#15073 - Remedies - Remedies

Major Outline

Remedies – UVA Law

Prof. Laycock, Fall 2016

Strategy:

• Big Picture: lump claim/parties into groups that can easily be disposed of based on similar facts

• Alternative Grounds: don’t hedge, but be sure to note alternative grounds and ambiguities

• Make sure you address every party and all theories of liability (see liabilities/COA sheet)

• Always evaluate strength of arguments, but don’t hedge and be decisive

• Consider which possibile remedy (if >1 available) will be best for the plaintiff

Themes, Policy, and History:

• Remedy:

• Economic Theory vs. Corrective Justice

  • Economic Theory: remedies outcomes should be used to create proper incentives that create economically efficient outcomes (optimal number of violations)

    • Criticism: sometimes leaves those wronged not fully compensated, also morality

  • Corrective Justice: Compensate because it is just; reduce violations of law to smallest possible number

    • Criticism: sometimes creates wasteful overdeterrence

  • LAYCOCK: everything takes both into account, but one will be primary (often come out the same way). More judges prioritize justice than law & economics. But see Posner.

• Writ System: old writs (with their own rules) have been replaced with one single civil COA

• Why do we compensate K expectancy rather than just reliance?

  • Economy treats future values as present values. You can borrow against a contract.

  • Promises rely in ways that are hard to measure and that can approach full value of expectancy.

  • Moral or conventional sense of what promises mean.

  • Substantive law of contract commits court and parties to situation post-performance, not to situation pre-contract, and remedies should reflect that. Contracts work better if both sides can assume they will generally be performed.

  • Efficient breach theory does not explain compensating expectancy

• Freedom of Contract vs. Abuse/Efficient Outcomes:

  • We want to let sophisticated parties have freedom of contract, but not to the extent that it is subject to abuse

  • See Kearney and limitations on damages cases

• Law/Equity:

• Judicial Discretion:

• Jury Fallibility

The Rightful Position

• Pp. xxiii-xvii, 1-18

Damages

• Rightful Position

  • {

  • Rightful Position: P is entitled to recovery that puts him in the position he occupied before the injury.

    • Specificity (Hatahley; see also uncertainty Bigelow, Glendale Federal)

    • Lesser of Two Rule: P gets lesser of market value or replacement cost. See In re September 11th Litigation.

      • Exception: For special purpose property, replacement cost even if greater. (Trinity Church real property & King Fisher Marine chattels; rule in In re September 11th Litigation)

    • See also environmental cases for varying views on the rightful position

  • Expectancy vs. Reliance:

    • Contracts: Expectancy is default rightful position in contract (see UCC section).

      • See UCC buyer and seller defaults

    • Torts: No expectancy in tort (Smith) EXCEPT in fraud cases (in most states).

  • }

  • United States v. Hatahley (10th Cir. 1958 p. 11) – Specificity & Standard

    • FACTS: government took and killed special Indian horses, Indians didn’t mitigate because they didn’t have $, lost other livestock. Emotional distress claim.

    • D Court:

      • Awarded $395 for each horse (replacement cost was $300)

      • Awarded $3500 for emotional damages for each plaintiff

      • Awarded half of the value of the lost livestock since they couldn’t figure out what was lost because of killed horses

    • Precision/Specificity/Standard: remedy must be grounded in legal standard with sufficient facts and reasoning to justify the damages amount so as to put P in the rightful position.

      • But see: Excessive precision. At some point it is not economically efficient to litigate to perfect accuracy.

        • E.g., Mass Torts: formulas avoid need for individual damages hearings. D strategy—destroy class by forcing every individual P to prove their precise damages, but requires specificity.

      • Abstract losses (e.g. anguish): Lower, but still existent, specificity requirements. Usually go to jury because they can pull a number out of thin air. Judge can’t.

      • APPLICATION: horse remedy pulled out of thin air.

    • Proximate Cause: must show how the harm lead to each particular claim for damages, and to what extent

      • APPLICATION: Trial court erred in finding 50% of other livestock costs for no reason (too speculative)

    • Mitigation: No compensation for losses after time by which plaintiff could reasonably have been expected to mitigate.

      • APPLICATION: Indians’ damages cut off at time when they should have had replacement horses.

      • But see Alaska Case: fisherman didn’t pay child support because of bad business, D court said get a real job, AK Supreme Court reversed saying that due to cultural differences, no proof that it would be better

    • Emotional Distress: must be calculated plaintiff by plaintiff, and explain reasoning (Laycock: medical/psych. fees, missed work, pain normally judged by jury)

    • OUTCOME: remand for new trial on damages

  • Value as the Measure of Rightful Position

    • Pp. 18-35; Supp. Preface, 1-3

    • In re September 11th Litigation (S.D.N.Y 2008 p. 18)

      • Lesser of Two Rule: Plaintiff is awarded lesser of market value or replacement cost (alternatively, the easier one to calculate).

        • POLICY: P is made whole in least expensive way

        • Exception: Special Purpose Property (NY): you get replacement costs even if they are greater. See also Trinity Church. Requires:

          • (1) The improvement must be unique and must be specially built for the specific purpose for which it was designed

          • (2) There must be a specific use for which the improvement is designed and the improvement must be so specially used

          • (3* Most Important) There must be no market for the type of property and no sales of property for such use; and

            • LAYCOCK: WTC had a market, even if it was a limited one (few could afford it)

            • In practice, if this is satisfied, courts will find other ones satisfied as well

          • (4) The improvement must be an appropriate improvement at the time of the taking and its use must be economically feasible and reasonably expected to be replaced

      • Market Value: “Price at which property would change hands between willing buyer/seller, neither under compulsion to buy/sell, and both having reasonable knowledge of relevant facts.” US v. Cartwright (SCOTUS, p. 22).

        • If total loss: Market value with interest includes every stream of income. No additional recovery for lost rent, etc., even if MV+interest is less than MV+lost rent.

          • Laycock thinks this is undercompensatory

        • If temporary loss: Market value calculated by loss of use for time period of loss.

        • Property of Fluctuating Value (e.g. oil, soybeans): Apply the New York Rule of highest market value between date of loss and date by which P should have replaced.

      • Replacement Cost: cost to replace. Can depend on P’s subjective situation (see Hatahley)

      • FACTS: WTC 40 years old, sold just before 9/11 for $2.8B, spent $16B to replace. Insurance pay? Also had lease of property for 99 years to obtain rents. Now only capable of getting rents for 86 years.

      • APPLICATION: Owner gets MV, anything else would be windfall. 1960’s buildings not worth the money it took to build state of art new WTC. Court said $2.8B included value for rents discount to PV. Also gets interest (should, but doesn’t really, compensate for rent)

    • Trinity Church v. John Hancock Mutual Life Insurance Co. (Mass. 1987 p. 28) – Special Purpose Real Property

      • FACTS: Zero MV because landmark status restricts use, high replacement cost.

        • Outcome: Replacement value minus depreciation awarded.

      • Special Purpose Property (MA): Lesser of two does not apply when proven value to owner is unjustly far from MV OR where there’s no way to determine market value

        • See also: New York test from 9/11 case.

      • Reasonable Replacement Costs: Remedy: replacement cost minus depreciation IF (1) replacement occurs AND (2) replacement is reasonable.

        • APPLICATION: here, reasonable replacement was done by reasonable repairing

    • King Fisher Marine v. NP Sunbonnet (5th Cir 1984 p. 27) – Special Purpose Chattle

      • FACTS: P bought barge for $30k, was going to convert into drydock. Negligence sunk it. 1/6 similar to it in the world. Expert testimony that it was ideally situated for conversion

      • RULE: Where P can convince a trial that there was non-speculative value to him, they can recover replacement cost (here $233k)

    • Environmental/Land Restoration Cases: compare…

      • Sunburst School District No. 2 (MT 2007): benzene contamination of school/homes. Court awarded $15 mil to restore properties even though property was only worth $2 mil (avoid giving power akin to private right of eminent domain)

      • Poffenbarger (AL 2007, p. 33): oil spill reduced value of land by $6k, remediation costs were between $15k-$2.6million. Awarded reduction in market value.

      • Peevyhouse (OK 1963, p. 33): Restoration costs after coal mining were grossly excessive to reduction in MV, so court only awarded MV reduction despite term in K requiring D to restore land (not “principal purpose” of K).

  • Expectancy or Reliance as the Measure of Rightful Position

    • Torts: (Smith)

      • FEDERAL RULE: No expectancy in tort – only out of pocket loss. Comes up often in securities fraud cases.

      • MAJORITY OF STATES: you can recover beyond out of pocket losses for fraud.

    • UCC Default Remedies for Breach of K

      • Seller (p. 37)

        • If buyer repudiates K or refuses to accept goods (Neri)

          • Difference between contract price and market value

            • If goods resold, difference between contract price and resale price

        • If buyer keeps goods and fails to pay

          • Contract...