Remedies: Professor Yeager
Remedies
Master Notes
Remedies: What the plaintiff gets after liability has been determined.
Example: Neri boat case. Lawyer
writes a letter demanding deposit back, this is not really a good idea.
Egg washing case—
Study by an old professor—people with interests and relationships (business
people) think that lawsuit is the last resort, the end of the world.
It is almost never in your interest to sue.
Judges, lawyers, said the opposite, what other remedy do you have?
Many instances, the relationship could have been rehabilitated.
2 classes that refer to hand outs.
Class 22-professor will bring the handout to class.
Tests are closed everything.
Overview of the materials:
1. Starting out with property rules, this will be an introduction to equity.
Divide between property rules and
liability rules.
Property v. Liability—property rules are the exception, liability are the norm.
Property rules are backed up b equitable remedies, liability is backed up
by legal remedies.
Property—the person you are suing has affected a property right.
Propery refers to somebody owing you the property, NOT damage to a barge
(this is a liability). Example a K,
one person promises a unique good, and this is backed up by specific
performance, so one person promises a unique good and fails to deliver.
Plaintiff entitled not just to value of exchange, but also to the
property.
Liability would be, I bought this painting for 7 million, it is worth 10, so
compensate me 3 million dollars.
With that painting the plaintiff would say, when that seller promised me a
unique good, it vested a property right with me.
Equity is backed up with In Personam remedies, over the body of the defendant,
the specific performance decree, the judge in a specific performance case will
retain jurisdiction over the matter until the property is delivered.
Equity operates In Personam over the defendant, what can you do to
squeeze the remedy out of the seller?
Hold them in contempt.
Equitable power has the contempt element thrown in, contempt over not fulfilling
a contract, this is exceptional, and why it is the exception and not the rule.
Restitution-is a remedy that you get when you sue for the wrong of unjust
enrichment. The wrong is that you
are unjustly enriched, the COA sue in quasi contract for restitution.
Anyone who is unjustly enriched at the expense of another has to disgorge
the ill gotten gain to the other party.
Still undeserved. It does
not mean you have done anything wrong, it just means you are unjustly enriched.
Quasi-contract—not real contract, unjustly enriched party when they get the
gains unjustly they implicitly/constructively promise to pay them back.
Injunctions baked up by the contempt power.
Most of the focus will be on liability rules, where your want to is to be whole.
Liability:
-General/Market (terms operationally identical) tort when you refer to market,
call them general, in K law when you refer to special same as consequential.
-Special/Consequential
-Punitive—arise only out of tort law and require some sort of scienter
General or market damages refer to inactactness (tort undamaged body—or an
operational airplane, what is the intact value of the thing)
How much money will it take for you to purchase substitute happiness.
If you play chess and can’t play chess anymore, how much money would it
take to purchase substitute happiness for chess.
Damaged airplane, how much does it cost to make the airplane fly again, how do
you judge this value?
K price –mkt price
K price – cover price (resale price—how much to go out and find a substitute
performer, the buyer won’t perform the seller must find another buyer and vice
versa)
Special tort term, consequential is the K term.
They don’t refer to intactness, they refer to lost revenue or what is the
same—increased expenses.
Special damages in torts a doctor negligently performs a surgery and you can’t
work at the same job anymore.
Increase of expenses you need to go to the doctor, go back to school to learn a
new job, etc.
Consequential damages are the same thing, just with K cases.
Consequential damages are easily understood as overtime pay.
You didn’t deliver the concrete for production of the bridge, I had to
pay 14 people time and a half because of your delay.
Downstream consequence of the breach.
Lost business is another example.
Consequential damages are very susceptible to manipulation.
Conversely, in tort cases, special damages are seen as discoverable and certain.
General damages are looked at as certain in K cases, but uncertain in tort
cases. Everything will be repeated.
Remedies
Notes 1/14/2009
RESTITUTION:
Nye & Nissen
case reveals the operation of a property rule.
Restitution is not always necessarily a property rule.
Sometimes gain to the defendant is less than the loss to the plaintiff.
The real property rule aspect with respect to restitution arises when the
plaintiff seeks to recover more than they lost.
Defendant somehow triggers a property rule so that she gets ownership
interest in the defendant’s property, even if that property is in excess of her
loss.
Gets an ownership interest in the defendant’s property, even if that loss is in
excess of the loss of the plaintiff’s property value.
Ex. Defendant gets $100 dollars, profits to $1000 dollars and plaintiff
goes after the $1000 dollars rather than his $100 dollars.
Nye & Nissen
case:
Orwell sold property to Nye and Nissen and they couldn’t agree on the price of
the Eggsact machine. So they agreed
to leave the Eggsact machine outside.
Nye and Nissen then decided to use the Eggsact machine since it was just
sitting there.
-Egg-sact case. Saved company $1.43
an hour, 1 day a week, for 3.5 years.
SOL allowed him only to recover for 156 weeks, or 3 years.
Only 3 years of use by Nye-Nissen was recoverable.
Orwell did not know that the machine was in use until 3 years later.
Court said there are two ways of going at this:
1. Option between asking for compensation for the loss—ask for compensation for
tort of conversion. The knowing use
of another’s property without permission.
A form of theft recognized in tort law.
If he sues for compensation, it would be for the tort of conversion, and that
would be figured at the reasonable rate of the machine, the value that the
Egg-sact machine would have for the owner.
It is hard to tell what the market value is, because he is not looking
for a buyer and there probably aren’t many.
To see what the market would exchange it for is difficult.
Hard to discern the reasonable rate.
During the trial, Orwell decided to “waive” the tort, which is a bit fictive,
since if he waived the right to conversion, he would not have a right to sue.
In reality he is merely electing to sue for the remedy of restitution.
Restitution is the remedy for unjust enrichment.
Sue for wrong of unjust enrichment for the remedy of restitution, you sue in
assumpsit, which is the common law writ for contract, and what arises out of
assumpsit because this is not a real K? Quasi-contract.
Sue in quasi-contract between victim Orwell and Nye & Nissen to pay back any
ill-gotten gains from the appropriation of the Egg sact.
$1560 dollars is in excess of the reasonable rental value of the Egg-sact
(valued at $900 dollars). Labor
savings are calculated at 10 dollars a day, one day a week, for years reduced by
SOL. 156 weeks is 1560 dollars,
which is in excess of what Orwell sought as the reasonable rental value.
When he prays for restitution, he asks for 1560 dollars in labor savings
conferred on Nye and Nissen.
The controversy is that the compensation or value of the machine is
significantly less than the gain to the defendant.
One rule is that you can’t double recover, you can’t enjoin the wrongdoer to
give the property to you and pay you.
Election, in modern dispute, exists to the extent that you still can’t
say pay me the rental value of the Egg-sact, AND pay me the savings appropriated
on you.
Posner-throwing the book at a knowing wrongdoer, you want them to negotiate a
deal.
Conscious wrongdoing on the part of the defendant.
Knowing wrongdoing allows the plaintiff to disgorge from the defendant
not what the defendant took, but what the defendant got from it.
IMPORTANT NOTE CASE:
NOTE 5 on page 572:
Edwards v. Lee’s Administrator
-Cave case.
-6000 square foot cave. State
wanted to condemn the land. Edwards
owned 4000 and the rest of it is owned by Lee (under the
2/3 owned by Edwards, and 1/3 owned by Lee.
What do you think the two competing claims would be on the part of Edwards who
had appropriated Lee’s property.
What are the two choices at this point?
First argument is I shouldn’t pay you anything because you couldn’t
utilize the cave without the entrance on my land.
But also, Edwards needs to apply to Lee to use his land.
If you are allowed to waive the tort, just like in the Orwell case, then
all the profits would be greater than the reasonable rental value.
There is a tremendous amount of money derived from the cave.
Knowing.
Note 6 on page 573, making a copyright infringer disgorge rights.
Conscious wrongdoing always has a profound effect on equity.
If no knowledge that the cave was on Lee’s property, then anything
exceeding the rental value would be unjust.
Restitution would not be appropriate.
PAGE 566: 40:13
a. Mistakes—either unilateral or mutual.
If it were conscious wrongdoing, then we wouldn’t talk about mistakes.
If the seller cheats the buyer, we would call that fraud on the part of
the seller.
Mistakes are either unilateral or mutual.
Mutual are rescindable. The buyer
doesn’t know what he is buying and the seller doesn’t know what he is
selling—i.e. barren cow example.
Unilateral mistake typically refers to the case where the buyer knows more than
the seller (one party knows what they are doing and the other doesn’t).
If it was innocent overstatement by the seller, this is what we are
talking about. Typically a
situation in which the buyer knows more than the seller.
Again, if the seller takes advantage of the buyer we don’t enforce the
contract, you award damages to the buyer for breach of warranty or fraud.
Unilateral mistakes, contracts are enforceable.
Mutual mistakes can be rescinded.
What follows rescission?
Restitution. Throw the contract
out, you are not bound by it.
Unilateral mistakes are enforceable, as long as the basic risk allocation says
that the seller should have known his or her own business better than that.
We’re not talking about a case where two $10 dollars bills were stuck
together.
When the seller is responsible for knowing the true value of things, the only
way a buyer can defraud a seller is via a promise to pay.
Otherwise the seller has to know the value of their own product—that is
how we allocate risk in sales.
Pete Rose baseball card story.
Knowing the seller’s business better than the seller.
If Johnny knows your business better than you, then you are mistaken.
If Johnny didn’t know the value of the card then the law should rescind.
But if he did know, then it is a different story, you have to say –yeah I
took advantage of him.
Weak party is allocated risk of relying on strong party, nothing to rescind.
Unilateral mistakes don’t trigger anything, mutual mistakes trigger
restitution.
Painting case. Buyer should say
that she did know.
Amoco problem—pay royalties to the wrong people.
Supposed to pay 2 Smith’s, Herbert and Huling.
Paid Herbert Huling’s royalty.
b. Actual or Supposed Contracts: end up with a K that is unenforceable or void,
then once performance has occurred, then the person who’s conferred a benefit on
another, even though it later turns out to be unenforceable, can recover in
quantum meruit for services. Case
on 648 Boomer case—Muir general and Boomer is sub contractor.
Contract price is 333,000. Progress
payments are 313,000. Boomer has
already spent 571,000 and that is apart from any inefficiencies on the part of
Boomer. He entered into a bad deal.
In the end Boomer built a dam costing 600k for only 333k.
With the dam 95% of the way completed Boomer ends up walking off the job and
Boomer wins the resulting suit.
Court allowed Boomer to rescind contract and recover in restitution, so the
court is really rescuing a person who made a poor decision.
Borderline application of doctrine of restitution.
Muir breached the K (by not delivering materials) even though it was 95%
completed. Court: Muir breached,
normally restitution is not the run of the mill remedy for breach of K.
But once you breach, an option in equity is to rescind the K, we’ll
through the K out and allowed Boomer to sue Muir in restitution.
Instead of Boomer losing 267,000—the person who would stand to profit by
the K (Muir) breached at the 11th hour and the court allowed Boomer
to recover everything that Muir had gained.
So Boomer, who struck an exceedingly bad bargain made back every penny
that he had underestimated.
C. Judgments
Easiest Example: A judgment is rendered in the case, it’s paid and then the
judgment is reversed.
D. Emergencies—doctor or nurse stops by the roadside helps you out, and they can
charge you right off the schedule.
Can charge you right off their fee schedule.
E. (Skip) joint obligations and the like
F. Wrongdoing: Theft or a version of theft (Edwards or Olwell case)
Remedies
Notes 1/21/2009
Snepp v.
Snepp files a petition for certiorari.
Agreed to seek pre publication clearance for any information arising out
of his employment. Also agreed with
employer not to divulge any classified information.
Any info classified or otherwise could be disseminated by employer
Agreed with CIA to not disseminate classified information, could not publish
without pre-publication clearance.
Snepp felt that the agreement violated the first amendment.
In the
First remedy that they asked for was a declaratory judgment (which is a remedy).
They are judgments and they have conditions established by statute.
Generalized ban on advisory opinions.
Don’t want to waste judicial resources.
Attorney General can give an opinion, but a court must have a live
dispute, it must resolve real cases and controversies.
Limited to cases that are live, but extended through DJ to cases which
are sort of live.
Declaratory judgment bound by (young Dilemma, an ex parte young dilemma)
-young dilemma will create a live controversy that is still somewhat extended by
what we call a case or controversy.
A young dilemma is not the following: I am in an output K with a buyer and I
don’t want to perform anymore due to a shift in the market.
Am I bound by the K, I want a declaration that I am not bound. No, this
is not what you can do. Stop
peforming, breach, and then let the other party sue you.
Young, was seeking to enjoin the Attorney General from collecting from him an
unconstitutional tax. Well don’t
you need to wait for the AG to sue you for the tax or throw you in jail first?
Young pointed out that the dilemma is too start to be waited out.
-Dilemma too stark to wait out, you think the tax violated the commerce clause,
why should I pay a bogus tax. You
should not have to choose between criminal penalties or unconstitutional action.
If I capitulate and pay I am giving up an important right, but if I
refuse to pay, I might end up in jail.
The dilemma is give up the important right or get the book thrown at you
and you shouldn’t have to chose between criminal penalties and a waiver of an
unconstitutional tax, so what do you do?
You go to court and get a declaration on the unconstitutionality of the
tax. Not seeking an advisory
opinion because the AG had demonstrated an interest in the tax.
Deliberate pattern of enforcement, now it is live.
Avoid catastrophic outcome. Want
court to declare patent invalid.
Can get a declaration that you are not infringing.
Why should someone facing two equally bad outcomes pay really bad damages
or give up an important right. In
those circumstances we say that the right is live.
In this case,
Second, they want an injunction against future violations.
With an injunction you have to do what the court orders you to do under
pain of contempt. Because it is an
extraordinary remedy, it is hard to get.
Lastly the government sought a constructive trust, which is a form of
restitution. Says that plaintiff
won’t be places in right position simply by compensation.
What would happen if the
-Received a 60k advance on the book.
(see footnote 2)
If we deem this to be ill gotten, then the jurisdiction would end at the time of
the judgment, that would only be gains realized at the time of the judgment, and
ordinary restitution would not apply to yet to be realized gains.
A constructive trust is a more aggressive equitable remedy that can
operate over the future income.
Snepp was really being asked to do was a transfer of the title interest from the
profits of the book, rather than the profits derived and reduced at the time of
trial.
District court gives
Snepp takes the constructive trust up to the 4th circuit, and the 4th
circuit affirms most of what the district court said, including the finding that
Snepp actually deceived the employer when Snepp promised to seek pre publication
clearance. Meaning, there was a
fraud, meaning, “I’ll give you a preview of anything I intend to publish,” with
no intent to actually publish.
Don’t just say there is a breach of contract, give me a remedy.
To say we seek a constructive trust over the profits, will not follow a
conclusion that Snepp breached the employment K.
Constructive trust is a penalty and it has no place in ordinary breach of
K.
4th Circuit—no gain by deceit, if he asked for permission, it would
have been granted.
4th circuit said that he should get something, so they said that they
would give him nominal damages. 4th
circuit said that they will give injunction, nominal damages, no constructive
trust, and if you have a jury trial then you should get punitive damages, which
are exemplary damages that follow tortious behavior when there is scienter.
Deceived
Case does not talk about whether district judge actually granted D.J. but it
does say they affirmed the findings and gave them nominal damages.
So somewhere in the lower court rulings, either the D.J. is granted and
affirmed, or (see recording)
between 40 and 46 minutes...
Case is a review of the 4th circuit vacating of the constructive
trust remedy imposed on future profits on a decent interval by the district
judge.
Question for constructive trust is:
Have a K
1. Seek pre-publication; and
2. Don’t publish any classified information.
If you don’t get a constructive trust for an ordinary breach of K, the question
would be do you decouple this clause for that clause and say, if they can be
severed, then Snepp violated clause 1, but not clause 2.
If he did that, what is the violation, is it an ordinary breach of K on
the one hand, or is it a breach of fiduciary duty on the other hand.
What did Snepp do? Was it a K
breach, or was it a tort? If Snepp
breached a fiduciary duty then it is a tort, if it is a K breach, then it is a K
remedy. Tort breach, the more
hawkish the remedies are. The
argument of the 4th circuit and Stevens dissent and Snepp are that
the two clauses are severable, and although Snepp is a fiduciary of the
The
Middle of first paragraph of II on 587—whether Snepp violated his trust on
whether the book actually contains classified information, the gov’t doesn’t
deny the right to…
Supreme Ct.—This is not a run of the mill K, he is not an ordinary employee, we
don’t want to relegate him to nominal damages and the opportunity to prove
punitive damages later. Hard to put
your finger on the harm because they were going to allow him to publish anyway.
We don’t want to relegate him to the speculative punitive damages option.
Profits are ill gotten as result of tort of breach of fiduciary duty, so
he must disgorge not just his advance, but also future benefits.
Holding:
4th circuit ruling is modified to reinstate the District Judge’s
constructive trust. What is the
constructive trust? It is a legal
fiction. When you see constructive,
substitute for the word “not.”
Not a trust, but treat it as one because it will achieve a socially desirable
result.
Note 3 on page 593:
Equitable remedy, and equitable remedies require inadequate remedy at law, so
before you can impose a constructive trust you must find that the legal remedies
available to the
Constructive trust is a judicially created remedy—to transfer title to the party
who deserves it and it follows from the law of real trusts where you have the
settlor who takes the property and conveys it.
You have two different interests, the legal title which sits in the
trustee and the beneficial or equitable interest or ownership which is the
beneficiary.
You have the settlor—legal title(trustee)
You have the beneficial/Equitable Interest (beneficiary)
Courts invented constructive trusts in equity to do things like they did in
Snepp. How do you get all profits
if Snepp is the owner. You have to
identify a triggering wrong, like fraud, or embezzlement.
Some tortious behavior on the part of the defendant.
How do I get these assets into the right party’s hands?
Well you declare Snepp trustee of the property, holding in trust for the
beneficiary
You have the right to say that you always owned it and the trustee never owned
it. Think of the Costebelle
case—next class.
Main advantage of a constructive trust (saying wrongdoer never owned it) is a
privilege over other creditors if the defendant is insolvent and that will keep
coming up over the next few days.
Another advantage of a constructive trust is tracing.
Note 7 on 594.
The theft victim sues the lawyers claiming that thieves acquired as constructive
trustees. The question is, what do
we do with you now that you have the cash?
The key statement is that the attorney’s took with knowledge of the
wrong.
Here’s how it goes, thieves hold the bonds wrongly, they hold them in trust.
Attorney’s did not acquire the property innocently.
Attorney’s took subject to the trust.
Attorney’s received bonds with knowledge they were stolen.
You can trace the assets.
One advantage of the constructive trust by transferring title is that it can
defeat creditors anxious to get into the defendant’s pocket.
Another advantage, if you were wronged and you can trace your property to the
wrong you can trace through exchanges, you may be able to recover.
Bottom of 593—If the securities go up in value, the beneficiary can get the
increased value and all the investment knowledge of the bad guy goes to the
benefit of the beneficiary. Before
you give these aggrandize values, often the thieves have other people who are
waiting to collect, and if you want to do equity you must realize that you could
give 10 times the value to one person and do you want to give this terrific
benefit to one victim, who happens to be a theft victim, when there might be a
hoarde of creditors who extended credit to the thief?
If the judge gives the whole pile to one dude—why, because he was wrong?
Is there some legitimate explanation for giving all the resources to one
person? The creditors assume the
risk. Mind want to give a remedy
that is mindful that this person is not deserving of all the benefit of the
defendant.
Remedies
Notes 1/26/2009
1977 case: Hickses
à
Clayton
(Costebelle)
Hicks v. Clayton
Hickses convey their property, Costebelle to their lawyer, Clayton.
Clayton promised to pay them the purchase price with an unsecured
promissory note and worthless stock that was represented as having significant
value. Ownership interest in
Costebelle is encumbered, the Hickses took out 3 separate notes on the property.
When Clayton could not pay the Hickses, the Hickses defaulted on their notes to
the bank.
At the time of the suit, the HIckses brought the claim to court, the Hickses had
fallen back 13 months in arrears to their savings and loan.
Promissory note was entered into without the intention to perform and the
stock was worthless. This is a
singular way for a buyer to defraud a seller, by lying about intent to pay.
Seller can defraud a buyer by lying about value, or having no intention
to perform, this would trigger an action for fraud.
So to can the buyer be liable for fraud.
If seller overstates value innocently, a warranty action arises, but if
it is intentional a fraud action commences.
But Clayton defrauded the Hickses intentionally, as buyer Clayton
defrauded the seller in the only way a buyer can defraud a seller, lying about
an intention to pay. Two different
frauds—representation of stock, and intention to pay on the promissory note.
At trial the court found that Clayton had committed fraud—and breach of
fiduciary duty.
By definition each lawyer is a fiduciary to his/her client.
No doubt that triggering wrong for restitution is present here—fraud and
breach of fiduciary duty.
They wanted to get restitution and constructive trust—(different versions of the
same remedy).
If you were to rescind the K, then the Hickses would get back Costebelle and
Clayton would get the stock.
Rescission is an equitable remedy, it is inappropriate where legal remedy is
available. Hickses wanted
restitution. Trial judge denied the rescission/restitution/constructive trust
prayer. Trial judge ruled
that Clayton had committed fraud and breach of fiduciary duty, but decided that
a money judgment was appropriate.
Court of appeals found this implausible, they thought that the money judgment
was uncollectible, the Claytons are in terrible financial shape.
Also, the Hickses can’t get back the money through the property, if the
Hickses got a judgment and then tried to execute that judgment, but this won’t
work because there are liens against the property.
The lien holder will take first.
Hickses ownership interest is encumbered by the loans.
Clayton did not pay their taxes and the IRS recorded a lien on their property.
If the property is already encumbered, the lender with the first
encumbrance would have to be paid off before the IRS.
Claytons owed Costebell, the Hickses owe the savings and loan a pile—so
if the Hickses owed 80k and they get 100k from Costebell, the IRS would take.
So IF the Claytons are the owner of Costebelle then the IRS can go after
Costebelle so even if the Hickses owe the savings and loan less than the value
of the property, the surplus is going to be gotten by the IRS, because the IRS
after the savings and loan are paid off can collect on their claim.
That means no money left for the Hickses.
In CA, in order to punish lenders for excessive loans for unqualified buyers,
the amount creditors can get from the defaulting party is only the value of the
sale of the foreclosed home. Banks
are stuck with the loan value at the sale.
You have discretion to do equity and if everything points toward equity, then
you may have a duty to equity. If
it is open to choose, you can choose wrong, if you choose wrong, you get
reversed. To leave the Hickses out
in the cold would be wrong.
Hickses have a free choice, can elect between law and equity.
There are conditions for equitable remedies that have to be met, and here
they were. Have elect, can’t
duplicate remedies that are just piling on.
You can elect law and equity if the conditions for equity are met.
There are conditions for equitable remedies that have to be met, and here
they were. You have a choice if the
equitable requirements are met, if you don’t meet the equitable requirements,
then you don’t have a choice.
There is one move the court of appeal wants to make here to give the Hickses an
advantage. Whom is the remedy
pitched at?
Theory is that 24 hour fitness, and Visa and USD extended credit with the risk
that the debtor would default. 24
hour fitness, etc. ran the risk when they extended credit.
Also, you can’t pay your creditors with somebody else’s money.
And cheating somebody out of money allows us to say that the Claytons
can’t pay their creditors with the Hickses stolen money/property.
Bankruptcy wants to treat similarly situated people similarly.
COURT: By ordering equity the court says that we will rescind the contract, so
the Clayton’s never owned the property.
They held the property as constructive trustees for the beneficiaries,
the Hickses. Constructive trust
made up by the judge to give the property to the right person.
If the Clayton’s never owned Costebelle the Hickses are not just getting
an advantage over Clayton’s creditors, they are also getting a big advantage
over the IRS. So basically, how do
we cut out the secured IRS creditor, how do we get something for the Hickses?
Well, any surplus in Costebelle would go to the IRS, but not if the
debtor (Clayton) never owned it.
The remedy is specifically intended to cut the IRS out.
So now if there is anything left over from Costebelle, it goes to the
Hickses.
What can we do to get the Hickses some money?
Cut out the IRS.
What if the Claytons improved the property?
We have to consider that too.
Say that there is a constructive trust and Costebelle was never owned by
Clayton. Imagine that the value of
Costebelle was significantly in excess of the sale price, imagine that
Costebelle as a kind of overkill—which happens when you have an increased value
of the thing. Imagine you steal a
piece of property and then you build a house on land that you stole, and let’s
say the value of the land is 100k and the value of house is 100k and if you get
the property in trust, you have disgorged 200k from the defendants.
And equity can do this, and this is a benefit of restitution, it is
designed to deter. But when you
give a value of Costebelle in excess of the purchase price, so that it is worth
a lot more now, maybe you disgorged that benefit from them restitution can do
that, but when you do that you have to be mindful of the fact that the Hickses
aren’t the only people on the planet.
And if you are going to give the Hickses an extra 100k, who might be
punished by that, aside from the Claytons?
The unsecured creditors, all the people who ran the risk of default.
Would you rather give the Hickses a huge windfall, or give the surplus to
the other creditors?
When you have the overkill problem, Dobbs says that whenever you have a
constructive trust imposed on property worth more than the beneficiary is owed
it is equitable to give the beneficiary the title, but it is more equitable to
want to share that surplus. But
courts don’t talk about partial constructive trusts.
If it is fictive, constructive, why can’t you have a partial constructive
trust?
When there is an overkill problem courts come up with an equitable lien.
Equitable Lien—a judicially created equitable interest in the property that
allows you to claim a security, and force a sale to get that security.
It is different because it is not a transfer of title, so it is different
because it is going to be subordinate to other creditors who recorded before
you. I.e. equitable lien on
Costebelle for 100k, this would be subject to IRS.
Overkill equitable lien in tune of the debt and then leave the rest.
Underkill problem: what happens if the property depreciates?
The value goes down? What
happens if the value of Costebelle is 50k instead of 100k?
Some courts think if I give you constructive trust, that is what you get,
title, and people say I don’t want title, I want to be made whole.
So what do courts tend to do?
Equitable lien for 50k and a money judgment for 50k.
Here is an equitable lien for the amount of your loss and here is a money
judgment for the value, so you get your 100k.
Dobbs point is that a constructive trust is seen as an all or none thing.
In Re North American Coin & Currency, Ltd.
NAC-North America Coin is in a precarious position.
September 12th, the manager/principles of the precious metal
company had a choice, fold the company, or improvise, stay open for another week
and then make a plea to the board of directors and the stock holders to bail
them out. They stay in business.
Orders that come in the final week, they take the new purchase orders and
set it aside in a special bank account and call it a trust account.
But it’s not a real trust, it’s just a bank account.
If the company is bailed out we will place the orders, if we collapse and
file bankruptcy, we will give the money back.
They take the orders but they don’t make any promises to the purchasers.
They just take the orders and set the money aside and they label it
themselves. 600k of orders are
placed and paid for, but the stockholders did not bail the company out and on
September 23rd they file for Chapter 11.
The company folds and files a Chapter 11.
They want to get creditors off their back and come up with a plan to
reorganize.
Dispute between the late purchasers and the bankruptcy trustee.
Purchasers are saying where is the 600k?
Bankruptcy secretary says that he is giving out the money pro rata to the
unsecured creditors. The trustee
wants to give it to the company’s other creditors.
No claim that late purchasers were told that their money would be specially
protectd and nobody is claiming that they were misled by affirmative statements
of how things should proceed. But
plaintiffs claim fraud saying that plaintiffs accepted money knowing they could
not perform. Plaintiff’s claim
fraud contending that North American Coin accepted money knowing that they could
not perform. Claim was that company
was in such bad shape that the company concealed the financial status of the
company.
Court makes a slim distinction between hope and fraud.
Court said that even if they knew they were insolvent, they took the
money in good faith. They still
took the money in good faith, with the hope that they could still continue after
support from the stockholders and directors.
If they really intended to not perform, why would they lay the money
aside, why wouldn’t they just take the money?
Court said that they had a belief, it was not a fantasy that they could
save the company, if it were impossible, we would infer frauds, but we see a
desperate, but good faith attempt to save a sinking ship.
If it is not fraud, we wouldn’t have far to go.
Constructive trust not triggered in this instance.
Constructive trust triggered by theft, tort, and unilateral mistake where
the risk is shared (I know you are overpaying me and I accept it).
Fraud consistent with federal principles.
If were defrauded bankruptcy attorney must cough it up and give it to the
bankruptcy victim. Imposing
constructive trust is perfectly in accord with federal law…BUT there was no
triggering wrong in this case. Constructive trust does not follow in an ordinary
commercial default.
669 Note 2:
Some victims, victims of fraud misappropriate or mistake who can still identify
their property are preferred over creditors.
Being paid by mistake doesn’t make you a wrongdoer, but you can’t pay
your creditors with someone elses money, read on same moral plain as cheating,
even though it isn’t cheating.
2. Page 601 Note 4. **Dean
Krohnman-- the constructive trust
should follow as a matter of course whenever specific performance is
economically justified.
How is the right to get specific performance unique, how does that trigger
constructive trust, how does it make good sense for a constructive trust?
Because the property can’t be replaced on the free market…constructive
trust follows specific performance, K law isn’t concerned with wrongs, the
defendant who doesn’t deliver is effectively stealing the property, that’s why
it is an equitable rule.
Vested a property interest instead of a right to be made whole by value of
exchange. Constructive trust
follows specific performance. The
defendant who does not deliver property is effectively stealing it.
Gives plaintiff that immediate interest in the thing, the defendant’s
property. If you don’t deliver when
you promise unique goods it is tantamount to sealing.
Remedies
Notes 1/28/2009
Hicks case. Clarify the differences
might be between restitution and
constructive trust.
Differences between restitution on one hand and constructive trust on the other.
Constructive trust is a species of restitution.
Constructive trust is a remedy that fixes in place of unjust enrichment.
Advantages of constructive trust: it has the advantage of tracing through
exchanges because it is a title interest in the asset, it can be transmuted to
other forms of the asset. It is a
remedy that is meant to fix the vice of unjust enrichment.
Unlike restitution, it does get triggered by a wrong.
The advantage of constructive trust over restitution is that it has the
advantage of tracing. Because it is
a title interest, it can chase all transmuted forms.
Restitution does not have that tracing ability.
Ordinary order of restitution, unlike a constructive trust, will not allow you
to trace it. No advantage of
tracing through exchanges.
Restitution is not a title transfer.
Does not give that privilege to a plaintiff who gets an order or
restitution. Ordinary restitution
is not a fictive transfer of the asset.
Also, can’t privilege the owner via insolvency.
Constructive trust has privilege over other creditors and tracing through
exchanges.
In cases involving theft, the difference becomes more noticeable.
You steal Lee’s cave or Orwell’s Eggsact machine, there is not K to
rescind and you have the problem of the defendant turning the asset into another
asset.
Eerie Trust
case:
Talk about an aspect of constructive trust, the idea if you have a triggering
wrong, the constructive trust can transfer title to the other party—like the
book in U.S. v. Snepp, or the cave appropriation, or Nye and Nissen.
If you have that triggering wrong you can trace through exchanges.
Get an advantage over other creditors.
Can also trace through exchanges.
Main concern in Eerie Trust—if constructive trust allows you to trace through
exchanges, HOW do you trace through exchanges?
Last minute creditors are nullified.
If you have 15 creditors, you can’t just take all your money and pay off
1 creditor and leave the rest out to dry.
Another problem is identifying the money.
Which coin is yours? Which
dollar bills is yours? See the
problem?
Eerie
identifies this above mentioned problem.
Eerie trust, the executive of the Gingrich estate, take 25,000 dollars for the
trust, it was basically theft. See
it as a sort of embezzlement.
Not just a matter of bad investment strategies, instead they stole the money.
Really this is a dispute just like the North American Coin and Currency
Case. This is a dispute between the
secretary of banking and the Gingrich heirs. Heirs sought priority over $25,000.
They are looking for reclamation of their own property, looking for a
constructive trust over the $25,000.
The claim would be, since the money was stolen, it was never owned by the
other party.
Trial court denied them their claim for constructive trust over the $25,000 and
said you are just entitled to a money judgment.
Can the Gingrich heirs, who were wronged by the bank, trace their funds?
What was in the bank, the trust?
Actual cash was as low as 2865.40.
They call this the lowest intermediate balance was $2865.40.
meaning after the tort, until the secretary took over, the lowest amount
of money was $2865.40. There were
also cash items in the amount of $1937.00.
Lowest amount of other deposits after the tort, the triggering wrong, was
$6373-- cash in other banks.
A large amount of money placed in a deposit in another bank after the wrong is
committed and before the secretary took over.
And also during that period there were some cash funds used to purchase
bonds and a mortgage. Mortgage had
been foreclosed on; Eerie trust had purchased the premises pursuant to
disclosure.
So we have a large deposit, also after the wrong but before the secretary took
over, and also have securities.
So they have about $11,000 in cash sitting around and also the unidentified
large deposit, and then the value of the mortgage and the bonds.
There are no other clients who claims that Eerie Trust has transferred
their funds, no competing claimants who are trying to get title to assets of
Eerie Trust.
View of heirs: All post tort cash is theirs and all post tort purchases are
theirs. They claim any lowest
intermediate balance, and anything purchased with the cash, including the
securities.
Most generous tracing rule is the swelling of assets theory: you took my money
then improved your wealth, that means I can reach your wealth.
On May 1st you took 5k from me, that increased your wealth by
5k, so I should be able to reach any wealth that you have, even assets you
possessed before the wrong. This is
the broadest and most generous rule.
SC says that nobody believes that, you can’t say you stole my money
therefore anything you have is a constructive trust.
If swelling of assets is rejected, the opposite extreme would be to trace the
exact bills and coins. Nobody
follows the most generous and most stingy.
Instead there is liberalized tracing, but it still is tracing.
Identifies as the trend, but not so liberalized that there is no tracing
at all.
The court cites the Nashville case from 1879—established that when you
have a fund that is commingled, commingled between the trust beneficiaries
assets and the trustees assets, when the two are mixed and withdraws are made by
the bad guy, the presumption is that the dissipation or withdraw of money from
the mixed account is the withdraw of the wrongdoers money first.
So bad guy and good guy, and the account is dissipated, the dissipation
is the bad guys and what is left is the good guys.
When he spends money from a commingled fund, it is assumed the money
being spent is the bad guys.
What constitutes the commingled fund?
Here we have cash deposits, cash items, cash laying around that has been
transmuted into other securities, cash at different banks, etc.
Court said that cash is cash.
All of the cash accounts owned by Eerie Trust should be treated as one.
Anything less liberal would be impractical and unrealistic.
Lowest Intermediate Balance—identify certain points in time (one of two points
in time):
1. Deposit by the plaintiff and the bankruptcy or litigation, where the
secretary took over; or
2. Between deposits by plaintiffs
Recognizes that when the money goes down, when it reaches its bottom point, what
is left is going to belong to the beneficiary.
Moreover the restatement of trust and other interpretations, say not only
does the defendant dissipate his assets first, he also invests the beneficiaries
assets. When the money is wasted
the trustee uses his own assets, when he makes sound investments, it is the
beneficiaries money.
So the lowest amounts left over in the accounts belong to the Gingrich’s.
Idea is to get what is sitting around in the hands of the
beneficiary—typically not much is left in bankruptcy proceedings.
Disposition of the case: Gingrich heirs, in addition to the 11,000, can pursue
the other 14,000 in the mortgage and securities, i.e. can seek the last of it by
executing on the securities…up to the tune of 25k.
Notice they don’t say you can have the mortgage or the securities, it is
up to 25k.
Restatement of trust provision cited—says that when the trustee wrongfully
commingles trust funds with his own into one indistinguishable amount, and
subsequently makes withdraws the beneficiary can get a proportionate share of
what remains and what is withdrawn, or take an equitable lien on both to secure
his claim for reimbursement, and it is not clear what the remedy is in this
case, a personal constructive trust, or whether they are just getting liens
against the case, securities, or assets.
Not clear if they are getting a constructive trust of 11k of cash and
then 14k from, or whether they are just getting a right to exercise a lien for
that amount of value—if a security interest is given (lien), or if it is just a
transfer of title (constructive trust)—this is unclear.
Doesn’t really matter because nobody
else is after these funds.
Look at page 675: note (b)-end—[Inconsistent with Eerie] Once plaintiffs trace
their money into a commingled account, anything plausible is assumed in their
favor, but the impossible is not presumed.
So…
If you have money that comes in from a legitimate source after the tort, but
before the litigation (before the secretary takes over), the bankruptcy trustee
may say that this is a large deposit that came in, but it has nothing to do with
the wrong. Presumption of Eerie is
that once you put the asset into the trust, it becomes commingled with the
trust. Laycock says you don’t want
to do away with all tracing—but Eerie comes close to this.
Laycock points out a certain arbitrariness to it.
Page 677 first full paragraph... After the wrong, you could have a large
check that clears in the account of the wrongdoer and that lowers the amount of
the cash balance to zero and then a huge check comes in and the intermediate
balance is zero. But if a large
deposit comes in first and then a large check is cashed, then there is no
problem satisfying it. The lowest
intermediate balance rule can leave the plaintiff in a really good or really bad
shape.
Problem 6-1:
1. Triggering wrong, the $6,000 is easily identified proceed of the Microsoft
shares, so the tracing rules would easily allow the constructive trust
beneficiary a shot at the $6,000.
2. This is reachable, easily identified transmuted form.
Mom can get the Apple stock derived from the theft.
3. It’s too bad, but that is what has become of the asset. The 3,000k is hers,
and (4) the $10,000 in the checking account is unreachable.
What about what we talked about last class?
Would you just say take the 3k? She should take an equitable lien on the
diminished value stock, and then a money judgment on the remainder. Take an
equitable lien and then a damages.
Problem 6-2
1. $3,000 is hers.
2. His money is deemed to be blown in Vegas, who’s $1,000 is in the account?
Mom’s.
3. $1,000 out of $5,000 is hers.
4. $6,000 belongs to mom as constructive trust. (59:00 minutes)
5. 750 shares.
6. His money, he blew it.
7. She doesn’t want the cash, she wants the investment.
Note 2 on page 669: Wrongs plus
mistake. The requirement that there
can be a claim for a constructive trust.
Note 4 on page 670. read it.
Note 7: Fraud is conscious wrongdoing--how does mistake get on the same list?
Also note 10 on page 673.
The function of mistake and fraud in the law of remedies:
-Problem 1.) Seller defrauds a buyer, and invests the proceeds—fraud is a tort
and for a tort you can get the general damage and the special damage caused by
the wrong plus punitive damages. As
a tort remedy, restitution is always available in cases where the wrongdoing is
conscious--that allows the plaintiff to recover more than she lost.
You can’t tack on damages, restitution, etc.
Defrauded buyer can get a constructive trust over the assets of the
seller. Not just get restitution in the amount of the value, but also traced
through exchanges, and get advantage over creditors.
This goes beyond mistake, it is a cheat.
This is the Hicks case.
-Problem 2.) When the seller just
breaches and the buyer relies. When
a seller breaches and a buyer relies, this is not a triggering wrong.
An ordinary breach of K does not trigger restitution.
When do we say that there is a seller breach?
Seller innocently overstates the value and the buyer relies on it.
-what about a case of warranty? The
buyer is mistaken as to value. In
such a case the K has been breached by the seller for overstating value, but it
would never trigger restitution/constructive trust.
Instead it triggers market and consequential damages in favor of the
victim—but you don’t get the extraordinary equitable remedies.
-Problem 3.) Buyer defrauds the seller.
Only one way—buyers cheat sellers by intentional deception, a lie about
the intention to pay. Buyer
receives seller’s goods or services, but the promise to pay is empty.
Can say that this is a tort.
A buyer who just doesn’t pay for goods or services, no equity, just the money
plus interest. BUT a buyer who
cheats the seller AND NEVER INTENDS TO PAY, could cause the seller serious
economic injury, then you can disgorge unearned gains.
If buyer profited from seller’s goods and services in a way that exceeded
the loss, you can recover that.
-Problem 4.) Buyer exploits seller, even knowingly.
First example would be the baseball card case, the second example would
be the overpayment case. They
are not treated the same. What
question do we ask? To whom have we
allocated the burden of knowing the true value of things?
In the baseball card case, the seller. Baseball card memorabilia store
should know the value of the card it is selling.
BUT when you get overpaid by someone, you have an equal responsibility to
disgorge yourself of the benefit and certainly a court of equity, once you
realize you have been overpaid, anything you do with that will overpayment would
be disgorged.
-Problem 5.) When mistake is mutual, does restitution/constructive trust
pertain? Yes.
The cow case. Cow not
barren. Value exceeds both parties
expectations. No justification in
enforcing a K when neither party knows what they are doing—a little different
from a clever shopper going into a store.
Remedies
Notes 2/2/2009
Casebook 383 and UCC page 180.
Continuation of property rules, where plaintiff gets a right in property
interest.
Conditions in which K gives buyer a right, not to the traditional damages
remedy, but of the equitable remedy of specific performance.
Vests in the plaintiff not a right of the value of the exchange, but a
value of the thing—give me my carrot, my heirloom, my piece of real property,
INSTEAD of the value that the exchange would have created.
Contract between buyer and seller vests a right for the plaintiff to ask
for his property, his thing, etc.
Campbell Soup Co. v. Wentz:
-Campbell and Wentz’s entered into a K which allowed Campbell to monopolize a 15
acre plot of land. Deal was to buy
as many carrots as they could, they could sort through the carrots and buy all
the carrots they chose. They could
take or reject any carrots, and even prevent the Wentz’s from selling them if
they rejected the carrots. All
-It was an output contract, all the carrots that Wentz could produce and all the
carrots that Campbell would want.
The K price was between 23 and 30 dollars per ton.
15 acres and $30 dollars per ton.
Produce as many carrots as the acreage could produce.
Wentz’s refused to deliver the carrots.
Campbell wanted the carrots for their soups.
They scrambled around to replace the tonnage that was missing.
There were 100 tons sitting around in January, and that is the subject of
the K that was not performed.
Campbell encounters Lojeski who sells them carrots for 90 dollars a ton.
Of 62 tons sold to Lojeski almost all were resold, and half were resold
to Campbell.
Once Campbell got wind that Lojeski was selling them its own carrots, they
refused to buy any more carrots.
They then initiated a suit.
What theory would Campbell sue Lojeski?
They don’t have a K with Lojeski.
If Lojeski was an innocent, a bona fide purchaser for value (not a sham gift
transaction) without notice of the wrong, our emphasis on the free alienability
of property should push us to assume that he can take fee title to all
unrecorded property. The role that
knowledge plays is really important.
In the cave case, a reasonable case would result in a reasonable rental,
but knowing takes it to another level—all the profits.
So if Lojeski was a bona fide purchaser, would suggest that he should be
able to take title to all unrecorded property.
If it is recorded then you have constructive notice of encumbrances on
property. We want Lojeski to go out
and buy carrots, we don’t, however want him to steal carrots.
Normally we would just let Campbell sue Wentz.
Knowing that somebody breached a K is different from knowing that somebody
misappropriated the property.
Unique goods must be delivered. If
the carrots aren’t fungible, and if Campbell cannot go out and find similar
goods on the open market and find like substitute goods, then it is not just a
run of the mill breach of the K. If
these carrots are unique then they really belong effectively, at the time the
promise is made, to the buyer.
When the subject of the K is unique, now you are acquiring them with the risk
that they will be viewed as if they are stolen.
Difference between diverting substitute goods and unique goods.
Distinction between having the right to sell something that you have promised to
someone else and not having the right to sell something that you have promised
to someone else.
Wentz couldn’t sell the carrots because they belong to Campbell.
Because the goods are unique, they aren’t Wentz’s to sell.
How does Campbell sue Lojeski at all?
There is no K between Lojeski and Campbell’s soup.
Can’t sue Lojeski for breach of K, can sue Campbell for breach of K.
Quasi K for what wrong? Unjust enrichment.
It is wrong to be unjustly enriched.
What remedy does the person who sues in quasi K for unjust enrichment
get? Restitution. In the Orwell
case, what would the cause of action be if he didn’t raise the tort of
conversion? Conversion lines up
with unjust enrichment because it is wrong to knowingly divert somebody
property.
How does Lojeski get sued by Campbell?
Gets sued for quasi K, for the remedy of restitution.
Even if he didn’t believe them to be unique, he still appropriated goods
he didn’t know the seller had the right to sell.
So if he took knowing there was a K with Campbell and the goods were
unique, then he couldn’t take good title to the carrot.
When can you sell stuff to somebody else in breach of K?
When the goods aren’t unique.
Every specific performance statute will talk about the right to reclaim goods
from a 3rd party acquirer.
UCC says that if somebody ends up with your goods, you can send the
Sheriff to forcibly reclaim your property.
Any knowing acquirer of unique goods would have to forfeit the property.
The carrots were unique—the shape of the carrots, the color of the carrots, and
the texture. The trial judge, when
pressed to order specific performance, the judge said that they weren’t really
unique. The 3rd circuit
says who cares about identifiable soups, this is a company which when they dice
the carrots, they all look the same.
The important thing is that there is no rough and ready substitute for
carrots. In 1948 it was getting
easier to get specific performance.
Top line on 385—liberality of granting of equitable remedy.
Not just unique goods now.
What is the term that the UCC has added?
Unique goods OR in other proper
circumstances? Inability to
cover. And inability to cover can
be interpreted as difficulty in covering.
Go from unique to other proper circumstances and that is interpreted as
inability to cover. Is it
conceivable that some of the K carrots could be acquired by Campbell?
Couldn’t Campbell just pay Lojeski more for the carrots?
Campbell did not deal with Lojeski.
Inability to cover includes
difficulty to cover, meaning we are a long way away from one of a kind
paintings, family heirlooms, and real property.
Specific performance in its liberized form is meant to give the plaintiff
the right to coerce a conveyance of property when not coercing the property
would put the plaintiff in a really bad spot.
Note d on page 386—Frame v. Frame: gravel case.
Plaintiff got an injunction to preserve gravel supply.
Easy to believe that court did not find the spot market an adequate
supply. Do we really expect the
buyer to run around and patch together a huge supply by running around and
patching together many small suppliers to fill their huge order?
Although the amount of gravel is unique, but the difficulty in covering
makes it unique in this circumstance.
3rd circuit says error for trial judge to assume money damage
is adequate.
Professor Schwartz on page 393: incidental damages, which the buyer could get
here—it’s difficult to monetize.
The cost of finding and making a new deal, have to spend time, frustration,
anger, these are all hard to quantify.
Back to the Campbell case: 3rd
circuit says that In the respect that carrots were uniform, etc., it was error
for the judge to find a money damage adequate.
What would money damages do in this case?
-in the absence of a liquidated damages clause what would damages do here?
(Liquidated damages clause is $50 dollars an acre for 15 acres, or $750
dollars).
-Absent liquidated damages clause, what would the damages be?
Campbell got the carrots for 90-30 = 60 dollars under the market
price—(Mkt Price – K Price).
-Rule in absence of damages clause and specific performance would be the
difference between market price and K price.
That is found in UCC 2-713,
that is what every buyer is entitled to if the judge deems it an appropriate
remedy in their favor. Market
damage would be 60 dollars a ton times 62 tons withheld so that means that Wentz
would have to pay $3,720 for the right of diverting carrots to Lojeski.
Supposed to take incentive of diverting the carrots away.
It is possible that Lojeski may pay above market price.
Trial judge said legal remedy was adequate.
3rd circuit says that legal remedy is not adequate, BUT that
Campbell had an unconscionable K.
Under UCC buyer entitled to market damages and consequential damages if they are
unavoidable, can be proved beyond reasonable certainty, etc.
What type of consequential or income stream damage did Campbell suffer
here? Well Vons, Ralph’s and
Albertsons are waiting for the soup.
What if Vons buys Progresso soup because they can’t get Campbells soup?
Consequential damages could be well in excess of market damages.
Instead though, the Wentz’s were rescued from high money damages by the
liquidated damages clause. The
court said that the trial judge was wrong to deny specific performance and give
legal remedy. Court said that legal
remedy was inadequate and equitable proper…BUT Campbell had an unconscionable
conduct with the farmer. The
liquidated provision was lopsided in favor of Campbell.
In Modern courts, most would not find this unconscionable—it has to be
procedurally and substantively unconscionable.
At the time unconscionability was not a defense against a legal
remedy—and liquidated damages was a legal remedy.
Wentz breached, Campbell should get specific performance, but they
behaved unconscionably, so they get the legal remedy of $750.
They were entitled to specific performance, but they drove too hard in
the formation of their K.
<crazy ass Yeager tangent>
Problem—assigning prices: what is the market price, what are consequential
damages? Judge has to make thorny
proximate cause decisions, certainty, etc.
Also, non monetizable costs, you have to go out and find substitute
performance. Damages, liability
rules put it all on the judge. But
specific performance says that as soon as the unique goods are promised they
belong to Campbell. But
specific performance is meant to reflect that a lawsuit over damages is more
expensive and more specific performance would be more likely to have negotiation
rather than breach. That’s why UCC
liberalized specific performance and codified it as
not an extraordinary remedy. So not
restricted to unique goods, but available in other circumstances, where buyer
doesn’t have to scramble around in spot market.
Now specific performance is about efficiency of allocating the right to
the thing, moreso than specific compensation.
Text of the UCC—
Article 2: look at page 180--rejects any doctrine of election remedies…
180 comment 1: cumulative rap can also be found in this provision, the one
Campbell would have got in the trial court if not for the liquidated damage
provision—look at section 2-713—not required to cover under the UCC.
Although if you don’t cover there are certain consequences.
UCC is always leaving remedies open depending on what seems just.
What does exist even though there is election of remedies?
What does exist—a ban on double recovery.
You would say that you could get the carrots or the value, but not both.
Nobody would say that you can get
specific performance and damage.
You can get the carrots, or the value, but not both.
If you get the carrots, that doesn’t bar NON-DUPLICATIVE damages.
I.e. if you still have a problem with Vons, you lost the January order.
2-716: Specific performance may be decreed where the goods are unique or
in other proper circumstances.
2-716(3): right to get replevin to the goods.
If plaintiff can’t cover, you can go out and get a coerced exchange from
the acquirer of the goods or even a 3rd party acquirer.
Will allow you to go to Lojeski’s farm and get the carrots and if you can
demonstrate that Lojeski took with notice of the wrong, Lojeski can be divested
of notice. Right will be blocked if
Lojeski has taken as an innocent buyer of the goods.
Look at comment 1—see highlights.
Notes make a point—professor Schwartz--talking about the non-monetary
problems—thinks that request for specific performance proves inadequacy of
damages. The fact that the thing
means a lot to the plaintiff is expressed when the plaintiff asks for specific
performance. Indication that it is
unique not in an objective sense, but in a sense that it matters to the
plaintiff. But you might say that
all value is subjective. The market
value of a house is subjective.
What did Dean Kronman say on page 601—specific performance in relation to
constructive trust—constructive trust triggered by theft, and there is also the
mistake aspect. Is constructive
trust a typical remedy for breach of K? No.
He says that constructive trust follows not just theft, but fraud, and
It’s as though Wentz stole the carrots.
Constructive trust should follow whenever specific performance appropriate.
Why, it is as though Wentz stole the carrots.
You are saying essentially that the non performing party has run away
with the goods. Wouldn’t be carving
out this odd exception, it would be treating this particular remedy as
acknowledging that the defendant is sort of a thief.
Remedies
Notes 2/4/2009
Reference to note 4 on page 601.
Dean Kronman--Constructive trust should follow as a matter of course whenever
specific performance is justified.
We know that Campbell could get the mkt price -
K price. If it wasn’t for
the liquidated damages clause, market damages would have been over 3k and there
would have been consequential damages.
So this really isn’t a good case for what Kronman is talking about.
But imagine that there weren’t a shortage creating an unusual scarcity
problem where Campbell’s K did not give them such a good deal. See UCC 2-713.
UCC 2-713 Damage equals mkt price – K price. Imagine the K took place like most
K’s do, at market. Both parties
think they are getting a good deal.
Think about a situation where Wentz sells carrots to Lojeski at a little over
market price, and it’s not as though there is a huge upswing in the value of
carrots. So the sale takes place at
the market price, so the market price and K price are almost equal, so Campbell
would not realize a huge gain by relying on the K.
Make Lojeski a bona fide purchaser, with no knowledge of the wrong.
Since there is no shortage, Lojeski has no knowledge, no reason for
Lojeski to suspect anything.
Lojeski isn’t acquiring a scarce resource that is unique.
Laycock is asking not this formula, but rather all of the money.
Dean Kronman would say— because the carrots can’t be gotten from anybody but
Wentz, then the uniqueness of the carrots would entitle Campbell to specific
performance. But Campbell can’t get
the carrots if he is an innocent party.
You can’t allow Campbell to take from Lojeski, because Lojeski doesn’t
not take subject to the trust. So
the question Laycock asks is, can Campbell get the proceeds?
All the money, the money that Lojeski paid for the carrots, all of that
money belongs to Campbells because they weren’t his to sell.
That would trigger specific performance, which is cut off by his act
being innocent. Does it make sense
that Lojeski can buy them, but Wentz can’t sell them?
Can give market price – K price.
Would either give 0, 10 dollars a ton, or 60 dollars a ton.
He is asking can you give what?
Not mkt-K formula, but all the money.
Campbell can say give me the money, not the mkt price – K price, but ALL
the money you gained from the sale.
Dean Kronman would say because under the remedy of specific performance the
promise of unique goods vests a property right and the refusal to deliver the
promised goods is like stealing them.
Kronman would say you can disgorge Wentz of everything.
Why is this odd, because normally you don’t do this in a breach of K
action.
Kronman: Property right vested in promissee, promise to deliver and not
delivering is like stealing.
2-716(2)—the decree for specific performance may include such specific
provisions…
By refusing to deliver the unique carrots, what Wentz did is on the same plane
as stealing—so his argument is refusing to perform with unique goods is akin to
stealing, as though the breacher has stolen the goods.
When does the constructive trust really turn into a boondoggle?
When do you look at it and scratch your head in terms of the justness of
giving them everything? Remember the overkill problem?
I.e. you steal the land and then build a house on it.
That’s exactly what restitution can do.
Kronman would say that refusing to deliver unique goods is like stealing—like
Nye and Nissen, like the cave owner.
Equity—where jurisdiction of the court does not terminate with the
judgment—Lyons case, keep me updated on your new choke hold policy.
Court can take over the police department, equity allows this.
INJUNCTIONS:
-Preventative
-Reparative
-Structural (will not read any structural cases specifically)
Laycock distinguishes the types of injunctions above—but professor is not
totally sold on these categories, he says that injunctions are a little bit
preventative and a little reparative.
All injunctions are a little about the past and future.
Injunctions are equitable remedies, and injunctions operate in personem and are
backed up by the contempt power.
Affirmative injunction vs. a negative or prohibitory injunction (not a very
useful distinction—linguistic game).
Example: Affirmative
injunction would be “labor union keep working,” negative would be “stop
striking.”
Not be asked to discern between any of these terms.
Will refer to the structural inunction.
Preventive Injunction:
Humble Oil & Refining Co. v. Harang
-Plaintiff seeks to enjoin the defendant Harang from destroying documents that
are related to certain transactions that had been entered into by Harang and the
geologist in their various doings in their geological company.
They started up this company together while the geologist was employed by
Humble Oil. Leaked the knowledge of
oil in lands was shared with Harang and they would strategically purchase land
and make large profits. Humble oil
sued Harang seeking to disgorge them of their ill-gotten gains—ill gotten
because it is a product of theft of information from Humble oil, so they want to
disgorge all the benefits gained from the theft of information.
-don’t want to sue for restitution—concerned that efforts would be thwarted if
Harang shreds documents that geologist took with him.
If the documents end up outside the reach of the court, if you can’t
prove wrong, then can’t win the case.
-don’t want parties to run to the court and say enjoin the other party from
destroying documents and forcing the court to oversee the entire discovery
process.
-This would corrupt every discoverable process.
-We don’t want courts to have to use their contempt power to police the parties.
It would corrupt every discovery process in which documentary evidence is
key.
Irreparable injury is a necessary condition of an injunction.
Court says that irreparable injury is satisfied, as it is in most cases.
So it is a necessary, but not sufficient condition for an injunctions.
To get the extraordinary remedy of an injunction, you need to suffer irreparable
injury. The court said that there
is no doubt this is satisfied, but in most litigation cases this is always the
case where one party controls most of the document.
So it is a necessary, but not sufficient condition to getting an
injunction. You need several other
things (see below).
INJUNCTION REQUIREMENTS:
1. Irreparable Injury (see above)
2. Real Danger: ripe—thing you are afraid of occurring (feared harm) must be
imminent, or inevitable.
3. Legal remedy is inadequate
4. Scope no broader than necessary to squash mischief that is aimed at it (one
bad story manager who discriminates on age out of many store manager across the
nation—do you need to enjoin the entire national chain?
No, you would only need to enjoin that store—otherwise the scope of the
injunction would be broader than the mischief).
Back to Harang case—Alleged by the attorney in an affidavit that Harang has
already tried to destroy certain records reflecting his relationship with the
geologist. This affidavit is
unsupported—based on hearsay, all we have is a lawyer saying he thinks the
documents will be destroyed. There
is no reference how the attorney knows that, it seems self serving and without
verifying the source it looks a little iffy.
Also we already have rules for production.
Even though there is no way to prevent the destruction of documents
before a motion to compel, there is no reason to believe that documents have
been destroyed.
Have you really demonstrated that this is an imminent or irreparable harm?
See note 12 on page 239. The rule
of real danger or ripeness does not require that the defendant has committed one
violation…it is enough that there be substantial—if the affidavit had been filed
by a reliable informant, then the plaintiffs claim would be much stronger.
Note that the defendant does not have to have destroyed documents
beforehand--
Courts—will not issue an injunction merely to assuage the worries of the
parties. Notes
talking about, under Note 8 about what kind of remedy is available for
the destruction of documents. Old
tort of spoiliation of evidence.
Generally not a tort. Most courts
refer to deal with the problem in which evidence should have been produced, not
in a special procedure for damages.
So you really have no legal remedy available to you for the destruction of
documents for money damages. As far
as discovery rules go, they don’t triggered until arguably too late.
Also there is criminal obstruction.
If you are in a case where destruction of documents is a problem you will suffer
irreparable injury and you will have inadequate legal remedies, the problem is
one of ripeness. This is usually not a
live problem, as the judge said in the Harang case.
Humble says that it would work no hardship on the defendants to order an
injunction. They are not allowed to
destroy documents, so what further harm would it do to impose an injunction?
Why be so worried about injunction.
Laycock—injuncitons have consequences, the first consequence is that the
plaintiffs can use it to manipulate the defendant.
It can also ruin your reputation.
Interesting case: Tennessee—so many problems with marital dissolutions that
injunction follows as a matter of course.
The threat of contempt always hangs over the defendant—even if it is an
injunction of something that you are supposed to do (i.e. not destroy
documents).
Discovery rules don’t get triggered until arguably, too late.
They are not allowed to destroy documents, so why worry if you are enjoined from
doing it? Well injunctions have
consequences. The plaintiffs will
have power over your. They can ask
the judge to ask you to show cause why you shouldn’t be in contempt.
Plus, it may ruin your reputation.
The contempt power includes incarceration until you play ball, or conditional
fines until you play ball. You want
to make sure that the extraordinary in personam jurisdiction is used as
necessary. BUT Tennessee has had so
many problems in marital dissolutions, that that have automatic injunctions.
Therefore in every divorce proceeding, by statute the judge is supposed
to enter an injunction against both parties until the decree is finalized.
Note 13 on page 240.
-Lyons case—choked by police.
Plaintiff challenged police practice of choking people.
Plaintiff must show a real threat of harm.
-U.S. reversed the injunction on the ground that it was not ripe.
Did not demonstrate a real threat of being choked again.
The real threat, something had to happen.
Injunctions go both directions, backward and forward.
Yes they choked you, but the likelihood that you will be choked again is
not more than anybody else, and so the likelihood that you will be choked is too
insignificant to utilize the contempt power.
It is a different ripeness problem.
This is not ripe for an injunction—Lyons has the history, but he does not
have the future. Here something
happened in the past, but the probability that he would be choked was no greater
than any other person. Now, if
Lyons was a minority and you can show racial discrimination, then you might be
getting somewhere. This was not his
claim, he was just a generalized member of the population.
LA won the injunction, but the chokehold was unjustifiable.
Remedies
Notes 2/9/2009
Injunctions
1) Irreparable injury
2) ripe/not moot
3) legal remedy inadequate
4) scope no broader than necessary
Nothing extraordinary about ordering somebody not do something or do
something—it is the remedy that backs up the injunction, the in personam power
of contempt which makes this extraordinary.
Humble Oil again…
Remedy that backs up an injunction is what makes a district judge hesitant to
inact it. If the document is
crucial to demonstrating the theft of the secrets, if the document is necessary
to that proof is outside the reach of the court—the injury would be irreparable
because Humble Oil could not prove fraud.
Nobody is disputing that the wrong would result in irreparable injury,
there was no other way which the plaintiff could demonstrate the wrong.
They have not demonstrated a sufficient likelihood that the injury would
occur—
Ripeness was a conclusion—Humble oil just seeking to have their fears allayed.
Just because you are afraid an injury would occur, it doesn’t mean that
it is a live problem.
Opposite of ripeness is mootness.
One way of blocking an injunction would be mootness.
Not that it never was live, but that it is no longer live.
This thing happened and that demonstrates perhaps a propensity at that
point, but things have happened since then that have nullified the concern.
Marshall v. Goodyear
Even though Reid was the unlawfully terminated employee by Goodyear, it is the
Secretary of Labor, Marshall, who is bringing the suit.
In only the most outlandish cases is the employee expected to do anything
other than go back to work.
Meaning, front pay is awarded in the tiniest fraction.
It’s typical for the employee to seek not just the lost wages, but they
are typically looking to have their job back.
Secretary was suing Goodyear for 3k in lost wages and an injunction
against the worldwide corporation against future acts of employment
discrimination in the form of age discrimination.
In this case, the trial judge found only one violation against Goodyear.
Trial judge granted a nationwide injunction barring them from future
discrimination against the age discrimination act.
Prior to entering the injunction it was found that the manager in once
outlet in the major operation was discriminated.
It was the further finding that Goodyear was committed to compliance with
the age discrimination employment act.
Goodyear appeals.
The 5th Circuit said that it allows legal or equitable relief as may
be appropriate. In the discretion
of the district judge and the cases interpreting the ADEA have uniformly held
that you don’t enjoin the entire corporation unless there is a companywide
policy or practice, if there is not companywide policy or practice then you only
enjoin the wrongdoers. If you have
3 stores and there are 50 other stores that aren’t, you don’t enjoin the entire
chain, unless the discrimination is emanating from the company.
Two relevant 5th circuit cases that had been decided that the court
could rely on. Hodgson
case—actually broadened the injunction that had issued before.
In the Hodgson case, the Secretary of labor sued First Savings for age
discrimination and the injunction was too narrow.
There were 5 branches and a main office in one county and 1 personnel
officer was making all the hiring decisions.
Injunction only struck at the age discrimination at the teller position,
but the court found that there was a policy in place went beyond tellers.
Ads specifically said, “we seek a young man.”
5ht Circuit broadened to include the entire First Savings operation.
The other precedent case—Brennan case on page 242—Injunction upheld
against 60 retail outlets after a finding of discrimination at 3 offices.
5th Circuit thought that centralized supervision made a
companywide policy—it wasn’t just 3 renegade stores.
3 stores that were discriminating were operating according to company
policy. 5th Circuit said
that ADEA does not require that corporations have centralize employment
policies. They can have it left to
the individual micro units of the store.
Absent a policy, the injunction should be curtailed to the offending
stores—so absent a policy the injunction should be entailed to those 3
stores—but this wasn’t the case.
The injunction is way too broad and it should be no broader than the store.
Ask, what if at the time that the case went to court, Goodyear
demonstrated that the bad apple that discriminated had been fired?
Is the case is live anymore?
What if they imposed an injunction at only the one store, and by the time the
case comes to trial the manager in question has been fired.
Could make the argument that there are still remnants of his
influence…That does not come up, but in the Goodyear case it is easy to say that
the injunction was excessive. The
district judge has overreacted.
Looking at some of the notes:
Note 2:
What is the likelihood that future
offenses may occur in the Auburndale store?
We know that he has discriminated, but is the problem sufficiently ripe
to say that he has demonstrated a propensity?
There is a benefit to having the Secretary argue, in that he can argue
for the public, not just for the fired/discriminated against old person.
Difficulty-Note 3: Obey the law
injunctions—you don’t want to tell people to obey the law, you always want
to obey the injunction to the specific evils that have been performed.
See also Note 8 on page 245-injunctions that merely tell
defendants to obey the law tend to be bogus, but Laycock goes on to say that
obey the law injunctions are common.
Why? Because District Judges
don’t want to leave loopholes.
Defendants can just find some unnamed behavior. The concern is that you need
fair notice to the defendant to know what is being regulated.
Generally obey the law injunctions are too broad.
There is some tolerance, but you want to narrow them down, if possible.
Not as uncommon as you might think because courts don’t want to leave
loopholes for defendants.
See note on page 245: Example of a
too broad injunction. District Attorney v. Board of Selectmen:
Note 5 on page 244:
The more you know about what defendant has done wrong, the narrower the
injunction can be. Gallo Winery
v. Gallo Cattle. Gallo winery
suing the Joseph Gallo cattle co.
Original injunction was for all products, but appeals said it should be
restricted to cheese. Natural
affinity between cheese and wine.
But not between wine and the other cattle products.
Thus, tailor the injunction accordingly.
Minnesota Mining v. Winston Research:
Minnesota Mining comes up with a great tape recorder, involves some trade
secrets, etc. The secret will
eventually come out, but two months before release several employees leave
Minnesota and form Winston Research, which steals the technology and develops
the tape recorder before Minnesota gets a chance.
No gains, no sale. What did
the court, realizing the scope problem might say if Minnesota Mining wants a
permanent injunction? Well it won’t
stay secret forever, so that scope would be too broad.
They issue an injunction for 2 years—how long it would have taken for the
secret to get out had Winston not stolen the information.
Only if all of these elements line up will the court utilize an injunction.
Random Contempt Tangent (will be discussed in detail later—next class):
1. Criminal
2. Civil Coercive
3. Civil compensation
Injunctions need past and future.
If it hasn’t happened in the past, it isn’t ripe.
If it won’t happen in the future, it is moot, not likely to happen.
Need a past willingness to violate the law and the likelihood that it will
happen in the future.
Bell v. Southwell
(injunction to fix the past wrong)
Possibility of a court undoing a past wrong.
Justice of the peace die, and Georgia law requires that the election
official put together a reelection to install a new justice of the peace in the
dead guys place. Belle, an African
American ran against Southwell for justice of the peace and the election was
fraught with blatant racial discrimination at the polls.
Has both prohibitory (negative) and affirmative injunction—affirmative would be
to force a new election and negative would be to prohibit Southwell from
serving.
D.Ct. Judge did not order a reelection, although he made it patently obvious
that things were wrong with the election and that there were flagrant violations
of the constitution. D.Ct.
Can’t set aside election because the results would be staggering.
If a trial court can set it aside, then nothing will be final and you can
end up with invalidated political careers.
Injunction about preventing future harms.
The backward harm—invalidating the election would be staggering.
Appeals court said that we just held in the Hamer v. Campbell case that
held we do have the power to set aside an election, but we don’t do it lightly.
Did not seek an injunction until after the election because there was
nothing to seek before the election.
A federal court can set aside a state election and enjoin the illegally elected
person from serving or taking office.
It is an irreparable injury if you can’t change it until 4 years later.
There is no legal remedy that can be sought.
Can’t give Belle the amount of money that serving as justice of the peace
would be worth.
Second objection that Georgia officials had made was that the outcome would have
been the same. Does this have any
currency? It is the entire voting
system that is broken.
What is the Ordinary supposed to do according to Georgia law?
Under Georgia procedure, the Ordinary was just going to appoint
Southwell. Georgia procedure allows
for the Ordinary to install somebody whenever an election is bogus.
Bagwell is a tough case. Always
focus on the contempt power—belongs to the court—rules on contempt place
restriction on what the judge does.
All about the judge taking action with or without the requisite process.
Negative injunction-ban Southwell.
Affirmative would be to institute a new election.
One injunction would ban Southwell from serving and the other is to force
Georgia officials to have a new non-discriminatory election.
Remedies
Notes 2/11/2009
Extradordinary remedy of an injunction which is backed up by ancillary remedy of
contempt. Used to enforce specific
performance, etc. When contempt is
used to get an out of line defendant in line, it cannot be said to be ancillary.
Mineworkers v. Bagwell:
-Hornbook treatment of regulation of contempt power.
FACTS: Long dispute between United Mine Workers and the companies which employed
them. Company entered into suit to
seek injunction which would prevent mineworkers from illegal activities.
Plaintiff detailed violation of law that they wanted enjoined: I.e.
obstructing ingress/egress to the company, violent outbursts, picketing with an
excessive amount of people. Angry
workers would assault company workers and they damaged company property, etc.
Trial court granted the injunction, banning those activities.
Plaintiff, who benefits brings to the court’s attention that the
injunction has been violated.
Plaintiff moves the court to enforce the injunction.
If there is cause demonstrated in the moving papers the court will then
order the defendant to show cause why defendant shouldn’t be held in contempt—so
it gives the defendant notice to be heard.
The court held a hearing and found in the contempt hearing that the mine workers
had committed 72 violations, and the judge criminally fined the union 640k and
set up a fine and fee schedule for future violations.
It’s not the schedule that they complain, but
it is the procedure at issue.
Judge said that I will fine you 100k for every violent instance of
violating the injunction and 20k for non-violent instance.
There are 7 subsequent hearings conducted over several months and each hearing
was a day or two long and in these hearings the trial court found 400 separate
violations of the injunction, many of them violent.
The court levied 64 million in fines against the mineworkers.
12 million was to be paid to the companies, and the rest to the counties.
The hearings that were conducted were, held before a trial judge who allowed
discovery, cross examination, introduction of evidence, and proof had to be
demonstrated beyond a reasonable doubt,
however the request by the unions for the jury trial to determine whether they
violated the injunction was denied by the trial judge.
So we have an inconsistent conclusion by the trial judge.
Criminal standard of proof would apply, but not criminal application of
right to a jury trial. The case
settles. The companies and the
union decide not to take this any further and they agree to vacate all the fines
and the party join a motion to dismiss the case of which the mediator signs off
on. And so the parties mutual
motion to dismiss the case is presented to the trial judge, who grants the
motion, vacates the 12 million dollars, but assigns Bagwell to go collect the 52
million from the union. Trial judge
not bound by the parties settle of the case.
But it seems odd because the dispute is over labor practices and it seems
to be over—so injunctions dissolved?
Well they are dissolved too, except for the money owed to the county.
But it seems natural to be bound because they have settled.
From that, the union appealed.
And even the company doesn’t care about the 52 million—it’s payable to
the state.
The union appeals. Up to the mid
level court of appeals the case goes.
VA Ct. of App. Reversed the court trial court.
The Bagwell appeals and high court of VA overturns, and then the United
Mine Workers take it up to the Supreme Court on appeal.
The Supreme Court reverses and says that this was a criminal contempt case and
as a criminal contempt case it would have to be dressed up with criminal
procedures and the procedures used were not criminal—therefore, we reverse.
You can’t have criminal contempt
without criminal protections.
The questions are what made the 52
million dollars a part of a criminal case against the union.
How do we know the difference between civil contempt and criminal
contempt?
Must analyze what the judge was doing.
3 types of contempt:
1. criminal
2. civil coercive
3. civil compensatory—easiest to identify, you have a hearing as to how the
defendant who violated the injunction caused economic harm to the plaintiff.
You would assess damages as you would in any tort case.
Nature of hearing is demonstrated by two
features—was there a finding or hearing on damages and second, who did the money
go to. This is the only proceeding
in which the money ordered to be paid is actually paid to the civil plaintiff.
As Laycock notes, damages are inadequate, but they are not useless.
Once the defendant who had an equitable remedy levied against him shows
himself to be a bad apple, the court should use the contempt power any lawful
way possible to get the defendant to play ball and if the defendant refuses to
abide by the injunction, the judge still must come up with a way to make the
defendant pay and as long as the plaintiff can demonstrate damages, civil
compensation is important. Proof
standard is more difficult than normal K damages case, it’s clear and convincing
evidentiary standard.
Legal remedy requires a jury trial, equitable do not.
Some states, like CA don’t allow civil compensatory—they think it is an end run
around a right to a jury trial.
|
Criminal |
Civil Coercive |
Civil Compensatory |
|
Payable to government |
Benefit of plaintiff, money goes to the government. |
1. hearing on damages |
|
|
|
2. Money to plaintiff |
|
|
|
3. Must prove by clear and convincing evidence—that injunction was
violated and that there were damages (see recording) |
|
|
|
CA does not recognize this |
Paragraph C at the bottom of 780: Neither party has suggested that the
challenged fines are compensatory.
So two remaining are civil coercive and criminal sanctions.
When the money goes to the government, you know it is not going to the
plaintiff.
Differences between civil coercive on one hand and criminal coercive on the
other? Here the difference is in
procedures that would make the contempt lawfully sanctioned.
In a criminal case, whether it be contempt or any other type of criminal case,
criminal protections are attached, but what protections you get depend on what
type of case.
Petty: no attorney and no jury. How
do you know for purposes for right of counsel whether a case is petty?
It’s petty if the case is a misdemeanor and no jail (meaning that no jail
is imposed). Also applies in the
trial by jury right. Where there is
legislation where there is greater than 6 months authorized.
Bloom v. Illionois—where most of these laws arise out of.
There was no legislation, guy was sentenced to greater than 6 months.
Triggered not by fact of incarceration, but rather the possibility of
greater than 6 months in incarceration.
Does not hinge on terms of felony or misdemeanor.
It just turns on whether the legislature has provided authorization for
greater than 6 months in jail.
Legislative authorization of greater than 6 months in jail gives you a right to
an attorney.
In this case, we didn’t have incarceration.
At some point we are told, cases become serious when the criminal fine
gets high enough. A misdemeanor
case where there is no jail will never trigger the right to counsel.
But a case where there is a huge fine CAN trigger a trial by jury.
Civil coercive fine, there is no upper limit.
You don’t get a right to a trial by jury, no matter how high the fine is.
With actual criminal fines, Congress has said $5,000 criminal fine vs. and
individual and $10,000 vs. an entity would trigger the right to trial by jury.
This is controversial however—some courts (see below) have said that these
amounts are too low.
Soderno
case—10k imposed on an individual does not grant a trial by jury—debatable if
right is triggered by arbitrary amounts.
If the question is what point to criminal fines, where no incarceration
is being authorized or sought, then Congress has set the limit at $5,000 and
$10,000. 7th circuit
says that these amounts are too low and that they would need to be higher to
trigger a trial by jury.
Some argue that the amount of money depends on what the defendant can afford.
Fines can trigger a right to a trial by jury, but it is not clear when.
In the Criminal contempt sanction— it can be incarcerative or monetary and it
really has not to do with whether it is incarcerated or monetary—it has to do
with the judge’s intention. Is the
judge imposing a criminal punishment for an already completed act, or is it get
compliance out of somebody for coercion.
Court says that in terms of incarceration, no purge opportunity equals criminal
contempt. Even something as little
as 50 dollars if no opportunity to avoid it or reduce it, it would be a criminal
contempt charge and all rights that attach to a criminal procedure.
If no opportunity to avoid or reduce $50 dollars would be a criminal
charge.
The only way a criminal sanction can be levied against you in terms of
incarceration or money would be if criminal protections were granted.
If I said pay 50 dollars to the state—if it is for an already completed act and
there is no opportunity to avoid or reduce the sanction, then it is criminal.
But finding out if you can purge something is difficult.
If you can purge the sanction, then it is not a criminal sanction.
If it is for an already completed act and there is no opportunity to
avoid the sanction, then it is criminal.
Figuring out what allows you to purge is central.
Typical purgeable offense: pay alimony, make the conveyance, deliver the keys to
the safety deposit box. No ongoing
judicial supervision of the conduct.
In this case the judge is taking over union conduct—telling them all
these things that they can’t do and it is supervised for 6 months.
That is not exactly like saying pay alimony (which is easily done).
Purgeable is a characteristic of civil coercive contempt. The term purge
can’t be understood in isolation, the term purge goes with discrete.
Criminal no purge opportunity goes with non discrete.
In order to say that the judicial order is purgeable you have to supervise a
very narrow range of conduct so that compliance is easy and finding out whether
compliance has occurred is easy.
Scalia: the modern contempt has grown.
Detailed conduct become these sort of obey the law provisions, they are
not simple to understand or comply with.
Detailed code of conduct
Summary contempt = no process.
Judge just lets you have it with no process at all.
The only time you can have summary contempt is if:
1. it is prompt
2. it is direct
-no fact finding, means in the presence of the judge
3. if it is criminal, it has to be minor/petty
If you have even limited fact finding—then it is not summary.
I.e. if a judge asks you, “did you pay the alimony?”
And you say no, then that is not really summary.
You can have summary criminal contempt, but it has to be minor.
Relatively low crime and if it is incarceratory, it must be brief.
This is surprising—you can have criminal summary contempt, it just has to
be low stakes.
Indirect contempt you need notice and opportunity to be heard is enough. In the
case at hand (International Mine) the judge combines criminal and civil.
There is nothing wrong with requiring too much proof, but the union is
worried about the fact that they didn’t get a jury trial.
So we have to say both criminal and civil deal with incarceration and fines.
We can say that criminal is backwards and civil is forwards and the
criminal is punitive and civil is remedial and the criminal is prohibitory and
civil is affirmative…BUT we know the court is not fond of these labels.
They are trying to figure out whether what the judge has done is
sanctioned the from already completed act, or oppositely if the judge has tried
to coerced the defendant.
Who handles a civil contempt action for the plaintiff?
The plaintiff does in her own name.
Have precedent cases to compare it to.
U.S. v. United Mine Workers case a 1947 case.
Involving the same union.
Bottom of 778, you can see how the court goes into some specific problems.
The United States v Unites Mine Workers involving the same union.
Bottom paragraph, which is a spill over paragraph—criminal if there is no
purge opportunity. For every day
that you don’t pay alimony deliver the deed, or pay the deed.
Is that discrete? Easily
understood and obeyed? Is it
purgeable, yes? What happens to the
100 dollars if you pay on the 8th day?
You’ve lost it. Avoidable,
so not a criminal penalty.
Avoidable in a sense that tt was announced in advanced, command was discrete and
required no complex fact finding.
Original mine workers case U.S. v. United Mine Workers imposed a fine of
3.5 million for strike activity.
Finding find was criminal and excessive, court reduced the fine to a flat
$700,000. Excessive because it did
not have the right procedures, or because it was an excessive fine.
2.8 million was civil coercive, but you can avoid by issuing notices—with
timely compliance you can avoid the thing altogether.
Don’t be confused by the size of the fine, not converted to criminal
contempt on size. Size only matters
if it is punitive, non purgeable, non discrete, then it can trigger criminal
procedure. This is an enormous
fine, but no spectra of criminal procedure invoked because it is civil coercive.
Requires no complex fact-finding, not conduct that governs a wide range
of activities.
Coercive imprisonment and suspended fines.
1994-we think this contempt sanction is different. Old Mine Workers case as 50
years ago…
Ginsburg Concurrence:
1st point—it can’t be made civil coercive just because the fines
assessed are set up in advance, because the criminal code sets this up in
advance whether it is purgeable or not.
2nd: with civil plaintiff removed from the scene through the
settlement, join motion to dismiss the case dissolve injunction, etc.
Bagwell collecting the 52 million dollars will not benefit the plaintiff.
Civil contempt is said to be for the benefit of the plaintiff.
But the plaintiff doesn’t even want the money.
Scalia’s point—mandatory injunctions usually required a single simple act…
Message of Bagwell: purgeable/discrete enough to qualify as an order which can
be easily obeyed and adjudicated.
That is the teaching of Bagwell—the term purgeable is informed by the presence
or absence of a discrete or complex underlying decree—the more complex the
decree the more the adjudication must be treated in accords with a criminal
process. Is the order discrete
enough to be adjudicated with simple modes/notice and opportunities.
Complexity of the underlying decree.
That fee schedule could only be adjudicated in a full blown criminal case
because the underlying decree was not discrete enough to be litigated with
simple notice and opportunities.
Exams—assertion and authority.
Specifically alluding to facts.
Pretty good exams tend to read like hornbooks.
You know the rule and cite them, but it is pretty decoupled from the
question. The people who nail it
can see how to answer it in light of marshalling the facts.
Rely on mastery of authority.
Specifically allude to facts.
Space is limited—character limitations.