Do not rely on what's below. See binder for hand-written notes. This is the rough draft of the brief only.
US Naval Institute v. Charter Communications
US Ct. of Appeals, 2nd circuit, 1991.
936 Fd 692
Procedural history: P=Naval
D=Berkley (Charter owns?)
From the S Ct, P wants "fashioning of relief in favor of P for BOC regarding a paperback edition of The Hunt for Red October.
-2nd time in front of US S Ct
-1st time: S Ct awarded $35,380.50 in damages and $7,760.12 in profits wrongly received by D
-S Ct remanded for entry of judgment, giving P appropriate relief
-D now appeals for more profits
-P cross-appeals as a whole (appeals both profit and damages awards)
Facts:
-P was given rights to book's copyright
-Enters licensing agreement w/ P, Sept. 1984 to allow to publish paperback edition NOT sooner than Oct. 1985
-P sends editions to retail outlets too soon (mid Sept) putting outlets in postion to sell by end of Sept.
-As a result, sales started Sept. 15, 1985. So successful, book was on best seller list by end Sept.
-P. started this suit when it learned of P's plans for early shipment and sought (but failed) to get an injunction to stop the early sale
*Basis of judge's decision= found defendant did not BOC b/c it was entitled, according to industry custom, to ship prior to the agreed pub. Date
-On the remand, P sought all of D's profits from pre-October sales of book (citing copyright infringement), est. to be worth $724,300.
*D. said no way to copyright infringement said at very most, P had a breach of contract. D also said profit figure was inflated.
-DC judge said P gets:
1. Damages for copyright infringement for actual damages suffered
2. Amount of profit D earned that is attributable to the infringement
-Actual damages were calculated as what P would have earned (prior to the paperback, P's hardcover was the only copy to buy). But there was a dip in the hardcover book market from 3/85 to 8/85 and the court used the average sales as a predictorà$35,380.50 figure
-"Attributable to the infringement" amount was calculated by profits that resulted from sales to ppl. who would not have bought the hardcover edition in Septà$7,760.12 figure
Issue:
Breach of contract or Infringement of Copyright and amount of damages for both
Rules:
Ct. awards the amound of D's profits to P as loss when that figure reflects the actual loss. Here, D's profits greatly exceed P's loss, no tort was committed. Punitive damages are not allowed in the law of contract damages.
*(Contract law is compensatory, not punitive—re: Restatement of Contracts, sect. 356 comment A… comment B: "unefforceability of imposing huge amount in damages (as a penalty?")
*Unless a tort exists, punitive damages are not recoverable under contract law
Analysis:
-In assessing how actual damages figure was calculated, S Ct uses "clearly erroneous" std. of review and find against P's contentions (1st ½ September sales instead)
-S. Ct concludes early shipment did haven an effect on hardcover sales based on end-of-year figures
-S Ct agrees the DC was correct in using Aug sales and also agrees that in terms of damages, ct. should err on side favorable to injured party. Further, D did not provide evidence in the record to prove that sale of books is spread out evenly over the month. (D even admits the industry sales unpredictability in its brief)…S Ct cannot DC's calculation was erroneous.
Conclusion:
P is not entitled to profits (infringement)—original holding reversed. P. is entitled to damages ($35K figure)
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Economics of Remedies: Sullivan v. O'Connor
Do not rely on what's below. See binder for hand-written notes. This is the rough draft of the brief only.
Sullivan v. O'Connor
Supreme Ct. of Mass., 1973
363 Mass. 579, 296 NE 2d 183
Procedural history:
P=patient
D=doctor
-P awarded $13,500 for BOC regarding P's nose
-P's declaration against D consisted of 2 counts
1. contract to make beautiful unfulfilled
2. negligence (conventional medical malpractice)
-D denies both
-Tried by jury
Who is objecting to what:
Defendant says judge erred in allowing the jury to take into account anything but the P's out of pocket expenses.
D also objects to the judge's refusal of his request for a general charge to that effect—specifically, the judge's refusal of a charge that the P could not collect $$ pain and suffering connected with the 3rd operation (judge let 3rd operation in) or for disfigurement and associated mental distress.
Plaintiff objects to the judge's refusal of her request to collect her "loss" by being made unattractive—the difference in value of a pretty nose and an ugly nose (post-op nose) àS Ct overrules P's exceptions… WHAT DOES THIS MEAN???
Facts:
-P professional entertainer
-Agreement was as P put it in declaration (both sides agree)
-Inoperable to correct
-P did not demonstrate to jury that P lost job due to surgery
-P agreed $622.65 in contract for D's fee and hospital expenses
-3 hospitalizations total for P (only two were stipulated as part of the original agreement
Issues:
Is the arrangement between P and D as enforceable as a commercial contract?
Rules:
-According to DC judge, P could collect her out-of-pocket expenses for all operations
-Also could collect damages flowing directly from D's breach of promise
-P could collect pain and suffering for 3rd surgery but not first two
-No proof any lost wages of P so can't be in damages calculus
-"Middle of the Road" courts have historically allowed similar actions involving medicine to be brought forth based on alleged contracts but require clear proof of the breach. Juries are instructed of this as well as the degree of complexity of the operation to weigh in on their decision.
-In commercial BOCs, P gets compensatory damages or restitution damages
-Usual expectancy formula (see damage and four kinds of assessments): difference in value of good or perfect (nose, hand, whatever) and the value of the (nose..ditto) after the operation
-formula also applies if operations had neither worsened or improved, but $ value would be less
-Absence of negligence and malice (acting in good faith) is NOT a defense for BOC
-Other state laws suggest the concept of expectancy is how the ct wants to treat these cases (patient-physician cases)
(expectancy: when the individual hopes to receive something but has no founded assurance of possession)
-Legal article by Fuller and Perdue: Expectancy holds up strongest when promises are made in a business context and become weaker when the context shifts to non-commercial transactions
Analysis:
-Pain and suffering is OUT because P would be suffering even if surgery was a suggest
-Third surgery is IN b/c if doctor had done what he said he would
-NY has more relaxed laws a/b collecting damages in these kinds of cases when "special" (express) terms were stated in the agreement—i.e. specific results, effect certain cures, etc. Allows for both expenses to be covered as well as any direct detriment felt b/c of the procedure (proximity and forseeability are important)
Restitution seems too meager in these kinds of cases, but expectancy recovery may be too excessive.
Application of the reliance measure to the present facts could work, but we (the ct) have never done it before.
-The use of the reliance interest as a base for damages of pain and suffering found NOT to be compensable in BOC in other holdings
-D supports this idea (duh)
-Psychological injury was not fairly foreseeable by D as a probable consequence of BOC in most commercial transactions. But, it is foreseeable here (subject matter of the contract does matter)
NY case says suffering (distress as a result of BOC beyond what was envisioned by treatment as agreed , should be compensable on same grounds as worsening of patient's condition b/c of breach.
Logic: suffering is worthless if treatment fails
Conclusion:
D's exceptions fail. P gets to get $$ for her worsening condition. These were compensable under either expectancy or reliance.
Notes from class:
Look at three different ways of looking at damages:
- Expectation (assign damages as what P wanted)
- Reliance (assign damages as what it would take to return P to original form)
- Restitution (compensation equal to what D made/gained)
In Sullivan, cts weighed in each damage assessment. Here, restitution seemed too small (just the doctor's fees being reimbursed). Expectation value of pretty nose from the nose she has now. Cost of third surgery and pain back to P only) For reliance, P pays no fees, costs of surgery and pain and suffering for all three surgeries… Like this all never happened.
Result: P gets pain and suffering for third surgery. P gets difference in value between original nose and deformed nose and the expense of all three surgeries.
In Sullivan, the trial court was uncomfortable because this case "sounds in tort" – not in contracts. This court did not want to make precedent. Does not want to bound by its own decisions in future cases à "bad facts make bad law" Ct does not want future cases re: botched plastic surgery.
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Notes
The Meaning of Enforce
contract- a promise (or set of promises) that the law will enforce or at least recognize a duty in some way and gives a remedy… promotes stability in the market place
UCC definition: the total legal obligation which results from the parties' agreement
Cotton cases of 1973: Cotton value shot up and the farmers did not want to make good on their forward contracts (previously established price points) because of the significant price difference ($.30 to $.80). All of the farmers lost the suit. [the K was enforced by the cts]
The law enforces contracts.
Two fundamental assumptions when the law attempts to enforce something.
- Law strives to relieve the promises of what was lost ("redress the breach" via a "remedy") and not punish the defendant "just 'cause"
- Relief granted to the aggrieved party should generally protect promisee's expectation of what they (expected) when they entered the contract in the first place [where the promisse would have been had the K not been breached]
REMEDIES:
Three interests of the P that are used in the assessment of what is/how much damages should be awarded.
- Expectation interest/loss of bargain
- Reliance interest-interest created based on reliance on contract or promise.
Includes: *benefit of bargain
*lost profit
*cost of cover
3. Restitutionary interest
Restatement (Second) of Contracts- (R2C)- published by the American Law Institute (ALI) which is a Philly-based group of judges, lawyers, scholars and other experts in law
R2C attempts to restate the rules of Common Law of Contracts. It generalizes rules of the majority although each state has its own rules, technically.
"Restatement" is not the law but most states have adopted significant portions of it.
-It is persuasive precedent
Uniform Commerical Code (UCC) was also drafted by the ALI and the NCC (check on this) on Uniform State Laws
-Designed to standardize law governing commercial transactions.
-Article 2 = Sales Contracts for the sale of goods. It's the law in 49 states including Idaho. (LA is the only one out)
UCC covers sales. Common law cover services.
Contract law is "private law." Private ordering.
Why should the law enforce contracts?
- Fx of markets for goods and services ("chain of the economy")
- Promote certainty in commercial transactions involving financial risks
-hedges/manages risks… Think insurance policies (lendor relies on insurance to mitigate risk… mortgage companies require the purchase of homeowner insurance before they lend out)
3. Promote good faith and fair dealing in the community.
-element of "predictability" consumers can expect certain results in normal transactions
Elements of enforcement:
- Give something to get something (bargained for exchange)…quid pro quo
- Legal transaction—no selling things that are illegal (drugs, organs)
Hypos:
- Kidney hypo: X agrees to sell kidney to Y for $25K. This is an invalid contract. It's not legal to sell kidney so no contract can exist. It's a good bargain, yes, but it's an invalid contract.
- Seller defaults on deliver of 1 tractor out of 5 in an agreement. Will the law enforce the contract? Yes. The law will otherwise the law effectively endorses theft and fraud. "Good faith and fair dealing."
- Z agrees to build solid brick house. Z uses brick veneers instead. Enforceable? This is a service issue but specifically, an issue of materials (when hybrid problems like this comes up, ct decides which is the dominant issue). Z dominately was to build, not sell brick, therefore a services contract exists and governed by common law.
Damages:
Look at three different ways of looking at damages:
- Expectation (assign damages as what P wanted)
- Reliance (assign damages as what it would take to return P to original form)
- Restitution (compensation equal to what D made/gained)
In Sullivan, cts weighed in each damage assessment. Here, restitution seemed too small (just the doctor's fees being reimbursed). Expectation value of pretty nose from the nose she has now. Cost of third surgery and pain back to P only) For reliance, P pays no fees, costs of surgery and pain and suffering for all three surgeries… Like this all never happened.
Result: P gets pain and suffering for third surgery. P gets difference in value between original nose and deformed nose and the expense of all three surgeries.
In Sullivan, the trial court was uncomfortable because this case "sounds in tort" – not in contracts. This court did not want to make precedent. Does not want to bound by its own decisions in future cases à "bad facts make bad law" Ct does not want future cases re: botched plastic surgery.
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