1 George Mason School of Law Contracts II Reliance/Restitution/Punitives F.H. Buckley

The measure of damages  If damages are meant to compensate the innocent party for the wrong done him, what is the wrong when the other party breaches? Failure to perform: Expectation damages Inviting detrimental reliance: reliance damages 2

The measure of damages  When would the Π prefer reliance damages? 3

The measure of damages  When would the Π prefer reliance damages? Whenever these exceed the expectation award 4

The measure of damages  When would the Π prefer reliance damages? Whenever these exceed the expectation award  Limits on expectation damages Uncertainty Foreseeability Or bad bargains? 5

The measure of damages  When would the Π prefer reliance damages? Whenever these exceed the expectation award  Should the Π have the option in such cases? 6

Freund  What are the three kinds of damages that are considered? The Expectation Interest The Reliance Interest  Semble not to exceed the expectation interest, or else a windfall 7

The measure of damages  When should the Π be limited to reliance damages? 8

The measure of damages  When should the Π be limited to reliance damages? Contracts with Physicians  Hawkins v. McGee 9

The measure of damages  When should the Π be limited to reliance damages? Contracts with Physicians  Hawkins v. McGee 10

The measure of damages  When should the Π be limited to reliance damages? Contracts with Physicians  Why a different result in Sullivan v. O’Connor? 11

The measure of damages  When should the Π be limited to reliance damages? Contracts with Physicians  Hawkins v. McGee  Why a different result in Sullivan v. O’Connor? What would the two measures give?  What difference in pain and suffering claims? 12

The measure of damages  When should the Π be limited to reliance damages? Contracts with Physicians  Hawkins v. McGee  Why a different result in Sullivan v. O’Connor? What would the two measures give?  What difference in pain and suffering claims?  Is this available in commercial cases? 13

The measure of damages  When should the Π be limited to reliance damages? Contracts with Physicians  Hawkins v. McGee  Why a different result in Sullivan v. O’Connor? What would the two measures give? What would restitution give? 14

The measure of damages  Kizas v. Webster 15 Robert Stack as Eliot Ness

The measure of damages  Kizas v. Webster The FBI attracted college graduate to work as clerical staff because of the possibility of receiving preferential consideration as special agents The FBI stopped the program in 1977 because (1) they weren’t getting qualified people, and (2) the FBI wanted to institute an affirmative action program. 16

The measure of damages  Kizas v. Webster So what do you think of the takings argument? 17

The measure of damages  Kizas v. Webster So what do you think of the takings argument?  Reversed on appeal 18

The measure of damages  Kizas v. Webster So what do you think of the takings argument?  If it would succeed, what kind of damages? 19

The measure of damages  Kizas v. Webster So what do you think of the takings argument?  If it would succeed, what kind of damages? What are the problems with expectation damages? 20

The measure of damages  Kizas v. Webster So what do you think of the takings argument?  If it would succeed, what kind of damages? What are the problems with expectation damages?  Uncertainty  FBI’s right to terminate 21

The measure of damages  Kizas v. Webster So what do you think of the takings argument?  If it would succeed, what kind of damages? Do expectation damages place a ceiling on reliance damages? 22

The measure of damages  Kizas v. Webster So what do you think of the takings argument?  If it would succeed, what kind of damages? Do expectation damages place a ceiling on reliance damages?  Yes—but no proof that a bad bargain. 23

The measure of damages  Kizas v. Webster So what do you think of the takings argument?  If it would succeed, what kind of damages? Do expectation damages place a ceiling on reliance damages?  So what they get is the difference between what they received as FBI employees (and for a year afterwards) and what they would have received in the labor market, plus dislocation 24

Anglia v. Reed Robert Reed, The Brady Bunch

Anglia v. Reed  What was the problem with expectation damages? 26

Anglia v. Reed  What was the problem with expectation damages?  If expectation damages are speculative, could any reliance damages be awarded? 27

Anglia v. Reed  What was the problem with expectation damages?  If expectation damages are speculative, could any reliance damages be awarded? Both pre- and post-contract reliance damages awarded 28

Restitution  The forms of action: Trespass Action on the case  Negligence  Assumpsit  Quasi Contract Money had and received 29

Restitution or Unjust Enrichment  A general principle of restitution out of Quasi Contract, Money had and received, breach of fiduciary duty  Based on Δ’s unjust retention of a benefit as against Π, and not on Π’s reliance losses. 30

Restitution  Suppose that, without asking you permission, I put orange aluminum siding on your house. Can I recover the cost of doing do from you? 31

Restitution  Bailey v. West p. 5 What should the Πs have done with the horse? 32

Restitution  Bailey v. West p. 5 What should the Πs have done with the horse? Restitutionary remedies are available in spite or the absence of consent—but not if the Π is an officious intermeddler 33

Restitution  Bailey v. West p. 5 What should the Πs have done with the horse? Restitutionary remedies are available in spite or the absence of consent—but not if the Π is an officious intermeddler  If not, see Leebow at p

Restitution  Bailey v. West p. 5 What should the Πs have done with the horse? Restitutionary remedies are available in spite or the absence of consent—but not if the Π is an officious intermeddler But that problem doesn’t arise when restitution is sought as a remedy in contract 35

36 George Mason School of Law Contracts II Reliance/Restitution/Punitives F.H. Buckley

Zara Contracting 37 Tri-cities Airport, Endicott NY

Zara Contracting 38  Zara contracts with US gov’t to build an airport  Zara subcontracts the entire job to Π  Two months after Π begins work, Zara wrongfully fires it and finishes the job itself.

Zara Contracting 39  Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. What can Π recover?  Value of work done at contract rate?

Zara Contracting 40  Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. What can Π recover?  Value of work done at contract rate?  Quantum meruit for value of work done (more than contract rate as the work was harder than expected)?

Zara Contracting 41  Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. What can Π recover?  Value of work done at contract rate?  Quantum meruit for value of work done (more than contract rate as the work was harder than expected)? What was the benefit unjustly retained by Zara?

Zara Contracting 42  Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. Quantum meruit for value of work done (more than contract rate as the work was harder than expected)?  Contrast Palmer Construction at 909 Qu. Breachers vs. non-breachers

Zara Contracting 43  Two months after Π begins work, Zara wrongfully fires it and finishes the job itself. Quantum meruit for value of work done (more than contract rate as the work was harder than expected)?  Contrast Palmer Construction at 909 Qu. Breachers vs. non-breachers Britton v. Turner?

Ventura v. Titan Gov. Jesse Ventura (Ind. MN)

Ventura v. Titan  If Ventura had bargained for $X in royalties, could he recover more than this in quantum meruit? 45

Ventura v. Titan  If Ventura had bargained for $X in royalties, could he recover more than this in quantum meruit?  Is this consistent with Zara? 46

Can restitution damages exceed expectation damages?  Britton v. Turner 906 What would expectation damages amount to? 47

Can restitution damages exceed expectation damages?  Britton v. Turner What would expectation damages amount to?  Unlike Zara, Π is in breach here 48

Can restitution damages exceed expectation damages?  Britton v. Turner What would quantum meruit give the Π? 49

Can restitution damages exceed expectation damages?  Britton v. Turner What would quantum meruit give the Π? Aliter a temptation to strategic behavior by the employer? 50

Can restitution damages exceed expectation damages?  Britton v. Turner What would quantum meruit give the Π? Aliter a temptation to strategic behavior by the employer? Can the employer bargain around this? 51

Can restitution damages exceed expectation damages?  Britton v. Turner What would quantum meruit give the Π? Aliter a temptation to strategic behavior by the employer? Can the employer bargain around this?  “It is easy, if the parties so choose…” 52

Do damages undercompensate?  The American rule of costs chills meritorious actions (and encourages frivolous ones)  Small dollar claims might not be brought  But class actions remedy this  And then some? 53

Do damages undercompensate?  If they do, an argument for punitive damages? 54

Do damages undercompensate?  If they do, an argument for punitive damages?  Of course, this assumes that the U.S. has it right and the rest of the world is really very backward… 55

Do damages undercompensate?  Would compensatory damages undercompensate in Hibschman Pontiac? 56

Little GTO Little GTO, you're really lookin' fine Three deuces and a four-speed and a 389 Listen to her tachin' up now, listen to her whine C'mon and turn it on, wind it up, blow it out GTO Wa-wa, wa, wa, wa, wa, wa, (mixed with "Yeah, yeah, little GTO") Wa-wa, wa, wa, wa, wa, wa, (mixed with "Yeah, yeah, little GTO") Wa-wa wa, wa, wa, wa, wa, wa (mixed with "Ahhh, little GTO")

Do damages undercompensate?  What was the “malice, fraud, gross negligence and oppressive conduct”? As opposed to a simple breach of contract… 58

Do damages undercompensate?  What was the “malice, fraud, gross negligence and oppressive conduct”? As opposed to a simple breach of contract… Did the Π independently establish a common law tort? Or elements of fraud, malice etc mingle in the controversy 59

Do damages undercompensate?  The jury awarded punitive damages assessed at 10 times the compensatory damages When is the “first blush” rule triggered? 60

Do damages overdeter?  Suppose you’re a potential Δ. Are you made whole by a finding of no liability? 61

Do damages overdeter?  Suppose you’re a potential Δ. Are you made whole by a finding of no liability? Imagine the argument to the jury in Miller Brewing  They’re so rich, they won’t notice unless you make it hurt 62

Do damages overdeter?  Interstate Exploitation Suppose state A was permitted to impose a tax on citizens of state B… 63

The Pinto Case 922  Ford did not make a safety improvement which would have solved the problem because it did not think this cost effective, given the expected value of the accident In doing so, it valued a life as worth $2M Does this deserve punitive damages? 64

Miller Brewing  Best Beers a distributor for Miller for 30 years  Was the termination wrongful? Was Miller animated by something other than its business interests? 65

Miller Brewing  The court found that Monroe Beverage’s performance was in some ways inferior to Best Beers.  Is this relevant? 66

Miller Brewing  Is Hibschman Pontiac overturned? The need for an independent common law tort. 67

The Backlash  Kozinski in Oki America at 992  Thyssen v. Taiwan Int’l at 923  State Farm and interstate exploitation at 925  Cooter on business judgment standards 68

69 George Mason School of Law Contracts II Punitive Damages F.H. Buckley