convey that interest to another to whom it justly belongs
ii. Costell - if funds are wrongfully used by another in purchase of real estate,
constructive trust in property purchased (or improved) will arise in favor of one
whose money was wrongfully used
3. Tracing
i. Hybrid remedy
1) Wrongdoer sells Blackacre in breach of trust for $100,000, and uses
$90,000 of the proceeds to buy Greenacre (worth $150,000 at the time of
judgment), and uses $10,000 to buy Whiteacre (worth $5,000 at the time
of judgment)
2) Beneficiary can claim title to Greenacre through a constructive trust
decree and enforce an equitable lien of $10,000 on Whiteacre.
a) This yields $5,000 in proceeds through an execution of the lien and a
residual claim against Wrongdoer of $5,000.
ii. Commingled Fund
1) Lowest intermediate balance rule
a) New deposits are normally not treated as replacing the plaintiff’s
money if the balance has gone below the misappropriated amount.
But exceptional circumstances.
2) On bad investments the wrongdoer spends his own money first.
3) On good investments the wrongdoer spends the plaintiff’s money first.
4. Subrogation
i. Substantive subrogation allows a party who has nonofficiously discharged
another’s debt to claim restitution in the amount of the debt discharged, as
necessary to prevent unjust enrichment. ii. Subrogation is also an equitable
tracing remedy, allowing the clamant to assert any special priority or rights of
the creditor whose claim is discharged.
iii. R3RUE § 57 Subrogation as a Remedy
1) If the defendant is unjustly enriched by a transaction in which property of
the claimant is used to discharge an obligation of the defendant or a lien
on the defendant's property, the claimant may obtain restitution
a) by succeeding to the rights of the obligee or lienor against the
defendant or the defendant's property, as though such discharge had
not occurred, and
b) by succeeding to the collateral rights of the defendant in the
transaction concerned.
2) Recovery via subrogation may not exceed reimbursement to the claimant.

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3) The remedy of subrogation may be qualified or withheld when necessary

to avoid an inequitable result in the circumstances of a particular case.
VII. Measure of Damages
A. 3 Basic Measures of Damages
1. Expectancy (lost net profits) >
2. Reliance (out-of-pocket expenses) >
i. Farash - out-of-pocket expenses and “reasonable value of his performance
rendered”
3. Restitution (quasi contract; compensation for value of benefit)
B. Compensation
1. Harris v. Peters - When personal property is destroyed, the measure of damages is
FMV of the property immediately prior to its destruction, which makes the injured
party whole.
C. Exceptions to compensation
a. Certainty requirement, avoidable consequences/mitigation, credit for benefits (but cf.
collateral source rule), limits on consequential
i. Certainty
1) Kenford -Loss of future profits as damages require that damages be
reasonably certain and directly traceable to the breach.
2) Fairfax - absolute certainty as to the amount of the damages is not
essential when the existence of a loss has been established.
3) Raishevich - If D’s wrongdoing prevents P from demonstrating the exact
measure of damages, factfinder may make a just and reasonable estimate
of
the damages caused; but no double counting
ii. Avoidable Consequences
1) Clark - P cannot recover for doing the whole.
2) Roberts - P can recover for damages to his truck but not for lost profits
without proving that a reasonable effort was made to obtain a substitute
and was unable to obtain one.
3) WorldCom - Jordan didn’t make reasonable efforts to mitigate damages by
not pursuing any endorsement.
iii. Offsetting Benefits
1) Ziedonis - Proper measure of damages is remaining contract compensation
minus earnings from other employment.
2) Hartke - P’s recovery should be limited to paying for those risks that P
specifically sought to avoid and that came to pass. iv. Collateral Source
Rule
1) Helfend - D can’t mitigate damages by means of the collateral insurance
payments to P.
2) Taylor - P’s remarriage is not admissible in a suit for wrongful death.
v. Foreseeability
1) General (cost of cover) v. consequential damages (lost profits) (Hadley v.
Baxendale)
a) General - usual, in natural course of things.
i) New Valley Corp. - Direct damages are damages measured by
the loss of the value of the performance promised by the

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breaching party; Includes value that P would've gotten for sale

had there been no breach
b) General damages are so obvious they need not be pleaded;
Special damages need to be set out specifically in the pleadings.
2) Two branches: no consequential damages unless
a) already foreseeable to D or
b) reasonable supposition of contemplation of the parties
3) Contracts, foreseeability has to with contemplation. Torts, different but
foreseeability similar idea.
a) Hampton - no recovery in tort & K for non-foreseeable damages
b) Evra - in tort, liability is limited to the foreseeable consequence of
D’s carelessness
D. Default Rule - Cheapest cost avoider
a. Generally, liability is on party who can do something to avoid the loss
i. Inform or keep a spare shaft.
b. Incentive - want more informed party to take precaution
E. Economic Loss Rule
1. Denies P recovery for purely economic consequences of negligence, who have not
suffered any physical injury to person or property, with exceptions
2. General Electric - Economic loss rule provides that P can’t recover in tort losses
associated with injury to the property of another
F. Measuring Expectancy - Contracts
1. The idea is to put the nonbreaching party in as good a position as would have been
the case had there been performance (plaintiff’s “rightful position”)
2. Measure of damages is the difference between what was given and what was
promised, along with consequential and incidental expenses minus any payments
received from the breaching party and any costs saved as a result of the breach.
i. Wilson v. Hays - no lost profits; burden on P to show consequential damages
ii. United Virginia Bank - damages should be determined as of the time of the
breach of contract; damages don't need to be precise
3. Losing contracts
i. P will choose quasi contract and unjust enrichment to the extent they could,
since expectancy ex post is negative
G. Lost Volume Seller
1. Unlimited supply/capacity
i. WorldCom - not LSV; LVS is under no obligation to mitigate damages because
transactions that may occur after the breach would’ve occurred independent of
the breach
2. Get lost profit damages
H. Lost Use and Cost of Repair
1. Lost Use
i. Bumann - wrongful occupation of realty; damages is deemed to be the value
of the use of the property for the time of such occupation and the costs of
recovering the possession
2. Cost of Repair
i. Hancock - reasonable cost of remedying construction defects unless such
costs were impractical and grossly wasteful, in which case a difference in
value approach should be used.

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1) Cost of remedying might involve unjust enrichment ii. Bellizzi -

driveway was likely to be repaired; measure of damage is the market price of
correcting the performance.
iii. Appalachian - If promisee’s primary interest was the value of the result
performance would’ve produced, then the value formula is applicable (reduced sale value of lots); if
performance itself, then the cost formula (cost of installation). VIII. Damages in Contracts and
Torts
A. Contracts
1. Emotional Distress in Contracts
i. B&M Homes - Generally mental anguish is not recoverable in breach of
contract cases but such damages may be awarded where contractual duty is so
coupled with matters of mental concern that a breach will necessarily or
reasonably result in mental anguish or where breach is tortious or attended with
personal injury.
2. Liquidated Damages and Penalties
i. Liquidated damages provision must bear a reasonable relationship to the
probable loss (ex ante, evaluated ex post) AND
1) Space Master - enforceability depends on intent of liquidated
damages provision (compensation or penalty) ii. Damages have to be
difficult to determine ex ante (evaluated ex post) AND
iii. (only some courts) The liquidated damages provision must bear a reasonable
relationship to the actual loss? (ex post)
3. Avoidable Costs
i. Kentucky Fried Chicken - Recovery of damages by the prospective LL is
limited to only those damages arising from the breach which could not, by
reasonable effort on his part without undue risk or expense, have been reduced.
1) Taking middle course of action is OK
B. Tort
1. Expectancy Damages for Torts
i. Coghlan - out-of-pocket or benefit of the bargain damages
1) Out-of-pocket: difference in actual value at the time of the transaction
between what P gave and what he received
2) Benefit of the bargain: difference in value between what P actually
received and what he was fraudulently led to believe he would receive
2. Non-Economic Components of Personal Injury Damages
i. Remittitur.
1) Semi-deferential (Fertile - upholds remittitur) 2) Active judicial
management (Consorti - remittitur to much less)
3) Very deferential (Epping - no remittitur)
ii. Loss of enjoyment: separate from pain and suffering?
1) McDougald majority: no; Dissent: yes iii. Mcdougald - Cognitive
awareness is a prerequisite to recovery for loss of enjoyment of life
3. Inchoate Torts
i. Cancerphobia is a type of mental anguish or emotional distress.
1) Hagerty - P is entitled to recover for continuing expense of periodic
medical checkups and for cancerphobia. ii. Medical monitoring. 2 theories:
mitigation and evidence-building (Ken Abraham).
iii.Increased risk (disallowed in Hagerty, but “single injury” rule does not apply).

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IX. Punitive
Damages A.
Introducti
on
1. Purposes: Punishment, Deterrence
2. Juries have always played a role in punitive damages
3. Implement more of a sanction than price
4. Supra-compensatory
○ Damages don't compensate for dignitary harms, or pain and suffering
○ Damages don't address the whole problem
○ Probability of getting caught
B. State of Mind
1. Courts would like some control over juries, and this legal line puts the issue partly
under the control of judges (can overturn an award for lack of malice – recklessness
but not conscious disregard).
2. Taylor - Conscious disregard of safety of others may constitute malice
3. Grimshaw - “Malice” includes conduct evincing callous and conscious disregard of
public safety by those who manufacture and market mass produced articles
4. Smith v. Wade - Jury can assess punitive damages when D’s conduct is shown to be
motivated by evil motive or intent, or when it involves reckless or callous
indifference to federally protected rights of others
C. Compensatory damages and punitive damages
1. Smith v. Whitaker - Where all essential elements of punitive damages claim are
established, such a claim may be sustained without proof of pain and suffering
(w/o compensatory damages)
2. Miller Brewing - compensatory only; in order to recover punitive damages in
lawsuit founded upon breach of contract, P must plead and prove existence of
independent tort
of kind for which law recognizes that punitive damages may be awarded
D. Due Process Constraints
1. Guideposts for assessing excessiveness (BMW; State Farm)
i. Degree of reprehensibility
1) whether harm was physical as opposed to economic
a) BMW - only economic
2) whether the tortious conduct evinced an indifference to or a reckless
disregard of the health and safety of others
3) the financial vulnerability of the target
4) the repeated nature of the conduct
5) intentional deception versus mere accident
a) BMW - no bad faith/motives
ii. Disparity of harm reflected in compensatory damages and punitive damages,
and
1) State Farm suggests that multipliers of more than single digits (punitive to
compensatory) are unlikely to pass due process standard.
2) Mathias - great disparity but held not excessive; compensable hard to
quantify and detection issue
iii. Difference between the punitive damage award and the civil penalties
authorized in comparable cases.

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2. Concern of out-of-court behavior

i. State Farm; BMW - can't punish to change D's conduct in other states
ii. Phillip Norris - Due process forbids a state punitive to punish D for injury that
inflicts upon non-parties
3. Owen-Corning - Repeatedly imposing punitive damages on same D for same course
of wrongful conduct may implicate due process constraints
X. Public Law
A. Implied Rights of Action
An implied cause of action is an "extension of a civil remedy to one injured by
another's breach of a statute or regulation not providing for such relief."
1. 1960s to late 1970s - fairly generous in implying private causes of action
i. Thompson: Marshall - not necessary for Congress to have in mind private
causes of action; Scalia - actual intent is required
2. After 1979, Court has been much more restrictive in its approach: Congressional
intent
i. Cort - no legislative intent, no cause of action
1) Is the P within the class for whose benefit the statute was enacted
2) Is there any indication of legislative intent, explicit or implicit, either to
create or deny a cause of action
3) Is it consistent with the underlying purposes of legislative scheme to
imply such a remedy for the P
4) Is the cause of action one traditionally relegated to state law, in an area
specifically of concern to the states, so that it would be inappropriate to
infer a cause of action based solely on federal law? ii.Karahalios - the
more elaborate administrative remedies, the more it reflects that Congress
intent to occupy this area and not to leave anything implicit including
private cause of action
iii.Lieberman - no cause of action for damages under Title IX
B. Constitutional Violations
1. Yes private right of action - Bivens
i. It will infer a private right of action for monetary damages where no other
federal remedy is provided for the vindication of a constitutional right, based on
the principle that for every wrong, there is a remedy.
2. After Bivens in other contexts, Court has been less willing to that route
i. Social Security - Schweiker - Congress has provided a great deal of process, and
some relief, and has been otherwise silent as to a remedy, which the Court
found to be enough to foreclose a Bivens remedy. ii. Military - Stanley -
No Bivens claim for the serviceman's injuries because the lower court ruled the
injuries occurred during Stanley's military service.
iii. Private contractors serving government function - Malesko - Bivens remedy
excludes corporate defendants
XI. Remedies in Litigation
A. Attorneys' Fees
1. American rule: each side pays its own legal fees
2. Exceptions
i. Statutes with fee-shifting provisions
1) Fogerty - Copyright Act is symmetric; prevailing D & P both eligible for
reasonable attorneys' fees

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2) Getting some kind of judicially approved result is key to make yourself

available as prevailing party
a) Maher - Getting consent decree qualifies as a prevailing party; no
full litigation needed
b) Texas State Teachers - have to be successful on significant issue
c) Bukhannon - getting D to change conduct doesn't give P attorneys'
fees; D's voluntary change in conduct lacks the necessary judicial
imprimatur on the change
ii. Common fund
1) Litigant or lawyer who recovers a common fund for the benefit of
persons other than himself or his client is entitled to a reasonable attorney's fee from
the fund as a whole (e.g., class action suits) iii. Bad faith
iv. Inherent power
1) Chambers v. NASCO - sanction for attempt to defraud court of
jurisdiction, meritless motions and pleadings and delaying actions,
attempt to reduce other party into compliance; Rule 11 and §1927 don't
fully cover abuse
v. Contempt of court proceedings (discretionary)
vi. Contractual authorization
vii. Collateral litigation/3P tort
viii. Private attorney general (some states, not federal)
1) Alyeska (federal) - no; only narrow exceptions to American rule (bad
faith, willful disobedience, common fund) ix. Equitable exceptions
1) Encourage certain types of Ps to bring claims (asymmetric)
2) More penalty for wrongdoing D (asymmetric)
3) Making the prevailing party whole (symmetric)
3. Calculation
i. Lodestar method - hours spent * prevailing rate in the area
1) Perdue - departures from lodestar method are disfavored; objective
assessment is necessary ii. Rivera - Fee awards under §1988 doesn't
necessarily have to be proportionate to the amount of damages a civil rights P
actually recovers
iii. Goodrich - Awarded attorney's fees as a percentage of the gross amount paid
out to class members and put a ceiling on it
iv. Kay v. Ehrler - Attorney who represented himself shouldn't be awarded a
reasonable attorney's fee
v. Missouri v. Jenkins - reasonable attorneys' fees recoverable under 1988 includes
separately billed paralegal and law clerk time
B. Prejudgment Interest
1. Should return the P to the position it would have been had the D compensated it
immediately after injuring it.
i. Matter of Oil Spill - prejudgment interest at the market rate puts both parties in
the position they would've occupied had compensation been made promptly
2. Common law rule - interest would only be applied when damages became
ascertainable or liquidated, and then only simple interest at the legal rate
i. Woodline Motor Freight - no prejudgment interest; value of damages was
subjective, not liquidated or ascertainable

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C. Jury Trial
1. 7th Amendment - generally speaking, right to a jury trial in “legal” actions; no right
to a jury trial in “equity” cases
i. Not applicable to States; as a general matter, states are free to broaden or restrict
right to jury trial
2. Colclasure
i. Right to a jury trial is limited to those cases which were so triable at common
law; mortgage foreclosure proceeding wasn't
ii. Merger is unlikely to affect the right of jury trial in a mortgage foreclosure;
state courts have often reached the same result based on the clean-up doctrine
3.Terry (SCOTUS) - Union breach of fair representation; issue by issue approach
i. Marshall’s plurality opinion -- 2-pronged test to determine whether right to
jury trial exists under 7th Amendment: (1) nature of issues and (2) type of
remedy sought.
1) The action in instant case is somewhat analogous to an old equitable suit for
a breach of fiduciary duty by a trust beneficiary against a trustee, but also
analgous to a breach of contract action (legal).
2)However, the REMEDY SOUGHT -- compensatory money damages -- is more
akin to traditional damages in an action at law. Thus, right to jury trial in
this case. ii. * Brennan & Stevens’s concurrences -- reject historical analogy
test -- not for courts [more of a historian’s job] – should only focus on nature of
remedy (legal or equitable)
iii. * DISSENT (three Justices) -- test should look primarily at historical analogues -
nature of
remedy less important; should not be a separate, more important factor
4. Marseilles Hydro Power - suits approach; underlying dispute determines whether
jury trial's available; nature is breach of K but seeking equitable relief so no jury
trial; claim for damages is suit at common law, yes jury trial

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