Wed 9/5 Class 2

08/30/2012

These are all the notes for Remedies. I re-listened to

recordings of every lecture so the notes are very comprehensive (I
found it more useful to study from the notes than from an outline).
The only exceptions are class 1, which is not included here, and
class 3 (9/6) where I took notes in class but did not listen to the
recording agains. Also, this was the year of Hurricane Sandy so
there are 26 classes instead of the normal 28. But we had extended
classes so he covered pretty much everything.

Distinction b/w prices and sanctions. Sanctions are penalties for

something that is normatively prohibitied. Prices are amount of money to
pay for something. Strict liability vs. negligence.
E.g. ceiling on pollution with fine sanctioning regime
o This give signal that its normatively prohibited and we would
IDEALLY want the level of this activity to be ZERO. And there
would be a cliff in penalties. Repeat offenders would pay
MORE
E.g. Tradeable rights in pollution Pricing regime. This is different
signal. That its not normatively bad etc. We allow you to pollute as
much as you want if you pay. The ideal level is NOT ZERO.
There may be constraints on action BEYOND just the FINES or the
PRICE - Sanctioning regimes say that the conduct being regulated is
impermissible and legally, and perhaps, morally, impermissible.
People and businesses do things that are not just for material
sanctions (i.e. social sanctions etc.)
o Contrast with pollution rights regime where you can buy the
right to do something as long as you pay more.
o Sanction regime law sends a SIGNAL
E.g. Israeli daycare center people picked up their
children late MORE when they imposed a fine. Now it
didnt seem like bad behavior, but just pay a fine for it
(purchasing a service). Social stigma was more
incentive before! Same reason people keep library
books and willing to pay fine. Or park and get parking
tickets.

Prices basically signal that things are on the

market and you can just pay for it.
Some legal theorists (Laycock) think that breaking a contract is
ALWAYS wrong (or breaking the law) b/c of social norms etc its always
SANCTION BASED and breaking the law is WRONG.
Others (Holmes (contracts) Posner) just see everything as a price (e.g.
efficient breach).
We can get further than both ideas by drawing DISTINCTIONS b/w
different legal regimes that operate more in one area (price or
sanction) and some more in the other.

Hammurabi Rule 59 if you cut down a tree in another mans orchard

you pay half a minut of silver.
Purpose of making them pay money.
o Backward looking - Laycock thinks that remedies are
backward-looking process of stain removal. Restore the
plaintiff to rightful position.
Compensatory justice focus on position of
victim/plaintiff and put him in position as if the wrong
hadnt occurred.
o As opposed to corrective justice You have to put BOTH
people back in the situation they wouldve been in. scales of
justice. E.g. if you take something you have to give it BACK
so that YOU are also in same situation. (This is like unjust
enrichment etc.). Aristotilian view. This is the scales of
justice being in balance.
o Laycock etc. not focused on Aristotilian view, but putting the
PLAINTIFF back in the position he was in. Making the D pay
often puts the D in a WORSE position than he was in.
In a situation where the person chops down a tree and
has to pay 50 minots of silver, the person who had to
pay is worse off if the tree wasnt worth as much to him
as the FINE. There is a big cost.
Maybe we like this b/c we WANT RETRIBUTIVE
justice. More complicated than just corrective
justice.
o BUT sometimes we depart from compensatory justice in
some scattered pockets we measure compensation by amount
that D GAINED (unjust enrichment).

In some areas we can measure the compensation not

by what the plaintiff lost, but what the defendant gained
(i.e. unjust enrichment). This is NOT compensatory b/c
the plaintiff could end up much BETTER off (e.g. getting
the profits of the beer company). This is about putting
the DEF back in the original position rather than putting
the P back in the original position.

For P it doesnt really matter where the compensation COMES from.

But we get annoyed by that and want the D to pay! So its more than just
COMPENSATION.
We have an idea that people should only be compensated when the
harm is casued by some sort of WRONGFUL action. E.g. you would never
win b/c of economic harms you suffered b/c of free market competition.
**Compensation for harm always relies on some baseline of welfare.
Often that position is just the STATUS QUO. But not so simple.
In tort law if you run someone over but that makes them miss a
plane which crashes, you would still have to pay for the broken leg.
What is the baseline, broken leg? Or should the P pay YOU b/c you
saved his life.
BUT in contract law, there is a projected counter-factual that
takes a longer time-frame to figure out the baseline (contrast with
tort law which takes shorter time-frame and you wouldnt figure out
the counter-factual of getting on the plane.)
EXAM!!! ******What accounts for this Difference? shouldnt
the baseline be where he ended up.
What if you break LeBrons leg and now he can pursue painting and
hes a lot happier. Can you reduce your damages by off-setting the benefits
you gave him? NO. But why?
E.g. Tobacco companies say they KILLED people off earlier so even
though they cost money in Medicaid b/c of cancer, they actually saved MORE
b/c of savings in end of life care.
Tort and criminal law places a big difference on ACT or OMISSION.
Shifting baselines also mean the difference b/w drawing the line b/w
an act or an omission. The baseline makes all the difference.

E.g. youre swimming and drowning person grabs onto you. You
shrug them off and they drown. Depending on where you do the
timeframe.
E.g. it would be paternalistic to turn off the wireless connection in
classrooms. Or Levinson wants to not allow computers. The
baseline is all the difference. Is levinson paternalistic b/c he didnt
PROVIDE internet (assuming the classes didnt have wireless
already).
o The law schools control over the environment is so pervasive
and there is difficulty in distinguishing.
E.g. Georgia doesnt ENFORCE the desegregation laws against
restaurants. Georgia says that they are just doing NOTHING, they
are not ACTING (according to the state action doctrine). But if you
expand the timeframe to Georgia facilitating the property rights etc.
makes them responsible.

Underspecified principle. Depends on who we are trying to restore,

the BASELINE.
****From a forward-looking perspective none of this matters. An
economist would care. They attribute no value to punishment or corrective
remedy etc.
Instead they want to create incentives for people to behave.
Hammurabi tree owner fee is to create incentives to create a world where
people dont chop the trees down of their neighbors under this theory.
We want to create a society with less tree cutting.
But since backward looking compensatory people and forwardlooking economists agree on the situation. We dont have to choose
b/w these two results.
o BUT in HARD cases arise when these interests diverge.
What if tree cutter needed the wood to survive by burning it. And
basically the tree owner is really rich and got everything by machinations.
Cuban Rev. Court peasant stole bananas from the shop keeper. But
shop keeper has profiteered and exploited peasants. They give ALL the
wealth from shop keeper to the banana thief.
If we believe in distributive justice then this makes sense.
Our system looks at the original situation even if the original situation
is unjust e.g. Bill Gates has a lot of money and the custodian who dings
his car has nothing.
Why restore a baseline that from a DISTRBUTIVE justice
perspective is unjust.

Two different kinds of justice. Compensatory and distributive.

Compensatory or corrective justice is BLIND to distributive justice.
It PRESERVES status quo distributions.
Why do we believe in compensatory justice that from a distributive
justice perspective is just wrong. We all agree that we shouldnt
affect distribution. The context of the tort case isnt used to move
in a distributive justice direction.
o Why not allow our concerns about distributive justice trickle
in?
We do that through the legislature etc. The govt will
give money back to the custodian later.
o Maybe doing it through the TORT system is stupid. Only a
small subset of poor and rich people end up in court. Its
haphazard.
In some areas of law there is no way to distribute. E.g.
contract law.
o We can do it better through legislature or administrative
state. Another justification that economists point to is that
any time we make rich people pay more, we are imposing a
COST on the rich. And this makes rich people a smaller
incentive to GET rich.
EXAM: In the context of TORT cases, if we dont
make the custodian pay, ALSO the custodian will
have less incentives to drive safely, and then our
society will suck and well have SMALLER pie and
there will be less welfare for the state to
REDISTRIBUTE in the FIRST PLACE.
Rationalization for our system we have a more
efficient two-track system for distributive justice AND
create good incentives, AND compensate victims.

Rule 235 if a boat builder builds a boat and if its not good w/in a
year, then boat builder had to fix the boat. This is specific performance of
contract basically.
The alternative is a substitutionary remedy like damages. So that
the boat builder can give the leaky boat PLUS money
Its substitutionary in two senses: 1) money instead of the thing
you contracted for AND 2) it substitutes the COURTS valuation of
the thing.
Hammurabi Rule 263/265 If shepard has lost ox or sheep that have
been entrusted to him, he has to replace them. But if he lied and sold them
for silver, then he has to replace them TENFOLD.

Compensatory vs. SUPER-Compensatory damages.

In first rule its a (specific) compensatory remedy
In 2nd Rule its super-compensatory

Why give money to the victim as opposed to the state etc if all we care
about is deterrence?
Well, victim would have no incentive to bring the suit in the first
place.
o BUT alternative might be that of the criminal context where
govt brings the cases.
o BUT the private party (ox owner) has the most INFORMATION
and is in best position to report the loss rather than the govt
So why do we involve govt in criminal or regulatory
cases.
B/c private parties dont have an incentive. BUT
we can give them an incentive (whistleblower)

Rule 265 What is the purpose of super-compensatory damages e.g. if

someone just sells your ox instead of doing what he was supposed to he has
to pay 10x. The idea is the retributive mode.
But shouldnt the additional 9 oxen go to hamurabi or to the poor?
o This might be a BAD idea, b/c the owner may want the ox to
get stolen (i.e. moral hazard. Like banks who take risks and
are bailed out by govt if they lose money).
o ***If ox thieves are hard to catch, then maybe ox owners
end up losing 10 oxen for every thief that gets caught.
E.g. insurance has a moral hazard e.g. you cant insure your life for
10x what its worth. They actually insure at smaller amount so people will
be incentivized.
How to prevent?
o Deductible puts insured on the hook at the start
o Exclusions which are contractual rules for the way the insured
has to behave. (e.g. you have to have a smoke detector)
Landlords their tenants have moral hazard to destroy property.
Solutions (and w/ rental cars) require precautions and
deductibles/security deposits.
Maybe this moral hazard problem is the reason we dont give people
damages for every crime they suffer.

If its hard to catch a certain kind of criminal (e.g. horse thief or

poisoner) needs to pay a more severe penalty. That person pays for
everyone else. E.g. horse thief gets hanged. Poisoner boiled in oil. That
way there is the same amount of liability for the amount of wrong. AND
from compensatory perspective, when the owner gets 10 oxen when he lost
10 over time It evens out on the LARGE SCALE.
*****But what if every thief is caught. Is there some justification for
bigger penalty from forward looking perspective. Is there some reason for
10x?
Not from compensatory justice perspective.
If the thief only has to pay the market price of the thing, he will
steal and hopefully he wont get caught and worst case he pays the
price.
o At the very least youre indifferent. The whole world is a
store w/ market price.
Shouldnt we say that its efficient theft? Hes
demonstrated that he values it more than market price
by taking the risk.
WE ACTUALLY DONT KNOW IF ITS EFFICIENT
THEFT b/c the Seller DIDNT SELL. So maybe he
TOO values it more than market price!!
So the way to ensure that its efficient is to
channel people into voluntary transactions.
Negligence liability vs. strict liability.
E.g. If negligence requires obtaining a sheep-dog to help take care of
the sheep. A dog costs 20 and sheep costs 100 and having a dog reduced
the chances of loss of sheep by 30%
Expected cost of no dog = 50 b/c of expected value of paying for
the sheep b/c of negligence
Dog = 20 (for dog) + .2(0) = 20
Even if damages for the loss of the sheep is only the value (i.e.
50), then its still worth it to get the dog.
o This creates a big incentive in a negligence regime. This is
b/c there is a huge difference (DIDNT GET THIS)
Negligence cliff depends more on where the
negligence level is set, then the amount you have to
pay when you ARE negligent, b/c if you pay the amount
required to take the precaution, you dont have to pay
any of the damages!
Strict Liability shepherd liable no matter what if he loses the sheep

With full compensatory damages. With no dog the expected

payment is 50 but with dog 40 b/c of the reduction in chance of
sheep eaten
o BUT when we have sub-compensatory damages (i.e. not
100%) then while in the neg regime it was still worth it to get
the dog, here the shepherd will NOT get the dog. SO from
Hammurabis perspective, the shepherd wont do what we
want him to do.
Why does Hammurabi and we use criminal punishments instead of
monetary damages or tort liability
To many economists we can extract retribution and deterrence in
the form of socially useful revenue in form of cash
Why hire someone to whip criminals?
Well most criminals are poor and cant pay money as retribution.
o E.g. Hammurabis first resort when stealing is to pay a big
fine...but if you dont have money you are just put to death.
Is there any other reason to just lock people up besides that theyre
too poor to pay?
o We dont want people to just pay a price to commit a crime.
o We may like to have a toolkit of punishments unavailable in
other areas of law to send a signal of moral repugnance etc.
Hammurabi regulates the maintenance of dykes by imposing a fine.
Regulation vs. Tort. Hammurabi chooses tort.
Advantage of tort is that legal system only has to intervene only
when something goes wrong. He would have to invest in inspectors
etc. to inspect all the dykes. But tort is cheaper.
Regulation vs. Tort
o Public enforcement vs. private enforcement
o Ex ante vs. ex post
Why switch to regulation and ex ante control?
Well, there would be an under-deterrence problem b/c no one
would be able to pay the huge tort cost after (e.g. of a plane
crash).
But with small regulatory fines, we can spread the risk and make
them do things to avoid a small fine that they WOULD have to pay
and are not judgment proof against.
Maybe eye for eye is good b/c instead of people actually taking eye,
they will bargain for a price that the wrongdoer pays in the shadow of what
the penalty WOULD be if they dont reach an agreement.

Create incentives with rewards vs. imposing penalties

Tort law makes people pay penalty when they are negligent
Criminal law also imposes penalties
o Why the negativity?
Rewards would actually solve the judgment proof
method. It would eliminate need of prisons etc.
Why wouldnt world be a better place with rewards rather than
remedies (e.g. minor league baseball tickets) no judgment proof problems.
Lottery system can give rewards. And you dont have to reward
everyone to incentivize everyone.
Why are we so attached to penalties and not rewards?
Its not b/c of the focus on
Penalties may send a MESSAGE that the baseline expectation is to
comply with the law. So if you dont then youre not good.

**transaction costs legal systems will go toward the group which

is smaller (usually the law BREAKERS). If most people BROKE the
law, then the rewards systems would be better.
o The same strategy of punishing the one person you catch a
LOT to make up for the ones you dont catch can ALSO be
applied to the REWARDS system. SO the number you have to
transact with doesnt have to be the same as the size of the
group. You could just interact w/ a smaller subset and
penalize or reward in relation to the number there are.
o E.g. Taipei residents given lottery tickets for picking up shit.
Stokholm rewarded drivers for driving the speed limit.
Camera.
BUT problem is you might incentivize dogs
shitting
o Transaction costs focus on the smaller group doesnt
really explain why we prefer penalties.

***Penalties may be just more effective than rewards b/c people

dont want to lose what they ALREADY have rather than NOT gain what they
dont have.
There is no real consensus some believe in EDUCATION that
penalizing is demoralizing while rewards may have spillover halo
effect. But its not really conclusive.

E.g. fighter pilot penalty or reward based on how good rewards are
penalties were more effective. Flaw in this study is that the
penalty goes to an especially BAD landing so next landing is easier
to be BETTER. Whereas when you reward for good the likely next
landing is closer to the MEAN which is WORSE!!
o Same thing applies to the Sports Illustrated jinx just
regression to mean. This is more likely than causal theories
of overconfidence or cracking under pressure.
o E.g. educated women who marry dumber men, its just b/c
more people are stupider.
o E.g. people who go to therapy get better well they are
depressed and they would revert to mean no matter what.

***If the only issue was that penalty was double the effectiveness of
rewards, you could just DOUBLE the reward and then get to the same place!
So is there something else??
Maybe its an expressive message not just about a specific kind of
conduct or just emphasizing that only state has the power to penalize
whereas any rich person could reward.
Problem with rewards is also that people will just try to get them. E.g.
drive around w/ seatbelts on trying to get pictures of themselves
and get lottery tickets which then makes more drivers and more
dangerous roads!
E.g. if you pay people to stop bothering you in the park, then
people will bother you just to get a reward.
****BUT with a reward system for beach rescues would be better
b/c a penalty system might discourage people from going to the
beach so there are fewer potential rescuers (b/c people are afraid
to be blamed for not rescuing. Also could encourage people
incapable of helping to go get themselves killed)
**VERY CONTEXTUAL whether there are secondary bad effects.
BACK to the PUZZLEMENT over whether rewards or penalties are
better and well come back to it and END OF COURSE.

What to do about Compensatory Damages?

Compensatory damages are the norm generally. we will later try to
explain where there are departures from these norms and WHY.

In theory compensatory damages are the price that would leave the
plaintiff INDIFFERENT to the loss b/c this is what would bring him up to his
baseline level of happiness.
IN PRACTICE: Dominant compensatory damages rule is that def
pays plaintiff the market value of what was lost. Market value often
works pretty well as a proxy for level of damages where plaintiff
would be indifferent.
o E.g. if someone values his NY Times at market price, then
getting paid that amount when it gets ruined would be fine
under strict liability or neg standard.
****But often people who own stuff place a higher
subjective value on things. If it were lower than the
market value you wouldnt have bought it.
In other words, Most consumers value it MORE
than the price except the last buyer (the
marginal consumer)
The buyers enjoy some consumer surplus.
Sellers try to recapture that surplus. They
try to discriminate based on groups of
buyers.
o E.g. airline tickets and hotel tickets for
business or leisure travelers (e.g.
staying over Saturday night).
You can charge business
travelers more b/c of agency
etc. and that they have more
surplus.
*** More important Thaylers idea that Ownership
ITSELF actually adds to the perceived value.
ENDOWMENT EFFECT.
E.g. you dont sell a 200 dollar bottle of
wine when you get it as a gift, you drink it.
Rationally you should sell it b/c you
wouldnt pay 200 dollars for it. But thats
not how it works even though you wouldnt
have BOUGHT it.
**Partially rational explanation owning an
entitlement makes you richer so then you
have a higher budget so you can afford
even the thing that was given to you.

Willingness to pay is different from ABILITY

to pay. If you dont have the ABILITY to
pay, your lack of willingness says nothing!
This cant explain ALL of endowment effect
especially when talking about coffee mugs and
pens!
E.g. with mugs and pens, then youd expect
half the people to trade the mugs when you
told them they were a seller. Most people
dont give up the mug!!
o Almost DOUBLE the value is accorded
to the mug b/c of the endowment
effect! (half the people youd expect
to trade DONT)

People value what they have more than the opportunity cost of not
selling. They dont sell. Asymmetry.
Why is this?
o Hard-wired?
Chimps who like peanut butter more than popsicles
wont trade the popsicle for peanut butter
**Is it b/c of RISK of not actually GETTING the
thing you are trading for.
This may be hard-wired and express itself in
our endowment effect. Before contract law
etc. Psychological attachment to the bird
in hand
Maybe its a habit that we get into to say that other
peoples stuff sucks so it makes us feel good.
***Its also b/c things have different meanings to
people. E.g. a house is not just a commodity to people
ALL the time (its a home etc.).
People resist commodification of the house.
People think of it SOMETIMES as a commodity.
But when its not, people want to think of it as a
HOME.
No endowment effect when you are given a
token that is said to be a commodity that you
have an exchange orientation to.

E.g. people dont want to accept ANY price for some

marginal increase in chance of cancer for their kids.
They dont want to think of buying and selling their kids
lives.
Same thing as the coffee mug. You just want it.
You dont want to sell it!
BUT some people like Finance people think of things as
commodities and are interested in exchanging.

*******People assess welfare not in ABSOLUTE terms but in

CHANGES from some baseline. People care about losses more than gains.
It feels worse to lose than good to gain. Endowment effect is one
manifestation of LOSS AVERSION.
People decline a bet of win of 150 vs. a loss of 100 in a coin toss
even though expected value if +25.
o MY idea: I think people dont take the bet b/c they arent
running it 100 times but only once.
Expected GAIN must be DOUBLE expected loss before most people
will take a bet. E.g. heads you win 200 and tails you LOSE 100.
Biologically maybe NOT dying is more important than an
improvement.
o Harder to pick out a happy face out of a crowd of sad faces
than a sad face out of crowd of happy faces people wired to
identify threats.
o Friendships are undermined by ONE negative interaction even
though there were so many positive interactions.
STATUS QUO BIAS!! people averse to changing b/c change can
have costs AND benefits associated with them. People conservative in that
they dont want to risk. Disadvantages loom larger eg. Changing job,
marriage, home town.
Legal implications default rule supposedly shouldnt matter (e.g.
default rule for at will vs. for cause employment).
o But default rule in contract is a type of endowment. Workers
endowed w/ for cause employment might be less willing to
bargain it away even though they arent willing to pay a huge
amount to GET it through the contracting process.
o Thayler NJ and Pennsylvania have different auto insurance
policies as default. People retain the default even though its
easy to switch. People in NJ and Penn cant actually have
different preferences.
BUT its not only loss aversion but LAZINESS. E.g.
magazine renewals.

Default rule. Maybe have it instead of opting into retirement savings

plan or opting into organ donation, then just do the socially GOOD thing as
the default b/c more people will just stay there.
Its not any more paternalistic than the other way!

Whether something codes as a gain or a loss depends on the

BASELINE you have. But baseline may be whats EXPECTED.
Cab drivers set a baseline TARGET per day. And go home early on
rainy days! When they could just work more and go home on sunny
days when leisure is better!
They are working FEWER hours when the hours are profitable and
working MORE when they are LESS profitable.
PGA golfers are more successful at making puts for PAR rather than
birdie b/c PAR AVOIDS A LOSS, rather than giving an advantage.
So course designer could increase performance by just
DECREASING the par numbers!!
o Workers tend to respond better to penalties.
o This gives people who control the baseline expectations
POWER.
Thayler people responds differently when a company says its a
surcharge as opposed to limiting a discount.
Baseline makes a difference credit card surcharge seems worse than
a discount for using cash seems good. Consumers dont want to have a
surcharge.
You can say that a tax increase is an ELIMINATION of a tax CUT.
Eliminating bonus just brings us back to the baseline!
Restaurants are starting to charge different prices for different
times of or certain days.
o E.g. people wont go to a restarurant that charges MORE on
the weekend but will go to a restaurant that charges LESS in
the weekday.
*****People have a sense of a fair or just price e.g. people on a
hot beach will be willing to pay more for a beer from a hotel than a bodega
JUST PRICE KEYED TO THE PRICE OF SUPPLY.
And consumers dont see demand based justifications for price
increases as fair e.g. higher price for snow shovels after a blizzard
vs. price increase b/c the price of shovels for the seller is more.
E.g. demand based increase in price for restaurant will be seen as
unjust.

What about tickets to theater people think its fair to do it by a

queue first come first served rather than just auction off tickets
o This wouldnt apply to admissions to law school b/c you
wouldnt base it on what people willing to pay.

Employer should structure compensation system as a PENALTY

system rather than a BONUS system. (but this brings problems of morale
etc.).

COMPENSATORY DAMAGES
What if a person values something at higher than market? Why is it
ok not to make them whole?
E.g. if person loses a NY Times copy that he values at 10 dollars
shouldnt he get 10 dollars?
Well if you get 2 dollars for the NY times that got ruined even
though its worth 10 dollars for you, you can just buy another and
get that 10 dollars of utility.
o Caveat:
Youre not as well off b/c you incur the hassle of going
and buying it.
BUT in many legal regimes you can get
incidental damages like cost of getting the
paper. Still its hard to calculate and to
prove! Plaintiffs a little worse off.
BIGGER PROBLEM: American rule of attorney fees.
No real justification as part of remedies to
have a plaintiff pay attorneys fees b/c the
def did the shitty thing to you in the first
place and now you have to pay.
What is the ADVANTAGE of the American Rule??
Litigation would never arise if people agreed what the outcome
would be. People would be better off just settling and then splitting
the cost savings.

o Litigation happens in cases where people DISAGREE over

what the outcome of litigation is going to be! No bargaining
range. American rule INCREASES settlement because it
makes more of the overall cost of litigation FIXED!! So even
if you think different things about the result, you still know
youre going to spend a lot so youre more inclined to take
these into account as opposed to an all-or-nothing British
rule system.
o E.g. Democratic Peace hypothesis One explanation is that
democracies tend to be more transparent. So we know about
their capabilities.
o ***Whether encouraging settlement is always a good isnt
always clear b/c we would have fewer instances of
PRECEDENT which makes settlement more difficult b/c we
dont know what will happen.
NO JUSTIFICATION WITHIN REMEDIES FOR THE
AMERICAN RULE. DEF IMPOSES A COST ON PLAINTIFF
SO HE WANTS TO BE COMPENSATED.
WE TRADE REMEDIES FOR PROCEDURE.
Well pretend that Compensatory damages are fully compensatory.
They are problematic when you cant go to market and find a
REPLACEMENT which would mean that market value goes out of
alignment with subjective valuation
o E.g. if you value the NY Times at 10 dollars but cant replace
it.
o Trinity Church its not bought and sold in markets!
o Valuing environmental issues. How to value the Prince
William Sound or Gulf of Mexico before and After SPILLS.
USE VALUE can say that its the market value of the
scenery or fishing you can use market proxies by
adding up the price of cruises to Alaska or how much
they sell fish for etc.
Natural resources have an EXISTENCE value people
want to save bald eagle even though they wont see
one. How to measure it??
One possibility is to measure cost of cleanup or
restoration.
***Courts and govt agencies fall back on
construction of artificial markets surveys.
Contingent Valuation how much people
would be willing to pay etc.

o This may be just expressing policy

preference.
o Also changes the amount when you
ask how much to charge Exxon or
how much you would pay
o People when endowed with the
natural resource will say no price
would be enough b/c they are
endowed and dont want to
COMMODIFY
o Also when asked how much to pay to
save 1 grizzly bears is the same as for
10. People translate that question to
how much do I like Girzzly bears

Thurs 9/13 CLASS 5

Market value as the standard rule.
What about when the think doesnt have a market value courts in
desperation turn to creating hypothetical markets
**Related set of cases where there is a market but its clearly
imperfect, so we dont trust the value.
USED GOODS
o Lemon effect. Suppose there are three levels of quality.
Good, average, or Lemon.
Buyers have harder time telling how good the car is.
Sellers have more information about the product.
Buyers therefore make decisions based on imperfect
information.
Buyer will usually be willing to pay average price b/c
they expect that it will be average.
BUT sellers of GOOD cars wont be willing to sell
to that buyer. BUT owners of LEMONS will flock to
such a market.
Knowing this, Buyers see this, so readjust
to halfway b/w average and lemon cars.
Then sellers of average cars select out of
the market.

Same as if the Prof told class they would all

get the grade that was average of all GPAs
in the course.
***When people can select out of the market for
REDISTRIBUTION, then the people who it will be
taken FROM will select out.
Why are most redistribution of wealth programs have to be
implemented at the NATIONAL level? B/c if NYC just redistributed, people
could MOVE OUT OF NYC. Cant have it work if you can select out.
E.g. coolness of nightclubs. Most cool and attractive people will
leave the bar. Clubs go through life-cycles and they have to try to
stop it.
o Slow it down by bribing cool people.
E.g. class actions where at any given rate of recovery, certain
people wouldve done better on their OWN whereas others wouldve
done worse.
o If its opt-out the people who do better would opt out and
then value of claims goes down etc. etc. as more people opt
out.
o Sometimes NOT allowing opt outs is the only way to make it
work!
These ADVERSE SELECTION PROBLEM are in INSURANCE MARKETS
at any particular premium level, probably sick people get more out of it.
Unless you can pool exactly identical risks, then you get this Lemon effect.
Insurance cos try to stratify premiums based on risk profiles.
o Other strategies to get rid of this employer provided health
insurance which forces people to be in the pool.
o E.g. All you can eat buffet most of the other customers are
large men. Lemon effect.
E.g. Employment settings fixed wage lower productivity
employees will OPT IN. e.g. at law firm w/ lock-step.
**Implication for compensatory damage is that if your USED CAR gets
fucked up in a crash, you will be under-compensated b/c the MARKET PRICE
is based on LEMONS!!!!
Why isnt Lemon effect applicable in new goods markets? B/c there
is more information about mass-produced new goods.
Laycock gives other cases where market value doesnt work well
U.S. v. 50 Acres US govt takes a citys landfill and the city replaces
it with a larger landfill that lasts much longer. So city got a much bigger
landfill out of it. City wanted compensation for the new landfill that they
built!

Sup Ct says NO b/c you only lost the small one.

Levinson: why is this case hard?
o There is talk about whether the right measure of
compensatory damages is Market Value or REPLACEMENT
COST.
Levinson: this terminology is UNHELPFUL. B/c the
choice is b/w TWO market values (market value of the
old one, and market value of the new one).
MY IDEA: but what if you can only replace with a
NEW and better one that you wouldnt have spent
money on?????
Is there any good argument for the city to get the cost
of the better landfill?
So he addresses my idea above. What if landfill
becomes more expensive b/c running out of
places and landfill sites dont come in every single
size!
But then STILL dont they get the Cadillac
landfill instead of a chevy. The smaller landfill
wouldve filled up. And then they wouldve
bought another chevy-level landfill. But now they
avoid that and they got the value.
BUT they have to pay NOW instead of waiting! At
very least they should get interest?
City could point to other reasons why it was
disadvantageous to make a long-term
commitment for a big landfill rather than
getting smaller ones for shorter times.
Conditions might change and landfill
becomes useless or inconveniently located.
**There must have been some REASON
why city hadnt upgraded to BEGIN WITH!!
****Even stronger argument maybe city had a plan
to get rid of landfills ALTOGETHER. So after 10 years
the Cadillac is worth NO MORE THAN A CHEVY to the
CITY!!
SO here it would be that city is forced to buy
something better AND that it gets no benefit from
the better thing!! This would be stronger
argument.
BUT is it really not valuable?? If they
stopped using landfills they could just use
the extra land.

o Supreme Court POINTS OUT that

there is a functioning market in
LANDFILLS which reassures them that
if the city decides not to use the
landfill it can RE-SELL the landfill.
Ebinger plumber negligently burns down the cooling tower on an
office building. Court awards what it calls REPLACEMENT costs but what we
would call market value of the new Cadillac version which is better and will
last longer.
Opposite outcome from 50 Acres.
Distinction b/w this and 50 Acres is that in Ebinger a special rule
applied which was integral part of a larger whole rule. If the lost
thing was an integral part of a larger whole you can get
replacement costs!
o So when landfill is an integral part of a larger city this
argument fails, but when water cooling tower is said to be
integral it is. WHY??
o Levinson: doesnt find the integral part rule illuminating.
Levinson: says that 2nd Circuit probably thought it was
the cousin of 50 Acres where there were no options
but a new custom cooling tower and the court doesnt
think that there is ANY WINDFALL to getting the new
cooling tower. Even though the new cooling tower
would last LONGER, the OLD ONE wouldve lasted
beyond the life of the BUILDING!! SO there is no real
advantage!
This is as if the city were only going to use the
landfill for 10 years AND there is no market for
landfill space.
This category is the forced upgrade situation.
Another recurring fact-patter which creates problems for market value
as a measure for compensatory damages.
This is a situation where someone claims that the thing lost is much
better than it appeared!!
King Fisher Marine P bought barge for 30k and two days later Def
sinks the barge. Def says he owes 30k b/c it was bought for 30k. P says
that he was going to use this barge as a dry-dock b/c it has special features
and the market value of a dry dock is 200k and that was the value to ME.
He wins! And gets market value of the dry-dock.

How are we supposed to believe that he got such a good deal on

that barge.
o Well the NEXT DAY the guy went and spent 200k on a drydock to replace it. Court was convinced.
This is the OPPOSITE of the theoretical value of saving
the bald eagle.
o This tactic will work sometimes...probably NOT

What if you are a P in this case and you REALLY did get a good deal
like this (e.g. cheap parcel of land that can be used as shake shack location).
Pennzoil says that they bought Getty which has value of 10.9B for 3B
dollars. Texaco is held liable for fucking up the merger agreement b/w
Penzoil and Getty and deprived Penzoil of 7B dollars in profit. Eventually
settle for 3B.
Penzoil calculated the value by how much it wouldve cost Penzoil to
get those barrels of oil through exploration and drilling and get the
10.9B value (not even counting the other values of Gettys assets).
The big thing was the value of Getty vs. the contract price of 3B.
Why was the deal so GOOD? And 3B was a significant bump UP
from the market value of the shares!
o And if it was worth so much why didnt Texaco and Penzoil
fight over it and bid a lot higher?
All this evidence was uncontested. They recovered the market price
of the oil. The evidence was there. They bought a Cadillac for a
chevy price.
Trinity Church Hancock Tower being built but digging of foundation
shifts the ground and cracks the stone masonry of Trinity Church. Hancock
cost the church some years of its life. Trinity puts on evidence that it lost
25% of its life in the first 100 years of existence. Then it puts on evidence
that b/c of Hancock it lost another 50%. But that leaves 25% (about 100
yrs). Trinity wants 50% of the cost to REBUILD the church anew.
Two issues.
1) How to measure the damages?
o If the church had just fallen over then the market value of the
CHURCH would be 0 b/c anyone would tear it down and build
a skyscraper.
o But there is still some value to the congregation as evidenced
by the fact that they hadnt sold it.
o Court recognizes this and calls it special purpose property
that can be valued in a different way aside from market value.

o Owner of the 99 yr lease of WTC wanted more than market

value bc he claimed the Twin Towers are special purpose
property.
Levinson: the reality is that you courts dont look
at a special purpose building and then depart from
market value. They SEE that market value isnt
working, so they call it special purpose.
o The Ceiling on what to pay them should be rebuilding the
church block by block. This would restore the subjective
value to the congregants
But maybe NOT. Maybe rebuilding it doesnt actually
restore the mojo of the church. Perfect replica
doesnt preserve it which could be a component of
subjective valuation.
But suppose that congregants would be ok with it.
o We have a floor which is the cost of the land, and the ceiling
is the replica cost.
The problem is that if we give them all the money to
COMPLETELY RESOTRE the church, they might just use
10% of the money to build a state of the art facility and
pocket the rest!!
This would over-compensate them!!
Do they really value the church at such a high
value?? OR would they be just as happy with a
state of the art replacement.
o The problem of misrepresentation is a persistent problem.
Like haggling in a market.
This can be solved by Self-Assessed Tax Valuation
Could AUDIT the self-assessed valuation but this is
just same problem as assessors.
They publicized the self-assessed tax valuation and
every 2 years and anyone can buy it etc.
E.g. King Solomon.
E.g. Admiralty rule where they insure each other for
lost cargo and people self-assess for the calculation of
how much you get COMPENSATED and how much you
will COMPENSATE
o Can Self-Assessment be applied in the Trinity Church
scenario?
Could look at the property insurance and the value they
paid for insurance.

Suppose its 20M to rebuild Trinity and land is worth 5M.

Trinity values b/w those two values. What should court
do?
Could choose an intermediate number right in
between. You wont be THAT wrong either way.
That would never happen b/c our legal system is
averse to splitting difference and doing
probabilistic calculation.
**Could order Hancock for cost of rebuilding
the church, but ONLY after Trinity rebuilds
the replacement!
BUT if Trinity only values the church at 10M,
it can bargain w/ Hancock and say if you
dont make a deal well build something for
20M, but we can settle on 15M. This forces
Trinity to give back SOME of the
exaggerated value. Its not perfect but its
better than court guessing ALL OR
NOTHING.
This outsources the bargaining By
going EYE FOR EYE, we can accomplish
a coasean result. (This is like where
we discussed bargaining in the
SHADOW of Hammurabis Eye for Eye
rule!)
E.g. Peeveehouse Farmer leases land to coal
mining company to do strip mining. But Coal
company supposed to restore the land to previous
condition.
The unrestored land has a market value of
300 dollars LESS than restored amount but
it costs 30k to restore the land.
Farmer wants 30k. The court rules that the
farmer can only get 300 dollars.
But there is another case Groves where
court allows for the restoration cost.
o ****Not surprising that it goes
both ways b/c like trinity church,
we dont know if they are telling
the truth and whether trinity
values it a 5M or 20M

In Peeveyhouse court couldve ordered

SPECIFIC PERFORMANCE. If farmer really
values land at 30k he will let the company
restore it. BUT if the farmer was
bullshitting, they will strike a bargain and
the Farmer will be forced to disgorge
some of the windfall
o We avoid the blue bus problem
where we dont want to just split
the difference. We allow the
people themselves to do it.
o Of course its possible that they might
bluff all the way to the end and the
company will actually do it.

2) How do you deal with the gap in timing b/w the tort and the time
it will fall down?

Class 6
Trinity Church problem of how to value things not bought and sold in
markets, plaintiffs exaggerating, etc.
Trinity Church also raises second issue of TIMING OF HARM
Even if we know how much its worth if it gets knocked down
immediately, should it be able to recover NOW for costs it may
sustain in a century or even NEVER. As long as its standing its
just as good so why should they get damages now?
Majority says they can collect the damages now but
o Dissent says as long as its standing it doesnt have any harm
for recovery b/c the only harm is the church actually falling
down. But harm hasnt actually materialized! Who knows
what happens. Church may sell land to developer and will
never have actually suffered the harm. Anything can happen.
o Majority conceptualizes harm or injury as having already
happened b/c they say its the STRUCTURAL DAMAGE of the
BRICKS to the church.
Can try to ANALOGIZE this case to older cases.
o E.g. Pierson v. Post applied to the Texas gas reserve case.
o One analogy: follow dissent and say the real harm is only the
church falling down on theory that if the church is still
standing there is no harm.

The harm under this theory is probabilistic b/c the

percentage has gone up that it will be destroyed.
This is NOT the same percentage as the
percentage of the building that Hancock building
destroyed.
Similar to tort liability for asbestos where there is
a RISK that workers will get sick b/c of it. So
there is a probability that they will get sick 10
years DOWN THE ROAD and they want
compensation NOW.
Calculate by EXPECTED value of their claim.
E.g. if cancer costs 100 and if there is 60%
chance they get 60.
o The HARM is temporally separated
from any real cost in the same way
that the trinity churchs harm is
temporally separated and may NEVER
ARISE if you conceptualize the HARM
in the way of the DISSENT
So the way that a court
conceptualizes the harm is
important EXAM
MAJORITY of courts give NO RECOVERY for
the HARM and will only give you money for
MEDICAL MONITORING. They wont pay
you for the HARM itself (e.g. the cancer).
Advantage of waiting is that youd only have
to pay out the people who ACTUALLY get
the recover (e.g. 60% of them).
o Also the problem is that youre
overcompensating some people and
undercompensating the ones who
actually GET cancer.
Bad matching.
Def doesnt care of course b/c
they will pay the same amount
(either 100% of damage to 60
people or 60% of damage to
100 people)
So from deterrence or
retribution is makes no
difference.

BUT from compensatory justice

perspective it doesnt make
sense.
BUT if we were really concerned
with this mismatch, we could
create a POOL that gets paid
out later (solves the
disadvantage of WAITING
for cancer to develop which
is that DEF might not be
around to pay!!)
o OR we could solve the matching problem with INSURANCE. If
court allows all the workers 60%, the INSURANCE company
could collect premiums of 60% in EXCHANGE for paying out
LATER 100% IF you get cancer. So each worker has the
chance to CONVERT their compensation BACK into perfect
matching.
This of course relies on the PERSON doing something so
if you want compensatory damages to work w/o relying
on what the PERSON themselves does, then it doesnt
work.

Why dont we have probabilistic damages for harms that DONT

happen. E.g. if you drive recklessly on W. 3rd st but DONT harm anyone, you
DONT have to pay anything even though you ENDANGERED THEIR LIVES!!
Shouldnt you have to pay for the RISK you imposed??
You have to go to jail for attempted murder!!
o So if criminal law is about retribution compensation of the
victim isnt the most important thing. BUT we still dont
punish attempt as badly so there IS some taking into account
of the compensatory idea.
In TORT though we have the idea that people who didnt get hurt
DONT need the money and the person who you DID HIT needs
FULL COMPENSATION
o Paying everyone 10% wouldnt fully compensate the person
who got hurt.
o But this COULD be solved through first party insurance? The
would be unnecessarily complex etc.
There would be a huge number of TORT plaintiffs.
High potential for FALSE CLAIMS b/c people could
say they were on W. 3rd st!

Compare this to CRIMINAL law where there is only ONE

plaintiff (govt) who stands in for everyone and the
punishments are not keyed to probabilistic harm, but to
badness of conduct which is much easier to impose
when applying this to attempt liability.

No DEEP PHILOSOPHICAL reason for not running a probabilistic tort

system based on expected harm. The reasons we DONT do it are pragmatic
reasons based on the cost of doing it.
We might say that our system does a better job of matching
(notwithstanding that we could do it through private insurance) we
might say that its better to do the matching DIRECTLY.
Back to Trinity Church
Even if it makes sense to give damages BEFORE the harm occurs,
you might say that the court nevertheless ERRED in giving Trinity
the FULL AMOUNT w/o discounting for the PROBABILITY that it
NEVER HAPPENS.
Reasoning by analogy to toxic exposure, the Trinity majority made a
mistake. It did what no court would do in the cancer situation.
***On the OTHER hand, the Majority could have in mind ANOTHER
analogy.
If a P can show that the ACTUAL harm he has was 60% chance
CAUSED by a certain D, then that P can recover 100% of
damages!!!
o So ESSENTIALLY, the PROBABILITY is on the OTHER SIDE
As long as the probability that you caused the harm is higher than
50% (preponderance of evidence), then you get 100%. BUT if P
can only show 40% chance, he gets NOTHING.
o This system is thought to be not such a big problem b/c on
average it works out even though sometimes Ds pay when
they did nothing, and sometimes D doesnt when they did it.
This is simpler system that we choose to go with.
o BUT sometimes the all or nothing approach causes problems:
e.g. every year 10 children fall off the Circle Line boats and
drown. It would be good if the circle line equipped the boats
with life preservers but the company would rather add
another seat rather than store the preserver.

They are NEGLIGENT, but whenever the parents of

drowned children sues, the circle line shows that even
having a life preserver would save a child only 40%
chance of dying. So they always get off b/c no plaintiff
can prove causation!!
But if they had the preserver at least 60% of
children would be saved!!
o Flip side of this problem is that a life preserver would save
60%. In this case the parents who sue ALWAYS WIN.

E.g. Gate Crasher paradox a RODEO 499 tickets were sold and
there are 1000 people at the rodeo. So 501 people snuck in. So under
preponderance of evidence standard the Rodeo should be able to sue EVERY
one of the people and recover the price of ALL the tickets. BUT we know
that this would never happen b/c the EVIDENCE is purely probabilistic.
Problem of TOO MUCH liability though!!
Which is a worse problem? Overcompensation of the parents, or under
compensation.
All the circle line has to do is get the LIFE PRESERVER and then itll
not be negligent EVER we want them to use life preservers and
we shouldnt worry about overcompensation in THAT CASE.
o LEVINSON: THERE IS an asymmetry in how much we should
have to worry about these two cases. We should want the
circle line to just do whats easy to prevent negligence
liability.
***BUT you can solve BOTH problems, and in particular the too little
liability problem, by going to a probabilistic model. You could make the
circle line pay 40% for EVERY kid which is the same as fully compensating
the 4 out of 10 who are their fault. This would create the correct amount of
deterrence.
Disadvantages of this approach: mismatch problem b/c 4 drowned
kids only get 40% and dont get fully compensated and the 6 who
werent the circle lines fault get overcompensated.
BUT the all-or-nothing rule is also BAD b/c we get it wrong when
NO ONE gets any recovery!! BUT at least we dont get it wrong in
EVERY CASE which we ADMIT we are doing in the probabilistic rule.
o BUT what this analysis is missing is that in the probabilistic
analysis, circle line has the incentive to just have life
preservers, and then they will NEVER be negligent and there
will be ZERO ERRONEOUS VERDICTS. So the error cost
would actually be ZERO! So maybe this is best!

Strong case for going probabilistic when there is asymmetry in

distribution of ERRORS. We worry less about when they are consistently
made to pay MORE b/c they can avoid this just by not being negligent and
having life preservers.
Brings us back to the W 3rd st discussion maybe we were too quick to
dismiss probabilistic negligence. If the probabilistic analysis WORKS, then
defs will have an incentive never to drive negligently and this will prevent
any false verdict b/c Ps will never have a reason to bring a case.
In a theoretical world there is nothing wrong w/ a probabilistic
scenario. And maybe its good b/c it gets the circle line RIGHT
when the other way doesnt
There IS a movement toward this sort of analysis.
Med Mal where you can never show greater than 50%
Courts are starting to allow for recovery of 25% chance of survival
loss b/c of med mal for the same reasons where we would like the
result of probabilistic recovery, like the circle line case.
E.g. Summers v. Tice the court cheats b/c the real result should be
NO recover from either b/c its less that 50.1% BUT the court allows
recovery. Probably wouldnt work with like 3 or 4 hunters.
E.g. Sindell - Courts will award liability based on proportion to the
MARKETSHARE for the manufacture of DES etc.
Clear that probabilistic recover would be useful in more cases than
courts usually allow them in. Its not obvious why its not better in EVERY
case.
Courts generally dont go with it but carve out some exceptions
where probabilistic recovery works.
One reason they may NOT is what Shauer says b/c courts have an
aversion to probabilistic recovery. He says that ALL evidence is
based on probability (e.g. eyewitness testimony, preponderance of
the evidence etc.).
People feel its important to do what Brandeis says that once we
have 51% we must act as if were 100% sure.
Blue Bus Case P gets hits by a bus, blue bus line and green bus line.
80% of buses are blue buses. Cant P show that its 80% chance that it was
blue bus company? Why shouldnt this be ok?

Traditional argument is that it would make the possibility of error

just TOO OBVIOUS. Shauer makes FUN of this.
o Some value of CONCEILING the way in which our judicial
system is bullshit b/c this would lessen the FAITH in our
system.
Not good from a truth perspective.
Hubble says that what if blue bus drivers are better. But Levinson
says Schauer would also want to take these things into account. Do
you still have an aversion to uses the probability in the case?
o Well it would basically make blue bus company STRICTLY
LIABLE.
Bus company may not want to be above 50% which
deprives people of service.
Nessin 24 out of 25 prisoners participated in killing of a guard. We
know that 1 of them DIDNT. But we know that each prisoner has 96%
chance of having been guilty which would be enough for beyond reasonable
doubt. What do we do? Convict ALL? Convict NONE?
Put them on the Stand and convince ourselves that were gleaning
something.
**Whatever the justification the ALL or NOTHING idea creates
problems in OTHER areas of the law.
Supppose P proves 60% probability that D was negligent and then
60% probability that Ds neg CAUSED the harm!
Does P win? Standard Jury instruction is that P must establish
EACH ELEMENT by beyond 50%. So yes.
o But the probability that D was BOTH Neg AND caused the
harm is .6 x .6 = .36 !!
P is admitted to hospital w/ heart attack and ER doctor sends him
home. Then next day still feeling bad and cardiologist gives him wrong
medicine dies.
P can only show that 40% chance that each of the Drs negligence
caused.
Argument that he should prevail is that there is 64% chance that
one of the Doctors caused it. Should P be able to recover against
Hospital if they both work for the hospital??
o IN REAL TORT LAW ALMOST CERTAINLY NO!!
What if you got invited out to dinner? But you have other shit you
want to do. But not ONE reason individually would be enough to make you
not to go to dinner. But all 3 TOGETHER add up.

Do you point to ONE reason or say that all of them add up??
o Most people just point to ONE reason!

Multiplicative Fallacy Schauer points out Linda experiments

Linda is 31, single outspoken and very bright, majored in philosophy, was
into social justice etc.
Is she bank teller, bank teller and active feminist.
85-90% of people choose answer 2. EVEN THOUGH ITS CLEARLY
WRONG b/c there MUST be a smaller proability of being both a
bank teller AND a feminist than JUST being a bank teller.
Called the CONJUNCTIVE fallacy
o Representativeness heuristic/fallacy people approach this as
which is more representative of the PROTOTYPE of this person
than the probability.
E.g. if you ask someone if someone had a Phd or Not
and was reading the New Yorker, people say Phd.
This defeats LOGIC.
No surprise that it defeats ideas like base rates
of how many Phds etc. people look at evidence
from their own TWO EYES.
No surprise the court wants to rely on
eyewitness evidence rather than the
background probability of the number of
buses in the area.
E.g. Linda is argumentative and likes to follow rules. Even if you tell
people that she was selected from random pool and much more likely that
shes a waitress, people still think shes probably a lawyer.
People think that the evidence they have now about this PERSON
herself allows them to decide she is probably a lawyer.
E.g. Green Cab 85% of taxis are green. But P is 80% sure that its
Blue and sues blue cab company. What are the odds that she was hit by
Blue cab. People agree that theres more than 50% chance that it was blue
at least!! People ignore Base rate.
Doctors some of the worst offenders of this base rate neglect. Base
rate has to be taken into account. NOT the accuracy of the TEST if you are
looking at a SAMPLE that is so skewed toward not having breast cancer and
is thus SKEWED toward FALSE POSITIVES.
Prosecution and Defense in OJ trial said

Going back to TRINITY CHURCH

Majority kind of had the Blue Bus on its side.
Majority believed that the building would still be used as a church
when it fell was above 50% then it followed traditional ALL OR
NOTHING tort principles.

CLASS 7
Trinity Church what about dissents view that the only harm is if the
church falls over, then Hancock would NEVER be liable for the harm to the
church b/c the thing hasnt collapsed!
What if 99 years later, some tourist knocks over the church by
leaning on it. And Trinity gets to sue the Tourist and is liable for
everything. Dissent basically says as much that a future
construction project would have to take the church as it finds it
and would have to pay everything.
o Isnt that out of proportion? Couldnt the falling of the building
be unforeseeable???
Could say that Ps sometimes get lucky and sometimes
unlucky and thats ok
E.g. in Vosburg what if you kick people with metal
knees and their skulls are Strong. And on average its
all coming out the same.
o This leads you to behave in the same way as you would if you
were charged the AVERAGE amount of damages in EVERY
Scenario.
Legal regime sticks with all or nothing. All for eggshell
plaintiff and none for the rock skull plaintiff.
Vosburg may not be the perfect analogy.
o Instead of the church as the eggshell skull plaintiff. Think of
it as you have a normal skull and then someone smashes it
and you have a lattice of cracks in it and weakens it.
Expected lifespan is shorter.
o A year later someone just taps you on the head and you die.
Who should pay? Following dissent, tapper pays everything.
Tapper might have to pay something, but what he
would pay would be the actual harm inflicted which was
the reduction of the lifespan which is a lot smaller if
your skull was really just about to fall apart.

o If you sued the original cracker, then courts would probably

make you do what the majority said and make the cracker
pay.
o This is what they do in the toxic torts suits.
Think of Trinity as definitely having cancer. The
question is whether Trinity would die of OTHER CAUSES
before it would die of cancer.
o But court using expected life expectancy tables are similar to
some sort of probabilistic idea of w
Final point the court awarded Trinity the 4M in replacement costs
TODAY even though the money wont be used until 100 yrs from now etc.
Unfair to Hancock Trinity will do nothing with the money and
make MORE than the adjusted for inflation price, b/c the
REAL INTEREST rate will probably be higher.
AND they give Trinity the time value of the money b/w when the
harm occurred and when Trinity is getting paid.
Each of the ways of measuring compensatory damages can be
conceived as restoring the people to a rightful baseline, depending on which
baseline you want to use.
Basic features of contracts and tort:
Arguments that any of the 3 normal damages regimes
expectation etc. could be conceived as restoring a party to a rightful
baseline depending on what you want to restore
o Expectation DOMINANT MEAURE - restore plaintiff to
post-contractual position
o Reliance restore P to position pre-contract. In theory this
could be the same as expectation if reliance includes the
opportunity cost of next best opportunity.
E.g. if you were going to sell a boat to B and B says he
cant, if you calculate reliance as the next best
opportunity then you wouldve sold it to someone else
and then that would be the same as expectation
damages.
BUT (my idea) isnt this a problem b/c the P
would still HAVE the boat, which is a windfall?
Courts dont interpret reliance in this way but
focus only on OUT OF POCKET expenses.
o Restitution def gives up something he gains from plaintiff
pursuant to the contract. E.g. seller says he will sell and got
a deposit has to return deposit.

In theory, restitution can be equal or GREATER than

expectation if we say the Def has to return ANYTHING
they gained by virtue of the breach. E.g. in an efficient
breach theyd actually have to give back not what they
were going to buy something for originally but also the
profit.
Courts dont interpret it this way (it would
eliminate efficient breach altogether). They
restore D to pre-contractual rightful position.
Return anything of value that P gave you.
Expecation > Reliance > Restitution
Expectation is greater than Reliance b/c parties
enter into contracts that will make them better off
than before.
Reliance should usually exceed restitution b/c
restitution is a subset of reliance.
You might invest in the performance of the
other party. One way is giving a security
deposit but the reliance damages are
broader.
Expectation should usually exceed reliance
Exception:

Exceptions arise in LOSING CONTRACT CASES where the contract

would actually make the person WORSE OFF.
o K = 40k Builder invested 30k and anticipates 20k more to
complete house.
Conveniently, the Homeowner breaches and doesnt
want it. Now Builder is the P.
o Expectation damages would be 20k b/c 40k price 20k more
he needs to spend and saves by not having to complete the
contract. REMEMBER THIS AMOUNT.
o Reliance is what hes already spent = 30k
Builder will ask for 30k. The reason in this case that
reliance exceeds expectation is b/c the contract was
shit. (losing contract).
Usually courts wont allow you to just choose reliance.
Expectation will be the calculation if EITHER party
chooses it, not just the Plaintiff.

The 30k that he invested may have a market

value above 30k which would make restitution
higher. But court wont allow restitution damages
in that case as long as the other party wants
expectation.
Always some party will want expectation b/c
it will be better for them.
How might restitution damages be greater than Reliance damages
o Builder can argue that although hes only expended 30k, that
30k investment has a market value thats higher b/c housing
market went up.
But in a case like this the court will say the same thing,
that expectation will be the way we go if either party
wants it.

In theory, there has been debate (inconclusive) about what the right
way to calculate compensatory damages is.
Lon Fuller and Purdue said that restitution was the most easily
justifiable calculation because it was the corrective justice dream.
Taking away wrongful gain!
o Reliance is second best they said that often youd have to
give P more than just the restitution.
THIS IS JUST which person you want to focus on (Like
our discussion of Hammurabi) This focuses on the
Plaintiff and Def is fucked.
They were OK with this b/c thats how tort law works
and Ds get worse off than they wouldve been if they
had never gotten involved w/ P to begin with.
o They did NOT like Expectation Damages b/c they didnt see it
as a way of restoring a PRE-WRONG baseline.
On the model of tort the idea is to RESTORE to level
that the person WAS AT BEFORE the D ever got
involved in his life.
But this is the difference b/w contract and TORT.
Tort you didnt want to get involved with the
person. Contract you DID so you want to get
what was promised to you.
Performance that was promised to him becomes
part of his property. So this IS sort of bringing
him to a previous level.
o Some say that expectation damages violate the promisors
right to change his mind. But what about promisees right to
performance of contract.

Economists only care about what will make people behave best and
create best incentives.
We will stick with forward-looking perspective for a while.

BORING REVIEW.
Is contract law like strict liability or negligence in tort. ITs like strict
liability b/c you have to pay even if the breach is EFFICIENT.
What is the equivalent problem in torts in strict liability to
overreliance by promisees.
o **The pedestrians dont have any incentive to internalize the
costs of their actions for rollerblading.
o This is akin to getting expectation damages no matter what.
Moral hazard.
Tort analysis common law saw this and created contributory
negligence. Is there an analogous thing in CONTRACT?? (to
incentivize promisees to not over-rely).
o Duty to mitigate is not quite b/c it kicks in AFTER the breach
(analogous to after the tort).
o ***Common law does this by foreseeability (HADLEY v.
BAXENDALE)
Mill contracts with shipping co. to bring a new shaft.
The shipping co. doesnt bring a new shaft and mill had
to close down and the COSTS to him were huge.
Plaintiff relied EXTREMELY HEAVILY on contractual
performance. Had NO BACKUP PLAN.
Court CUTS OFF most of the damages calling
them UNFORESEEABLE.
Where contractors rely TOO heavily on contractual
performance, courts will CUT OFF the damages
they can get. (idiosyncratically high reliance)
You could make your over-reliance
foreseeable by TELLING the other
contracting party (probably cost will go up
b/c they would be liable for more).
If we understand foreseeability to be superoptimal reliance by P, expectation damages
combined w/ Hadley works exactly the same as
strict liability w/ contributory neg in TORT.
In boring review promisee will rely only
OPTIMALLY.

o Hadley IS a little of a stretch as

opposed to contributory neg where its
more directly tailored to wrongful acts
of plaintiffs.
Contributory neg and Hadley rule might
be getting at exactly the same thing.
o Might lead us to wonder whether
remedies and liability have any
difference.

Wouldnt it be SIMPLER to just have a NEGLIGENCE rule in BOTH

TORTS AND CONTRACTS.
Shouldnt contracts evolve to the point that torts did in coming up
w/ negligence instead of strict liability and contributory neg.
OR could we say why doesnt TORT just use strict liability like
CONTRACT?
Of course we are just talking about a DEFAULT rule. They can just
contract around it. E.g. Ill only buy it if I get a mortgage.
No reason to see why negligence in torts is better or that strict liability
in contract is better.
Last time we discussed whether strict liability or negligence is better in
contract or tort. Strict liability needs a SUPPLEMENTAL rule (with
contributory neg or Hadley v. Baxendale) to reach the same result as
negligence.
Activity level problem in TORT is not really applicable to contracts b/c
we arent very worried about too much contracting.

IMPORTANT THING ABOUT REMEDIES - Dilemma of

compensation two parties def and plaintiff where def is contract breacher
or tort injurer.
Weve learned from Boring review is that in order to create efficient
incentives for both parties, each party has to bear or internalize the
costs of their behavior. Defs have to fully compensate BUT also
plaintiffs must receive less than full compensation so that they take
care as well.
o BUT how do we ensure this if every dollar is going to the
plaintiff?

Strict liability works on one side but not the other.

Can do NO LIABILITY full incentive for plaintiffs to
take care but bad incentives for defs.
BOTH tort and contract deal with the dilemma by
breaking down the accident into a number of
DESCRETE BEHAVIORS defs level of precaution,
Ps level of precaution, etc.
USE Negligence regime for one party, who never
has to pay if he complies with it, and then leaves
the other party with the residual costs and forces
that person to have the right incentives to
internalize costs.
E.g. Negligence rule in torts make VICTIMS the
residual cost-bearer. As long as we can rely on
neg rule to check the D, the residual cost goes to
victim.
Contract law basically reverses the roles by
having def have strict liability and plaintiff
(promisee) have the Hadley v. Baxendale rule.
Promisees RELIANCE kept in check by
Hadley and then residual costs go by strict
liability to promisor .
**BUT problem is we cant get every dimension of
action e.g. we cant get ACTIVITY level involved
as shown by the boring review.

OTHER WAYS TO SOLVE DILEMMA OF COMPENSATION

De-couple money paid by defs and how much plaintiff receives.
The initial problem was that the victim was getting ALL the money.
E.g. public law regimes CRIMINAL LAW no expectation that
payment goes to victim. This enables us to make the right amount
of deterrence on the criminals side w/o creating perverse moral
hazard incentives on the victims side.
o Going back to Hammurabi this helps to incentivize victims
to take precautions like locking the doors.
E.g. Regulation regimes BP Oil pays money to govt based on
deterrence etc. and then govt pays an amount to victims that it
sees FIT.
E.g. No fault regime for auto accidents Each person gets no fault
insurance coverage. Compensation doesnt come from driver who
hit the car. How to control behavior of drivers? More regulation w/
more speeding tickets etc.

E.g. Workers compensation regime create incentives for workers

to take care of themselves and not get hurt b/c they dont get FULL
AMOUNT of compensation. Make up shortfall of deterrence on the
employer by using OCEA and FINES.

Other solution to dilemma of compensation is to - Give the parties

themselves more control over the process and the REMEDIAL regime that
will govern them. Parties might do best and they can specify their own
damages measures.
Recall from boring review that we can get the optimal level of
reliance Court would have to know a LOT of information to do this
in reality (similar to how hard to implement neg standard that takes
into account not only care but also activity levels).
o PARTIES have better information about this!
Can specify a liquidated damage measure in the contract that they
negotiatie. It will prob be b/w reliance and expectation
damages that the court would apply. It will induce some
level of reliance but not too much.
o Maybe court should just apply that and take advantage of the
parties knowledge (like self-assessment regime)
o BUT courts often REFUSE to enforce those
o Courts will usually enforce when its hard to calculate
expectation damages and when the liquidated damages
clause is supposed to be SOME approximation of expectation
damages.
BUT to work, isnt the point that parties might want to
specify some OTHER amount of damages?
o Courts unwilling to enforce when it looks too high relative to
expectation damages (when its low they prob enforce it).
o Why is court more willing to enforce UNDER-compensatory
liquidated damages clauses. (This makes some sense b/c the
optimal amount will probably be BELOW expectation damages
and higher than reliance)
TWA case Court invalidates a HIGH amount above expectation
damages in airline lease contract. BUT in the same decision they are willing
to enforce an under-liquidated damage. TWA is generally how it goes.
Puzzle: courts are usually willing to enforce whatever the parties agree
to. So why not enforce a very specific REMEDIAL rule?
Subsidiary puzzle: why court more willing to enforce underliquidated damages?

One way to get to those questions is to ask: Why would parties in a

contract ever bargain for liquidated damages higher than expectation
damages.
Youd think not b/c promisee would have to pay a premium for
liquidated damages above expectation which would be a sort of
windfall. Why would promisees want to pay a premium for
equivalent of a lottery ticket.
o Maybe theyre worried that the expectation damages imposed
by the court would UNDER compensate.
NOTE: this means that they are not assigning a TOO
HIGH value but trying to put in a value that is a true
measure of expectation damages that court will not
GET. So the promisee is paying a premium to get it
right, not to get a windfall.
E.g. Peavyhouse if farmer anticipated what court would do, instead
of putting provision that said that the mining company would relevel the
land, he couldve just put in a liquidated damages clause of 30k which would
eliminate the risk of the court deciding that he couldnt get specific
performance and only got diminution of value.
If he wrote that liquidated damages provision, he would be putting
his money where his mouth is, b/c he obviously paid a PREMIUM for
that clause.
Why not let him do that?
E.g. bunch of old alums want to go on bus to the the game before
they die. But if the bus breaks down they wont get the real value to them
of missing the game. They would just get the price of the ticket back.
They wouldnt get recovery for their enormous subjective purpose.
But what if they want to guarantee performance and put in
liquidated damages clause of 200k.
BUT the court wouldnt allow this.
Is there any reason NOT to enforce it?
o Courts are influenced by unconscionability fears makes
sense where there are vulnerable people.
o AND it could be just as likely that contract promisEES can be
under-indemnified and those people might be vulnerable.
E.g. fire alarm company puts in LOW damages clause so
that they dont have to pay for your burned down
house.
BUT if they wanted to give a bonus of 200k for getting there on
time that would be completely fine.

o E.g. TWA couldve compounded the liquidated damages into

its payments etc.
Focus on victims and their behavior doesnt come naturally to the
compensatory justice view of the world b/c it means that you are trying to
NOT compensate victims in order to incentivize them to take care. This
blurs the distinction b/w victims and wrongdoers which underlies the
compensatory justice way of thinking.
If we start to see harm-causing interactions as a BI LATERAL
thing, we lose our grip on the idea of casting one as the exclusive
wrongdoer and the other as the victim.
o It takes 2 people and their interaction to result in a harm and
both are in some sense at fault. BUT the legal system will
always cast one as P and one as D.
o This doesnt actually tell us that one is the wrongdoer and one
is the victim.
***Might be better to think about it as a regrettable
transaction and we should use the BEST way to get rid
of it, regardless of who we put burden on.
COASEAN view.
First inclination in case of hotel nightclub making noise is to make
nightclub the wrongdoer but this is b/c you feel like the nightclub is the
active participant BUT if nightclub was their first and if people come
around it our intutition is the opposite. IDEA of coming to the nuisance.
Our intuitions are fickle.
Maybe better is to just say that it takes 2 to make this problem.
We dont have to assign a wrongdoer etc. This is Coases big
point.
o Ask not who caused the problem. But Coase says maybe
better idea is what solution is best for both parties. i.e. figure
out what a single owner would do.
Directs our attention not to wrongdoers but to how to
best do this for people.
Groves v. Warner warner supposed to deliver concrete but
consistently screws it up and eventually breaches contract and gives delays
to groves. Groves considers hiring Trap Rock in addition but decides not to.
Warner says that Groves shouldnt be able to recover any increment
of damage that Groves couldve mitigated by hiring Trap Rock
o Court says NO

o Warner has incentive to try to get concrete to GROVES to

avoid Groves having big losses. The problem is in many
cases the plaintiff is in a better position to fix the problem.
Groves reminds us of avoidable consequence or mitigation idea.
Plaints cannot collect damages for harms they couldve avoided by
taking reasonable steps.
o E.g. if you ruin someones car and he doesnt replace it, he
cant just keep collecting damages forever b/c he cant get to
work
E.g. if someone breaks your computer then someone should buy a
new computer so you dont just keep accruing damages from lost
work. BUT in many cases the plaintiff is in the best position to
replace it b/c they know what computer they need. BUT w/o
mitigation rule plaintiff has no incentive to actually replace the
computer b/c he can just sit back and have the def pay everything.
o If Def is in best position then you dont need mitigation
doctrine b/c he will just go and replace it.
o Plaintiffs wouldnt have an incentive w/o the mitigation rule
b/c they could just sit back and let the def pay for everything.
Plaintiffs like Groves only have to take reasonable steps and court
says they didnt have to go get replacement concrete from Trap
Rock instead.
o In Groves the court says it wasnt required to mitigate b/c
Groves should only have to get REASONABLE mitigation of
damages.
Reasonable is like a hand formula is there a step
that P couldve taken that to reduce the damage that
wouldve cost less.
E.g. you get a summer associate offer and you get an employment
contract. 2 yr position. They decide to breach. Under contract
damages you would be entitled to the amount of salary for 2 yrs.
BUT you also have a mitigation responsibility.
o You need to get SOME job and collect the DIFFERENCE.
o But what job do they have to take? Paralegal job? Or can
they WAIT longer and keep looking to find a comparable job.
Wachtell would want you to keep looking for optimal
time to get a higher paying job.

Familiar contexts for mitigation of damages:

Employment
o Above
Landlord/tenant

o Common law was that landlord had no duty to mitigate

broken lease. But modern rule is that landlord has to take
standard mitigation efforts to replace tenants.
o NY still sticks w/ common law. landlords have no duty to
mitigate to substitute a tenant.
Might say best rule is who is in the best position to
mitigate? Arent the landlords in the best position?
IN Groves they say that plaint has no duty to mitigate. But doesnt
Groves know the high stakes and be able to replace Warner?
Shouldnt Groves have the duty to make the choice to mitigate? It
knows how much the contract is worth!
Why not?
o Equal opportunity rule Warner couldve gotten the
replacement! Better that Groves still deals with one person.
The rule is that if theres an equal opp, the DEF has to
do it, not the plaint.
E.g. when I break your computer, shouldnt I have to go
to market and BUY the computer b/c we have an equal
opportunity to buy the computer? But that makes no
sense. And landlords would never have the duty to
mitigate b/c the tenant can also find a replacement!
CONFUSION. In a case like Groves it is costbenefit justified for EITHER to use it. Cheaper for
WARNER to do it b/c warner had already had a
relationship with them.
Courts will only focus on GROVES of course
there is something they couldve DONE. So in this
case they dont like the result so make up another
rule equal opportunity in cases where the other
party is in a better position.
******This doesnt apply when there is
information imbalance and the plaint is in
better position to know what he wants etc.
o **Alternative in Groves is that plaint has NO DUTY to mitigate
until Warner takes ALL the reasonable steps before you need
to mitigate. ***The DEF would have to do EVERYTHING
before the Plaintiff has a duty. (easier than doing prima facie
duty to mitigate defeated by equal opp rule).
So you get to the same place without the prima facie
duty to mitigate which is trumped by equal opp rule.
Courts do it both ways and get to the same place.

Evera v. Swiss Bank

Evra rented ship by wire transfer to swiss bank of ship owner. One
time swiss bank fucks up and contract gets terminated and Evra
loses its business Dist court says Evra entitled to 2M for loss of
profits but Posner overrules.
Posner applies Hadley rule of no recovery for unforeseeable
damages.
o If mill owner were fully indemnified in Hadley, they would
have no incentive to mitigate losses.
o What is difference b/w Hadley and avoidable consequences??
Hadley focused on PRE-BREACH conduct. E.g. not
buying too much software etc in anticipation of delivery
of computer or not rollerblading etc before the accident
Mitigation is about what the responsibility is AFTER the
breach (e.g. installing replacement shaft in mill in
Hadley).
What if spare shaft were available when the shipper
notified mill owner and mill owner decided NOT to buy
the extra shaft and waited for damages to pile up.
Court would cut off recovery and instead of citing
Hadley, would cite MITIGATION b/c its after the
breach.
What if shippers can more easily provide a spare
shaft than it is for mill owners to keep a spare
shaft. This incentivizes the mill owner to NOTIFY
the shipping company of the huge losses that
would result (now its forseeable but now the
shipping will cost MORE).
Parties can contract around the Hadley default
rule by having the mill owner DISCLOSE if this is
the more efficient result.
****Is Hadley the RIGHT default rule? Shold the
default rule be equivalent of eggshell skull rule?
E.g. if you are delivering important contract
documents through FedEx, you can contract
around the default Hadley rule of low
liability for loss of the envelope by buying
more insurance.
Evra is a tort case. Evra contracts w/ Chicago bank and Chicago
contracts with swiss bank
o This is not a contracts case. Yet Judge Posner decides to
apply Hadley contract rule anyway. Shouldnt it be eggshell
skull? (My idea)

o The problem here is applying Hadley rule, there is no way to

CONTRACT around it b/c its a TORT case!!
But Posner thinks that Evra is in a better position so can
use a Hadley kind of rule to cut off damages to
encourage Evra type Ps to take precautions.
Evra
Posner wants to send the message for people to do what they can
to prevent the problem
He doesnt want to be confined by the wrongdoer-victim
dichotomy that is inappropriate in a coasean conception of things.
o Swiss Bank was not in a good position to give special
treatment to indiosyncratically sensitive wire transfers.
Posner thinks Evra wouldnt have bargained around the
Hadley default rule b/c it was in a better position to prevent
the loss and NOT have paid the premium it wouldve required
to make Swiss Bank responsible.
Contracts Idea Posner maker of outdoor wear. Takes pictures of
mountain climbing expedition for ad campaign. Company and photographer
incur huge costs to take the pictures. CVS loses the film that the guy just
drops in the slot. Patagonia then sues CVS.
Posner CVS cant be made to pay huge amounts of money.
Patagonia will have no incentive to behave differently in the future.
Patagonia would be much easier to avoid this problem than for CVS
to be infallible (Like the Swiss in Evra). Or at least give some
notice!
o So what if Patagonia just tells CVS that its worth a lot of
money. In this hypothetical world, CVS would hire a different
person and take precautions and then CHARGE more.
Bargaining around the Hadley rule. Patagonia makes the
damages foreseeable.
BUT if the bargain doesnt take place (like in Evra where
it CANT take place), then Hadley works to cut off
damages. Posner says thats good anyway! B/c it will
tell the Patagonias to take precautions.
Posner isnt stuck in the wrongdoer/victim
paradigm.
If this analogy works then Evra is genius. Posner
GUESSING at the contract that WOULD have been had
they been in position to contract.

Maybe distinction b/w tort and contract should matter when importing
Hadley into tort b/c of the difference b/w strict liability and negligence.
Maybe we dont need the Hadley rule in a tort case like Evra b/c we have a
negligence standard!!! Negligence is supposed to work well on its OWN w/o
strict liability and contrib neg.
Under a Neg rule, then Swiss bank wont be liable! (This is what we
said about Driver and Pedestrian). Negligence gives pedestrians an
incentive NOT to blade b/c the driver wont have to pay if hes not
Negligent!
o So in Evra, Evra will expect Swiss bank to not be negligent,
and when they get lost itll not be b/c of negligence, so they
will take precaution.
Maybe the strict liability vs. negligence distinction is important even
if the difference b/w contract and tort isnt important.
o *****We need Hadley when defs are held to a strict liability
standard. But we dont need it when we have a negligence
standard.
Hubble: maybe we couldve just used proximate cause instead of
importing Hadley into Tort. Eliminate need to borrow from other
fields.
Levinson: maybe it wouldve cost swiss bank 100 to avert the loss.
But at same time it wouldve cost Evra only 50 to avert loss (e.g.
not making payment at last minute). Maybe this couldve been
resolved by saying that swiss bank wasnt negligent.
o Maybe standard of care should be set by ASSUMING
that other party is behaving OPTIMALLY (in this case
if Evra behaved optimally, then Swiss Bank didnt need
to do ANYTHING).
BUT lots of courts would analyze Swiss Banks behavior
just by reference to their own behavior. And in that
case of course Swiss Bank COULD have done something
more which leads to a conclusion that Swiss Bank is
negligent!!! B/c they will just compare Swiss Banks
cost to avoid vs. the huge cost, while IGNORING the
even smaller cost that Evra couldve incurred to avoid it.
BUT this is being stuck in wrongdoer/victim
paradigm.
Would be equivalent of only looking at whether
Groves couldve done something without thinking
if D couldve also enlisted Trapp Rock.

Posner realizes this in Evra and doesnt want this result

and imports Hadley rule to prevent it. Uses Hadley in
the same way that Evra court uses the equal
opportunity rule as an auxiliary rule to get rid of it.
- wouldve been easier for BOTH courts to just
avoid using the auxiliary rule and for Posner to
say not negligent taking into account what Evra
couldve done and in Groves saying no duty to
mitigate taking into account the assumption that
D would behave optimally Takes care of it w/o
the need for the auxiliary rule.
*******Defs in the anti-coasean mindset will actually
decide that certain people are negligent by NOT taking
into account what P wouldve done. So because of this,
maybe to the extent that Ds are operating DE FACTO
under a rule of Strict Liability, then maybe WE DO need
a supplemental doctrine to make it all work b/c the allin-one negligence doctrine might not work in practice.
BUT couldnt we have just used proximate cause
or comparative negligence to get to the same
place?
Comparative Neg: Posner couldve
emphasized steps that Evra couldve taken
to prevent the tort from taking place.
Prox cause: e.g. a tycoon on the way to
airport to make big deal and loses out on
20M. If negligent driver crashes into him
then comparative neg doesnt work but
tycoon wasnt neg so that doesnt work.
But court wont make driver on the hook for
20M. In that case court can use
foreseeability and prox cause to avoid that
result.
Avoidable consequences: Posner couldve
used that and said Evra couldve gotten the
check over by messenger or something like
that. Posner doesnt go this route and
focuses on pre-tort actions of Evra rather
than post-tort.
o GOOD POINT FOR EXAM CAN DO
IT EITHER PRE-TORT or POSTTORT (Or Breach) mitigation is
post-breach/tort etc.

Seatbelt rule: hybrid of avoidable

consequences and contributory negligence.
Pre-tort
Avoidance of
Contributory/comp neg
accident
Minimizing harm
Seatbelt rule

Po

Av
co

Couldve used assumption of risk: say that

Evra knew how shitty the consequence
would be of not getting the wire in. So they
assume the risk.
Posners decision is probably more an
analogy to seatbelt rule (staying within tort
doctrine rather than importing contract).

E.g. Car wash if car wash still has to indemnify for Ferrari or chevy,
then Ferrari person is getting a better deal. Why doesnt the lemon effect
take hold and have really expensive car washes.
Moral of Evra lots of tort rules that couldve been used.
Posner couldve used a lot of rules to cut off recovery for plaintiffs
as a way of forcing them to internalize the costs.
Why do we have so many rules in the tort law context. Maybe
theyre residual from where tort was strict liability.
Couldve ALSO used no recover for pure economic loss.
***BUT why not EGGSHELL SKULL RULE?? this couldve been
used AGAINST Swiss Bank.
o What if Vosburg volunteers to be the catcher in a game of
baseball. Vosburg puts out his knee and gets fucked. Then
of course it wouldve been some combination of assumption of
risk, contrib neg, etc.
The difference b/w that and the real case is that Putney
just KICKED him.
MOST of the EGGSHELL skull rule dont deal with
NEGLIGENCE but with INTENTIONAL TORTS
And with an INTENTIONAL TORT you know who
the cheapest cost avoider is!!
If its a negligent kick then you start thinking
about the coasean cheapest cost avoider.
So in Evra, Posner would say that Evra was like Vosburg
in our hypothetical, but not like Vosburg in the
ORIGINAL case where it was intentional.
**Damage limiting doctrines all have the common theme to get the
Plaintiffs to behave better
But Economic Loss Rule does that fit the pattern of all the other
ones?

Pruit v. Allied Chemical allied chemical dumps, no one dies, but fish
and crabs etc. suffer and die. Ps sue Ally for negligent tort.
Fishermen say that they lost profits.
Distributors seafood restaurants etc.
Surrogates group of boat owners, bait shop, marina owners that
lose sales of sports fisherman equipment.
Court allows recovery for fisherman, and for SURROGATES of the
SPORTS FISHERMEN b/c they are unlikely to bring suit or recover
much.
Court DENIES recovery to distributors and cut off damage at
WATERS EDGE.
Pruit is typical. Deny recovery to land-lover.
BP Case settlement fund now replaced the Feinberg fund.
Considerably more generous than tort law would be. Feinberg had an
arbitrary geographical limit that wouldve been much greater than tort law.
NY Times hotels in FL got fucked and werent going to get
recovery from Feinberg.
o Feinberg substituted a proximate cause test.
Tort law general concept that no recover for economic losses or
pure pecuniary losses (PPL). If you are run over and cant go to work you
can get compensation for lost wages. BUT if you run over A-Rod, the
Yankees cant get compensated for lost revenue. A-Rod, though, has
personal damages as a hook, and you can latch onto it the economic losses
to him, like loss of income.
This economic loss rule is applied somewhat selectively (like it wasnt
applied in Evra). If it applied across the board, then you couldnt have
tortious interference w/ contract, legal malpractice etc.
In Pruit the court allows commercial fishermen to recover but not the
land lovers. Court makes exception for PPL, and gives recovery to class of
plaintiffs (fisherman) but limits it. So it applies the pure pecuniary loss rule
SELECTIVELY.
Is this selective application because the court is trying to force
certain Ps to take some precautions to avoid a loss?
o E.g. Some seafood restaurant if they get cut off from cases
of pollution then will they take some precaution?
But are they really going to be able to take some
precaution to IMPORT from another area??

How do we explain this rule if its not really fitting with

the reasons for the other rules?
***Common explanation is that the alternative is just
UNIMAGINABLE What if Ds were on the hook for ALL
the economic loss that they caused?
E.g. people lose money, cant buy other shit, and
other companies affected.
Ripples of Economic harms go out INDEFINITELY!!
The Bar on recovery for pure pecuniary loss plays
the same role as PROXIMATE CAUSE in LIMITING
the extent of the Ripple effect!!
E.g. if you drive negligently and that causes
the whole downtown to burn down and
court wouldnt allow recovery so far to canal
street etc.
E.g. you run over a lawyer, and the firm
loses a case (thats pure pecuniary loss).
Doesnt foreseeability just mean that there is a LOW
probability? Why do we round down and make it 0 for
Defs when its not foreseeable.
This fucks over the P like Ms. Palsgraf!
You can describe any harm so specifically that it
looks unforeseeable.

**********Foreseeability can be manipulated by just saying things

that are VERY specific was it foreseeable that I would run you over at
11:45 and break your femur or vice versa. What is the right description of
the harm?
Just ratchet up a level of generality and it becomes more
foreseeable.

Damage cutoffs where you would burn all of downtown b/c of driving.
BP wouldnt be made to pay for every loss that results (two devices:
economic loss rule and proximate cause rule).
We have a perspective that you should generally pay full
compensation. So burden is on these doctrines to show why they
should cutoff compensation/damages.
1) Retributive Justification - People have a sense of just desert
people want punishment to reflect the level of badness associated with it.
people want def to pay for the amount of negligence. The way we can
achieve this is through limits on damages for pure pecuniary loss or prox
cause etc.

But you can push back you can say ex ante, you are neg and
there is a TINY probability that something huge would happen and
the expected cost to society is medium
o So youre not LUCKY. But why should that matter.
o Courts may not feel ok when its an individual BUT repeat
player like taxi company you wouldnt care as much.
o But shouldnt courts consider the case where you have a
really low result from bad negligence and you get LUCKY.
o **Here were making a tradeoff b/w compensatory justice to
victims with proportionality on a retributive basis to Defs.

2) Economists perspective for every dollar lost by the bad acts,

there are offsetting benefits to others!! So D should only be liable for the
NET social loss
E.g. Oil tanker negligently crashes into only bridge that connects
island and mainland. No one can get back and forth. All
businesses on the island suffer greatly and lose profits. The
businesses sue the oil company that owns the tanker.
Courts will usually say no recover (pure pecuniary losses). They
didnt own the bridge and therefore cant hang any monetary
damages on them.
o Maybe this is OK b/c there is no net loss to society b/c all
the customers go to mainland businesses.
This is why competition is never a tortious loss in a
capitalist legal system.
o Of course its not going to be perfect. Consumers were
obviously going to island businesses for some reason. But
SOME will be recovered.
What if there is bad information and people get fucked by stock
change caused by insiders. The corporation may try to defend by saying
there is no net social loss b/c there is precisely same number of
buyers/sellers.
This argument never wins.
E.g. Ordinary tort case Negligent driving and crash into
restaurant. They can recover lost money b/c attached to physical
damage. You wouldnt win by saying that theres not SOCIAL LOSS
b/c people went to OTHER RESTAURANTS.
Offsetting benefits idea really gets you nowhere. Restatement says
that you can only offset damages by benefits conferred to the
PLAINTIFF, not to a third party.
Tobacco companies say they saved govts money by paying taxes
and killing people off early this doesnt work.

E.g. in employment discrimination cases employers try to have

bottom line defense that they also had affirmative action that offset their
discriminatory test for promotion etc. So on net the offsetting benefits
made it ok.
This argument has consistently FAILED.
o You could argue that this is b/c the benefit is not conferred
onto the same people so this makes sense.
Even when plaintiff is the recipient of the benefit as well as the
harm (e.g. having sex for promotion) courts will obviously not say
that offsetting benefits are ok.
Even if its close in time e.g. doctor saves you on the side of road
and then negligently runs you over.
o This will never win.
Offsetting virtually never happens (maybe would work if you
chopped off a leg to save someone from being stuck and saved
their lives) You probably wouldnt be held liable for chopping off
the leg.
o but offsetting wont work esp if the offsetting gains are to
people other than those who were hurt.
****OFFSETTING BENEFIT ARGUMENTS ALMOST NEVER WORK!!!!
Texaco couldnt you say that penzoils loss is Texacos gain so this is
really offset?
Legal systems only take these things into effect Haphazardly and
hard to see when or why.

Sometimes economic loss rule is a way of expressing

preference for contractual remedy rather than tort!
E.g. owner of a boat brings boat to dry dock where its going to be
serviced by a maintenance company and dry dock does something
negligent and smashes boat. Owner had entered into contract w/ a
renter of the boat who was doing something profitable w/ it. Boat
renter sues the dry dock in tort for lost profits from the business
even though the renter doesnt own the boat. (suing over the
hypotenuse of the transaction)
o Court (Holmes) says no recovery b/c its pure economic loss
and renter has no ownership interest to hook it onto. BUT
in writing that opinion, Holmes implies that the owner of the
boat could recover the lost profits of the RENTER, IF the
owner had contracted w/ the renter to INDEMNIFY the renter
for losses.

This implies that the renter shouldve created a remedy

for himself through CONTRACT which would then make
him able to pick up the TORT damages THROUGH the
owner.
Its more efficient according to Holmes basically b/c
there would only be ONE lawsuit b/c only the owner will
sue and the renter will collect through contract.
Levinson: thats stupid b/c the renter needs a
lawsuit to collect from the owner. You might say
this is a less costly lawsuit but they all could
settle. But the chances of them settling one case
or the other is the same.
Maybe the compelling logic is actually that
contract has the BENEFIT of creating a
CHOICE!! for the renter. Maybe some
renters have a backup boat, or are renting
for pleasure and dont want to pay the
premium to get the indemnification. This
allows renters to identify themselves as the kind
who want the indemnification or not. Allowing the
renter to sue directly in tort doesnt make this
distinction and allows useless renters (e.g.
pleasure renters) to sue in tort anyway!
Hubble/Levinson: this is another
manifestation of the same way that law cuts
off damages b/c plaintiff didnt do
something (contributory neg, comparative,
mitigation, seatbelt rule).
Step that wasnt taken was not going
through CONTRACT.
o E.g. Bird v. English construction company negligently takes
down power lines and printing co needs to shut down for a
while. Printing company tries to sue in tort the construction
company.
Court says you cant because its pure pecuniary loss.
Printer should contract with power company for
uninterrupted service.
Some will have backup generators and some wont
and will want indemnification. Isnt this better
than a one size fits all tort remedy. Some might
not care at all! Isnt it better than having an off
the rack tort rule.

Can we explain Pruit like this Commercial

fisherman are suing on behalf of the fish then
the seafood house tries to sue BP. Well then they
shouldve contracted with the fisherman to
provide uninterrupted deliveries.
Or Lady Luck Casino people cant get to casino
b/c bridge breaks. Casino can contract w/ owner
of bridge for indemnification (but here owner is
govt so that wouldnt happen).
Levinson: when contractual indemnification is
possible it makes sense.
E.g. Sealy case: Plaintiff buys truck to use in business,
truck is defective, sues truck dealer for products liability
for lost profits, and CA sup ct says no recovery to
plaintiff for pure economic loss.
This is obviously a signal to sue in warranty. BUT
wont get compensated for time w/o a truck. But
court is saying you COULDVE contracted for that.
You want to get indemnification in tort w/o paying
the price for it in CONTRACT!
BUT what if the truck blew up and destroyed the
factory, or hurt the plaintiff and ALSO caused
economic loss THEN the plaintiff would get loss
of profits. Why doesnt preference for contract
over tort apply also in this case??
All the reasons for wanting contract
damages (like sorting plaintiffs who value
things) also apply here!
BUT recall that historically, tort law required
contract claim for products liability (privity).
o So why dont we like the old privity
rule???
Encourages buyers of products
to CONTRACT for
indemnification or NOT and pay
LESS.

**(My Idea) maybe

we dont want privity in
products liability in
TORT is that tort
imposes medical costs
on society and just b/c
someone contracted
out of indemnification,
doesnt mean it wont
cost to society?
o E.g. Evra tries to sue swiss bank in
tort (going across hypotenuse) and
Posner cuts off recovery. Essentially
bringing up pure pecuniary loss (or
privity) rule.
Evra decided NOT to buy
indemnification just as Sealy
didnt buy indemnification.
You can basically channel into contract in a lot of tort situations. BUT
weve decided to use tort for products liability, and employment law
(wrongful termination torts), corporate law (fiduciary duties that are
mandatorily imposed by courts), contractual disclaimers of liability at ski
slopes etc.
How was Evra to know that Posner would be attached to contract
when all of law in 20th Century has been moving toward tort
displacing contract.
Why have we moved toward TORT instead of keeping everything in
contract like it was??
o Transaction COSTS! torts are mandatory off the rack. So
we cant have everyone contracting for everything whenever
they buy something.
BUT you could say costs of contracting have gone down
form contracts. Youd have 3 choices of
indemnification when you buy something.
o STANDARD EXPLANATION world has become more
complicated, and demands of information is too big and
people cant adequately assess the risks etc.
Makes more sense to leave it to contract in a case like
Evra where they are SOPHISTICATED.

How can we describe the economic loss rule as a way of

channeling people out of the tort area into contract. Or REGULATION

Create limitations to drive people out of tort. BUT we can drive

them toward regulation.
E.g. What if one person creates a crash in Holland Tunnel and shuts
down transportation into the city. Cant recover against the guy.
Maybe its a problem of the whole city that we socially havent
valued having another way to get into the city!
o People shouldnt spend their time suing the guy, and instead
lobby the govt to have another way to get into the city.
E.g. 9/11 recovery will not be for pecuniary loss against the airlines.
This is not the solution. Allowing tort claim against airline isnt
going to be the solution
o The more torts look like social disaster then the more they
will not want that and push toward regulation.
E.g. 3 mile island nuclear facility the hotels in the area lost
business and sued the nuclear plant. Court says pure economic
loss, no recovery etc.
o Court really thinking that nuclear meltdown is more
appropriately taken care of by regulation rather than tort.
o If nuclear meltdown happens, there will be no one LEFT to
sue the company!! This goes back to Hammurabi where there
was discussion of whether we want to do things by ex ante
regulation or ex post.
E.g. Silkwood nuclear company says that we already have a
regulatory regime and that extra tort liability would upset the
balance so the regulatory regime PREEMPTS tort liability.
o In Pruit, allied Chemical might say the same thing b/c they
had all these fines etc.
Regulation will get involved when there are too many
plaintiffs, etc.
Why is this not persuasive in Pruit to cut off liability to
fishermen etc you might say that its b/c we want to
COMPENSATE and the regulatory regime DOESNT
compensate, but if thats our concern shouldnt we
compensate the CRAB SHACK TOO??
We often make the regulation preempt tort law.
And sometimes compliance w/ regulation can
serve as a defense.
We might think that regulatory regimes are inadequate
and are under-regulatory e.g. there is a powerful
lobby that stops it. Tort law is a supplement/safety net.
Gives victims a second chance.
Why do we need TORT law? We can have the GOVT pay it out
through the money they collect through the regulatory regime.

Many situations have overlap b/w regulation and tort regime and hard
to get them to work efficiently. But there are places when we think that
regulation will work better and make it clear that there will be no tort
recovery whether by preemption or other ways.
But what about products liability e.g. you bring a suit about
convertibles or CARS generally. Even though you have a safe CAR. But you
say that the category is MODES OF TRANSPORTATION so the CAR is an
UNSAFE version of THAT.
You dont WIN. But hard to explain in tort doctrine why you dont
win.
But if you step outside and think that courts dont want to get
involved in something thats a regulatory and value-laden decision.
THINK ABOUT ALL ASPECTS CONTRACT, TORT, REGULATION IN
DECIDING HOW TO BEST DEAL WITH A PROBLEM.
How do you explain within tort doctrine why if you provide an
alternative to a car that is just light rail. Or that if you say guns cost
outweigh cost b/c I have alternative that sprouts flowers. You would lose.
BUT these are value-laden decisions that should be decided in regulation and
lawmaking. Courts dont want to get into that through tort.
Pain and suffering damages. Includes physical pain and emotional
anguish, loss of function, regret, etc.
Can recover lost income, medical expenses and PAIN AND
SUFFERING.
For many types of physical injuries, pain and suffering is the largest
part of it. Like if you got amputated cleanly by a lawn mower you
would basically only get for pain and suffering.
o 50% of tort liability
o Physical pain, emotional anguish, regret etc.
P. 136 Westbrook enumerates some typical pain and suffering Ps
back and knee are injured and he gets compensation for not following his
dog, water ski, loss of sex.
All compensation is UP FRONT (recall the discussion of up front cost in
Trinity Church). we dont have people come back and reassess.
The tradeoffs are same as trinity church avoids perverse
incentives of prolonging injury, it makes sure that the D is still there
and solvent etc.

Problem is its predictive BUT pain and suffering damages are NOT
discounted for present value.

Payment is lump sum up front so it doesnt create incentive to keep

suffering etc.
PROBLEM - We dont know what the market is for pain and
suffering. ALSO not clear if dollars can ever compensate for the
injury.
Raiden says that problem is that we dont really know that dollars
can actually compensate.
Raiden she wants to draw a distinction b/w INCOMMENSURABILITY
and what economists call INDIFFERENCE. If you cant make a decision b/w
two things you may be indifferent, but the different things may be
INCOMMENSURABLE.
Nice way to see this is to say if you cant decide b/w X and Y how
about X+ 10 dollars. If you are economically indifferent you should
take X+10. But when you still cant make the decision they may be
incommensurable.
o E.g. cant decide wehther to become a musician or lawyer.
Raiden suggests thinking of injuries and money as
incommensurable. It may be that for the right price you would give
up your leg. But that doesnt mean that you are expressing a
PRICE for your leg.
o Just b/c you are making the CHOICE doesnt mean that youre
equating the two values. If you say you would give up leg for
1M, doesnt mean that at 999,999 you WOULDNT and that
one dollar more makes you more eager. You cant think of
your leg in same terms.
Raiden different social norms for what can and cant be
monetized/commodified. (sex, adoption, organs etc.)
o E.g. George Bernard shaw story about asking woman to have
sex with him for 1M
Or if you take a job abroad for 200k more, can you
actually MONETIZE the value of time with your
FAMILY??
E.g. what if the managing partner of the firm is
the parent of your wife and just wants to get rid
of you.
Why do we block these transactions? Raiden says we are upholding a
norm of incommensurability so even if there is an efficiency gain, the
SOCIAL COST would be too big.

So we get a grey market that arises around them. E.g. give

someone a gift instead of money to say sorry, can buy dinner for a
girl but not pay for sex, donate to college, pay for healthcare of the
mother before she gives birth so you can adopt the kid. GIFT
CERTIFICATE reduces dead weight loss w/o FULLy commodifying
the transaction
o Socially launder the payment.
Raiden 2 issues
If we see bodily injury as incommensurable problematic
for REMEDIES b/c the idea is that we should be able to
compensate so that victim is INDIFFERENT. But
incommensurable means they are better off in one
dimension, and worse off in another dimension
o Practical problem of valuation No metric
Concern about commodification makes it AFFIRMATIVELY
undesireable to pay money for injury! This breaks down the
social barrier.
o E.g. money-primed subjects dont HELP people in the
experiments.
Money-primed people wanted to be alone more.
Conclusion is that when we focus our society on MONEY,
then people become more individual (both in a GOOD
way (self-reliance) but BAD ways also).
o Raidens Solution? We should just keep doing the same thing
and pay money but NOT think of it as providing
COMPENSATION, but a SYMBOLIC recognition of wrongs and
acknowledging RIGHTS and the wrongfulness of the injury.
But we arent saying to anyone that compensation is
the goal.
But couldnt we just have a PARADE?
From a forward-looking DETERRENCE perspective we dont really
care if its compensatory or incommensurable b/c from the Ds perspective
its trading money for money (in terms of costs to take precautions).
BUT we at least need a good METRIC to balance out the costs and
benefits of deterrence etc.
o SO were back to the same POINT where we need some good
metric.
Hubble this effect may come out also b/c our indifference points are
not as fine grained so maybe thats why people.

Legal system decides to address it by just giving it to the jury and

having them decide.
Juries told to give fair compensation or a reasonable amount.
Judge can use remittitur to get an extreme jury verdict. This action is
seldom reversed by appellate judges. Jury verdicts are seldom overturned
by appellate judges so juries usually make the decision.
Some jurisdiction BAN unit of time arguments and then MULTIPLY.
This tends to get a VERY large number.
EVERY STATE BANS the argument of asking the jury HOW MUCH
they would have to be PAID to accept the injury that P suffered.
o Of course this will be higher than asking how much you would
have to PAY to get rid of it.
o ***The problem is that jurors wont want to admit that they
would want to be paid some amount to accept an injury and
that they value their leg at a certain amount.
o Make whole instruction DOUBLED jury awards. And an
instruction of how much would you have to be paid
DOUBLED the awards AGAIN.
Tort Reform Movement focuses on pain and suffering.
Two Types:
o 1) Caps on damages but some have been struck down
under equal protection
********Caps on damage recoveries basically only
apply to people who have ridiculously high damages!
Which seems perverse
Some states put a RATIO on how much medical
expenses/lost wages must be to Pain and Suffering.
But in many cases (like the clean cut leg) the
medical expenses might be very low but the pain
and suffering is the only deterrence so we
wouldnt want this.
Maybe you should limit it on the low end for people who might be
bullshitting
Another proposal use a statutory schedule based on the
underlying injury. This is like workers comp.
o This is a more promising solution. Bloomberg study said 40%
of award variation is b/c of severity of injury. BUT that means
that 60% is based on other shit!! (like good-lookingness)
If you think taking individual factors into account is a
GOOD thing, then you dont like this.

Same debate over sentencing guidelines (e.g. do

you think that judges will be harsher on certain
races or do you think individual cases being taken
into account its good).
o This is thought of as some new innovation King Ethelbergs
Laws schedule of injuries.

*****Attack on Torts has proceeded also in Academy Can think

about how much insurance people would buy and think of compensation that
you deserve in that way - Economists predict that people will buy insurance
against losses that impact the value of dollars POST LOSS. I.e. things that
will decrease your wealth.
Insurance transfers money from pre-loss state to Post-lost state.
People buy insurance only in cases when dollars would be worth
more to them Post-Loss!! The kinds of losses that make money
WORTH MORE (or decrease your wealth)
o E.g. injuries that create medical expenses. b/c you have to
use it on medical expenses. The dollars you spend on
medical expenses are worth more than if you had been able
to use them on a mink coat b/c the medical expenses are for
your first-order needs (health).
o E.g. you want to prevent an injury that would fuck you over in
your JOB b/c you wouldnt have money.
BUT unclear that youd be willing to pay insurance premiums for
insurance that would pay you for pain and suffering b/c its
UNCLEAR that pain and suffering s a reduction in your wealth.
o Dollars may be worth LESS afterward than BEFORE when you
were more ABLE to do fun stuff with the money.
o E.g. Most parents dont buy life insurance for their children
b/c when child dies you dont have wealth loss. In fact you
needed more money BEFORE when you had child expenses.
E.g. People dont have insurance against breakups.
**Things that dont change the MARGINAL UTILITY OF
MONEY are not things that you buy insurance for.
Unclear though: what if you loved skiing and got
hurt and later you substitute reading for it, you
would want the money BEFORE when skiing more
expensive, unless you replaced skiing with
expensive cocaine. BUT in general this isnt the
case.
***LEVINSON: Argument makes him uncomfortable it may be that
even if its worth LESS to us AFTER, then we still want to transfer money to
the post-injury state.

The economists argument presupposes that people want to

maximize net utility over the COURSE OF THEIR LIVES. So even if
you had a HIGH amount of utility early and really low later it would
be better than having a middle range but overall lower throughout.
o So They would want to put money at the point where it could
be used for MOST utility.
This may not be true!! People want consistency.
EQUALIZING utility.
May want to smooth out the loss by allocating
DOLLARS across your life.

E.g. if you got injured and could have a ticket to a baseball game and
before injured you wouldve gotten more pleasure by sitting in better seats
that arent wheelchair accessible. Economists would say that you should
allocate the tickets to your non-injured self b/c your utility wouldve been
higher. But thats not entirely intuitive or realistic b/c people want to EVEN
OUT their utility and might want to increase their happiness after the injury!
Same idea as not partying like a rockstar for 2 years when youre
19 and having miserable life for the rest of the time even if it would
build up enough utils!
E.g. economists wouldnt send flowers to a sick person. But we do
that b/c we want to EVEN it out.
o E.g. why do people SHOP when they are unhappy.
E.g. you have two friends to give baseball tickets. One is a huge fan
and would have higher utils and starts from baseline of 10 and
would go up to 20 but the other guys baseline is at 5 and goes up
to 10. Maybe you give it to the sad one b/c you want to equalize
welfare ACROSS PEOPLE.
o Rawles you cant just enslave some people even if you
would get societal utility that was higher, b/c the goal should
be about equalizing.
o We confront these questions with how much we put away in
tax advantage retirement account and you could put away
75% of your wealth and be rich later. Or you could spend it
all now and have nothing later.
What about age discrimination?
Arent you treated the same over the course of your entire life if
everyone gets old??

***We have to get clear on the meaning of life then.

But more straightforward response to insurance perspective

regardless of COMPENSATION perspective. The perspective of Ds and
deterrence and making them pay. This would prevent injury in the first
place.
Insurance theory only focuses on compensation. Why? They think
that deterrence is less important in major areas of tort liability
(med mal and products liability) b/c of the CONTRACTUAL nexus
b/w the injurer and injured
o One consequence is that victims are paying premiums for the
protection they get through tort system.
o ******Victims can INFLUENCE the safety incentives of the
Ds through market decision-making and contract.
This is RELATED to privity of contract (Evra) economic
loss.
Same idea carries over to why we might not need
tort liability to manage the safety precautions of
manufacturers.
In theory, in war old of perfect contracting you wouldnt need tort
liability to make companies to make their products safe.
What if 1 out of every 100 cans of pepsi has a cockroach. But the
damages is 5 dollars.
o Expected cost of drinking a cockroach is 5 cents and cost of
pepsi is 1 dollar. The PRICE of pepsi is 1.05 b/c of the
expected cockroach consumption price.
o If youre fully informed as a consumer, imposing TORT liability
will force Pepsi to internalize the costs of the cockroaches
which will be passed on to consumers in the form of 1.05
ACTUAL price. Now its the sticker price rather than an
implied price.
Pepsi will have incentive to take same roach reducing precautions in
the contract or the tort world as long as the precaution costs less
than the premium they would have to charge in order to cover for
the cost of paying out damages.
o Without tort they will EFFECTIVELY only add 2c a can in
precaution costs b/c you wont add the IMPLICIT 5c.
o This actually does work e.g. when Tylenol was hurting
people. Or people pay premium to VOLVO for safer costs.
So SOMEWHAT RESPONSIVE. But its hard for the
average consumer to actually know the risk of the
ROACH and how much DAMAGE it would actually cost
w/o the help of a TORT system.

Worry is that in the pepsi example, w/o tort,

consumers dont know about the risk and dont
add on the implicit 5c.
******TORT system allows consumers to
just look at STICKER PRICE b/c Pepsi will
internalize the price and actually put it on
the can and CONSUMERS DONT HAVE TO
KNOW ANYTHING!!!
Products liability creates a VISIBLE
price level of safety risks. This is only
way in an imperfect information world
to create deterrence

FINAL DILEMMA What if we want Ds to PAY b/c we want them to

internalize the full cost but we dont want VICTIMS to RECEIVE the full
amount of pain and sufferent b/c we believe in the Insurance theory
(above)?
Standard solution might be REGULATION (product safety
regulation etc. Medical services, healthcare, cars).
o De-coupling solution
o But if Regulation you believe is INEFFECTIVE, then you want
tort to SUPPLEMENT it.
One final argument against pain and suffering
Sunstein
o People bad at Hedonic Forecasting cant predict how well off
or bad off they will be after something good or bad happens.
Good and bad events roll of our backs happiness-wise.
Short term BLIPS, but we end up returning to the
baseline levels of happiness in SHORT period of time!
E.g. Junior professors approaching tenure etc.
Even people who have HUGE injury get back to normal
EVEN THOUGH people who are healthy assess
these injuries as HUGE ex ante.
People are BAD at hedonic forecasting
People who know LESS about parapalegics
actually think that they are much WORSE
OFF.
o We neglect that people ADAPT.
o Maybe we only need pain and suffering compensation
for the brief adaptation period.

For SUNSTEIN this observation leads to argument that pain and

suffering awards are OVER-compensatory b/c people are bad at
hedonic forecasting AND b/c they are FOCUSING only on the
INJURY
o This is bad BOTH for backward-looking COMPENSATION AND
in terms of forward looking DETERRENCE.
o Some might be under-compensated people underestimate
how much a small injury like ringing in ear or depression.
Sunstein suggests creating a STATUTORY SCHEDULE based on our
best assessments of actual hedonic losses.

Sunstein injuries dont end up costing people as much as judges and

juries assume.
You could make his argument for loss of WEALTH and material wellbeing. So shouldnt we just get rid of ALL compensation?
o BUT maybe the compensation disappears also hedonically, so
maybe it doesnt matter that were giving worthless
compensation for a worthless loss!
Maybe we should want govt to reduce just NOISE and repetitive
things. Just focus on papercuts and common cold, rather than huge
things.
Increased GDP doesnt lead to more happiness.
Peoples happiness in terms of income generally comes from
comparison to the relative group that youre in. (doesnt really work when
you compare to the WHOLE country. More about small groups).
People will take LESS money as long as they are relatively more
wealthy than the other co-workers.
Womens decision to work outside home affected by sisters
husband in comparison to their own husband.
People get into arms race of having more and more money they
want to be better than others but basically only end up increasing
ABSOLUTELY but not RELATIVELY b/c EVERYONE is increasing in wealth. So
its a collective action problem and were not really gaining anything.
Maybe we should hire task-masters with canes to STOP people from
working? Like Hammurabi.
Or maybe govt should do it for us. And have rules about what we
need to wear etc.
E.g. BMWs hedonic value only lasts for 3 months.
People dont get much happiness from moving to California.

People get more happiness from experiences than from material things
b/c they come up more.
You should spend on small vacations rather than a big vacation b/c you
get little hedonic blips. (or buy a bunch of small things).
Or you should have a short commute! Dont move to suburbs b/c
traffic is constant misery.
Devote yourself to PEOPLE and relationships rather than things. BUT
negative social relationships are very hard to adapt to ALSO
Manage expectations Happiness comes from things turning out
better than our baseline expectation.
Silver medalists not as happy as bronze b/c of the hedonic baseline
that they use (in this case the gold medal).
From hedonic perspective its better to make the downward
comparison rather than the motivating comparison of who was
better than you.
o Gratitude journals think of all the ways your life went better
than people or could have been.
Curse of modern life and choices. Major life choices werent a matter
of control.
Consumers wont buy Jam when they have 18 kinds of jam and its
oppressive, and theres always a dimension that your choice is
inferior to another along some dimension!
o Not a big deal w/ jam, but its debilitating when thinking
about careers, where to live, spouses. (e.g. happier when
you just say im going to live here).
o E.g. New York and all the choices of restaurants. shouldnt
worry about maximizing.
Sunstein recognizes that maybe the happiness studies arent the
ultimate guide. There are other things that people CARE about.
Sunstein mentions capabilities (like ability to run, see, think etc).
He mentions possibility that human education, wealth, etc. even if
they dont register on a hedonic scale, are things that people CARE
ABOUT!
J.S. Mill mocked that you shouldnt read a sad poem b/c it makes
you sad etc.
o Plato we shouldnt aspire to life of satisfied oyster.
Sunstein says that people w/ severe disabilities say they would spend
a lot of their leftover life or give a lot of money to get rid of the disabilities.

E.g. Dialysis patients would give up of remaining life.

E.g. People with children are LESS happy (moment to moment)
than when they didnt have children. BUT they say that its the
most satisfying thing in their lives.
o How do we explain this discrepancy? There are things we
do that appear to make us unhappy BUT yet we value
them.
And that we have studies that show that dialysis makes
no difference in happiness but they would give up half
their lives and people who are unhappy with kids say
its the best thing.
Sunstein says people may be making forecasting
errors.
PEOPLE mis-predict what makes them happy and
people mis-remember what makes them
miserable
E.g. people dont see that children make
them miserable or that dialysis isnt making
them unhappy.
ALSO people DONT just care about MOMENT To
MOMENT happiness. People derive some sort of
Satisfaction from things that require WORK and
some sort of SACRIFICE.
To extent our goal should be maximizing
moment to moment happiness, we
shouldnt compensate for pain and
suffering, BUT there are other ways we
measure our lives and maybe legal system
should compensate us for THESE LOSSES.
Have to figure out whether Mill, Nozick, and
Plato are right, or whether hedonic
researchers are right.
o WE FIGURE OUT MEANING OF LIFE
BEFORE FIGURING OUT HOW TO
ARRANGE LEGAL SYSTEM.

DEATH
Hedonic psychologists say that a STEADY increase in utility is better
than going up and down b/c a HEDONIC satisfaction graph might look much
better.

Common law used to not have recovery for wrongful death. BUT if you
injured them then you had to pay. It made sense somewhat b/c decedent
wasnt in position to be compensated for the loss. Value of life was only
something enjoyed by decedent. Survivors only suffered pure pecuniary
loss!! (no ownership stake).
Not such a great approach from perspective of making injurers
internalize the costs of their torts.
In 19th Century the rule changed in response to Railroad deaths.
o All jurisd allow survivors to recover financial support that they
wouldve gotten.
o States now allow recovery for services
How to assess value of lost wages and lost services to the other
family members. E.g. taking care of kids, etc.
o Can look at market value
Can add up how much it would cost to hire a cook,
nanny etc. OR can look at opportunity cost.
Maybe a lawyer who gives up 200k job to stay
home w/ family they can say that 200k of value at
least to family (but obviously that person also
eats some value by not working and the whole
value isnt transmitted to the family but consumed
by the person who stops working.).
How do we calculate how much the
decedent ate, well then the courts go back
to the market value of the services anyway.
Legal system is WILLING in wrongful death
context to take opportunity cost into
account while USUALLY they are reluctant to
do so!
E.g. Typically legal system is reluctant to take the opportunity cost
argument into account This has been a proposal in the income tax
context. What if we taxed earning CAPACITY rather than actual earning.
E.g. tax Levinson at level of Cravath partner. This would basically make him
do what is socially valuable.
From a fairness perspective Levinson is getting compensated by the
greater leisure time and satisfaction of helping students etc.
o B/c if youre NOT being a partner at Cravath, then you VALUE
your current job at 3M but all of your income is NOT taxable
b/c its all in the types of BENEFITS that are not taxable.
o Administrative problems obviously.

Tort system ALSO extended value to society/consortium

companionship etc.
Originally only wages counted, then they realized that they needed
services, but services didnt capture some losses like useless
children etc, so now we get society/consortium.
The common law used to just value the material benefit that the
child would give to the parents. This gave small recoveries and no
recovery for USELESS children. After child labor laws the economic
value of children was obviously NEGATIVE courts and juries
stopped awarding damages. Tort system changed in response to
social outrage. Loss of society began to be accepted as a recovery
in tort.
o Opportunity cost for child given how much children are
economic albatrosses, then they must be WORTH something
to them so we should calculate how much the parents spent
and expected to spend on that child. Benchmark for how
child is worth (no court has done it this way).
Given the squishiness of criteria so jury awards are highly variable.
May depend on other things like good-lookingness, gruesome death etc.
High income people get huge numbers b/c of lost wages
Children get huge damages (when jurisd allows loss of society)
Elderly people w/ no dependents get low recovery.
o Young people w/o children also get low recovery
BUT courts will often give estate value (b/c you
wouldve made money and given it to SOMEONE).
GLARING OMISSION is the INTRINSIC VALUE OF THE LIFE LOST
ITSELF. Hedonic value of the life to person who died.
o Some people say there shouldnt be compensation for the
LIFE itself b/c the survivors didnt actually LOSE the life etc.
The tort system based on compensating people who are
AROUND. Some jurisdictions DO allow for the loss of actual
life (Georgia etc.)
So you might see systematic under-deterrence for loss
of life. BUT if you gave that money to SURVIVORS, they
would be over-compensated
,And then you get all the same problems of
the insurance problem where people wont
want to pay more for products now in order
to be compensated when their family
member dies b/c the money isnt going to be
worth more to them after the accident

But from deterrence perspective, then we DO

want them to pay
AGAIN THE DILEMMA OF COMPENSATION
PROBLEMS

We might look at REGULATION which takes into account how much

people value their OWN lives RIGHT NOW. Tort then takes care of the
incidental losses to OTHERS
PUT THEM TOGETHER AND YOU MIGHT GET A COMPLETE
SOCIAL ACCOUNTING OF THE VALUE OF A LIFE
SO maybe the 7M component is accounted for in regulation and the
1M is accounted for by tort and life is worth 8M.
o We dont have the problem of insurance b/c the 7M before
dont create the compensation problem that the insurance
theorists point out.
Continuous proposal for reform is that tort SHOULD compensate for
the ACTUAL loss notwithstanding the possible DUPLICATION with regulation.
How to calculate?
o Viscuzi - Extrapolate from statistics about the SMALL risks
people take and see full value (no jurisd which allows
recovery for the actual life actually allows this).
How much are people willing to pay for safety
precautions like Anti-lock brakes etc.
Results of those studies 5-10M or about 8M. Govt
uses around 7M.
o This might make sense for assessing negligence in tort or in
ex ante regulation b/c QUESTION IN THESE CASES IS
ASSESSING SMALL RISKS OF DEATH. VSL numbers
increase exponentially as the PROBABILITY of death moves
UP! No one will take any amount for CERTAIN DEATH.
Hard to actually reconcile people making choices in labor and product
safety with the notion that a life is worth approx. 7M. No one will actually
give up their life for that price.
People place different values, in different places, and in different
contexts. Incommensurability (Radin).
Ask people how much they would pay to get rid of an EXISTING risk
and they will say a certain amount BUT to accept the SAME LEVEL
OF RISK thats NEW, people will often say NO amount of money.

E.g. Parents wont accept ANY amount to take a slightly less safe
vaccine. But they couldve used that extra amount of money for
some OTHER safety precaution.

Hard to actually assess how people value life. Levinson wouldnt

accept a 20% chance of being burned alive for anything less than MILLIONS
BUT he doesnt replace battery in smoke detector! SO do you value it from
answers to surveys or from the ACTIONS of Levinson.
****When we talk about probabilities we are able to put value on life
but when there is a PERSON who is identifiable we spend infinite amounts of
money on a certain person!
E.g. coal miners get them out and mobilize money to get them
out. But there was an emergency ladder that wasnt even
constructed.
o So how do we assess how much we value the lives of the
miners. The amount we spent on the ladder or how much to
get them out.
But no one accounts for all the people who are NOT going to get
treatment b/c of the money is spent on that one baby.
Should we value Every life the same? Wouldnt we be lying to
ourselves? Wouldnt rich people value their lives more than poor people.

CLASS 13 Thurs 10/11

VSL methods of valuing life. What it would mean to use this to set
compensation amounts in tort system and how they are used
VSL are self-assessment so theres no way to know if its accurate
o BUT rich people tend to have more concern for safety.
Shouldnt we just model everything around the Titanic
system.
o Populations affected by traffic safety are poorer than those
affected by airline safety so maybe we should focus on
safety regulation
Isnt it paternalistic to force poor people to pay for
regulations of safety even though they dont care about
them?
E.g. have a second class airline thats not safe but
at least poor people will be able to travel! Now
they cant afford to fly

Why not leave it to the MARKET and well have

unsafe things and people can buy unsafe things
One of the consequences of the shift from PRIVITY of contract regime
is that now we have MORE one size fits all systems
We do accept some variation e.g. poor people have old cars, but we
can go further than that.

We like these ideas in some domains

E.g. rich people buy better medical care, Volvos, safe areas.
E.g. We dont care that Chinese workers get less protection (only
when it makes their job cheaper and interferes with global
marketplace.
We dont like the idea that peoples lives should be valued. Even
capitalists get squeamish about the outcomes in a pure market based
system.
E.g. Lifeboat cases no room and some people have to be thrown
over. Six people decide who has to be thrown overboard.
o We DONT like it if a rich person just BUYS the spots at an
auction.
o Courts LIKE people to decide based on CHANCE.
Cardozo: wants someone to volunteer.
Courts generally want a lottery. Most fair. Everyones
LIFE is treated EQUALLY
The WRONG way to do it, which might be more
rational, is to sit down and decide whose life is
more valuable.
E.g. you decide to keep the First Mate b/c
they cant steer boat without them, or keep
the mother b/c she has dependents, but we
kill the cabin boy b/c has no dependents or
skills.
E.g. Military Draft supposed to be based on LOTTERY
system. BUT we still think that rich people should be
able to get out of it.
This was EXPLICIT in Civil War when rich people
could pay someone to take their place.
But this reduces volunteer btw, b/c
volunteers will just wait for rich person to
get drafted and then pay them and they will
get a bonus

But by the time we get to Vietnam it gets more

under the table you can go to COLLEGE or pay a
psychiatrist etc.
The fact that we make only CERTAIN people
eligible (young men) means that we dont want it
completely up to chance.
E.g. organ transplant LOTTERY a MARKET for kidneys
would be more efficient but we cant stand it.
But whats the difference b/w this and VOLVOs?
Probably just more direct.
**Larger point is that we are uncomfortable valuing lives
differently, but we allow it to happen when we can attribute
it to the invisible hand (e.g. Volvos), but more
uncomfortable when there is a PERSON directly in front of us
(e.g. trapped miners or 90 yr old patient we spend all this
money on them vs. statistical people that you could save
with the money).
o Values we assign are not paradigm of economic rationality
o We say that we value lives but we dont behave that way (e.g.
take your lawfirm salary and go to Africa).
Tort system
BUT we pay for rich people in wrongful death than poor people
based on the LOST income and financial support but we attribute
this to the invisible hand of the market. (we didnt decide that
some lives are more valuable)
Turn our back to the fact that b/c we dont compensate for lost lives
themselves, we have a deterrence shortfall, and b/c of this maybe
more people die, but these are just statistical deaths.
And we also leave things in the black box of the jury. We dont
have to confront it.
** 9/11 Victim compensation was uncomfortable.
o Put on the table quite explicitly how we should deal w/ loss of
3000 people.
o Solution was to split the difference b/w regulation and tort.
o One part was individualized compensation to incentivize
people not to opt out into the tort system.
Had to be politically feasible. We cant be paying rich
people so much more!
Tort alternative was never clearly viable b/c not obvious
that airlines would be held liable. Congress also capped
the tort recovery to the amt of insurance they have.
97% of victims chose to get compensation fund

250-7M in the fund. Mean was 2M. The tort

awards were higher but this is also due to
selection bias of better claims.
The valuation method in compensation fund
roughly tracked the tort system Was based on
age and income etc.
Women were able to use the male
expectancy in the workplace.
Factors in likely promotions, how much
household income goes up, chance of
retirement etc.
Feinberg used national data for spending
instead of NYC (even though NYC is more
expensive).
This is how tort wouldve worked except in TORT
system you can DISTINGUISH yourself from the
average person.
There were CAPS on high earners who wouldve gotten
20M b/c they were bond traders etc. He said it was
politically infeasible.
Feinberg also had non-economic losses of 250k.
o One interesting question is whether it shouldve existed at all?
Should govt get involved in compensation? When and how?
Usually govt doesnt compensate people for disasters.
BUT sporadically, govt HAS gotten involved in
compensating for floods, Whiskey Rebellion etc.
FEMA usually just provides loans etc.
After Katrina they paid for hotel and trailers
for displaced people. BUT no compensation
for loss of life.
Nothing for Pearl Harbor, OK City, US
Embassies.
Israel: system of govt compensation for victims
in terror attacks replacement of lost earning up
to middle income. Covers medical care, children.
Same thing for soldiers KIA.
o Compare victims of 9/11 attacks vs. Katrina:
Ordinary crime victims get nothing.
People who lose jobs b/c of US trade agreements get
nothing.
Maybe instead of giving 7M to bond traders family its
better to give to poor people

Is it just arbitrary that we gave compensation to 9/11

attack rather than drunk driving or other terror attacks?
Is there a way to have a rationalized framework.
Could it be politically maximizing solution
(b/c of interests group like Airlines and Trial
lawyers)
o But couldnt the polticially maximizing
solution be not to give taxes to rich
bond traders?
Maybe its b/c this event caused some rally
around the flag etc. patriotism. People feel
good that were taking care of them.
**Maybe its GOVERNMENTS FAULT! So
govt is the tortfeasor that should be held
responsible as opposed to a hurricane or a
crime.
o But you could say that govt didnt get
police on street or build levies etc.
o But maybe the acts that led to 9/11
are more DISCRETE rather than a
diffuse policy measure like not putting
police on the street.
Should we keep distribution as
some CONSTANT for poor
people etc. and then just
distribute around disasters when
they happen?
Victim Compensation fund Raises
question of HAMMURABI Why do we
care about compensatory justice when
it would move us AWAY from
DISTRIBUTIVE JUSTICE e.g. why
should we take money from people (i.e.
taxpayers) and compensate wealthy
bond traders instead of distributing
among the poor who need it more etc.

COMPENSATION FOR TAKINGS AND OTHER CONSTITUTIONAL

VIOLATIONS
Dilemma of compensation if we always force govt to pay
compensation for its takings.

Heller and Krier

Takings is like TORT b/c govt comes along and injures you by
taking your property.
Question is, like tort, what sort of compensation should it give you.
Its a STRICT LIABILITY RULE (like contract) b/c even if the govt
passes the hand formula and would not be negligent it still ahs
to pay.
Genius system to require govt to pay b/c we want it to be taken to
INCREASE SOCIAL WELFARE (not just b/c they dont like the
person).
o We want govt to TEST whether the value that the property
will be used for will be GREATER than the value to the owner.
o E.g. if house worth 10 for person and highway would provide
5, we dont want govt to take it.
We dont want govt to take just because it has SOME
positive value.
****If we say that govt never internalizes the COST unless it pays,
then shouldnt we think that govt also wouldnt internalize the
BENEFIT that would result unless they get to TAX the beneficiaries?
o Levinson: This asymmetry is puzzling to him in a way thats
not puzzling to Heller and Krier.
o Why does govt care about money flowing in EITHER
direction? Its the taxpayers money. So is this really a valid
thing. My idea: the takings doctrine is more for compensation
than for EFFICIENCY.
If what motivates govt officials is POLTICAL SUPPORT
then they dont really care if govt is paying money, but
the political consequences (as opposed to dictatorship
where its HIS money).
Maybe think about the decision in terms of
switching the loser When govt takes money
from a landowner, that person will be mad and try
to hurt the politicians. But what if you pay him
compensation, the LOSER is the taxpayers or
some other group that loses funding.
Political effect will just boil down to
which loser is more politically
powerful
E.g Lucas v. S. Carolina beachfront property
owners cant build houses on these parcels. Is it
a taking or regulation?

Does paying takings to beachfront property

owners actually INTERNALIZE the costs of
environmental regulation? In fact, what it
does is allow them to avoid the powerful
beachfront owners from getting mad.
Instead, we will DIFFUSE the cost of 1c to
ALL the taxpayers who will not have the
political clout. Or even just move the cost
to free lunch program of people who have
NO polticial voice.
How could this be? How can you increase
the cost of something and make greater
demand?
o Its only a puzzle if you dont
distinguish b/w financial cost and
the more important cost of
POLTICIAL cost (votes). They are
not always correlated.

Incentives of Property Owners

Heller want to pay property owners to prevent demoralization
costs b/c people wont be willing to invest or buy property etc.
Afraid govt will just take their property etc.
Compare this to the Boring Review
o Property owner is the same position as the buyer/promisee in
the computer case who, if not indemnified, will not invest as
much in software. OR same as the pedestrian who, if not
indemnified, will not rollerblade etc.
If those people were fully indemnified, the PROBLEM we
identified was the MORAL HAZARD, and they wouldnt
do anything to prevent losses and would OVER-RELY on
the contract and we didnt want this b/c we wanted the
potential for efficient breach whose efficiency wouldnt
be undermined by the over-reliance.
E.g. What if Donald Trump is going to be building an
office building but he knows the city council is 50%
going to build highway through his parcel. If its located
in the adjacent parcel it makes his building worth 15M,
and if they go through his the value would be 0.
Do we want Trump to build the building? Cost of
building is 10M and expected value is only 7.5M.
BUT if we compensate fully, his expected value is
always 15M so he will do it.

Not clear that he will get the full 15M but at

least he will get the 10M investment.
If we DONT compensate, he does the more
efficient thing.
**So if thats right, the dilemma of compensation
problem is NOT what Heller and Krier point out
(incentivizing govt) but its more like what we pointed
out in the BORING REVIEW!!
If we think its important to force govt to
internalize costs through TAKINGS, then its really
the same balance b/w govt and Trump as b/w
tortfeasor and rollerblader.
If the govt internalized costs like a
regular tortfeasor, Maybe their
decoupling idea is important for the boring
review reasons.
o Maybe better solution is to have govt
pay money, but not to trump but to
poor people.
o But really paying money is not
affecting political choices.
Compensation is NOT doing anything that
they say it will b/c its more about POLTICAL
costs.
Maybe the conclusion is the better rule is
NO compensation for takings.

Is there any good reason to have govt pay? Should we always just
call it regulation and have the govt not pay?
From perspective of distributive justice, people who are Ps in
takings cases, they are richer generally b/c they own property. So
its more regressive distribution.
***Difference b/w private and public law, it can make all the
DIFFERENCE when we switch from DOLLARS as the relevant
currency to a system that depends on VOTES . EXAM LOOK FOR
THIS
Government compensation and takings and why its a good idea
Levinson said it might be a bad idea incentive effect is based on
getting govt to internalize the cost to make sure that they do socially
valuable takings and to reduce demoralization effect.

But the first reason is not really effective b/c its indeterminate what
making govt pay will do (b/c votes may be what happens)
Demoralization effect might be a GOOD thing b/c of Donald Trump
example and boring review.
What about Justice:
o Distributive not really good for distributive justice b/c its
regressive distribution in most cases. Given that govt is in
charge of distributive justice. If we think govt should be
redistributing generally, why cant the distribution take the
form of an environmental regulation or taking.
o Compensation whats left of justice is the idea that we
should have some norm of restoring the status quo.
But then were back to the questions of 9/11
compensation fund.
To the extent that EVERYTHING govt does has a
distributive effect and b/c there will always be
some LOSER in govt policies, then how do we
determine which LOSERS should be compensated
by the govt and which not.
STILL hard to see how its compensation to a person for
a taking. Govt doesnt have money, they are just a
pass-through organization. So really its taxpayers or
some group that doesnt get funding who are paying
compensation. So really just taking money from one
group of private citizens to another. So shouldnt the
people who are giving the money have a claim too?
o Its also trickier to complain if we think of property as a
positive law in which the govt is giving you the
entitlements. So why cant the govt take it away?
If the govt is giving you a bundle of sticks, then why is
it different than saying we are just giving you a pile of
sticks without the stick that says you can build a huge
house on the property.
E.g. saying you cant use a gun to shoot someone
in the head is just a limit on the property.
Why is it different when you TAKE property than
when you LIMIT property rights
Cant govt just say that theyre not taking
anything but just REDUCING THE BASELINE of
your wealth.
Unfairness of takings is that it reduces the
wealth relative to some baseline.

Govt can point to some OFFSETTING

BENEFIT
o E.g. when govt takes land to build
railroad, you are offset by the
increase in value of being close to
Railroad.
E.g. Penn Central dont have
to compensate for zoning b/c
they are gaining also from the
historical preservation in the
AREA and will gain from their
other holdings. Courts wont
get into the nitty gritty of the
amounts.
If you say there are offsetting benefits, then
doesnt seem like theres a limit.

E.g. Kyllo
Could argue that person has no way to say that govt taking is a
negative b/c the govt has given him so much in the way of OTHER
things (schools etc., natl defense!!!)
o But you have to factor in taxes that homeowner paid. So is
the homeowner better off on net b/c of his lifelong
relationship with govt?
As compared to Hobbsean nature you might be better
off. It should work like Cuban revolutionary court who
just takes your property?
But should that person be made to bear such a disproportionate
cost?
o Courts often say that its unfair to pick on a minority when
everyone should bear that cost.
o But you cant just look at one particular govt act, it might be
the case that over the course of ALL govt programs, this
person might be better off than MOST PEOPLE.
But govt pervasively operates in a state of putting
some cost on a small minority e.g. tobacco companies,
rich people, etc.
Seems arbitrary to say that in THIS situation its
unfair.
Compensation for OTHER Constitutional Violations
Good thing about takings compensation is theres an easy way to
calculate it.

Carey v. Piphus kid punished for having weed and principal violated
procedural due process. But only gets nominal damage of 1 dollar b/c its
not deterrence or malicious conduct.
Until 1961 there was no MONEY for constitutional violations. Could get
injunctions etc. Monroe decision for state officials.
Govt created a federal cause of action against state officials.
Bivens created it for federal officers.
Could have sued in TORT beforehand. But constitution wouldnt
come into play except to defeat immunity by the official.
Carey Ps will get same damages as they wouldve gotten in TORT.
Individualized damage.
Straightforward if cop beats you up (medical expenses, lost wages,
pain and suffering) or in a taking where you use market value.
Straightforward when you are fired w/o cause etc.
But what about cases where theres no clear tangibly monetized value?
Carey this wouldve happened anyway b/c he wouldve been
suspended even if he got the procedure according to Matthew v.
Eldridge standard.
o School principal just has chance to say his side of story.
o Court says that since it wouldve happened anyway, then he
gets 1 dollar.
This is most constitutional violation like stopping people from voting
(There is black market for vote-buying which is about 10 dollars).
o BUT individualized value of voting is low.
What if the govt gets rid of Occupy protesters? Or what about
unconstitutional search or seizure?
Affirmative Action what is the individualized harm to Abigail
Fischer of not being admitted to the University given the fact that
she wouldnt have gotten in.
**Consitutional violations are meant to prevent a DIFFUSE social harm
rather than some sort of individualized harm. Some of worst constitutional
damages create no personal damages, but some minor violations create
huge damages.

What if you run a porn site and the govts law tries to shut you down.
And even if you win in Sup Ct, what about the fact that everyone left your
business on to the new sites? You would get compensated for the loss of
business.
BUT a protestor in Zuccotti park who is shut down b/c of his views
only gets a dollar. Isnt that an egregious DIFFERENCE in
treatment? Isnt suppression of political speech the WORST offense
against the First Amendment?
Arent the PEOPLE who watch the porn site the ones hurt? The
owner suffers an attenuated first amendment harm
Isnt the result in Carey v. Piphus wrong? Shouldnt the damage be
proportional to how bad the VIOLATION was rather than the actual HARM
(which would give the porn guy a huge amount).
What if we did it that way?
o Valuation problems how would we figure out how much it
would be worth. No real market (only plea bargains which are
PERSONAL).
Obviously well just ask a JURY to make it up. Like pain
and suffering. Better that we have Jury guess and try
to get it right rather than always getting it wrong with
amount of harm.
Windfall to Plaintiffs? P recovers societys value to the
right rather than the value to THEM. (But this is also
true about porn peddler). AND its true of exclusionary
rule where the Def gets a huge windfall
The Sup. Ct. says its about DETERRENCE and
theyre willing to give a windfall.
Maybe apply Radin argument: **********We like to maintain the
incommensurability of constitutional rights and MONEY. ITs sort of like we
dont assign money to lives lost etc.
Avoids unpleasant obligation to assign a money value.
o If we assign monetizable values, then its easier to just say
my violation of 1st Amend violation to prevent terrorism is
worth 1000 dollars while the violation is only 100 so we
should be allowed to do it.
But maybe we dont want that. We want it to be
incommensurable and say that you cant value the
1st Amend.

BUT in many cases, these people get EMOTIONAL DISTRESS DAMAGES

usually courts are not willing to get emotional distress. BUT these
dignitary cases or Constitutional Tort cases are where they are more willing
to give emotional distress.
E.g. Strip search cases like Lefko
o This of course depends on things like how attractive they are,
or bills for psychiatrists.
Not as GOOd b/c instead of saying that its horrible to
violate constitution we are litigating about emotional
distress.
** Why should govt ever have to pay compensation?
Compensatory justice same problems arise. This means that
taxpayers are paying (not govt)
Should majorities have to pay compensation.
o Why should plaintiff be able to get full societal value. Why
should the people in the demonstration recover rather than all
the people who wouldve HEARD it or society that loses a
robust political atmosphere.
What about Deterrence?
o Would this mean that govt or majorities will just go around
violating peoples rights b/c they can pay for it? That may be
the problem of putting a value on constitutional rights.
This is even more of a problem b/c these RIGHTS are
supposed to be counter-majoritarian or counterutilitarian
E.g. it may be beneficial to prevent Islamist
speech but we dont want the govt to be able to
violate 1st Amend and just PAY the cost.
E.g. What if police go aggressive in minority
neighborhoods like stop and frisk. What they do is both
1) prevent crime 2) violate rights.
In absence of compensation Harlem community
decides that on net its a bad thing even though
they get crime prevention.
BUT in compensation, we just switch the
loser. In a way, that brings people in the
neighborhood more to indifference, and the
taxpayers are the losers. And the people in
the neighborhood decide they get all the
benefits of less crime AND they get
compensation, so theyre not really the
losers so they dont make a FUSS.

o So this just allows stop and frisk to

continue.
Money damages is problematic in Constitutional scenarios b/c its
different from private actors:
Govt is not affected by money but votes (cost internalization
doesnt work)
Compensatory justice case is problematic b/c constitutional rights
different from the other privileges that we protect in private
situations.
NEW ASSIGNMENT PROBABILITY AND MAGNITUDE OF PENALTIES
Polinsky Optimal Law Enforcement tradeoff b/w the magnitude of
penalties and probablility that they will be applied.
Multiplier principle If we want to set the penalties equal to the
harm.
If you know that not everyone will get caught, then you have to
increase the penalty. Multiply by 1/(probability of getting caught).
o Polinsky chooses pricing regime (rather than sanctioning
regime) we want people to double park if they value double
parking at ABOVE 10.
Strict Liability example. There is an overdeterrence
risk b/c we dont care if people want to double park if
its more socially valuable.
In a sanctioning regime where we catch murderers,
then the multiplier sets a FLOOR.
If the cost of a murder is 10 and 1/10 of murders
get caught then MINIMUM penalty is 100 but we
dont worry about OVER-deterrence b/c OPTIMAL
level of murders is ZERO.
Same true for NEGLIGENCE level of liability
b/c we dont have to worry about overdeterrence b/c you can always enter safe
harbor of NON-negligence.
Bentham: if law enforcement is costly, then efficient system minimizes
the number of people who are caught and MAXIMIZES the magnitude of the
punishment. In double parking example you could just charge the one
person who gets caught 1 million dollars! If they dont have enough money
cant you lock them up in jail to cause them 1M worth of penalties.
Hard to argue with it theoretically

We invest much more in law enforcement and less in penalties. We

RAISE the probability and lower the sanction.
o One obvious explanation is INSOLVENCY if person cant
afford paying it. But could lock him up.
In criminal law better to catch one person and lock up
for double than catch 2 b/c of the cost of catching b/c
the lock up costs would be the same.
If prison is not something we want to use, then the
insolvency is a ceiling.

******Why do we like ex post tort instead of ex ante

regulation? Well regulation is anti-Benthamite. Dont charge
everyone who doesnt maintain their dam (Hammurabi) a small
amount but only a few people a large amount. Regulation too
expensive.
But why ever do regulation?
o Well, the def might not be able to pay the full amount of
damages, so better to charge everyone a smaller amount and
maintain the same level of deterrence.
E.g. if no one can pay full amount when DAM breaches,
then it doesnt make sense.
***Polensky why else do we not go in the maximum Benthamite
direction?
Potential defs might be risk-averse. Higher probability of lower
sanction reduces the disutility of risk-taking.
o People wont want to take the risk of a HUGE payment.
Risk aversion comes from diminishing marginal utility of
money. People pay insurance to convert probabilistic
chance of huge loss into a certain smaller cost b/c the
huge cost will cut deeper into their first order level of
money.
o BUT when dealing with corporations, the risk aversion is not
applicable b/c corporations spread risk among shareholders
who then spread among investments.
BUT people themselves are risk-preferring. Lottery,
Vegas etc.
In domain of LOSSES, people are risk preferring.
E.g. they will choose 10% of losing 100 to certain
loss of 10 but OPPOSITE when talking about gain.

In Polensky example, the deal is certain loss of 10

vs. 10% loss of 100. So people would prefer the
10% chance! So the LARGE penalty should be
HIGHER than equal and move even further toward
the Benthamite side (contra Polensky).
Complicated and we dont know exactly what peoples
risk-taking is but its not right to just assume riskaversion.

Kahan purports to provide a sociological answer to why the

Benthamite model wont work in crime context. He thinks that peoples idea
of whether other people are committing crimes makes a difference. A sort of
broken windows theory.
When people see crime going on, people infer that they can commit
crimes and there is a low probability that they will get caught. AND
the fact that there are so many people are committing crimes
makes it less likely that you will get caught, and the neighbors
wont turn you in b/c they are busy committing crimes.
Maybe its just a social norms thing like recycling. And the area
around you just gives you a signal about what the social norms are.
Like in a high crime area you might be seen as cool etc.
o Conformity generally people like doing things the same as
people around them.
Might be that broken windows theory isnt true and really its just
that the people who do these low level crimes are just more likely
to commit OTHER crimes and then they are taken to jail so dont
commit those crimes.

CLASS 15
Benthamite optimal law enforcement principle lower probability of
catching person and increase penalty.
But why dont legal regimes go in this direction.
Kahan explains that people influenced by behavior of those
around them so Benthamite idea might lead to more crime as
people see others around them committing crimes.
o Classic experiments with comparing a line equal in length.
When all the people around them say the wrong answer,
experimental subject says the same thing. Only about 25%
of people stuck to it. 75% conformed as they went along.

People in conformist cultures like Japan conform a little

more.
o What about when they are told to write down their answers.
What is the mechanism that induces conformity. It might be
comparing to what other people say. Maybe youre plausibly
deciding that the fact that all these people say something you
are persuaded. If this is the case you would WRITE down
that answer.
BUT if the reason is just CONFORMITY and approval,
then the answers on the paper would be DIFFERENT.
Largely the reason is SOCIAL APPROVAL. Less
conformity in secret.
BUT error is not completely b/c of social approval.
E.g. it might be that you get in line b/c you
think that people MUST be on to something
o Crime can work in the same way.
People want to conform or think that
people are on to something.
E.g Tax cultures influenced by how much you think other people
are paying taxes. Here people comply with IRS as opposed to Italy.
Deterrence is not really the issue.
o IRS thinks that they can deter people by saying that they will
catch people. BUT social influence effect if IRS says that
they had to redouble effort it could send signal that others
arent paying taxes and they shouldnt
Like Israeli daycare center when you are told that
there is a FINE for picking people up late, you think that
others are doing so and you wont pick up your kids on
time.
Strategy is used in Universities to get rid of plagiarism
and binge drinking effective to give ACTUAL rates of
these things, and students end up conforming to this.
What do you do in places where they are actually
quite high? University officials face dilemma of
publishing false information that becomes the
truth self-fullingly.
Police Dept might want to clean up broken
windows to CONVINCE people that crimes
arent actually happening. Is that
misleading?

***How does Kahan get from social influence to argument that

criminal law should focus on raising certainty of punishments and lowering
the penalty?
Kahan says that potential lawbreakers observe both certainty and
severity
o If its true that its easier to observe people being arrested
rather than the severity of the punishment, then it makes
more sense to show people certainty
But people HEAR how long people went to jail for!
Kahan says minority populations get a bad message by high
punishments b/c they are saying that they have contempt for this
minority group
o He thinks that putting more police shows that you care about
their safety. But cant that also feel like military occupation?
And couldnt you say that severe punishment shows
that society cares?
Kahan doesnt know which one is true
Maybe its the idea that you wont get away with it, and so at least
people are LOSING SOMETHING so you wont want to do it.
***Wouldnt doing it the Benthamite way give us LESS crime which
will then work like broken windows to show people that others
arent committing crimes?
o So it cant be that Kahan is saying that Benthamite version is
wrong?
o Levinson cant really figure out what hes saying.
**Might be some other reasons to invest in CERTAINTY rather than
SEVERITY?
o You might say that years in prison have DIMINISHING
DISUTILITY for the person who goes away. It gets less bad!
So it gets less effective.
Maybe it makes more sense to be able to send more
people for a short time. Or more times.
Also people who commit crimes tend to discount the
FUTURE.
In some areas of life people discount future i.e.
saving money or dropping out of school. Lying on
beach w/o sunscreen.
In other areas people value future more large
majority of taxpayers get refunds.

E.g. crack dealers enter into deferred

compensation and get starting salary thats
really low. And some small number get to
the top.
o Same as Cravath associate. You
might have to value the future MORE
than the present (may not be a
straight line).
Hyperbolic discounting people discount the
future MORE when its closer to the present. They
actually want MORE compensation to delay
something a smaller amount.
E.g. when you say that youre going to
exercise and study instead of a small
reward like drinking but when you get closer
to the day you end up drinking.
Precommitment strategies like annual
memberships for gym to make you guilty or
putting alarm clock on other side of room.

Discount future gains much more than we discount future losses.

People wont pay much to DELAY a fine but will pay a LOT to get a
REWARD sooner.
o People want to get the losses OVERWITH
Levinson: suspects that this has to do w/ disutility of
dreading rather than how we assess the disutility of the
loss.
E.g. people will pay to have the electric shock
NOW.
Subjects will want to put off FUTURE gains for
certain amount of time.
Procrastination is opposite of the electric
shock thing.
The discount thing only applies to PRISON. Not to FINES. Bentham
might be right in terms of FINES!
**Maybe best explanation for moving away from Benthamite system is
our sense of FAIRNESS.
Sunstein finds that U Chicago law students think that Benthams
system is unfair!
Juries wont enforce probably, Legislatures wont pass them.

What is it about these things that strike us as unfair?

Strong intuitions of retributive justice and PROPORTIONALITY if
social harm of double parking is 10, then it seems absurd to make
the one guy pay 1000.
o Doesnt matter if ex ante the punishment is fair b/c you are
less likely to get caught, when you do it seems unfair
o This is less of a problem if we know that the double parkers
are REPEAT PLAYERS then on net they will probably deserve
to pay 1000 b/c they probably double parked 100 times
OVERALL.
E.g. What about a toll that is much higher and only
applies once a week. We wont have to pay toll workers
and we would collect the same money.
This is fair if everyone on the road is the same
every day. BUT what about the guy that went on
the road once.
You could just buy insurance for double parking. But
we dont allow insurance for crimes.
Other fairness objection is the idea that one person pays 1000
dollars whereas the other people have to pay nothing! So its not a
comparison to the social harm and proportionality, but that other
people dont have to pay anything!
o But could you say this about a murderer? Can murderer say
that other murderers dont get caught!
Well, NO b/c the murderer is getting his FAIR sentence.
But in the double parking case, the person is getting
fined a huge amount to MAKE UP for the others. IF he
were getting charged 10 and happened to get caught
we wouldnt care as much.
Are we convinced by these unfairness concerns?
o There is also unfairness that comes from DEPARTING from
Bentham.
If we know there is a shortfall in enforcement and we
DONT raise the penalty, then we lose the deterrence
value. And there is more double parking. Is this FAIR
to the ADDED VICTIMS of double parking?
And compounded by the INCREASED number of
people who double park and dont get caught and
the ones who get caught get treated even MORE
unfairly compared to this higher number of double
parkers.

BUT society might want to invest MORE in enforcement,

but this is unfair to taxpayers or to the constituents who
dont GET the money? Or the other crimes that dont
get enforced?
Finally, where there is a choice b/w benthamite or non-benthamite
regime in a criminal regime or negligence regime. If we are threatening
people high enough (e.g. beheading), then NO one will double park, and
then it will be unfair to NO ONE.
Maybe fairness intuitions have played too much of a role for crimes
that have a low probability of conviction.
o E.g. auto theft gets convicted at 1% and they only get 1 yr in
prison. Expected value is 1 week in prison.
Tax evasion 1% chance of getting caught but you only
have to pay not even double.
Hubble: but what about the increased cost of procedural guarantees
and appellate review etc that it would cost to have higher criminals.

Next Assignment: WHO SHOULD GET PENALIZED. WHO SHOULD GET

THE REMEDY? WHO SHOULD THE REMEDY BE DIRECTED AGAINST?
The intuitive sense is that you penalize the person who most directly
did the bad thing. Sometimes it would work better to penalize the person in
best position to prevent the harm, which gives that person an incentive to
STOP the person who will do it.
Most common form is VICARIOUS LIABILITY
o Pizza delivery guy runs you over, and you can sue Dominos.
Originally respondeat superior servants were like
animals and carts who had no independent agency.
Kept vicarious liability around b/c even in modern world
it makes more sense.
2 Main advantages
Information you couldnt identify the
driver but you can identify that it was a
dominos car. So we dont lose deterrence
b/c you couldnt tell who it was.
o Same thing w/ manufactured product
where you couldnt figure out the
exact worker who fucked up.

Deep pockets dont allow employers to

just get out of liability by employing poor
people.
o Here they have to internalize the cost,
and they can do things to reduce the
liability. Safe driving course etc.
UNLIKE tort system. Which cant
do anything to drivers
themselves.
Compare ex ante
regulation to ex post
torts when people have
no MONEY (similar to
jack up probability in
benthamite when
people are poor).
We move toward
regulation when ex post
tort would do nothing. But
instead of an agency, we
use DOMINOS who is in
better POSITION to do so
and has more carrots and
sticks at its disposal.

Given these advantages, even when theres no identification problem,

or when employees HAVE money, maybe vicarious liability is STILL better b/c
Dominos is STILL in better position to prevent harm then the tort system by
itself!!
Dominos may have more expertise to encourage safe driving than
the drivers themselves!!
o Dominos has more info, can do screening, can provide
technology.
Why arent employers held liable for torts outside scope of
employment?
o Dominos has little expertise to control them outside the
workplace.
o BUT if we MADE dominos do so, maybe Dominos WOULD be
in a better position. Dominos might turn itself into a
regulatory agency. BUT the costs of doing so would be high
to Dominos but also loss in AUTONOMY in our LIVES.

o ***So when someone says that they dont have control and
so shouldnt be held liable, if we MADE them liable they would
have to get better at it.
E.g. Maybe HMOs are more effective regulators over
doctors.
BUT what about the fact that bureaucrats will be
overseeing the doctor patient relationship.
Enabler/Gatekeeper liability person who was in a position to disrupt
the wrongdoing
E.g. Liability for securities fraud might be placed on lawyers or
accountants
E.g. Therapists held liable for predictable acts of violence
E.g. social hosts from not stopping drunk driver.
***Here the liability is not based on a contractual
relationship but position to PREVENT (So its more pure??)
o **NOTE that Dominos is strictly Liable, but here its
FAULT BASED (negligence regime).
o
Indirect liability question of where to aim remedies often assume
the first best place is whoever actually caused the harm
Some situations we might do better to aim the remedies at them
b/c they are in a better position to stop it.
Every time something illegal happens maybe we should just hold
Bill Gates accountable. And hell create shadow govt to control
people etc. and he might do a better job.
o But thats a bad idea b/c no reason to think that bill gates is
well-situated to reduce cost or control people in the same way
that we think that Dominos IS in a better position.
o Do we really want Bill Gates to make a shadow govt
Indirect liability has become big issue w/ cyber-crime and copyright
liability on the web.
Users of file-sharing services cant identify them and they dont
have any money.
Child porn users, illegal viruses, etc.
All of these people have to go through an internet service provider,
or google/facebook.
o The intermediaries are solvent, easy to identify, and in a good
position to identify these people
SO maybe its more worthwhile to go after these
intermediaries.

Objections: 1) they dont have control on users

b/c of (self imposed) walls
2) they would have to take over-inclusive
measures that would control people etc.

Aimster Posner facilitated file swapping but instead of

maintaining an index of all the people on its server like Napster did, Aimster
would just CONNECT people and the people exchanged the file on AIM.
Contributory infringement requires knowing contribution and
more bad conduct
Vicarious infringement somewhat of a strict liability etc.
Well just call both vicarious liability.
POSNER shuts down Aimster entirely b/c he sees this as lowestcost way to do it rather than going after the individual people.
o Cost that well stop exchange of LEGAL files, but this is cost
were willing to bear.
Sony Betamax case in Sup Ct they allowed Betamax to stay b/c they
dont want to make something illegal that can do completely legal things just
because it CAN be used for illegal things.
You can use it to time-shift and watch things later. Legal fair use.
But you could also tape TV shows for purpose of library building or
ad skipping
Question: can we ban it entirely? Court preserves the technology
b/c it wants to keep the LEGAL uses.
Posner recognizes that shutting down Aimster will cost us the legal
uses. Posner WEIGHS the costs and benefits and finds that the benefits
dont outweigh the costs of the illegal activities. Basically everything thats
used is illegal.
E.g. you might raise the cost of slinkie dresses b/c some are used
for prostitution. Posner said that forbidding sale of slinkie dresses
would be too much b/c dont outweigh the benefits.
o Contrasts this w/ a massage parlor thats also a brothel. It
has POTENTIAL legal uses, but shutting down the massage
parlor outweighs the benefits.
Two questions:
1) how costly would it be for AIMster to stop the illegal uses
Posner thinks that inability is self-imposed b/c it doesnt want to
take responsibility. This is like massage parlor owner that tells
workers never to hear whats going on.

2) If they cant prevent it, then whats the cost/benefit of shutting it

down entirely.

Compare Sup. Ct. Grokster they do the same analysis but the
Justices cant bring themselves to say that Grokster can be held liable for
illegal activity just b/c its well-situated to prevent this and DOESNT. Posner
had no problem with this. As a result, the Sup. Ct. tries to make Grokster
look like it DID something and says that Grokster went after former Napster
users etc. Sup Ct requires some sort of accomplice liability to it. Cant just
say its been an OMISSION. Posner had no problem with it.

**Instead of targeting indirect liability at individuals as third parties.

But we can target a GROUP that is well-situated to control primary
wrongdoers i.e. a group that a wrongdoer is a member of.
In primitive societies if a member of our group is killed we can kill a
member of your group. This suggests that the concept of blame is
collective
o Levinson: skeptical about whether these societies are too
primitive to see the difference b/w individual and collective.
The group thats going to be punished very easily picks out
the person who is responsible and puts them up to be killed.
Or same thing if the group had to pay blood money (instead
of actually killing the person shifts to tort system).
This basically SHIFTS the responsibility to the group to
figure out who is responsible.
The harmed group has a very hard time actually
differentiating b/w the other group.
Brownsville Case - Case of battalion of soldiers that shot up the town
but no one in the battalion of black people is willing to say who did it.
Theodore Roosevelt decides to dishonorably discharge all 100 soldiers in the
battalion. There was outrage for idea that shared race made it easier to
treat them collectively and fungible.
Nazis used collective punishment as reprisal for killing one german.
- BUT we also have these ideas in inoffensive ways - this same idea
comes into criminal law in CONSPIRACY law. And also joint and several
liability (basically lets those people sort it out themselves). E.g. felony
murder rule.
Any liability placed on a COMPANY is some sort of collective
punishments. Shareholders basically have to pay. The market also
holds those shareholders liable.

Insurance individual tort liability is indemnified by insurance

company which comes from the collective premiums.
E.g. Partnership model in law firms they depend on each other
etc.

What about sanctions on Iran, or bombing a country? This is all

collective punishment. Or punishing or rewarding candidates for Congress
based on the performance of the president.
Collective penalties/rewards are a standard feature why do we do
this?

Levinson: for same reason as the Dominos pizza. We think that

they are in a better position to fix the problem etc.
o E.g. teacher punishes whole class b/c it doesnt know who
shot the spitball. Benefit from the punishers perspective is
that it leverages their better information.
Either makes the class give up that person.
OR the group will sanction that person THEMSELVES
and they are MAD even if they dont give that person
up.

E.g. the Ybarra case where everyone in the operating room held jointly
and severally liable when patient wakes up and is fucked
The idea is to either force information or have them divide up the
blame and then they will impose sanction the person responsible.
o Or they will come forward and say who did it.
E.g. Pinkerton liability threats to low-level gang members - you get low
level gang members to come forward.
**Beyond the INFORMATION advantage, the GROUPS have more
CARROTS AND STICKS at their disposal.
E.g. the teacher may not have effective punishments at his
disposal.
o Other kids in the class have other things at their disposal, like
shaming etc.
E.g. baseball example pitcher from Yankees hits a batter from Red
Sox. Pitcher from Red Sox then just hits ANY Yankees player. No
effort to pick out the pitcher themselves (obviously impossible in
American league where pitchers are judgment proof). Even in
Natl league, the pitcher isnt targeted.

o CAN INFLICT MORE PAIN ON THE PITCHER BY HITTING

THE OTHER PEOPLE and bringing on the collective
INTERNAL sanctions which are more effective than the
individual penalty of hitting him w/ a baseball
E.g. kicker in practice, if he misses, the whole other team has to
run sprints this is stronger sanction than to have to run sprints
yourself.
E.g. Relay races times are FASTER suggesting that people are
more worried about the approval of others on the team than the
glory of winning etc.
E.g. Rope-pulling experiment. When more people are pulling,
people put in LESS effort. BUT if you convince the people that
OTHERS can observe their effort, they actually will put in MORE
effort than they wouldve alone.

Israeli Court invalidates Israeli military policy of deportation of

suicide bombers (under intl law and Jewish law). The deterrence
justification is obvious b/c the suicide bombers cant really been deterred.
But they might be influenced by sanctions against family.
1) direct disutility form this 2) family will have INCENTIVE TO STOP
the bombers. These collective internal forces might be stronger!
Israeli Sup Ct rejects this idea of collective punishments says its
ok to deport the brother who helped to SEW the belt, BUT not the
one who is just a brother (and COULD have done something).
o ***Does this distinction b/w ACT and OMISSION justify
drawing this LINE?
Similar to Sup Cts distinction in Grokster.
Compare this strategy to US strategy Rucker US Sup Ct HUD
interpreted the statute as requiring them to EVICT the family of any person
convicted of drug crime.
This of course depends on the ABILITY of the family to stop the
person from dealing drugs. Rucker herself was blind and deaf, and
probably didnt have much ability to stop them.
***But locking up a lot of young people in a community HAS a
collective effect. So even if de jure it is INDIVIDUAL punishment,
de facto it has collective effect.
E.g. Pakistan strikes kill some people collaterally. Contrast w/ Firebombing Tokyo where the EXPLICIT purpose is to get civilians to pressure
GOVT. Is there really a difference?
***Two benefits: 1) get group to turn over the person (informational)
2) get the group to punish the person more effectively.

E.g. Group lending scheme whole group is responsible for people to

pay. Its successful b/c 1) informationally, its hard for bank to figure out if
people are responsible (the individuals in Bangladesh are in better position
b/c of lack of credit ratings). Individuals who arent good credit risks wont
be invited into the collective 2) groups are good at keeping them in check
and can even pitch in together to help each other pay. (Here there is NO
collateral to repossess so we need this).
This is an example that reduces the moral qualms we have etc.
Where would group punishment NOT work so well?
Contexts where the GROUP IS NOT VERY GOOD at monitoring or
controlling the behavior of its members.
o What would punishing family members do to prevent kids
from dealing drugs.
o E.g. Sanctions on totalitarian regimes. What the fuck are the
people going to do to convince their govt to change their
behavior b/c they are suffering?
E.g. Sadaam insulates people who would have power.
And the sanctioning regime actually leads to disease
etc. Fighting a war might be less brutal b/c people who
are dying would be elites etc or some conscripted
soldiers who would desert.
E.g. castro is still there! What is embargo doing?
When trying to change behavior of polticial ELITE thats immunizied,
then better to focus on a SMALLER constituency which is more
efficacious.
o When European countries wanted to punish Bush
administration in 2004 for violating free trade agreements
was that they targeted orange growers and steel producers
(Florida / Ohio)
o Smart Sanctions Iran aimed at oil and gas industry and
banks. These are for the elites. BUT the problem is that this
passes on costs to the general population.
Compare strategy of human rights organizations who organize
boycotts of conflict diamonds the COMPANIES may be in a more effective
position to change the behavior of the govt. More effective than trying to
mobilize impotent population.
Group punishment and group reward schemes create groups with
stronger incentives to help each other and also to punishs each other.
Expanding vicarious liability for employees gives employers
incentives to monitor

**SO their ABILITY to monitor people is endogenous with placing

liability on that person.
o E.g. tip pooling for waiters makes servers have a financial
incentive to have responsibility for ALL the tables and dont
ignore tables other than their own.
BUT building the better control system has a dark side e.g. in
Dominos example or Bill Gates
o E.g. increasing responsibility for sexual harassment makes
workplaces have strict speech codes, monitor peoples
behavior.
o E.g. Giants field kicker that might get killed by his teammates
o E.g. Drill instructors collectively punish the platoon when one
screws up. This creates unit cohesion. And the drill
instructor can remind recruits that he isnt allowed to lay
hand on them.
o E.g. Honor killings entire family suffers from dishonorable
behavior.
Compare this to western crime of passion of man
killing his wife who cheats on him.

been talking about when GROUPS have some information or control

capacity over potential wrongdoers as compared to some outside entity.
Can give you appreciation of law enforcement strategies of societies
that have blood vengeance etc.
o Could think of it as a clever adaptation to the situation where
there are tight-knit groups but very hard to actually get
information about who did something.
Leverage the groups greater capacity to control people
o How did Medieval English king control people? this is a
situation where its not some primal thing.
o No centralized police force etc.
Frank Pledge almost all adult men required to
organize them into groups of 10, then the whole group
is liable if one of them does something and the
particular person is not caught.
Gives these guys an incentive to work together
and hold each other responsible
PROBLEM group might go overboard e.g.
honor killings.

PROBLEM with group punishment is COVER-UPS

if class is going to get punished collectively for a
spit ball, the class will cover up and say it wasnt
a spitball at all!
Or w/ collective punishment for cheating
group has 2 incentives:
o 1 good: prevent cheating
o 1 bad: when cheating occurs, cover it
up.
E.g. military unit cohesion necessary to
get people to fight and die in combat b/c
they are bound to EACH OTHER.
o But they sometimes decide that their
collective interest is to not fight at ALL
E.g. in Vietnam faking raids.
What would happen if we held corporations
liable for criminal acts. We dont know what
the result will be.
o E.g. collectively punish Goldman when
a trader does something bad. Could
make them try to stop bad trading OR
they might REDUCE monitoring of
trades and keep those crimes invisible
and cover up the ones that do get
found.

MOMENTUS TRANSITION IN THE COURSE:

FROM DAMAGES TO INJUNCTIONS!!! (Injunctions are another
REMEDIAL form).
Why do people pay attention to injunctive orders?
Courts attach severe consequences to disobedience. Can hold
people in contempt if you dont fulfill the injunction.
o These consequences are like secondary remedies.
Contempt sactions 2 types 1) indirect contempt sanctions when
you dont comply with injunction 2) contempt of court
o Criminal contempt violations of injunctions are subject to
criminal prosecution.

Prosecutor does it, mens rea prosecution (must be

INTENTIONAL), you get all the procedural criminal
protections.
A lot of power for coursts (they basically make up the crime,
supervises the prosecution, and sets the penalty)
Civil Contempt
o Compensatory D made to pay money in compensation for
the harm from violating the injunction. Tort equivalent. Can
have THIS AND criminal contempt
Why is this needed at all? Doesnt exist in all jurisd.
Doesnt P always have the option of a damages
suit in tort for the violation of the injunction?
You cant do BOTH.
Why do you care? Answer is that procedurally, Ps
can benefit from suing in contempt b/c its
procedurally easier and move to top of the docket
w/ abbreviated procedures.
Ps who prevail, can recover ATTORNEY fees
and gets you a BENCH TRIAL which may cut
different ways.
o **More interesting form of civil contempt COERCIVE
CONTEMPT - when court has fines that INCREASE as long as
people dont comply.
Def has keys to jailhouse door in his pocket
o Famous Examples.
E.g. Yonkers housing litigation dist court orders city to
pass public housing, city refuses, court passes sanction
that each councilman who votes against it is imprisoned
and fined until they change votes.
AND has fine on CITY that doubles every day
Sup. Ct stays the first kind (1st Amend etc), but
the second ones are fine and its ok to coerce
councilmen indirectly by creating a voting cost.
Game of chicken basically. Judge doesnt want to
bankrupt Yonkers (wont have any money for
public housing).
There are constitutional limits. Due Process
clause creates a LINE b/w PUNISHMENT and
coercion. For punishment you need all
these PROTECTIONS.

***In practice, in order to continue with

coercive contempt sanctions, there must be
a reasonable chance of COMPLIANCE. IF no
chance, then its punishment.
o But this incentivizes D to make it look
like he will never give in, which the
court then INCREASES it and its a car
wreck in a game of chicken.

Must be some realistic hope that the defendant will cave in and comply
with the injunction for contempt sanctions to be OK. reasonable prospect of
compliance
So defs have an incentive to try to convince the court that they
have no reasonable chance of doing it! And then courts just turn up
the heat! Its a game of chicken that leads to a car-wreck.
E.g. Israeli case man much older Abraham got married to a much
younger wife. When he was old the rabbis said he had to give
consent to divorce. He was put in jail (this is how to give incentive
to do it). They dont want to PUNISH him. They tried to bribe him.
o Kept him in prison for 10 years. Abraham died in prison after
31 years. This is never justified if it were couched as
PUNISHMENT. BUT each increment of time is just more
coercion and Abraham had the key to get out by relenting.
Could never be justified if it were couched as
PUNISHMENT.
o E.g. Klump - Rancher doesnt want to leave prison rather than
take his cows off federal land.
Worst case scenario is where both drivers crash.
**Best way to win is to convince opponent that you are crazy enough
not to steer the car. You can disable yourself from doing it, e.g. tie your foot
to gas pedal. You can also convince them that youre crazy and they have
an incentive to swerve. Klump may be doing this
This is cold war shit too.
Standoffs arise with WITNESSES who dont want to testify. They can
only be held for 18 months for civil contempt and then you have to let them
go.
Susan Macdougal served the full 18 months after refusing to
testify for Ken Starr. 18 months is the limit. Then she was
prosecuted for criminal contempt and got a hung jury.
o Many mafia types think 18 months are prefereable to
testifying.

o Al Qaeda taxi driver wont testify and says he is never going

to change his mind b/c he will suffer eternal damnation
Judge determines that there is no religious prohibition on
testifying based on Koran experts and Islamic law. Stays in
jail for 18 months and then convicted of criminal contempt
and perjury.
States dont have the 18 month limit!
Martin Armstrong used embezzled money to buy a loot of art stuff.
Hes served longer than he wouldve had he been convicted. BUT maybe
hes willing to spend more time in prison to avoid having to ever turn the
stuff over.
**Coercive sanction is meant to escalate in order to get compliance
even if it results in what in retrospect looks like a ridiculous punishment.
Why and when do courts issue injunctions
Substantial likelihood that future injury will occur! Imminent threat
of harm, cognizable danger etc.
Ripeness requirement precludes injunctions in many cases.
o You will not succeed in getting injunction to NOT run you over
on street. Its not imminent enough.
But by the time the driver is negligent, its too late to
get an injunction b/c its a type of thing that happens
QUICKLY and theres no way to predict it.
Al Baradi v. Bush Guantanamo detainees who dont want to be
transferred to foreign govt. Request injunction to prohibit US Govt to
transfer w/o 30 days notice so that they have a chance to challenge them.
Court doesnt think that there is evidence that the govt is going to
do the illegal act of transferring them.
The govt admits that it would be illegal to transfer them to a
country that would kill them.
o But it wont do it!
Detainees point to media reports that this illegal action has
happened. They are worried that they wont have time to prevent
it.
Humble Oil Humble Oil wants Harangue not to destroy any
documents, and court refuses b/c not enough evidence that Harangue will
actually do it.
If courts granted injunctions in cases like these, then they would
have to grant them in EVERY case where P asks for it where they
say they might do something illegal

o But why not? If they dont do the illegal act, the injunction
doesnt actually HURT! (but isnt there already a LAW against
it??)
Maybe its b/c the injunction is just obey the law.
Whats the point.
This is costly and may add nothing of value
***WORSE may be some distortion of the law b/c one
of the cash values of injunctions is that its an additional
level of remedies. A D might be subject to
compensatory contempt, criminal contempt, tort
liability.
If we want the damage to be higher then lets just
raise the damages.
Separation of powers concern courts raising the level
of sanctions in arbitrary cases even though legislature
agreed on it.
E.g. if court doesnt like differential b/w crack and
powder cocaine could just enjoin everyone from
using powder cocain and then calibrate the
contempt sanction to equalize w/ the crack
sanction.
Separation of powers issue
E.g. what if there were a per unit fine for
pollution. If court then ENJOINS polluting, the
whole PRICING scheme gets fucked up. Converts
a pricing regime into a sanctions regime.
E.g. what if they applied injunctions to contract
breach. No efficient breach. ***Contract is
supposed to be a PRICING regime!
Courts that think there should be expectation damages wouldnt want
to increase those damages by imposing contempt sanctions on top of that.
Problems that arise when courts would be able to issue obey the
law injunctions on request of plaintiffs etc.
o Issues of separation of powers
o Issues substituting sanction for price
o Issue of equality and fairness of different remedial regimes
for different Ds
o Issues of litigation costs that are added by these sanctions.
E.g. adjudication for any harm ex ante.

Seems like a terrible idea, and therefore courts never do it, except
when they do when there is a RIPE or imminent threat.
Why ever allow courts to issue obey the law injunctions given the
costs. What sorts of benefits offset these costs?
We stick with damages where we think where damages are going to
be sufficient to repair the harm.
o Injunctions should only be in cases where its irreparable
In ANY pricing regime (contracts e.g.) we WANT them to break the
law when efficient.
BUT in sanctions area where we see someone who HASNT been
deterred (e.g. murder, negligence), we might LIKE the regime of
INJUNCTIONS b/c its INDIVIDUALIZED. Maybe for some defs the
baseline set of sanctions isnt enough, so we need to jack it up.
o This is exactly whats going on w/ increasing contempt
sanctions.
o Could do same thing through legislative regime (e.g. 3 strikes
youre out)
E.g. escalating fines for pollution. Dont need contempt
sanctions to create an escalating regime thats
somewhat individuated.
But the injunctions do serve this purpose.
Also why not just raise the sanctioning regime to
GREATEST commone denominator and it will get
rid of everyone who would do it. So we dont
NEED injunctions for this.
Why else are obey the law injunctions useful?
o Might see a benefit in the CONTENT of the injunction itself.
They reduce legal uncertainty. Court explains to the D how
the law applies to them.
E.g. Humble Oil not so useful.
BUT in Almar Badi might not be so clear that its
illegal, so making clear to the govt that its illegal for
them to do this action.
Defendants will engage in some illegal behavior
b/c they think its legal. And in other cases they
might not do something legal b/c they THINK its
going to be illegal. And they lose the benefits of
that legal behavior.
Defs might LIKE these injunctions rather than
have to GUESS.

There are ways to provide parties with ex ante clarification about what
the law is. SHOULD INJUNCTIONS PLAY THIS ROLE?
Alternatives;
o Hire a lawyer and get a legal opinion (not as good as going to
court b/c you have to pay and it doesnt carry any binding
preclusive effect)
o Declaratory judgments sort of like injunctions. Authorized
by statute in almost every state. Not a legal or equitable
remedy but a statutory invention even though theres not an
actual case or controversy in front of them.
Defs can also start these proceedings.
Still have to be RIPE. So not so different from
injunctions.
Suits to quiet title closely related to declaratory
judgments. Dont have to get damages first etc.
IRS provides letter rulings in advance.
When should courts offer this legal clarification. If potential D never
ends up doing it, then why expend all this energy. Ripeness prevents this
waste.
BUT we eliminate these things in a broad case of ripeness cases
where it WOULD be useful. But theres no coherent theory about
when it would be good or not to issue clarifications.
OTHER ways to do it legislatures can have clear rules, fewer
standards, less reliance on common law. Courts can write broader
opinions that give better clarity.
o Create an office of certainty that just does this.
o What ways should we use to provide legal clarification. And
what role should injunctions play in these.
Easy to identify costs of injunctions. Problems is to add a layer of
remedies sanctions.
Hard to figure out how much legal certainty is optimal, and what
mechanisms we should use to provide this certainty.
Law of injunctions uses RIPENESS to just slam the lid on this. But
how is this the right balance? Can anyone say that this is the right
balance?
Law of injunctions is just ripeness and how is this a good balance
b/w the costs and benefits of providing legal certainty. Arbitrary dividing line
b/w a regime of ex post adjudication and a regime where advisory opinions
are available on demand.

We were talking about Ripeness rule which our legal system uses to
Ration the availability of injunctions.
We were talking about unfairness of applying injunctions only to
some D.
Benefits of ex ante resolution of claims injunctions can offer
authoritative application of law to Ds facts.
o This can be done through Declaratory judgments, attorneys
advice,
Hard to believe that Ripeness works for optimal level along ALL
these dimensions. But at least the cases that are FURTHEST away
from needing an injunction wont get them and waste judicial
resources on them etc.

WT Grant - Hancock mootness is backward looking problem has

disappeared (in this case would mean that Hancock had resigned from these
two boards so that the boards are no longer interlocking.
US govt still wants an injunction so that they wont be able to have
interlocking boards.
o The Sup Ct concludes that its NOT MOOT. Although also not
RIPE.
Cant be that wed allow them to avoid govt prosecution
by just making the issue moot.
Exception to mootness is that voluntary cessation
doesnt mean the court cant rule on legality of
the situation.
That prediction is the SAME as whether its
likely that something will happen in the
future.
Court makes it confusing by saying that its
not MOOT but its not ripe.
o MOOT only if no reasonable
expectation that it will be repeated
o Ripeness is congnizable danger
o WTF is the difference?
Just b/c something bad has happened in the past is NOT
SUFFICIENT to allow for an injunction about the future.
o You want to convince the court that it will never happen again
to make a mootness claim good b/c otherwise the court will
want to lay down a preventive injunction to prevent the party
from doing the same shit.

E.g. corporation could bass by-law saying it wont have

interlocking boards of directors.
That would convince them somewhat unless its
really easy to amend the by-laws.
E.g. US in Almar Badi can try to commit itself never to
deport the prisoners etc. Govt cant just enter into a
contract to show their sincerity while a PERSON can.
Strained to think of a constitution as a contract
for a govt b/c not credible commitment
mechanism. Constitutional rights are often
broken.
No super-state to stop the govt from doing
something.
E.g. borrowing money. Govt must convince the
creditors that they will repay their debts.
E.g. would be better if govt could credibly
commit itself to NEVER bail out banks.
E.g. city govt might want to prevent
building on waterfront in case of flooding.
But everyone knows that when something
happens, politically they will have to bail
them out.
One way is to give insulated body like the Sup Ct
to make sure to protect constitutional rights. OR
Fed to independently set monetary policy outside
of politics.
But how do presidents make sure that they
dont take over the Fed ITSELF?
Democracy is essentially a commitment
mechanism for the elites to spread power,
so we dont have to trust them to keep their
PROMISE etc.
o BUT how does their commitment to
DEMOCRACY get maintained? We
dont know.

Marshall v. Goodyear dist judge orders nation-wide injunction

against Goodyear for firing of one old employee in violation of ADEA.
Circuit court says that this is only proof that there might be another
violation of ADEA in THAT STORE, not nationally
o Best defense to that would be proof that its happening in
other places or reflect a policy or failure to supervise.

Goodyears best defense is to show that its not likely by

firing that one guy and instituting a training program.

City of LA v. Lyons wants injunction against choke-holds by police

dept for people who are not threatening violence. He has a case for
DAMAGES. He cites evidence of deaths. Court holds that the injunction
claim is not RIPE b/c he hasnt shown any particular likelihood that he
PERSONALLY would be choked again in the future (he does have a damages
claim for the past action)
*****Ripeness and standing doctrine are interrelated and
redundant much as ripeness and mootness claims are
interrelated and redundant.
o Standing is alternative way of talking about Ripeness. Could
say that lacks standing b/c of injury in fact, OR say that its
not ripe b/c there isnt many chance of it happening or MOOT
b/c it happened before.
**Under this case you have to show it will happen to you
PERSONALLY.
o Compare to Langford case any given plaintiff couldnt really
say that it was likely that the plaintiffs house would be
searched but this probability was considered high enough by
the court.
But in Lyons they would have to make the assertion that:
o cops choke ANY citizen whom they encounter.
o OR that the city or Police Dept had some policy of doing so.
Court suggests this would be sufficient too.
Levinson: how seriously can we take the Lyons formulation? Not very
much.
E.g. how did Roe have standing to make a claim she would have
to show that she would get pregnant in the future reasonably likely
and want to have an abortion.
o The court doesnt conduct an analysis of how likely it will be
that she will get pregnant.
Instead they just say that pregnancy often comes more
than once to one woman. Why doesnt this same logic
apply in Lyons
E.g. Bowers v. Hardwick sodomy law state drops the case
against him when he gets ACLU. Georgia says its unripe/moot etc.
But the 11th Cir says that even though they barely ever enforce it,
they say his propensity to engage in sodomy again is high enough
that he might be arrested again. They even looked at Lyons!

E.g. US Parole Commission v. Gahrety Sup. Ct. fed prisoner

wants injunction against various prison-related policies in this
case it was guidelines about release on parole but by the time it got
to Sup. Ct he was OUT of jail already!!
o Question how likely he will be to face these restrictions again.
He cant claim that hes likely to go to jail again!
o But court doesnt care.
o This was Pre- Lyons but its still cited as good law.
E.g. elections cases bad elections practices the courts DO put in
injunctions to prevent unconstitutional election practices.
What about Marshall v. Goodyear even for that one person to get
an injunction against THAT employer he would have to show that
HE will again be discriminated against under Lyons. But no one says
that he cant get his injunction.
So why is Lyons special? Is it ever possible to get an injunction
against LAPD?
Class action wouldnt solve it b/c no plaintiff in the class will have a
better claim to ripeness than Lyons does so aggregating the claims
will do nothing!
Court is basically saying that no one will have standing
Couldnt they just have said that b/c LAPD issued a moratorium on
the chokeholds that it was just unlikely that anyone would get
choked? Similar to using Hancocks resignation. This wouldnt fuck
up injunction laws etc.
o This would leave possibility open to issue injunction if the
LAPD resumed the choking.
E.g. it may be very likely that someone in Guantanamo will get
deported but its hard to say WHO so Lyons gets in the way

Riverside County sup ct holds that theres no problem with criminal

suspects challenging arraignment procedures even though they have long
since been released.
Lyons was waived in the Justices face, but the majority says that at
the TIME, these suspects wouldve been helped by the injunction.
But isnt this true for Lyons.
o How do lower courts get around this?
They just assert that its likely enough that it will
happen again to this plaintiff.
E.g. strip-search of elementary school kids judge says Lyons wont
work b/c if theyre crazy enough to do it once theyre crazy enough to do it
again

Seattle School v. Parents Involved majority of the court find that it

IS a violation of Equal Protection. Dissenters say that Lyons means that
they cant have an injunction.
Roberts just concludes that there is a sufficient likelihood. And he
says that everyone has an interest in a fair selection system.
o But Lyons couldve said that he has an interest in police force
that doesnt choke people.
Nicholson v. Conn. Halfway House neighbors want to stop the
halfway house b/c it would be a nuisance.
Court says its not RIPE. Why?
o Well, the halfway house WILL open. BUT the question is if its
going to be operated in a way that is a NUISANCE.
How costly for these people to live there? How costly for
the halfway house to move somewhere else?
E.g. Sometimes its clear that something is a nuisance
beforehand like in a case where the jurisd said that
every funeral house is per se a nuisance. Or garbage
dumps. These lose no matter how theyre run.
o The Neighbors want the halfway house to be a nuisance per
se. But this depends on how its run, what kinds of criminals
etc. Also the point of halfway house is that they are in a
residential neighborhood!
Nicholson court uses ripeness to say lets wait and
see. Bad idea to shut it down preemptively b/c MORE
information will be useful. REDUCES ERROR COST of
making a bad injunction.
BUT cost of waiting too! If its allowed to operate
and they do go around killing people, then this is
a cost BEFORE people will get to get injunction.
And cost of building the house and then shutting
it down.
***Difference b/w Nicholson and the obey the law injunction cases
Here you might lose something socially valuable
o In addition to the cost of added sanctions that we talked
about earlier, we might be SHUTTING DOWN things that
should be legal
o Two kinds of cost/benefit:
Timing should we intervene now or later. (like Trinity
Church)

Scope of Injunction should it enjoin the operation of

the halfway house in a way that is a nuisance OR shut it
down altogether. (compare to Aimster where same
questions)
Almar Badi timing and scope. Ds wanted a 30
day notice requirement. So in the legal cases it
would ALSO have to make a 30 day notice.

TIMING cost of intervening EARLY versus intervening LATER.

Dershewitz
Same tradeoffs in law and politics in life.
Interested in preemptive war against Iraq theory that Sadam
would do damage to more people if we allowed him to get too
powerful.
o Tradeoff cant wait too long b/c Sadaam will be harder to
beat.
o But if do it too early, you might find out there are no WMDs
o Optimal timing of intervention is hard.
o Preemptive detention of people at Guantanamo costs of
waiting may be too high.
Same idea with preemptive punishment in criminal law
(attempts) we only try to punish for attempt when we
think they would try to complete crime.
Civil commitment of sex offenders.
Groves when do we say its been a breached contract.
How long do we allow trap rock to fix its behavior.
When to take a job or when to keep looking. Spouse
etc. Apartments in NYC.
Preliminary injunctions have same issues.
Optimal timing of legal or other type of intervention. Balance costs of
intervening too early or incorrectly and WAITING too long.
E.g. SAME AS REGULATION AND TORT TRADEOFF.
o You over-regulate or you dont prevent the harm. This
depends on whether the harms that we are trying to prevent
are remediable! If they ARE, we wont be pushed so far
toward regulation.

o E.g. With terrorists these are not remediable harms and they
wont compensate anyone. So we should probably move
toward MORE ex ante involvement even if were overinclusive.
o E.g. Airline security costs of screening airline passengers vs.
costs of terror.
Screening passengers costs manpower, costs to values
b/c of racial profiling.
Guantanamo question if were detaining
someone who is not guilty.
We may place a normative thumb on the scale in favor
of rights (e.g. beyond reasonable doubt)
Dershowitz: Biases often weigh LESS toward aggressive preemptive
measures. Preemptive measures PREVENT harm, so later we see the COST
of preemption instead of the benefits of it b/c NOTHING happened. So b/c
nothing happened (b/c of preemption) we think we overacted.
E.g. overly-effective security guard will get fired.
Complaints that Bush administration overreacted have gotten
louder b/c no terrorist act has happened! Maybe they were so
effective and thats why there was no attack.
o E.g. maybe it was bad idea to intern Japanese citizens b/c
there were no espionage cases. Maybe its because we locked
them up!
E.g. bc we always win wars, we feel like we wouldve won w/o
stepping on civil liberties.
Dershowitz worried that we might underestimate threats in advance.
We could say that if we had been more serious about airline security
BEFORE, we couldve prevented 9/11
Or prevented the damage that resulted from hurricane.
BUT it might be that when HARM OCCURS, we think we SHOULDVE
DONE MORE!! This is the REVERSE security guard paradox when
maybe the security guard wouldve done nothing!
o E.g. in tort, courts decide that the D is negligent precisely b/c
HARM RESULTED. But courts never see the cases where that
level of precaution resulted in NO HARM.
o Too easy to focus on the EXACT THING that happened e.g. we
shouldve had a box cutter detector in the airports before
9/11. They wouldve used some other way
o ***Levinson: There are OFFSETTING HINDSIGHT
BIASES so he doesnt see Dershowitzs point that it
always leans in favor of doing LESS intervention in the
beginning. Its equal!!

Terror and Global Warming Liberals and Conservatives disagree over

how early we should intervene on each of these issues!!
We were talking about preventive injunctions and optimal timing.
Back to choice b/w regulation and tort etc.
Issues of whether to intervene in Iraq, preemptively confine sex
defenders or terrorists etc.
o ***Error cost of overinclusivity of intervening early OR
underinclusivity of intervening late.
o These can be increased even more by not allowing SPEECH
that incites terrorism.
We can just compare the costs of intervening early and the costs of
waiting. Predictable costs of HARM resulting later.
Preliminary Injunctions and TROs this can be either a NEW
assignment or just a way to practice what we already know.
Timeframe period of time BEFORE a permanent injunction can be
granted. Under what circumstances will courts issue a preliminary injunction
OR will they wait until a full trial on the merits and then have a permanent
injunctions.
Permanent injunction refer to any injunction after a full trial on
the merits.
o Preliminary injunctions less than a full trial on the merits.
BUT can be appealed immediately (exception to final
judgment ruel)
o **Denial of preliminary injunctions doesnt mean that plaintiff
wont go on to win on the merits and get a permanent
injunction or vice versa.
o If we had a legal system where dockets werent crowded, we
wouldnt need this system.
o TROs (temporary restraining orders) preliminary preliminary
injunctions. Restraining order until you can have a
preliminary injunction hearing.
Decisiont whether to grant Preliminary inunction is basically just
another manifestation of the optimal timing question question of whether
the costs of intervening early (w/ chance of more error) is not worth it.
Standard is inconsistently expressed BUT 3 factors
o Ps likelihood of success on the merits

o Irreperable harm to P that he might suffer while waiting for

trial this means that DAMAGES are INADEQUATE to
compensate for the harm.
E.g. you cant get something on the market, you will get
PHYSICALLY hurt etc.
o Balance of hardships
In cases where plaintiff has decent likelihood of winning and before
they get an injunction they will be damaged (irreparably), then courts think
thats the beginning of a good case for a preliminary injunction.
BUT the balance of hardships must also favor the plaintiffs.
o a def who would go on to WIN, they are going to be damaged
by the preliminary injunction b/c enjoined from doing
something thats completely legal that they should be allowed
to do. This cost must be taken into account as well (which is
cost of intervening too early.
********Courts often just run through these factors one at a time.
But if we think of what courts are trying to accomplish, maybe it
really just boils down to cost/benefit b/c these things are so
interrelated.
o Two possible errors Prelim injunction is erroneously denied
and P suffers costs. OR its erroneously granted, and the D
suffers.
If court already knows who is right, then the error cost will be 0. But
when courts making assessment on a partial record, there is a good chance
that the court is wrong. If it could tell who was going to win early on, there
would be no reason for full trial on merits. For this reason permanent
injunctions have less error costs b/c after trial.
Laycock notes FORMULA grant Prelim Injunction if:
P x Hp > (1 P) x HD
P x Hp = expected error cost of denying PI
(1-P) x HD = expected error cost of granting PI
P = probability of plaintiff winning.
Guy had bear called Yogi in the backyard in a cage. Ps sue to enforce
a covenenant that says they can only have household pets. They get the
prelim injunction.
E.g. Def was GOING to get a bear, there would be a ripeness
question about whether he was actually going to get a bear.

In the formula above, irreparable harm to Ps is death of a child, so

even if the probability is low, that side of the equation will be pretty
high.
o Harm to def is harder. Harm might not be a lot if he just puts
him in the zoo for a while. BUT he might actually have to get
rid of Yogi forever.

E.g. if the odds that god exists are very LOW, the COST is so high that
we should still rationally live as if he does exist. So the actual COST can tip
things in one direction rather than just the probability. We should still incur
the piety costs during our lives b/c thats worth it.
Levinson: Courts dont really go through the formula. Courts just go
through the individual factors and sometimes talk about other factors like:
Status quo some courts say one function is to preserve the status
quo until a full trial of the merits.
o Not clear what the courts mean. In the Bear case this would
mean keeping the bear in the neighborhood the court says
the status quo is not just about what is but what should
be and b/c its contrary to the nature of people to live w/
bears and bears to live in cages the idea of status quo counts
TOWARD giving a prelim injunction.
This is not really an independent factor then. Theres
no reason that courts should think about keeping things
how they are if the way they are is ILLEGAL. A very
effective way to preserve the status quo is to just NOT
have prelim injunctions. So it makes little sense to add
status quo in.
Basically the status quo is just another take on
the P (probability). What is legal or what is
LIKELY to be legal (likely that keeping a bear
wont be legal).
Public interest: hard to figure out what courts mean by this. Isnt
the public interest just to get the formula right?
Winter v. NRDC - Navy case NRDC wants a prelim injunction against
Navys use of Sonar to see that it wont damage whales court grants the
prelim injunction
Court is convinced of high probability of prevailing but a LOW value
of irreparable harm to whales. (they werent able to show that there
was so much damage. Of course what they WANTED was MORE
STUDIES to see the damage).

SUP CT REVERSES Roberts says that they must show a likelihood adequate level of IRREPERABLE HARM (threshold showing). So high P in the
formula CANT completely outweigh such a low H in the formula.
Unclear (of course) what the threshold is.
o Doesnt what matter, not just the LIKELIHOOD but the high
expected magnitude e.g. that the bear will eat someone
Roberts also said that lower courts didnt weigh the irreparable
harm to the NAVY of the lack of training. But this doesnt change
the calculus, its just changing the H value on the side of defs.
o So thats consistent w/ the formula, just a factual
disagreement about the same basic formula.
BUT to make matters even more confusing, the court EMBRACES
additional factor of PUBLIC INTEREST w/o explaining what that
means, but suggesting what it means taking the H to NAVY as very
high. So this may just be another way of saying that the H value
needed to change and preserves the balance of error cost
calculus.
Ginsberg (dissent) she says the court hasnt really rejected a
sliding scale calculus. She says that its ok to have a low H value
and high P. She INTERPRETS the majority opinion as saying that
there ISNT really a threshold requirement (although Levinson notes
there is a lot of language suggesting she is wrong).
Some lower courts have suggested a THRESHOLD requirement on
ALL the variables (including P). But the 7th Cir. continues to apply
Posners balance of error framework. DC Cir. says the law is now
unclear.
Sup Ct tries to clarify in Holder and says a mere possibility of success
on the merits or a mere possibility of harm to the party is not enough!
Still unclear if we are using thresholds or sliding scale.
BUT these are natl security cases so maybe it really means that in
natl security cases there are special factors and we need to put
thumb on scale for the harm to D.
If D is erronenously enjoined, what happens? E.g. owner gave up the
bear? Does he get compensation. Comes from procedural thing called
injunction BOND. P must post injunction bond. If there were no bond
requirememnt, then all harm felt by D would be irreparable harm. No other
way for D to be compensated.
As a result, Ps would never get prelim injunctions b/c ALL harm to
D would be irreparable.
o The situation is not symmetrical b/c P can get compensation
from the regular course of tort.

o ***IN the formula above, the harm that matters is

IRREPERABLE
**Def might LIKE being preliminarily enjoined, and if he prevails, then
he gets compensation, but if he doesnt win, he was prevented from
continuing to do the illegal thing and incurring more damages! This still
doesnt account for irreparable harm.
Sometimes though, Ps dont have to post bonds or post inadequate
bonds. When D appeals prelim injunction they can also appeal the amount
of the bond itself. Trial judges have a lot of discretion over the amount of
the bond etc. E.g. poor people can be forgiven.
** BUT Forgiving poor plaintiffs from posting bond does NOT put them
in the same position as other plaintiffs b/c then, b/c there is no bond to help
ensure compensation to the def, the H in the formula for the DEF becomes
HIGHER and therefore the chance that the prelim injunction gets GRANTED
goes DOWN!!
So Ps that dont post bonds, have a smaller chance of actually
getting them.
E.g. if the city can drop out of the case, there is strategic element
b/c if they drop out, they
Is it really fair to have P post a bond like this? P did nothing wrong!
The court gave them a prelim injunction (albeit incorrectly).
In other cases the P would have to pay nothing. E.g. if P wins at
trial and then D suffers irreparable harm and then wins on appeal, P
doesnt have to compensate for the irreparable harm! So why in
the prelim injunction case do Ps have to post a bond.
Shouldnt the money come from the government!
What about when you go through a trial on merits (and def loses the
bear) and then the appellate court says its ok. Well he already suffered the
damage.
Should the govt have to pay compensation for fucking up at the
trial level?
Isnt it odd to allow people who are able to post a bond get an easier
time to get prelim injunction. Youre essentially paying for a procedural
benefit.

Temporary Restraining Orders (TRO)

In theory you would think that this would be the same analysis as
prelim injunctions.
Relevant period is just different - This is just b/w NOW and when
the Prelim injunction would issue.
These are so quick and not much time to go through a complicated
analysis Stakes are much lower. They just dont want to REALLY
fuck it up.
o Occupy TRO court denies extension of TRO that had been
granted which prevented the city from evicting
demonstrators.
Defs were given no notice but it was going on in the
middle of the night and they got the judge to do it by
just going to the womans house. They said they tried
to provide notice by leaving a message at the office of
the city attorney.
Neither judge got the bottom of merits.
Not obvious 1st Amend case b/c the question is
how much the sleeping in the park matters to
their expression of protest.
Scope of Injunctions
Takes idea of balancing error costs which we have been applying to
the TIMING of intervention and applies it to the SCOPE of
intervention (how much should we intervene)
o Amenable to similar anlaysis.
Nicholson Halfway House plaintiffs asking for shutting down the
halfway house altogether as opposed to asking it to operate in a way that
would not be a nuisance.
Shutting it down is an over-inclusive remedy b/c it requires the
halfway house not to exist rather than just to operate in a legal
fashion.
Almar Badi 30 day notice requirement. If court grants injunction,
then govt has to do that even when they want to deport them to
Switzerland.
Aimster eliminating the whole company also gets rid of LEGAL
things.
Question of how far courts should be able to go?

Pepsico v. Redmund Pepsi gets injunction against former employee

Redmond not to take a job w/ quaker for the next six months. Redmond
was supposed to not share any trade secrets. Court thinks odds are quite
high that he will take advantage of his knowledge.
This injunction is PROPHYLACTIC it goes BEYOND just saying
obey the law. Obey the law in this case would be to just take the
job and NOT DISCLOSE secrets.
o This is a windfall for Pepsi the injunction not to go to
competing company could have been in the contract! But
Pepsi didnt pay him for this clause. And now gets it anyway.
Aside: Reparative injunction there is a limited universe of cases
where a reparative injunction can fix what was wrong e.g. giving person
the job back. BUT what if the person has moved to another state etc.
then they have to give damages.
Can compare preventive injunction cases Almar Badi, Humble Oil,
WT Grant, Goodyear, Nicholson Pepsico etc. (prevent illegal acts)
vs. reparative injunction Forrester v. Boss
o With reparative injunctions that are supposed to RECTIFY the
results of illegal acts.
E.g. In Goodyear they could order REINSTATEMENT
Prevents ongoing results of a previous illegal act.
E.g. ordering landlord to take back tenant
E.g. Specific performance of contract could be seen as
this. Or it could be preventive to PREVENT the actual
breach.
E.g. Court orders and ELECTION to be RE-RUN.
When its cast as REPARATIVE, ripeness concerns are NOT AN
ISSUE.
o BUT Analogous problem is CAUSATION. We have to figure out
WHAT HARMS IN THE FUTURE resulted from the ILLEGAL ACT
IN THE PAST.
Reparative damages serve same purpose as damages
o Forrester v. Boss Boss says when he sells the property, they
can get a boat dock, Boss lied b/c he already got a boat dock
which precluded them.
Forresters got MONETARY compensation for the HARM
of not getting the dock. AND they also got the
INJUNCTION negating Bosss permit and allowing them
to get the dock.
App court reverses and says either injunction or
damages. Cant get duplicative damages.

With reparative injuncitons, the limited universe of cases is where

you can repare the world to what it wouldve looked like. Giving
back dock, reinstating the employee.
o But what if the employee was fired 3 yrs ago and moved to a
new job. Court can only use DAMAGES.
o In election case, some courts says to re-run election. But
sometimes you wouldnt be able to reverse everything etc if it
was already too far after.

In preventive context question is whether they must be limited to

obey the law or can then go beyond that and require more steps
In reparative context the question is whether the D has to repair
the causal effects of illegal activities or can they force D to fix the
world BEYOND the bad effects
Illustrated by Winston vs. Bailey cases.
Scope of injunction how much of injunction should you get like
size of the remedy
How far beyond obey the law can the courts go. How far beyond
compensation or restoring the pre-illegality baseline.
Many injunctions go further than that preventive injunctions that
go beyond just prohibiting illegal behavior. Reparative going
beyond just fixing the damage.
In Bailey courts can be impowered to go beyond. the court says that
the issue is really the lack of balance and control within the trust.
Disproportionate ratio between debt and equity.
Winston stands for rule that injunctions have to be very tailored to
the harm its supposed to fix
Minkong employees take trade secrets to Winston which develops a
very similar machine. Dist court finds a trade secrets violation and
enjoins Winston from bring its thing to market for 2 years.
o Is this reparative? Laycock wants to say its reparative. The
illegal trade secret violation is when the secrets are
REVEALED.
o You could say its preventive if you think of the trade secret
violation as only when its USED, not when its revealed.
Minkong argues that the injunction should be PERMANENT and
Winston says that there should be NO INJUNCTION.
o Shellmare seems to say injunctions should last forever.
Dist court decides that as a compromise 2 years is a good
injunction. How does it result in 2 years?

o Well if Winston really wanted to do it, it would probably have

reverse engineered the competing product. So they assume
that it wouldve taken about 2 years to develop w/ the benefit
of the reverse engineered product b/c Mincoms product
wouldve been in the market.
Not always obvious that the goal should be compensation and
bringing them to the back situation
o Maybe we want MORE b/c we want DETERRENCE. We want to
sanction it to make up for the ones we dont catch etc.
But maybe at least when we want compensation we should GO AT
IT in the Winston way.

Bailey opposite extreme investment trust has a high debt to equity

ratio. Debtholders dont get a voice. This case stands for idea that courts are
permitted to make the world look better than it would have but for the
illegality.
Debt holders want the trust to be run in a conservative way b/c
they want their money back. Equity holders want a lot of money
through risky investments.
Trust becomes insolvent. Managers are held liable for fraud.
o New equity control group takes over, and they make risky
investment that pays up.
o Dist Court STILL breaks it up with injunction b/c the setup is
STILL really risky. App Ct. upholds it.
Is it preventive or reparative? If the bad thing is self-dealing then
that was in the past and they are thinking that its going to happen
again and its preventive. But then is it ripe? The managers are
new! But maybe there is going to obviously be so much pressure
on them that theyre going to illegally invest. But thats a stretch!
o Alternatively its a REPARATIVE injunction (Laycock) the
illegal activity is the CAPITAL STRUCTURE of the trust itself.
Important question isnt the honesty of managers etc., but
balance and control and disproportionate ratio of debt and
equity.
Problem HERE is that Congress has said that these
structures are NOT illegal b/c even though said it was
not allowed prospectively, it DIDNT apply
retrospectively. SO judgment of Congress is that its
legal!
How can court in Bailey put an injunction
anyway?!

Doesnt help much to switch to a

prospective argument b/c its such an
attenuated possibility that they are going to
do illegal self-dealing etc. It would be
overinclusive! It would sweep up too much
LEGAL activity.
o E.g. what if you just dissolved
Goodyear b/c of age discrimination.
Would be disproportionate.

Winston stands for rule is that injunctions should be narrowly

tailored to the wrong. Bailey stands for court making the world look
BETTER than it wouldve looked otherwise.
Laycock thinks that obviously Winston is the right way to think about
injunctive relief and that Bailey is overstepping. Bailey is the equitable
discretion approach where it can do anything and rearrange legal rights and
entitlements as if it were writing on a blank slate.
If you talk about it in this way, hard to argue with Laycock.
o This looks like Cuban revolutionary court.
o If you think of Bailey in this way then no one would really
agree with it.
BUT cant you argue that you could have a case like Pepsico where
court enjoins employees from working for a competitor in order to
get rid of the problem.
o Courts are DOING what theyre supposed to (to respect and
protect rights etc.). But theyre just doing a really good job
of it! Sometimes the overinclusive injunction is the only way
to prevent the illegality!
Aimster Posner doesnt think that a shut-down of aimster is an allout GOOD. He has to balance b/w giving up legal sharing and getting rid of
infringments or allowing infringements for the sake of allowing legal sharing.
Bailey may be analogous to Cuban Revolutionary court in that the
court is aiming to REARRANGE the rights and entitlements to make the world
a better place! The court is targeting LEGAL CONDUCT which it doesnt like
and makes it illegal.
May Be 3 POSITIONS 1) winston do no more than surgically excise
the illegality 2) Bailey in the way that Laycock describes it, in the sense of
rearranging rights and entitelements (legal conduct is the target) 3) THIRD
WAY (Below)

*****But there is a middle ground like Posner in Aimster it

AIMS to be like Winston but ends up taking some healthy flesh
along with the tumor which means that some legal activities will
be prohibited. Theis is balance of error costs.
**This is similar to the tradeoff we discussed of the TIMING
of the remedy. The reasons to push for EARLIER
intervention are the same.
Cost of sacrificing legal activity . Think about both the direct
costs to D from being forbidden from doing legal stuff. AND
systemic cost of having courts do the Bailey type thing and
overstepping legislature
And cost of letting some illegal activity slip by think about
how much we can remedy them through MONEY damages.
To the extent that theyre IRREPERABLE, then we want more
overinclusive injunction.
o E.g. in Bailey, if we dont do an injunction, then Equity
holders will be insolvent when the trust goes bust. And
you should get involved before it happens.
Dundee v. Jackson P shows not just sexual harassment in that
situation but a widespread scenario of sexual harassment - court not only
enjoins sexual harassment but also orders the agency to put in place a
sexual harassment training program. This is BEYOND the requirements of
Title VII
EEOC v. Wilson Metal Casket company enjoins the owner of the
company from bringing a female employee along with him without a
chaperone. Prophylactic rule may be necessary in order to prevent illegality
even though it also disallows some legal activity (like for the guy to be with
female employees). BUT even though disbanding the whole casket company
would be just as effective, it would be overboard!!
Here sexual harassment wont be completely repaired by money.
So it makes sense to go beyond the obey the law injunction.

Microsoft Nothing illegal in Microsoft having a monopoly as long as it

came from network effects etc. had the first critical mass of operating
systems (like Facebook does now). It became costly to use a different
operating system. Question was Microsoft using its ubiquity in the operating
system to push its own products (e.g. installing Internet Explorer on
computer manufacturers computers if they want to use Windows).
One remedy would be to break up Microsoft into two companies
one with Windows and one with the Browser and the rest of the
stuff.
Microsoft accepts that it did something wrong and wants an
injunction limited to the illegal activity (per Winston) and charge
damages for what they did in the past.
Dist Court breaks up company and gets overturned. They later
come to agreement w/ govt for a Winston-like remedy.
If district court wanted to break up Microsoft what argument would
it have to make to stick to the Category II middle ground level
discussed above. (balance of error costs analysis)
o Court cant decide that breaking up Microsoft is just better
for society. Courts and Congress have already decided under
Sherman Act that monopoly is ok as long as its only acquired
through network effects.
o Court would have to make the case that if Microsoft is
enjoined solely from breaking the law, it will keep doing the
same thing which will be difficult to detect, difficult to
adjudicate etc.
Court didnt have the vocabulary to explain why it
should be able to break up Microsoft in balance of error
terminology.
E.g. Gang Members are enjoined from wearing gang colors etc. This
is prophylactic that creates a special set of criminal actions (like wearing a
red shirt) that applies only to certain people.
Concern is not JUST that innocent conduct is being criminalized b/c
legislatures do this all the time (e.g. POSSESSION of drugs or guns
b/c it LEADS to crimes etc. or LOITER in vicinity of an ATM).
o We accept this b/c its easier to detect and it allows police to
intervene earlier.
o E.g. crime of speeding, or loitering near an ATM, leaving the
country with more than 10k in cash.
o HERE we object to the fact that COURTS are making these
determinations rather than legislatures.

E.g. Compare Maritrans orders law firm to cease

representing a competitor company b/c it has trade
secrets from another company. It could be prophylactic
in saying that its preventing breaking of consequences.
BUT court says that its a violation to just
represent a client w/ that sort of conflict of
interest. SO court looks like its just applyin a
Winston like obey the law injunction.
The Bailey like prophylactic is BAKED INTO THE
LAW BY THE LEGISLATURE
WE ARE WORRIED ABOUT THE
INSTITUTION DOING THE PROPHYLACTIC
ENJOINING. WE DONT LIKE WHEN
COURTS DO IT.
Problem w/ anti-gang injunctions is that people dont like that court
is creating law. We wouldnt want court disallowing having burglary
tools near a house even though a legislature could do the exact
same thing.

BUT courts are able to be much more specific by naming INDIVIDUAL

people that have to follow anti-gang rules. The legislature would have to be
much more GENERAL or it would be a bill of attainder which is not allowed.
Due Process or Equal Protection violation.
Bailey, Microsoft, Anti-gang injunctions problematic b/c courts seem
to be doing the job of a legislature. Courts should stick to remedies.
Laycock thinks either stick to REMEDIES or you are the Cuban revolutionary
court, while Posner in Aimster realizes that you can go a little outside the
remedies etc.
Constitutional Law role reversal between courts and legislatures.
Rights are the province of COURTS when it comes to Con Law.
The Fed govt can ENFORCE rights 14th Amend and Court can interpret
them. So the govt has the right to Enforce (i.e. remedy) the rights. In this
setting Courts are figuring out what the rights are. BUT once Congresss
remedies go beyond obey the law, we get into a question about how far
beyond remedies are allowed to go before they start redefining the
underlying rights which are the province of the courts!!!
City of Boerne- State wants to apply its anti-drug laws to Native
Americans. The Indians claim its a violation of 1st Amend.

Court says that its not a 1st Amend violation unless its being
TARGETED against the Indians for purpose of curbing religious
freedom.
But when Court said that you had to show PURPOSE to curb
religious freedom congress acted.
Argument is that Religious Freedom Restoration Act Congress claims
that a lot of intentional discrimination is difficult to detect and the only way
to prevent it is to allow ALL substantial burdens on religious groups b/c
otherwise there will be a lot of things that discriminate against Religious
Groups and they are OK with being overinclusive. Dont have to show that
theyre being specifically TARGETED.
Congress wants to balance error costs.
Looks hard to justify under Marbury v. Madison and Congress is
reinterpreting the religious right (that would be Category III
Bailey). Congress is doing Category II, and the balance of error
cost. Its ok to be a little overinlusive to STOP discrimination b/c its
often hard to identify where laws are being passed actually to do
something shady.
Court says that its ok but Court will have to police the line b/w
Category II and Category III (Bailey) type remedy. Must apply congruence
and proportionality b/w the remedy you want and the means to accomplish
that end.
Congress is weighing cost of religious liberty violation and even if
not very common its saying that it wants to be overinclusive to
prevent it.
**whose balance of error cost will apply? Will Court defer as long
as it believes that Congress is in good faith applying balance of
error cost instead of crossing into Category III
o Levinson: he thinks that court is basically saying that THEY
will decide what the balance is and even though it says that
its giving Congress so much latitude, it says that you cant
say that the one religious violation is so bad that it makes
sense to disallow all zoning etc.
Dickerson (2000) Congress is contracting rather than expanding the
remedy relative to the scope of the right. Effectively CONTRACTING the
scope of the right.
After Miranda was decided Congress enacted a statute to restore
the voluntary standard from pre-Miranda.
o Miranda acknowledges that at its base its voluntariness, but
they put all these prophylactic rules. It looks like a blanket
prophylactic procedural requirements.

o Remedial OVERLAY on the right. Just like a preventive

injunction on case-specific basis would
Not hard to see why this kind of rule is useful. Courts
cant really figure out if its voluntary.
Miranda will do away with SOME voluntary confessions
b/c the cop forgot to read the warning.
Court doing balancing of error costs essentially.
This might be the right balance. You could also
just get rid of ALL confessions. But thats too
much.
o BUT if Miranda is like a prophylactic injunction, then it
becomes difficult to impose it on the states if its not a
CONSTITUTIONAL rule (thats the only power they have under
Marbury).
Court in Miranda says its a DEFAULT option. But the
states would have to replace it w/ an alternative that is
JUST AS EFFECTIVE.
o Congress takes court up on that enacts a statute saying
that if its voluntary, you dont need Miranda. Congress was
basically just rewriting Miranda and got ignored.
o Rediscovered in Dickerson.
Goes to Sup Ct to see whether Miranda is constitutional.
Justices in Dickerson believe that if Miranda wasnt constitutionally
required, then it was wrong to begin with b/c how can the remedy
go beyond the right its meant to protect.
o BUT there are MANY examples of courts putting in injunctions
that go BEYOND the scope of the right they are meant to
protect!
Category II balance of error costs - This is so that the
injunctions are effective in preventing the harm that its
meant to prevent!
Dickerson says that of course Miranda was required all along b/c
how else could we have bound the STATES and CONGRESS.
o Scalia says that court only can bind states and congress to
RIGHTS, not to REMEDIES. And the whole time youve been
saying it was prophylactic and so it was a Remedy.
o But it didnt have to be this way if the court had the Category
II framework instead of the Category I (Winston) and
Category III (Bailey).
o
Talking about when remedies are larger than rights or go beyond
rights, we are figuring out whether the remedy is just going beyond the right
a little OR if its changing the right itself!

Scope of injunctions Structural reform injunctions are these really

something different (as a subject)?
Structural reform litigation where schools and mental hospitals,
police etc. are brought under control of a judge that govern how
those institutions have to be operated (even up to minute details
e.g. calories prisoners fed).
How do courts get to this point?
o Well people bring a case about a prison being a hellhole etc.
o Courts will remedy through a series of injunctive orders that
become more specific.
One way to think about it is that its a terrible Bailey situation where
court is taking over the power of the legislature and court is usurping and
overstepping its bounds.
BUT you might think of it as court just providing REMEDIES. And
these are REALLY BIG violations to court needs to have a really
detailed and big remedy that goes BEYOND the obey the law
injunction.
o Maybe theyre really category II injunctions and dont have to
be thought of as a Bailey type of injunction.
Schools
Brown v. Board says that racially segregated schools are
unconstitutional. Says that this isnt ok. Equal protection clause.
District court now faced with segregated schools and have to figure
out what to DO!
o One obvious possibility is to just ERASE the segregation laws
and revert to the situation that they have in the NORTH which
would be neighborhood schools.
THE PROBLEM is that the schools REMAIN almost
entirely segregated b/c the neighborhoods are not.
Swan - Dist court says thats not good enough b/c we need an
INTEGRATED school system to comply with the constitution.
The only way to solve this is to BUS kids from urban neighborhoods
out and suburban white kids into the city.
Is this Bailey or category II??
o Well we need to figure out what the RIGHT itself is that were
addressing. Not clear if the violation was de facto
segregation or the de jure segregation (by law)
o Does Brown forbid de facto segregation??

If Brown makes de fact segregation, then BUSING

would be the narrowest Winstonian remedy.
But if brown is limited to de jure, then the narrowest
remedy would be just striking the statute from the
books.
Swann court makes the call that Brown ONLY forbids de jure
segregation and ALLOWS de facto segregation which is NOT
unconstitutional.
o BUT Swann court (Sup Ct) says that courts cannot require
integration by law!
Can courts do anything if its just about de jure segregation laws?
o They can only get rid of the effects.
BUT the court is Swann says its OK to bus kids and says that its
MANDATORY!!! Once you had de jure segregation, then you have
an obligation to integrate.
o How does the court get from the right to the remedy??
Court could have said the VIOLATION was bigger, but it
didnt. BUT then it applies the REMEDY that wouldve
been applied to the bigger violation.
This looks a lot like Bailey.
How does court in Swann finesse this issue?
o Court says the issue is CAUSATION. All we have to show is
that the small constitutional violation CAUSED the large effect
of de facto segregation
o Court in Swann in half-hearted way, tries to make this case.
They say basically that they will accept that all de facto
segregation was a result of de jure segregation
They make an empirical presumption.
Levinson: an empirical presumption can get you
from any sized violation to any sized remedy.
It makes some sense: school segregation may
have MADE the neighborhoods and familie wanted
to live NEAR the schools that were designated for
THEM.
This isnt true though! The Northern school
districts were just as segregated based on
residential patterns. So the de jure
segregation was really NOT the reason.
From standpoint of reality, you cant get to
this remedy. BUT the PRESUMPTION allows
you to do so!

Must be some Category II way to think about this:

maybe court could say that were not in category III but
we are just trying to MAKE SURE that we dont miss any
segregation and we value full remediation that were
WILLING to be OVERINCLUSIVE.
Tough argument to make.
Other option would be to EXPAND the scope of the
violation!
Couldve interpreted Brown this way.
State action dont want to increase state
action so far.
**OR they couldve said that OTHER kinds of govt
race discrimination, besides schools, b/c OTHER
discrimination by the GOVT contributed to the de
facto segregation. So it was caused by OTHER
laws, not just laws about the school segregation.
Court wasnt willing to look at school
discrimination in the same frame as housing
discrimination. Could bring a different case
etc.
After Brown, if you had segregation law, you had to remove it and
desegregate the school district and remedy it by integration/busing.
Is this problematic? Looks just like Bailey. Once we get rid of the
factual pretense, we realize that the remedy is going much further
than the right (like congress in Boerne).
o For the South, the court is changing the scope of the RIGHT
which is exactly what court said Congres couldnt do in
Borene.
o ***BUT maybe its different here b/c COURT is in charge of
the right AND the remedy. BUT unlike in Boerne its not
Congress overstepping the Courts power, its like the Court
overstepping its own power. So from point of view of
remedies, its not great, but its not annoying b/c of
overstepping.
IF you think that Con Law is just them making it up as
they go along then youre OK with this.
If you believe Constitution actually says what the rights
are, then it becomes problematic b/c court shouldnt be
able to just make up its right like Bailey or Cuban Rev.
Court.
If you think this is bad, then its EQUALLY bad
when court does the same thing by cheating on
the remedy side.

Missouri v. Jenkins 1990s The court decides that its basically

DONE with school desegregation. Insists on Winstonian remedies that are
strictly proportional to the right.
Kansas city school is de facto segregated dist court tries to BUS.
BUT the white families just ARENT enrolled.
o Dist court decides to increase FUNDING for the schools to
turn the city schools into MAGNET school
If you make the schools good enough, white families
will move into the city.
But even if not, the dist court wants to have a higher
quality for minority school children (this is probably
what he cares about) Brown DID mentions that
minority kids were getting bad education
Factual assumptions:
De jure segregation resulted in worse
education said it in Brown so thats good
enough
But this was generation ago so how do we
know it affected them
How do we know more money will help
o Facts dont really get in the way
anyway.
o Sup Ct says its crazy. Says that court has to show that
housing patterns were a result of de jure segregation laws on
the books in 1950s. And court denies that lower test scores
are a result of de jure segregation in 1950s
Court not going to allow huge remedies based on the
presumption of Swan anymore. Too attenuated.
NARROWER TAILORING TO THE REMEDY Even a
Category II argument is so difficult here.
Starts to insist on Winston-like remedies. Ps will start
to lose requests to maintain desegregation regimes.
We spent most of time talking about damages and injunctions most
important type of remedies. We talked about magnitude and size etc. E.g
size and scope of reparative injunctions as well.
Looked at remedial timing Trinity church for damages, ripeness
for injunctions etc.
We looked at timing (regulation vs. tort)
Talking about targeting who should we target (always primary
wrongdoer?)

Also talked about the relationship b/w rights and remedies.

NOW WE ARE LOOKING AT THE CHOICE BETWEEN DAMAGES AND

INJUNCTIONS there arent really clear roles but courts looking at the
advantages and disadvantages of both. So its not really anything new and
now theyre just comparing everything.
Parde P complains that D will come and chop down trees on his
property. He wants an injunction. Should court give him one.
When is court going to say leave us alone and well give you
damages if he chops it down.
The whole doctrinal concept is just a combination b/w ripeness and
irreparable harm rule. (irreparable as in, you COULDNT get a
remedy at LAW not in same usage that we use it)
o This rule says that no remedy in equity if there is an adequate
remedy at LAW
Basically they prefer Law to equity. Hierarchy and will
try to give DAMAGES as a preference.
Basically if you got fucked in the law court people
would go to ask the king for a claim in equity.
Civil jury trial right still depends on this
distinction. If its historically legal you get a
right to a jury trial.
o Modern courts dutifully recite the irreparable injury rule?
Why?
The rule has become a rule of remedies. Instead of
sorting b/w law and equity, it basically sorts b/w the
type of remedy and damages takes precedence to this
very day.
There might be better reasons for choosing b/w
them.
We might want to think about
disadvantages of preventive injunctions
(b/w they may be wasteful of judicial
resources, we might make a mistake, we
dont want every conduct like cutting a tree
should become a crime of violating an
injunction. OR maybe we like them b/c
individualized etc.)

BUT we also might think about the value of injunctions

in preventing or repairing harms that damages might
not be good enough at repairing! We thought of this as
a factor in balancing of error costs of more inclusive or
less inclusive injunctions.
TURNS OUT BY COINCIDENCE that irreparable
injury rule might TRACK our idea of this!!
BUT this is just one variable among many and were
going to add more variables.
Dont want to make this the most important thing.
This shouldnt be the SOLE factor.
THE PROBLEM is that the only black letter law in
remedies is basically this irreparable injury rule.
IF you believed that to be the case, youd
be very invested in what the rule meant.
How INADEQUATE do damages have to be
before theyre permitted to consider
damages?

If irreparable injury rule is REALLY the whole ball game, then how to
implement it?
Pardee court has irreparable injury rule. If D cuts down trees and
P gets damages, will it be adequate?
o If P is a lumber company, then damages SHOULD be
adequate b/c P thinks of trees as MONEY.
When things have clear market values this is easy.
o BUT what if P is NOT a lumber company but individual
property owner that has significant utility from THESE trees.
Will market value damages compensate?? But are they
incommensurable? This iS WHY the person is asking for an
injunction!! SO court has to weigh whether this loss is worth
it or whether better to give an injunction
Laycock argues that in cases like THESE, Ps are
almost never denied the injunction.
Laycock says damages are only adequate when
there is a PERFECT substitute in the market.
He gives us the Pardee opinion which waxes
romantic about the specialty of the trees to the
property owner.
Court says that legal remedies in form of
damages bc you cant replace it. They say that if
it were horse or HOG, then it would be different
b/c its a commodity that we can replace.

Laycock wants us to see that the rule is NOT much of a

barrier where people would actually CARE about the
result.
He says that contrary to the strong preference for
damages, courts are willing to give an injunction
where it MATTERS.
He says that even when damages are only
SLIGHTLY inadequate, they will give injunctions.
BUT these are cases w/ selection bias that
Ps ask in situations where damages are
actually inadequate.
Still, irreparable injury rule not much of a
barrier.

ONE thing to notice is the relationship to COMPENSATORY DAMAGES

THAT WE TALKED ABOUT. If they had been given damages, they would get
MARKET VALUE.
Tree owners would make the SAME argument for an injunction as
they would for HIGHER damages namely that market value is
UNDER-compensatory
o 1) If courts actually AWARDED higher damages for
indiosycratic higher than market value, people would ask for
injunctions less.
o 2) BUT courts are much less willing to turn around and give
higher compensation at the damages phase. So the market
value rule is MUCH harder to overcome than irreparable harm
rule.
WHY?
Well, it avoids the danger that people will just try
to take ADVANTAGE of the situation. It makes
people put money where their mouths are. All Ps
will claim some high subjective damage and get
more than market value.
With injunction theres no risk of overcompensation OR undercompensation.
Adjudication costs of trying to figure out
whether the P is telling the truth and how
much he actually values it at.
Continental Airlines stands for both these last propostitions if
damages are difficult to measure, and therefore high risk of getting them
wrong, then injunctions look like an attractive solution and courts will want
to just issue the injunction.

BUT there are other considerations. RIPENESS if the person was

never going to chop the tree down, then were wasting resources w/ this
injunction.
A bit of a tempest in a teapot b/c the irreparable injury rule is only
ONE consideration. AND Laycock himself discovers that there are many
cases in which courts disallow injunctions EVEN THOUGH damages are quite
inadequate. Courts will still say that you get damages and cite the
irreparable injury rule.
****Laycock concludes that courts are deciding NOT to give
injunctions for GOOD REASONS that have NOTHING TO DO WITH THE
IRREPERABLE HARM RULE, but INVOKE the rule anyway b/c they have
NOTHING ELSE to say and no doctrinal lingo to use to justify why they are
doing so. And there are other cases where damages are completely
adequate, yet courts still issue injunctions.
Irreperable harm rule.
What other reasons should we be taking into account?
Policing the boundary b/w consensual exchange and nonconsensual exchange of entitlements.
What if in Pardee the boundary lines are clear and trees are on Ps
property. And D says I dont care Im going to chop them down. Almost
any court would give INJUNCTION and they would do so EVEN IF P were a
lumber company and damages would be perfectly adequate.
Why does Levinson think this is true?
Recall efficient theft discussion from Hammurabi. The D can say that
b/c he values it higher than market then he should be able to chop the trees
down and then pay damages and society comes out ahead.
SHouldnt we just want price rather than sanction?
o Why shouldnt penalty for theft just be the price of the thing
(price rather than sanction?)
One idea is that we dont catch every thief (Hammurabi)
BUT we might STILL want a higher sanction.
Why?

In this context we DONT know the value to

the current owner. So even if the thief
values at higher than market value, then
maybe the OWNER values it even higher
than D.
o People often value their own things at
higher than market value.
o So if someone is going to efficiently
steal something, your recourse is to
invest in precautions and self-help.
We dont want this scenario.
Alternative is to have SANCTIONS to channel
people into consensual market exchange. This is
the best way to actually get at who values the
item at the highest value and the user who will
use it best will get it.
Why do we treat the person who drives recklessly and crashing into
your car recklessly different from the efficient thief?
From your perspective you lose the car either way. But if someone
just crashes into your car then you only get the MARKET value.
o Why not try to deter them or enjoin the reckless drivers from
driving at all.
Retributive its not intentional etc.
Alternative in the stealing example by BLOCKING
efficient theft, we are not LOSING the ability to have a
consensual market transaction!!! You can bargain. So
we dont lose much but we prevent all the inefficient
non-consensual transactions.
With reckless driver youd have to negotiate
ex ante with all these people. If everyone is
enjoined, this DOESNT channel people into a
good thing. Instead it channels people into
NOT DRIVING AT ALL (socially COSTLY) b/c
no one could actually make those contracts
w/ everyone.
So we use TORT to MIMIC what most
people WOULD bargain for ex ante
(barring examples of subjective
valuation
**IMPORTANT EXAM CONCEPT

Vincent v. Lake Erie necessity Defense Ds ship keeps ship tied to

dock even after unloading b/c alternative is to go out to sea in storm. Ship
damages dock during the storm.
Dock owner says its the equivalent of theft and wants punitive
damages!!
Court says NO. We let the court get away with efficient theft and
gets to pay only market value.
o Whats the explanation?
Like reckless driver, the ship captain has no way to
bargain w/ the dock owner.
What if the captain HAD had time, and the dock owner
wanted MORE money, but the ship captain said FUCK
YOU and just stayed there
THEN we probably wouldve gotten more punitive
damages etc.
But what if there WAS an opportunity to negotiate
another impediment is that this dock owner has a
MONOPOLY so it might be UNFAIR to require the
captain to try to strike a market bargain b/c he has no
ability to actually negotiate and seek out alternatives.
***SO when the costs of making the deal are too much,
we might not expect them to come to a deal.
E.g. in this case the Ship is worth 5M and the
dock worth 500. Both are better off striking a
deal but also to HOLD OUT and get more of the
pie that is between them.
We worry that the risks of them both
holding out and coming to an inefficient
result is too great and they wont come to
an agreement so we dont expect a deal.
***When there are impediments to coming
to a deal then we dont expect a deal.
E.g. efficient breach we allow efficient
breach w/o a bargain etc.
E.g. Eminent domain power NYC takes
property from private holders for Columbia
University. Or when govt took land for
Railroads. Why dont courts require a
consensual bargain?
o Market IMPEDIMENT holdout
problem owners can hold out for the
entire value of the RR operation!

o Eminent domain power is necessary to

overcome this and allow efficient
theft and only payment of market
value!!
E.g. how do we explain ordinary tort
damages for product liability? John Deere
TAKES YOUR LEG nonconsnsually.
o Why not negotiate the value of your
leg before? Market IMPEDIMENT.
Info cost to consumers and they cant
price the risk. Information
asymmetry etc.

Calebresi One view of the Cathedral central distinction b/w

property rules and liability rules
Property rule- backed by MUCH HIGHER penalty than anyone would
actually want to pay. For our purposes this is Injunctions backed by
contempt sanctions.
Liability rule is a PRICING regime. Its not a super-compensatory
rule. For our purposes these are Compensatory Damages
E.g. Pollution from Ds property is floating over and choking Ps trees.
Court has to decide if there is a nuisance, and then what to pay.
Courts goal is to minimize combined cost of harm and prevention
(i.e. to figure out what would happen if both were owned by SAME
PERSON). How much do extra precautions cost vs. the value of the
trees etc.
o Who is the least cost avoider??
Four Outcomes:
o 2 ways to decide liability issue (who has the right to pollute or
not to be polluted)
o 2 remedies (even if D wins there is a type of remedy)
o So that makes 4 rules that are possible.
First two rules:
o It IS a nuisance
1) But backed by property rule remedy injunction for
factory NOT to pollute and has to BUY the entitlement
from the tree owner who can sell it at any price.
Here factory CANNOT pollute b/c subject to
contempt sanctions etc. and will only pollute if it
can buy it from the tree owner.

2) Liability rule factory can continue to pollute but pay

damages and COURT determines value.
Factory can decide whether it wants to or not
based on the price.
o Its NOT a nuisance:
3) Property rule factory has a PROPERTY RIGHT to
pollute ALL IT ONCE. Symmetrical outcome to outcome
1 b/c the only way the tree owner can stop the factory
is to pay the price that the FACTORY wants them to pay.
4) MUST BE SOMETHING HERE maybe the
symmetrical outcome here is a COMPENSATED
INJUNCTION. The tree owner can STOP the factory but
PAYS a price set by the COURT (like under rule 2). This
time the factory cant prevent the tree owner from
shutting down the factory, but GET COMPENSATED.
This was used in Spurr the neighbors stopped
the feedlot operation but paid the cost of moving
the feedlot.
E.g. nighclub why dont courts take this option
seriously, and neighbors can SHUT DOWN the
nightclub but have to pay the nightclub damages
for moving etc.?
One reason its often impractical is bc in
nuisance cases where Ps are NUMEROUS,
hard to make it work b/c every neighbor will
have to chip in and there is a very big free
rider problem (in Spurr the developer was in
the picture and could solve the collective
action problem)
o Maybe condo board could solve this
but there are still other people
benefitging.
o ***Also it feels kind of weird if
neighbors win and then have to PAY.
We arent fully Coasean b/c we are
locked into an idea of a wrongdoer
and a VICTIM.

For our purposes the only results that matter are the choices b/w
damages and injunctions b/w rule 1 or rule 2.
So P wins, and what should they get??
Calebresi concerned that the entitlement ends up in the right place.

**If were sure that the court will put entitelement in the right place in
the first place, then the choice b/w which remedy to give will not be
important b/c it will KEEP the entitlement in the right place.
E.g. if the trees are worth more, then the choice is bw injunction
and damages but it DOESNT matter
o If they enjoin the pollution the trees are saved. But if they
have damages, b/c we gave the entitlement to the right side,
it will necessarily cost less to take a precaution to reduce
polluting than to pay the damages so trees ALSO get saved.
**ALSO if there are NO TRANSACTION costs, then even if we give the
entitlement to the WRONG person, then they will just bargain to make each
other better off etc.
Basically we just recited the COASE theorem. Legal rule doesnt
matter if transaction costs are 0.
o What doesnt matter means is that the result will be that
trees die.
o BUT it changes the DISTRIBUTIVE RESULTS b/c it allocates
entitlements and wealth b/w people.
Should we care about distribution of wealth b/w two
parties?
We will just redistribute as we see fit!
BUT not that simple. Distributive consequences
leads to different allocation
E.g. if we apply rule 3, then at the margin it will
benefit more factories, whereas rule 1 or 2 will
tend toward more trees
***Even though under Coase theorem it
doesnt matter in the short run, in the long
run it creates a BIAS or TAX on one of the
activities.
o Maybe the short run is all that court
should care about. And distributive
effects should be dealt w/ by the
legislature.
BUT now we are in the real world. Judicial error, transaction costs etc.
Damages can be calculated wrong.
Calebresi offer 2 rules of thumb:
o 1) Where transaction costs are low and easy bargaining, we
should prefer property rules to liability. Prefer injunctions to
damages b/c if they get it wrong, they can negotiate.

This is b/c people can negotiate around injunctions

better. Like efficient theft they channel would be takers
into utility maximizing transactions. Highest value user
will get it.
Under a liability rule (rule 2) and damages are 50 but
trees really worth 100 to owner. Owner of trees could
still just pay 50 MORE to stop the pollution.
So WHY does Calebresi say that its better to have
the property rule in this case? (when we talked
about the efficient theft we said we wanted a
sanction rule) Shouldnt the answers be the
same?
One problem we had w/ bargaining around
liability rules is multiple takers (of your used
cars) who would just want to get a bribe
from you.
BUT in the factory nuisance example, there
arent multiple THEIVES, b/c its ridiculous
to build a new factory to spew pollution just
to get the bribe.
And in the car theft example you could steal
it back.
Calebresis intuition makes sense in the CAR example
where there are MULTIPLE takers and chance of
reciprocal takings. In particular its not realistic in the
situation that THEY are talking about which is the
nuisance cases.
o 2) where transaction costs are NOT low, then we think that
there should be liability rules (according to Calebresi)
E.g. Boomer v. Atlantic Cement cement company
spewing pollution and ruining a bunch of tree owners
property. What if the cost of moving is 1M but the trees
collectively only worth 50k
If court applies Rule 1 (injunction) and gives a
property right inefficiently to tree owners. The
costs of striking a bargain are quite high. Have to
have a bunch of transactions AND also have
HOLDOUT problem.
So here the injunction is dangerous.

Rule 2 is the better way. Factory will pay the 50k

rather than shut down. In real world where they
cant bargain costlessly, we recreate the bargain
that they might have struck (but
nonconsenusally)
So when choice b/w rule 1 and Rule2, and
transaction costs are high, court should err
toward Rule 2. B/c then even if the tree owner
doesnt consent, then the factory can TAKE it.
BUT what if the tree owners value the trees at 2M
but court insists on 500K market value. Then the
factory will pollute but this is not the result that
we want!
Levinson: in high transaction cost settings,
we dont always want this rule b/c this ALSO
permist INEFFICIENT transfers if damages
are set TOO LOW!! We have to weigh the
risk that a property rule will PREVENT
efficient transfers against risk that liability
rule will PERMIT INEFFECIENT transfers.
Levinson thinks that Calebresis insight
is generally correct but in certain
situations (when courts get damages
wrong), then its not really possible.

Important application of this framework is choice of damages vs.

injuncitons in context of remedies for contract breaches.
Expectation damages VS. Specific Performance (injunction).
Nominal specific performance rule is irreparable injury just like the
idea for INJUNCTIONS.
E.g. Campbells soup why does campbells want specific
performance? They want the same color carrots for their
customers.
Laycock says that in most cases where the person CARES about
the difference, they will get specific performance. Farnsworth says
that now the thumb on the scale against specific performance has
lessened.

How we think about consensual bargaining or nonconsensual court

remedies.

Specific performance vs. expectation damages. Basically same

tradeoff and same idea as irreparable injury rule. Sometimes its expressed
as uniqueness.
Theoritcal perspective pros and cons can be analyzed w/in the
cathedral framework. Its just another situation of consensual exchange vs.
court ordered entitlement and nonconsensual exchange.
When someone doesnt perform the contract hes basically saying that
he (the promisor) is going to value the promise more than the promissee.
When do we think that they can organize among themselves the buy-back
of the promise OR when do we think that the court will do better.
E.g. Seller finds a buyer willing to pay more. Can pay B1 to not
perform. OR court can say that B1 gets expectation damages etc.
The basic justification for specific performance is that expectation
damages are often UNDER-Compensatory b/c holder of entitlement
values it more than market value and what the other person is
willing to pay.
BUT the justification for expectation damages is that there are
transaction costs are too high. When the Seller values it more than
B1, the transaction costs are often higher than it would have been
worth it.
Vincent v Lake Erie problem transaction costs are too high so we
make a situation where they have entitlements we think they
wouldve bargained for.
E.g. boring review example. S contracts with B1 for 2000 and B2
wants to buy for 3000. S wants efficient breach. Under expectation
damages regime, S would pay B1 damages of 2000 and sell to B2 for 3000.
If there is injunction and escalating contempt sanctions S would have no
choice. BUT given rule of specific performance it can still get into the hands
of B1. B2 can buy it from B1. The windfall of 1000 goes to B1. So theres
a distributive difference! But we really dont care b/c it goes to highest
valued person. B1 likes this.
At this level of analysis no one should care which rule we use b/c the
computer will end up with the highest valued person. So this would work
under coase theorem BUT the consensual bargain way of getting it into B2s
hands will be prohibitiavely high. SO we need expectation damages.
Why are transactions costs so high?
B1 B2. How is B2 going to find B1? Its going to be hard for him
to find B1.

o Also not always possible. What if Ss production costs go up

and thats why S doesnt want to sell to B1 and its not b/c of
another buyer? Then we would want a breach. But there is
no case in that scenario where another person can come
along and RE-Sale would not work!
What about the scenario where S negotiates with B1. This avoids
the problem of B2 finding B1 AND it would work also if Ss costs
went up. BUT high transaction costs HERE (Erie) Bi-lateral
monopoly problem. The pie is 1000 and they are trying to split it
and will each hold out or consume all the profit through bargaining
costs. ALSO demands on information coming from both sides which
is hard to figure out. B1 needs to figure out how much its worth to
S and vice versa. B1 would need to find out how much B2 is
offering etc. b/c thats what S values it at.
Because the transaction costs of getting the computer to B2 is too
high under specific performance obligations, then there will be
many efficient breaches that WONT occur under a specific
performance regime.

BUT in favor of Specific performance is that the analysis above is only

HALF the Cathedral framework. We have to weigh the potential of damages
to be UNDER-COMPENSATORY. This will lead to TOO MUCH breaching. E.g.
in efficient theft where thief values at 2.5k and owner values at 3k but court
values at 2k, then the thief takes IT!! But not going to highest valued
person.
What if B1 values computer at 3k and B2 only at 2.5k? Same thing.
****Choice b/w expectation damages and specific performance regime
comes down to a prediction about whether the costs of foregoing some
efficient breaches under specific performance rule outweigh the costs of
under-compensating breachees in damages regime and therefore possibly
facilitating a number of inefficient breaches where S sells to lower valued B2.
We expect to see too little breaching under SP b/c transaction costs
too high.
But we also expect to see too MUCH breaching, b/c expectation
damages are undercompensatory.
Huge disagreement. No empirical evidence. American rule makes
some sense. Specific performance warranted where the value is UNIQUE,
and these are the cases where were worried about expectation damages are
inadequate. If we think that irreparable injury rule is pretty good at coming
up with where Exp Damages are not good enough, then we think it works.

Constitutional law argument that govt should be able to

TAKE and then pay damages. BUT in constitutional law we basically
see a presumption in favor of injuncitons. When courts can see a
violation brewing, they enjoin it. If its happened before obviously
they give damages. (contrast with takings doctrine which is a
violation of property rights and we allow it w/ damages
compensation).
One obvious explanation is that Constitutional law is a
sanctioning regime. We want the level of violation to be
close to 0 and were NOT worried about Over-deterrence.
Futility of money damages as applied against the
government. Damages may be uniquely inadequate against
the govt (recall the distribution of taxes argument)
They may not be compensatory to people.
Incommensurability etc.
Kontorovich wants to use Cathedral framework in areas in which
government has a compelling need to take a constitutional entitlement but
cant make a transaction. E.g. mass detention of terrorists, Japanese etc.
Rather than putting courts in position of saying either NO violation (b/c we
dont want to let them out) OR to say Injunction to release. Maybe courts
should go the Rule 2 route and say that the rights are violated but limiting
remedy to money damages.
********EXAM: Interesting to think about the extent to which this
argument is the same as Calebresi argument as transaction costs is the
switching rule or the same as the discussion of specific performance vs.
expectation damages.
Undue hardship and Laches idea.
g
Sometimes courts will refuse injunctions when costs to the D of
injunction far outweighs the benefits to P of the injunction.
Van Wagner P has contract for 10 yr lease of billboard space. S&M
buys the building and plans to demolish it. D breaches and wants to pay P
damages. P wants specific performance and Ct says no. Van Wagner says
that the billboard space is unique (midtown tunnel). Court says uniqueness
is not about whether there is only ONE, but whether its unique in that there
is no market substitute and risk that market value is not a replacement. The
only reason we care is the risk that we get compensation wrong.

Court thinks theres no chance of getting it wrong. Very clear way

of figuring out the value of the billboard space! Complicated
system of measuring eyeballs seeing billboard space AND the length
of time they see it so we just have to duplicate that. On top of that
Van Wagner had leased it to some OTHER people. Damages will
allow perfect compensation.
Why does Van Wagner care so much??
o Answer is that the specific performance decree will be VERY
VALUABLE b/c S&M values tearing down the building much
higher. Van Wagner will be able to SELL the injunction to
S&M. Van Wagner can HOLD OUT!!
o With this possibility in view, Court is reluctant to give it to van
wagner and has to stretch doctrinal rules about each parcel of
real estate being UNIQUE.
Risk of undercompensation here seems negligible, and risk of nonefficient breach is also nonexistent. The main advantage of a
specific performance decree is pretty much nonexistent here!
**Moving beyond this, then are there any other reasons that the
court shouldnt give this injunction?
o Assume that injunction would lead to an agreement and Van
Wagner will get a big windfall. Why is this a bad outcome? Is
distribution what we care about in this contracts case?
How would parties have dealt w/ this if they had
contracted in it to begin with? Well Van Wagner
probably wouldve bargained for some share of the
profit opportunity. BUT he wouldve paid MORE for the
billboard. So in this contract where he paid no
PREMIUM for the lottery ticket, he shouldnt get the
windfall. Van Wagner probably wouldve not bought the
lottery ticket b/c they are in advertising business!!
o BUT its not just a question of distribution of wealth etc. The
actual value of contract might be changed. If specific
performance is the RULE, then what does the next building
owner do when he has the opportunity to knock down a
building? They are going to be fucked. Also worse for future
Van Wagners b/c less of a big pie for them to split b/c they
wont be able to be going into business with a real estate
developer.
o Limiting Van Wagner to damages by applying the undue
hardship rule makes some sense b/c it ensures the efficient.
Avoids windfall to promisee who wouldnt have
contracted for it in the first place!

We want S&M to pursue the real estate deal.

Whitlander D is building addition to grocery store next door to Ps

land. The footing of the addition will extend onto Ps property. D promises
to pay some. P asks for deal after the building is being built and D wont
cooperate. P sues for injunction removing the footing.
On summary judgment Dist court says No injunction b/c of undue
hardship. Damages would be valued at value of underground land.
The App. Ct REVERSES.
Cost to D would be a LOT to move it, and price of the land is
negligible. Why did App. Ct. do this?
Whats the difference b/w this and Van Wagner?
o One distinction is that the risk of undercompensation was
negligible in Van Wagner. Maybe its harder here b/c the P
might have subjective attachment to the land. Having
grocery store close to his house is not cool.
o Windfall lottery situation P in both cases would get undue
compensation through an injunction by being able to HOLD
OUT selling the injunction and getting a lot of money!
In Van Wagner we said bad result b/c we dont want to
force the purchase of lottery tickets ex ante.
***But analogous problem here is that we might
encouarage a bad behavioral pattern if youre going to
be subjected to much liability you might overinvest in
figuring out what the property line is. Overdeterrence
concern for taking 18 in of worthless land.
Compare this to Jacobs and Young v. Kent builder uses wrong kind
of pipe in the building. (Cardozo). Cardozo says that P gets only market
value difference. Doesnt get an injunction.
High transaction costs of giving an injunction would lead to bad
bilateral monopolies etc.
Also THREAT of having to pay overcompensatory bribes to Ps, will
lead builders to overinvest in checking that everything is perfect
with the contract. THIS WILL INCREASE PRICES of HOUSES.
This is a negative contingency instead of a positive one (e.g. Donald
trump calling)
NOTHING different about Whitlock and Van Wagner about contract etc.
The question is just whether we want to give injunction and risk that a)
parties wont be able to strike a deal to get out 2) confront Ds to pay these
big bribes will negatively affect Ds in future by not pursuing good deals w/
trump or overinvesting in precautions.

Levinson: Whats going on in Whitlock is that Ct expects that D is an

intentional encroacher. P TOLD HIM. D decided to go forward anyhow and
only expected to pay 100 dollars in damages. Ct. is willing to enjoin him
knowing that it will cost him a lot of money. That is an EFFICIENT THEFT. D
didnt have to invest ANYTHING. D couldve negotiated beforehand w/ low
transaction costs. At that point there wasnt even a bilateral monopoly!!
Add the possibility of undercompensation b/c P doesnt want the
supermarket right up against his house.

This makes sense b/c it channels them into an agreement that we

would want them to make and allows P to set his price for his land.
Compare to Van Wagner if he DID know that there wouldve been
an offer by Trump etc.
Different interpretation is that maybe D isnt so bad. What if Whitlock
led the grocery store owner to believe it would be JUST FINE to build on his
property. And then LATER came and wanted him to pay. In this case the
court definitely wouldve applied undue hardship rule. P wouldve
contributed the MOST.
Court couldve denied it by undue hardship OR invoked equitable
doctrine of LACHES
o When P strategically delays in bringing suit and allowing the D
to rely on the legality of his actions. Laches will mean that
injunction not applicable. Only damages. BUT Laches can be
a complete bar on recovery so a stronger doctrine.
Pro Football Redskins have a Trademark. Anyone disparaged can
bring suit. Ps (Indians) didnt bring case soon enough after their 18 th bday.
NAACP legal defense and education fund broke off of NAACP and
continues using the name. NAACP sues 25 years later about the name.
Court uses laches to say no injunction.
Laches in interchangeable w/ estoppel (cuts off remedies where Ps
mislead D into disadvantageous position). Laches is one subset of estoppel.
Estoppel is preferred doctrinal rule for cutting off damages and laches for
injunctions. Both are just as good but just tradition. Statute of lim are
mandatory. Were traditionally for legal claims. Laches are discretionary.
Why have a statute of lim? Policy justifications.
Repose

Hypotehtical version of Whitlock very costly for D after all this

time. Hard to see justification for Stat of Lim across the board.
BUT it is a good justification for discretionary laches in cases of
STRATEGIC delay!
o P can sit to wait and see if they can profit from the illegality.
Wait and see.
E.g. Election cases in Laycock they KNOW there is
going to be discrimination but it might HELP them. Ps
WAIT and see what happens in the election. Laches
invoked.
E.g. Wagner P tries to get specific performance of real
estate sale contract 10 years later b/c D spent money
IMPROVING his property. Court invokes laches. Better
to clarify early from a social perspective so people who
will benefit will have an incentive for improvement.

Laches can be a subset of undue hardship doctrine when P waits out so

he can get injunction and extract the money. E.g. in the pipe in the house
case, what if the P KNEW it was wrong and waited until it would become
difficult for D and then he could bribe him in a bilateral monopoly.
Ebay illustration of strategic delay and screws up injunction law.
Ebay 2 things to notice. Sup Ct does its best job of ruining remedies
doctrine. Articulates 4 part test for wehtehr to grant injunction. 4 part test:
1) suffered an irreparable injury
2) inadequacy of damages THESE ARE BOTH JUST IRREPERABLE
INJURY RULE
3) Balance of hardship (this is language courts use in prelim
injunctions no clear meaning in permanent injunction case but is
used to express undue hardship)
4) public interest not be disserved. This is language that has been
added to prelim injunction cases (Like whale case and navy but this
was prelim injunction).
This is confusing prelim injunction language and permanent injunction
language. Lower courts will probably just cite it and do whatever they
wouldve done anyway.
Substantive contribution of Ebay was to push courts away from their
strong presumption for injunctions in PATENT cases b/c they often have an
undue hardship component.

Courts had usually given injunctions b/c damages in patent law are
very difficult to calculate. You would have to figure out what the
price they wouldve bargained for before. All we know is how much
a phone sells for, not the contribution of each of the different
technologies in the phone. And then figure out how much the
patent holder wouldve made etc.
Courts werent sufficiently attentive to the problems w/ injunctions
in these cases according to sup. Ct.
o W/ injunctions you have a patent HOLDUP problem (which is
just a specific case of what we talked about before).
Patent holders WAIT to see that apple puts it into the
PHONE and then it becomes very important and very
costly to get it out of the phone! (This wouldnt be the
case if they brought their claim early on).
So here when patent holder got the injunctions, they
could hold out for a much higher price than they
wouldve gotten if they had bargained w/ apple in the
BEGINNING.
E.g. a couple of years after Ebay a patent holding
company only got 30M for a patent used in blackberry
and then appealed asking for an injunction. And in
shadow of this blackberry settled for 600M. This is like
WHITLOCK strategic delay and they want to WAIT.
Known as a patent troll problem.
This situation in Whitlock looks DIFFERENT when the
grocery store just TAKES the property hoping they will
only have to pay market value. Or if apple took patent
etc. Here an injunction is appropriate.
Too many patents and giving injunction will raise the
same issue as making contractor expend too much to
make sure he is putting in Reading pipe, and here we
dont want apple to have to do the same thing.
Kennedy (concurrence) says explicitly that when the patents are
vague and only a small part of the product, then we dont want to give
injunction b/c its just going to be used for strategic settlement etc.

PUNITIVE DAMAGES
Why do we have them? Not compensatory etc. P recovers much more
than what hes actually been harmed.

This is related to super-compensatory remedies (like contempt

sanctions etc.)
2 Standard justifications 1) deterrence 2) Punishment
Detterrence usually we think that compensatory damages already
provide deterrence and may be the optimal level of deterrence. **Laycock
says that deterrence is a side effect. Economists would disagree and
say the purpose is deterrence and the side effect is compenasation.
EXAM!! THEME THROUGHOUT THE COURSE
Where do we like a sanction rather than a price (or property rather
than liability rule in cathedral terms)
Supercompensatory damages are situations where we want to
CHANNEL people into contract. They can create property rules.
Another common situation where we want sanctions rather than prices
are criminal or quasi-criminal conduct that we dont think is socially desirable
activity. E.g. if you punch someone in the nose and want to pay
compensatory damages. People dont want that. We dont want a
consensual transaction to do it. We JUST dont want you to do it!!
Another justification for supercompensatory damages is we want to
create a MUTLIPLIER if people arent going to get caught to make up for the
people we dont catch. This rationale is calibrating prices to shortfalls in
payment. Its NOT the same as the justifications above which are about
sanctioning and punishment. Economists see THIS as the best and ONLY
justification for punitive damages.
Sup Ct in Exxon does make the point that punitive damages are
more justified when the wrong is very difficult to detect.
**Levinson: doesnt think that the multiplier rationale is very good
at explaining where courts are most likely to award punitive
damages in the real world.

E.g. cruise ship lets waste oil leak out into the ocean doing damage
over long period of time. Exxon valdez poured money into the.
o If it was just the multiplier principle, then we would expect
punitive damages in the cruise ship case more than exxon
valdez!! But this isnt how it works.
Most jurors dont believe in the multiplier.

Hasty model punitive damages instructions given to mock jurors w/

multiplier principles STILL only 20% were willing to do the math and get it
right (even though it wasnt even real!) (they will punish the big wrong like
oil spill).
**Punitive damages are viewed by judges and jurors as punishment.
But why do we need another form of criminal type penalties.
If youre a D all you know is its outrageous egregious etc. This
is vague and would never hold up as a criminal law
Basically based on the jurors. And not clear that these things that
theyre punishing are what we as a society would want to
criminalize.
Were talking about Grimshaw design defects that cause injuries.
Jurors find OUTRAGEOUS when manufacturers KNEW that the
product would cause injury or death.
o To jurors this means just that the company engaged in a costbenefit analysis.
o GM case chevy Malibu P showed that gas tank might not
have exploded if the fuel tank had been moved up. Jury
awarded 4.8B dollars in punitive damages.
Jury swayed mostly by Ps introduction of cost/benefit
analysis. GM decided that liability was only costing 5
dollars per car. And wouldve cost 10 dollars to improve
the gas tank.
Jurors are outraged by this kind of analysis even
though its a perfect Hand formula type thing.
Shouldnt we reward them?
Consciously choosing to design a car like that is
equated to murder.
Not clear what jurors are thinking. Always
predictable that people will die b/c of their cars.
As more people want to drive it, the number of
people who will die goes up and up!
And COST is a consideration and people
want cheap cars.
This is true of ANY manufacturing process or
product that is useful.
*********WHAT IS THE DISCONNECT? Jurors are treating cases
where there is an injury as a case where the OPTIMAL level is ZERO. And
NO ONE (even consumers) thinks that!! They are confusing prices and
SANCTIONS

what do you advise if youre the Gen Counsel of GM? You wouldnt
say DONT use a cost/benefit analysis. Probably a lot of document
shredding.
Not just jurors. Justice Souter in Exxon case seems to endorse the
view that action taken or omitted in order to augment profit
increases culpability
o LEVINSON: THIS CANT BE!!

Juries can decide whether and HOW MUCH punitive damages. Jurors
only told to award an amount sufficient to punish and deter, taking into
account reprehensibility and outrageousness.
Hastings reliable in assessing pretty consistent punitive damages.
INTENTIONALITY is usually what they are concerned with. They will
put things on a scale pretty consistently.
Judgments DO become inconsistent when they have to convert their
qualitative assessment of blameworthiness on scale of 1 to 10, to
DOLLAR FIGURES
o Jurors look for a number to ANCHOR onto.
Common way is to anchor something you KNOW and
compare it. Anchor is way more important than the
adjustment you make from the anchor.
Source of anchor point is crucial. People will use ANY
number rather than NO anchor.
Experiment where you just spin a random
number. Just SEEING a number will make them
answer a question of percentage DIFFERENTLY.
Experiment of German judges would even do that
with sentencing.
o Hasty said that 4.9B punitive damages number in GM case
was similar to the ADVERTISING budget. Jurors seize on Ds
net worth etc.
Most jurisd allow P lawyers to SUGGEST an award.
***Actually, the Ds that used HIGHER numbers for the
value of life in their own cost/benefit analyses actually
INCREASED punitive damages b/c it anchors the value
(and maybe makes the egregiousness look worse!)
Ironic
Maybe we need punitive damages that will DETER. So idiosyncratic D
that really likes to do it should be charged MORE . So net worth may be
relevant. BUT shouldnt it be based on how much the D derives in utility
from this ACTIVITY so we want to make it not worth it!

BUT if we believe in decreasing marginal utility of money, then we

SHOULD charge them more to make it hurt
o BUT with CORPORATIONS, this doesnt mean ANYTHING. The
corporations arent getting hurt so its useless.

Jurors often instructed that punitive damages have to be proportional

to compensatory damages. But WHY?
Looking backward, there is no necessary correlation b/w how bad
the BEHAVIOR was and the HARM it caused
From deterrence perspective, if we think of Benthamite idea, we
should want punitive damages to be VERY high in comparison
And Sanctions in comparison to prices should be MUCH HIGHER to
deter it.
No real rational reason for ratio idea. But Sup. Ct. has said it.
o No functional sense BUT its at least EASY TO ADMINISTER.
o Levinson: Another rule that would be more rational AND easy
to administer would just be NO PUNITIVE DAMAGES AT ALL!
One thing juries dont take into account is the number of other cases
where D will be subjected to punitive damages by OTHEr cases that resulted
from same conduct. E.g. Ford and Pinto case.
Ds are permitted to present evidence of earlier Punitive damages
but Ds NEVER have done this b/c it would SHOW that they lost
before.
You COULD say that only FIRST P gets punitive damages. But this
creates race to courthouse (Levinson doesnt care about this) OR it
could bankrupt the D before other Ps got compensated
OR we could have mandatory class actions. BUT courts are not
willing to allow this. Less willing to allow punitive damages in class
actions generally
Juries also dont take into account REGULATORY fines etc that the D
will ALSO have to pay. Regulatory fines often do account for everything.
There is political will to control punitive damages. People say they are
too high. (polticial clout of Ds)
2 reasons
o they may be too large (relative to some baseline)
o Inconsistent and unpredictable.
o Unfair etc.

Souter more concerned w/ not predictable than the SIZE. Low median
but high MEAN suggesting that there are outlier very HUGE punitive
damages awards.
Souter says that the really high cases come out when there deosnt
seem to be a reason to be that high.
o Levinson thinks thats bullshit.
o Souter draws analogy of criminal sentencing guidelines so we
at least get uniformity.
Tort reform in states: some have abolished, limited to some cases,
limited amounts, put RATIO. SOME HAVE MADE HALF OF PUNITIVE
DAMAGES GO TO STATE this makes sense. Decoupling strategy. Why
should the Ps get everything? If took everything Ps would have no incentive
to litigate it. Of course this means theyll always settle b/c its in BOTH their
interest rather than give to the state.
Punitive damages are policed by trial and appellate review.
Appellate is (shocks the conscience). State appellate courts
increasingly structure their review along a number of factors like
wealth, reprehensibility.
o Sup. Ct. took this role on in Exxon case. Sup Ct analyzes in
terms of federal maritime claims.
Limits it to some ratio 1:1. Reviews median verdicts.
Clear guideline. Special considerations though is if its
driven by profit, or especially horrible. So basically
meaningless.

Limits on CONSTITUTIONAL GROUNDS.

Through 1980s, it was brought on 8th Am grounds. But court rejected
it b/c its only about payments to the states. So court goes to due process.
BMW v. Gore - Court struck down 4M punitive damages b/c BMW had
re-painted a new car. So jury multiplied 4000 in compensatory by all the
other people estimated to have had this done to their cars.
Is their conduct outrageous? BMW said that if the reduction in
value of the car was higher than 3% it wouldnt repair.
o Juries FAVOR local plaintiffs (but theyre not biased against
out of state Ds). Judges probably affirm b/c want to give in
state plaintiffs money from out of states Ds. They get reelected.

State Farm v. Campbell Jury awards punitive damages b/c State

Farm initially refused to settle the lawsuit agains drunk driving P and
gambled and then the P was liable. But then State farm agreed to pay
everything! Nevertheless it was too late b/c of the EMOTIONAL DISTRESS
on the P for having to pay for driving drunk and killing people 145M punitive
damages.
Sup. Ct. says that this clearly violates Due Process.
BMW and State farm is beginning of an implementable limit.
One clear result.
o Only can impose punitive damages for unlawful acts
committed in the SAME STATE.
o And for only ONE KIND of wrong (you cant give punitive
damages for other things like state farm discriminating).
Only about what weve adjudicated.
o Phillip Morris v. Williams Oregon jury gave 8M punitive
damages. Philip Morris says it was not proper b/c Plaintiff
attorneys asked jury to think about how many people IN
OREGON (complies w/ state farm) also got hurt. Phillip Morris
wants it to just be about the PLAINTIFF HIMSELF (even if
other people are in the same state and its the same conduct)
Breyer says of course its only about people who are
parties. But THEN Breyer says that its ok to use
examples of harm to OTHERS to show how
reprehensible it is. SO its really unclear.
3 factors that should be applied (Gore and State farm)
Reprehensibility
Ratio to compensatory damages (State farm says that ratios higher
than single digits will rarely satisfy Due Process). 4:1 ratios also
get close to the line. Exxon suggests 1:1 in non-binding way.
o We can try to analyze from first principles and there are no
reasons to do this ratio bullshit.
o Levinson: it has to be that its b/c of the multiplier principle!!
But court in State Farm REJECTS this reasoning. But also
Kennedy says that difficulty to detect IS a reason!
o Phillip Morris involved 100x punitive damages. Maybe it
makes sense in wrongful death b/c compensatory damages
are undercompensatory
Look at civil and criminal FINES that might be assessed as well and
compare it to THAT number (as an anchor).

o BUT compare to Grimshaw where the court says that

precisely b/c government fines are so SMALL, we need
punitive damages to make that up!
Unless sup ct is willing to come up with a bright line test, all that sup
ct can do is sent a signal which will make no difference unless state courts
and legislatures are willing to do. Multifactored balancing test do nothing.
One way of getting predictablilty would be to get rid of punitive
damages altogether. No other legal system allows this.
Restitution/unjust enrichment. Shows up in many pockets of
substantive law and not clear where we see it.
Restitution used to be its own course etc. Restitution recovery is
based on what the D GAINED from the illegal activity.
Its like a RIGHT tort and contract, (unbargained for benefits are
restitution). What would go in the fourth square is bargained for
harms .
Blue Cross blue cross mistakenly pays 2k to Sauer. What is the
source of liability when blue cross sues to get back the 2k. No
breach of contract, no TORT, the only substantive theory is
restitution/unjust enrichment.
o The liability points directly to the remedy. Unjust enrichment
IS the remedy.
If you have a heart attack and doctor saves you, there is basically a
made up contract. He will be able to get the money based on
unjust enrichment etc.
o Courts not ALWAYS willing to do this. If Mercedes delivers a
new car to you w/o you ordering it, no court is going to make
you give back the sticker price.
Here there was a FAIR opportunity to make a contract
ANYWAY! Unlike in the case where you have a heart
attack and wouldve bargained for it anyway.
When there is reason to believe that the parties
WOULD have made this contract, but there is a
barrier (like youre unconscious), then more likely
to imply a contract.
Levinson: most obvious thing to do when someone confers a benefit
nonconsensually, if we want to Channel people into consensual
transactions, then law should do NOTHING (as opposed to when
you involuntarily TAKE something and we want to channel to
contract)

Borderline cases: where D MISTAKENLY confers a benefit (unlike

Mercedes dealership that KNOWINGLY gives you something). But Blue Cross
that gave you money by accident is also at fault. So courts go BOTH WAYS
(unlike the doctor cases).
Somerville Somerville built a warehouse on a lot they thought they
owned. Then they sue the Jacobs who own the land and SUE the Jacobs for
unjust enrichment. They say either Jacobs have to pay them for price of
warehouse OR they have to sell the land for the price w/o the warehouse.
BUT courts are completely clear that if they did it on PURPOSE,
there would be no recovery! (Like Whitlock, the supermarket case)
Courts also clear that if D SAW the P start building and waited to
get his unjust enrichment, then its like the laches cases and the
courts would SURELY make the D pay for unjust enrichment.
**The actual case of Somerville is the in-between case b/c both
people were not in the wrong. SO these cases go BOTH WAYS.
o Somerville is harder than Blue Cross b/c the only solution for
the D is to pay cash for the building or to sell his land. Seems
unfair as opposed to blue cross case where all he has to do is
give it back.
Cases would be MORE similar if D in Blue Cross already
SPENT the money in good faith.
Restitution as a REMEDIAL option can be used as a liability rule in
many areas of law
E.g. In Van Wagner instead of P asking for injunction against
breach of the billboard contract, they COULD have asked for unjust
enrichment in the amount that D made from building the building
with Donald trump. This is even better than selling his injunction
b/c by selling his injunction he only gets a SLICE of the pie whereas
restitution would give him EVERYTHING.
o But NO court would ever do that b/c the result would be EVEN
worse and Ds wouldnt make these deals and the contracts
would be too expensive earlier.
Tort overwhelmingly based on compensatory damages rather than
based on Ds gain. From backward looking Aristotilian perspective, then we
want BOTH to be back into their baseline position. But this is hard b/c the
amount the P lost is more than what the D gained. Why not focus on
restoring the D to his position?
How do we answer that from a backward looking perspective? Not
clear

But forward looking not crazy to do restitution. If Ford decides to

have NOT exhaust pipes which leads to sore throats. The liability is
100 and it wouldve cost them 50 dollars.
o Compensatory ford would pay 100 dollars per sore throat.
o In restitution regime Ford would pay 50 and disgorge the
BENEFIT. Now Ford is INDIFFERENT as between installing
tailpipe and not. We dont want him to be indifferent. We
could say restitution plus some little bump to encourage Ford
to do the right thing
o E.g. suppose lack of exhaust pipe is 10% in 1000 dollars of
throat tumor damage.
Damages would pay 1000 for every 10 cars and only
saves 500 in tailpipes. This would mean they put in
tailpipes and this is what we want.
Restitution for every 10 cars a person comes forward
with a tumor. Ford would only pay 50 b/c for THIS car
they wouldve had to pay 50 more. Resittution wont
make them want to install tailpipes.
You COULD make Ford pay 500 BUT this would
require INFORMATION in the tort system and
figure out how much Ford SAVED in total.
But tort might still have to do this anyway
and figure out probabilities to figure out if
Ford was negligent.

Plaintiffs may often prefer restitution damages. In efficient breach of

contract cases, D will always have gained more than what P lost. And in
strict liability tort cases P will prefer restitution.
Taking of property cases often when something is TAKEN and
goes UP in value, you would rather take that.
o E.g. stock broker takes your 100 dollars and invests in
something risky and makes 100k. Compensatory damages
would be 100 dollars. Restitution might allow you to trace
the 100 dollars
o E.g. Ruffin v. Ruffin Husband won 5 dollars. Wife said that
the 2 dollars he spent was owed to her in alimony. He
seemed to not have more than the 400 he owed her so she
had some sort of claim to this. She still lost (could have other
creditors). But when a person has a LOT of money in the
account you cant really claim that.

o E.g. D stole two cars. As car and Bs car. As car gets traded
for a 3rd car. Bs car traded for drugs which are consumed. A
and B both sue D. A might be able to recover the car and B
nothing b/c A can recover 3rd car. More reasonable to sell 3rd
car and give pro rata share
Bankruptcy rules have tracing rules for creditors.
o When will courts allow people to get restitution when P wants
it? Sometimes. Restitution is the exception, not the rule.
We can get better at predicting when restitution will pop up as an
option.
**Owell has an egg washing machine. D has been using Owells
machine. Owell tries to sell it to D for 600 and he says hes rather just use it
himself. Owell is given restitution damages for the amount of time D saved
which is 1600 dollars. If it were compensatory damages he probably
wouldve gotten ZERO b/c he lost nothing. It was just in a shed.
We cant justify this based on compensatory damages. The
problem here is we dont like him TAKING something w/o
permission.
o We are using a supercompensatory damages to enforce
property rules where transaction costs are minimal (there are
no monopolies on egg washers etc. The court WOULDVE had
a preventive injunction if asked beforehand! But thats not an
option now. Maybe punitive damages.

*********Edwards v. Lees Administrator Edwards discovers that he

has a cave on his property. He has the only ENTRANCE but back 1/3 of the
cave is under Lees land. Lee wants restitution damages. Ideally we want
Edwards to bargain with Lee and pay for the cave.
Laycock says that this is harder case than Owell, b/c there IS a
bilateral monopoly here!! And maybe we want a LIABILITY rule
rather than a property rule!
Kentucky Sup. Ct. gives restitution of 1/3 of Edwards property.
AND they give injunction preventing him from further using Lees
property. DISSENTER says that the problem is they wont be able to
bargain around the injunction and he worries about that and would
prefer to go with a liability rule where Edwards can still use the
part of the cave but Lee can recover 1/3.
**Levinson: people who take w/o permission are not always thieves

Beck v. Northern Natl Gas Natl Gas leasing a cave from an owner. P
is leasing storage in his cave to natural gas company. It goes into another
CAVE. Court awards restitution by market value of the rental of the cave.
Its just like Vincent v. Lake Erie and the dissenter view in Edwards b/c they
didnt know and didnt have a chance to bargain for it.
This would be different if the company had TAKEN the space
knowingly etc.

These cases establish 2 advantages of restitution damages over

compensatory damages.
1) Restitution can be supercompensatory. Ps want it and COURTS
want it when we want to channel them into consensual transactions
(or punish) These are same idea as injunction or punitive damages.
2) Makes things easy on the court where compensatory damages
are nonexistent or difficult to measure b/c the loss suffered by P is
INTANGIBLE (like exclusive use of property)
Myers v. Brewing Company Ds know that there is black and white
scotch so they label their cheap beer black and white. Trademark violation.
Scotch company gets RESTITUTION.
Strong case for Supercompensatory remedy of some sort b/c the D
KNEW and didnt negotiate etc. Like Owell. We Should EXPECT the
court to throw the book at them.
How would we measure compensatory damages. We are talking
about sales that are LOST b/c of this. Like cheapening of label etc.
o But well never know if sales went down b/c of THAt or some
other reason.
Most likely to find restitution when:1) we want some sort of
supercompensatory measure and 2) its easier to measure the Ds gain than
the Ps loss (like the beer)
BUT problem is that the beer company would have made SOME money
if they hadnt labeled it with black and white. How do we measure Ds
UNJUST enrichment? (as the level of enrichment that were causally
traceable to the LABEL). This would be really HARD and all the problems of
the compensatory damages would reappear. PLUS what incentives does this
give the beer company?? Nothing b/c at best they profit, but at worst they
come out even. We want a sanction and we wouldnt be able to do that if
they only had to give back the unjust part.
Owell court couldve gone to FULL PROFITS of the egg-washing
business.

Although doctrinally restitution is only about UNJUST

enrichment. IN fact, in many cases the purpose is to make
Ds pay MORE than that to use it as a SANCTION and not a
price.
o Courts routinely cheat in their apportionment in order to
make sure that damages are HIGH ENOUGH.
o IF they didnt do this, both advantages of restitution would be
LOST (sanctioning and the ease in valuation in comparison to
compensatory)

Snepp v. US Snepp has to send his manuscript to CIA for review. He

publishes a book on CIA activity in Vietnam. **Sup Ct says that its OK to
give restitution damages to CIA in amount of ALL of the profits EVEN
THOUGH none of the information was classified by admission of the CIA!! So
ALL of the profit was just
Sup Ct. views him as a deliberate wrongdoer! Just like Myer
The possible harm to CIA later might be really HIGH.
Sheldon v. MGM - MGM makes a film based on real life story. P wrote
a play on the same events and MGM plagiarized part of it. Dist court awards
P the ENTIRE PROFIT even though there was evidence that most of the
profits came from the general story and the star actors
Sup. Ct. gives 20% to P.
Why does the court give full profits in Snepp but only 20% here.
***EXAM: Maybe its better to ignore the empirical causal
judgments and that courts are making functional arguments. (we
want people to go make contracts AND we are afraid that MGM in
many cases will plagiarize and NOT GET CAUGHT).
o We dont want it to be TOO high. Might be copyright troll
problem and authors wont want to negotiate a license etc.
but WAIT for the movie to get made
Maybe thats why Dist court isnt good and 20% is
better
In Snepp we dont have these problems HUGE damages are good b/c
he only has to comply w/ EASY safe harbor by submitting for review. And
not really a danger of the CIA acting as a troll and letting him publish and
then getting a profit.
But why is Owell not so high! Maybe when they can ascertain the
amounts the court will try to do this. Or maybe the D in Owell doesnt seem
as bad as Snepp.

E.g. Da Vinci steals paint from pearl Art and wants to get the 1B profit
from the Mona Lisa. Art store will cite Beer case. Da Vinci will cite MGM.
Even though its clear that da vinci is a WRONGDOER, its just
ridiculous so courts care SOME amount about CAUSATION. And its
not proportional (constitution blah blah)
This looks like the stock broker case and tracing but its just
ridiculous.
E.g. you steal a computer and start a company on it.
o Restatment: tracing may be limited when the recovery is very
disproportional to Ps loss.
o ***Proportionality of punishment and CAUSATION matter
somewhat.
Restitution is much more FLEXIBLE than compensatory damages. So
maybe thats why its useful to courts.
Fourth and Fifth Am exclusionary rule. Its a KIND of restitution
remedy. Govt has to give up a lot like letting a murderer goes free. And
criminal defs suffered a minimal loss and get a huge windfall.
Purpose is deterrence.
There is an advantage here TOO in ease of application hard to
monetize the compensation to the D. Instead we are able to easily
get rid of it.
BUT fruits of poisonous tree doctrine ALSO gets rid of some of the
ease b/c we have the causation issues and apportionment.
o Courts will probably allow less leeway under this doctrine
when the officers INTENTIONALLY violated etc.
o
Vermule - Reparations schemes are hybrid b/c ordinary legal remedies
on the one hand and large-scale govt redistribution or transfer programs.
Reparations programs administered by legislatures.
Redistribution at this level of ambition like for remedying the harm of
slavery or Holocaust is generally regarded as beyond the outer bounds of
judicial capacity and LEGITIMACY.
Unlike redistribution and transfer programs and more like ordinary
remedies, they are based on a COMPENSATORY framework. The point is
past wrongs, NOT looking forward. They arent about distributive justice and
NOT about forward-looking incentives for people.

Like remedies as conceived by many judges, casebook authors etc.

Backward looking
Posner and Vermule give exmaples. E.g. holocaust reparations by
W. Germany. Czech Republic instituted reparations programs for
property confiscated by communists. US paid to Indians and
Japanese.
o There is a movement to institute reparations program for
slavery and Jim Crow. Even specific. Tulsa race riots etc.

Ogletree these types of claims are not so different from each other.
We should think of reparations for slavery generally to the specific harms
that resulted from Tulsa race riots.
But its obvious that the more specific it is, the more these claims
can succeed in court as opposed to requiring LEGISLATION
Reparations are useful way of expressing the limits of what remedies
are.
They stretch the boundaries of what is a legal remedy. They RELAX
the ordinary requirements of WRONGDOERS to PAY to actual VICTIMS who
should receive compensation
E.g. People paying reparartions would not be responsible for slavery
directly and the people getting paid not directly harmed (although
you could say that people alive today also benefitted or were hurt
by slavery).
Forward looking perspective, there is no reason to care about this
MATCHING. E.g. vicarious liability or collective punishment
schemes require the payer to be different for completely
INSTRUMENTAL reasons.
o This includes all of liability for corporations which require
shareholders to pay for decisions that MANAGERS made!
o We also from a forward looking perspective want to limit
recovery for VICTIMS bc we want them to take care
themselves.
Compensatory mindset makes courts reluctant to depart from the
matching of wrongdoer and payment and victim and damages.
o E.g. where courts are reluctant to give cancer recovery based
on a probability like giving them 60% of cancer damages.
Courts reluctant to give summers v. tice or market
share liability examples.

Compare school desegregation cases: beneficiaries like

in Charlotte Mekelenberg or Jenkins are NOT the same
people as the victims of de jure segregation in 1950s.
Even if we think that there is inter-generational
disadvantage that got transferred, only a few would
have a direct relation to the people who had a problem.
E.g. courts saying that if an employer
discriminated against women, they then have to
have an affirmative action program for women.
How is this remedial if not the same person?
DIFFERENT from forward-looking rationales
for aff action like DIVERSITY where youre
looking toward what will be good in the
future.
The more the Court insists on perfect oneto-one matching, the less there will be such
a thing as aff action, and more just claims
for remedial action on individual basis.

Proponents of reparations face a challenge of restoring matching on

both the payer and recipient side. Proponents of reparations for slavery look
to certain groups. Like Universities and Govt etc. So these entities can be
made to pay. On victims side racial group can be considered as having a
continuous personified existence.
Compare Lyons (LAPD choking case) he can try to cast a claim as
some member of my group (LA citizens, blacks) might be hurt.
E.g. Former pres of Brown University great granddaughter of
slaves. She inititated an investigation as to whether they should
pay reparations for slavery b/c people used slave labor etc.
o In order for a scheme giving scholarships to blacks to work
youd have to focus on the University as an entity and blacks
as a group. Once it becomes beneficiaries, students etc.,
then you start to lose footing.
E.g. is the post-WWII German govt or German people responsible
for Nazi atrocities. This would mean that individual Germans who
had done nothing wrong or had even suffered would have to pay.
Jewish people get the benefit in form of Jewish organizations and
Israel.
o This idea of entities is at the CENTER of CONSTITUTIONAL
LAW we the people is an entity. We have to believe in
that if we feel BOUND by an agreement made by these people
200 yrs ago who made some document.

Some forms of this communalism are more troubling than others.

Where victim or beneficiary groups are personified along ethnic or racial
lines, then we have a problem. E.g. Opposers of Holocaust reparations say
that thinking of Jews as a fungible group that can receive compensation for
wrongs in the past basically affirms Nazi ideology
Same idea of Thomas and Scalia w/ aff action sends message that
all members of minority groups are the same and share (negative)
characteristics.
We dont have this concern about shareholders and managers of
corporations.
Or when we group together Island businesses and mainland
businesses when island gets fucked by the bridge collapse etc.
Alternative to shifting focus from individuals to GROUPS is to expand
the relevant focus of the WRONGDOING and its effect on the people.
E.g. can justify the reparations to living black people, you can make
the argument that ALL blacks are ongoing victims of slavery.
o Swann makes an assumption that all de facto segregation is
a result of pre-existing DE JURE segregation.
On WRONGDOER side you can argue that ALL NON-BLACK
Americans are wrongdoers in the UNJUST ENRICHMENT sense.
Even if were willing to go that far in causation, we are left with
questions of DEGREE and how MUCH compensation anyone owes anyone
else. Like in Tulsa race riots we can figure out the wrongs and the remedies
but when we take it up to the level of Slavery generally, we dont know the
level of harm to a certain black person or how much a white person has
been unjustly enriched.
When thinking about the degree of harm or degree of culpability,
once you broaden this so far, we get a problem of OFFSETTING
BENEFITS puzzle.
o When we are trying to decide what level of compensation is
owed, what do we do about the fact that the wrongdoing
thats on the table doesnt capture the extent of the back and
forth harm and benefit
E.g. govt takes your house, but govt ALSO gives you
POLICE etc. How do we figure it out. (or w/ Cuban
court, how much do YOU owe the govt.)
Ogeletree have to look at some offsetting benefits like Civil War,
Great Society welfare, Aff Action, and benefits of living in a society like ours
that might not otherwise exist.
Some say that had there never been slavery, the descendents of
slaves would be poor people in AFRICA.

o But isnt slavery partly responsible for the shitty situation in

Africa??
Like when a tobacco co. says that we saved the govt money by
killing off the person sooner we laugh. But when doctor says that
pain and suffering of a non-consented operation is offset by what
the operation did.
o And we laugh at the doctor gets to run you over after saving
you argument.
o Damages for wrongful birth for botched sterilization
procedures some courts measure damages as cost of
raising child. Some dismiss and some say offsetting benefits
of having a child.
When do we take offsetting benefits into account and when do we
ignore them b/c we take a MYOPIC of the realm of what were
looking at.

Reparations offsetting benefits arguments are symptomatic of the

impossible counterfactuals that we cant imagine. When harm is small we
have an easy time generating those counterfactuals. We can imagine what
the world wouldve looked like if I dont crash into you and break your leg.
We know that its not TRUE (ie. Sliding Doors). Easy to ignore the other
effects and just focus on the actual situation.
In reality we just draw a small CIRCLE around the accident and the
illegality and pretend that the two lives that resutltd from the
accident wouldve been the same in all other respects!
o We can convince ourselves that we can draw a workable
counterfactual and calclulate damages.
BUT when harm is NOT so small, as it gets larger and approaches
the magnitude of slavery, it becomes more difficult to convince
ourselves that we have any GRIP on counterfactual way of
measuring the extent of the harm.
o When the compensatory justice question becomes what
position would blacks have if there hadnt been slavery?
WE DONT KNOW WHAT THE FUCK TO DO!!
o Bigger the wrong, and more distant in time, harder to get our
minds around restoring our world to what it would look like if
the harm never occurred. At some point we just throw up our
hands and acknowledge the injustices but no way to clear up
the problem.

Even if we could agree on what the world wouldve looked like in

absence of slavery, wed never be able to recreate it! RESTORING baseline
is a practical impossibility even if we KNOW what the baseline is! Even just
a year from now putting Romney in office would be impossible
SO what do we do?
o Repair it a LITTLE BIT?
o Or should we just say too bad its over and get on with our
lives?
At some point we just have to do that.
Economists would throw up their hands IMMEDATELY.
Other people would take a long time to get to that
point.
Economists say that past problems are SUNK. We
should always choose making the future better
instead of focusing on restoring the past.
The problem is that every dollar spent on
reparations is money we cant spend on
IMPROVING the future.
E.g. Brown University could spend money
on POOR communities or stopping cancer.
E.g. instead of trying to desegregate
schools, we could try to create better
schools (Dist judge in Jenkins TRIES to do
that using a backward-looking RATIONALE,
but hes thinking about forward-looking
goal)
We are willing to trade off distributive justice for CORRECTIVE justice.
When poor guy dents Bill Gatess limo, custodian pays Bill Gates his last
dollar, rather than how the Cuban Rev. Court would decide it by taking 1B
and give it to the custodian.
WE CHOOSE backward looking compensation rather than looking
forward to creating the world a better place.
o We could STILL explain it as forward-looking incentives. If we
create incentives to create a safer society, we create a bigger
pie to give MORE to the custodian.
So compensatory goals are ALIGNED with forward
looking distribution of wealth and utility maximizing.
BUT we cant have everything at the same time. To the extent we are
willing to spend money on reparations for groups, we CANT spend on
forward-looking goals. No reason to think that the pie is going to be any
more fairly divided than before and may be less fair than alternative.

E.g. just compensation to rich beachfront property owners in

takings case, we could just give the money to poor people
E.g. Repaarations for slavery would give benefits to Blacks, even
those who are wealthy, rather than create general help to POOR
people generally (some overlap w/ poor blacks).
o E.g. should Charles Ogeletree (black prof) be able to collect
money from median tax payer.
*******Does Ogeletree have the same sort of
claim as Bill Gates has (rightful claim). When the
claim gets bigger and bigger, do we still give
Ogletree PRIORITY, or when it gets SO BIG do we
have to tip the balance away from backward
looking claim and in favor of forward looking
altnertaive claims of alternative recipients. AT
WHAT POINT DOES TH BALANCE TIP???
What about wealthy aristocrats in E. Europe who were
dispossessed by communists who want their chateaus
back when the alternative is to give agricultural
opportunities to poor people and give shelter to poor
people who suffered in WWII?
Or 9/11 victim compensation fund gives out millions to
wealthy bond trader families instead of giving money to
poor people or invest in anti-terrorism, at what point
are we willing to say that we can no longer honor the
claim of these families to social resources.
Feinberg said the 7M dollar mark. Plausible case
for ZERO and plausible case for UNLIMITED
amounts.

Question hovers over our entire system of law and remedies. Its our
whole system of politics etc.
After Hurricane Sandy they say that we have to invest in saving it.
After Katrina why do we want to REBUILD it when its going to flood
anyway? It makes no sense to have a city there. Give everyone
200k and have them move somewhere ELSE. We have a PULL
toward REBUILDING
What is the VALUE OF REPAIR? How much forward looking benefits
are we willing to give up in order to achieve repair. No one willing to give
absolute priority to remedies in backward looking sense.
It may be that Indians and Blacks actually deserve ALL the wealth
in America!! No one is willing to do that
Completely forward-looking people are not willng to do anything

Most people are IN BETWEEN. Most people feel some pull toward
corrective justice but trade OFF the future at VARIOUS RATES
(implicitly w/o giving it some thought).
o Irony we regard some injustices as TOO BIG TO REMEDY.
The more horrible and enormous, the less likely well view it
as remediable! (Cant create counterfactual, cant invest all
that etc.). Instead we just focus our remedial efforts on the
smaller, more manageable kinds of harms like we deal w/ in
legal system.
When its too big Ogletree brings it to legislature and
says its close enough to the harms we take care of in
courts so we can do it through legislation.

FINAL POINT
How we assess the tradeoff b/w the backward looking compensation
and what we give up in making future better says a lot about what
you think the law should do
o Should it compensate people or make things better in future
o Is compensatory justice good for its own sake, or is it only
valuable in creating incentives and creating a bigger pie in the
future etc.
o **Simpler formulation: What do you feel about
RETRIBUTION? If you know a person will never commit a
murder again do you still want to punish him.
Tells you about law and what kind of person you are??