Contracts : Week of December 3

Reading for 3 December

Punitive Damages: note that we've got a few big cases underway this term of the court, along with some new justices. So there may be some serious developments in that area.
Bill to amend arbitration code: people on the law faculty have actually testified in favor of reform of mandatory arbitration. So maybe that will change as well. Wall Street Journal thinks this is a scam by lawyers to have more court cases, rather than nice arbitration. But sometimes the costs of arbitration are greater than the award, by orders of magnitude.
Bankruptcy reform essentially increased the cost of filing for bankruptcy, and makes it so that you can't file for it yourself. It's not as bad as people thought it was going to be, but it still basically represents Congress being bought by the payment card industry (note that it does not get you out of car payments or student loans).
If UCC §2-302 is the grounds for a breach of contract, there are no punitive damages. But many state consumer protection statutes do allow this.
In WI, you'll need a lawyer to make a case for unconscionability (it's not explicitly there for remedy in the statute), but it can be done. Also, it's not clear that a private individual can always bring a suit.
Still, you can get punitive damages some of the time. Also, for the tort of fraud (note that to justify "punitive" damages, the case must be egregious: innocent error won't get punished).
Devlin v. Kearney Mesa AMC/Jeep/Renault, Inc.
Commentary in class
You've got to consider the nature of the acts, the harm, and the wealth of the defendant, and the amount of regular damates (this is from the Supreme Court: BMW v. Gore).
The goal is to extract enough to make the defendant take notice, but not cripple. This has always been a suspicious area: the power of the rule of law (predictability) vs. the power to hurt bad guys. You don't get all the protections you do in criminal cases, but do you want a bunch of amateurs deciding how much of a fine you should pay?
Ex post facto concerns: a lot of times damages are awarded in cases where it wasn't totally clear that they'd be penalized. It's theoretically possible to have criminal penalties as well, plus awards in multiple jurisdictions for the same sorts of acts. Also, in theory, we've compensated the plaintiff with plain old damages.
There's also this notion of the private attorney general: real criminal law can't cover everything, so we want bounties to make lawyers want to help out in this area. On the other hand, why make a lawyers-get-rich system? Who does that really help?
This is a US-only problem, pretty much, because we have relatively modest regulation and private causes of action. The theory is that only serious cases and ones involving crazed rich people will get litigated, and the market will take care of the rest.
Is there, or is there not a litigation explosion? We are told there is one, but research (Galanter) indicates that this may not be so. Not only that, but awards to plaintiffs are declining, in spite of inflation. But anyway, fear of the explosion has caused many states to institute caps on damages (these get attacked on the basis of constitutionality: the state constitutions allow you to sue for damages). 14 states have this (in many states, the cap is a multiple of the compensatory damages, in some, it's just a flat amount).
In product liability, you may be better off if you kill people, rather than make them need intensive care for many years. Atrocity stories are the counter-argument: corporations getting off cheap for huge awful deeds.
Anyway, there are some wacko jury verdicts, to be sure. At the same time, though, we have this notion that punitive damages have run out of control.
The Supreme Court won't specify a bright-line ratio for punitive damages, but they indicate that single-digit multipliers are a pretty likely limit.
Remittitur: those damages are excessive, you may remit $X (usually half) or have a new trial. This is a power that judges have, so we should not pay too much attention to huge jury awards.
See, for example, big punitive damages against tobacco companies. This can get reversed: you can't target a defendant for harm done to anyone but the plaintiff (i.e., it was not a class action), and perhaps not even beyond the borders of the state.
In March of 1989, the Valdez smashes up. 5 years later, fishermen (et al) sue Exxon claiming their livelihoods were wrecked. They get awarded a $286M, plus punitive damages of $5B. That was in 1994. On appeal, the 9th Circuit cut the damages, but this fall the USSC granted cert.
So: are we only interested in the procedures of recovering punitive damages, or is there something substantive here? It's a very mixed bag: Ginsburg, Scalia, & Thomas concur ?!?! About not limiting damages.
So do we really want to protect consumers? Do they need it? It's a funny kind of thing. Some of these cases get a lot of caring (tainted hamburger at the drive-in restaurant; Chinese toys, etc.). Others, not so much. Undoubtedly, you'll get cheaper toys if you don't regulate. And block cross-collateral clauses, etc. So the question is "how do we make the world better?" Maybe by doing nothing: the cheapest way of solving all problems. There's a distinction between normative (people should take more care) and empirical (people trust), though.
So we've got causes of action, but how do we finance them? Remember: if your contractual interests are compensated perfectly, you still lose money (lawyer fees). Setting up a way to offset this is tricky. Why would you want more litigation?
Used to be that corporate lawyers were the butt of jokes-- now it's plaintiffs' ones.
The arbitration bill has a shot, but it's unlikely that we'll get punitive damages back any time soon. Arbitration is not good for auto dealers, but it's good for regular consumers? (remember that the auto dealers got an exception to the FAA; same with members of the armed forces).

Leff: Thomist (St. Thomas Aquinas) unconscionability: the "just price." Generally we're talking about taking advantage of a situation that one did not create (i.e., selling to the poor, etc.). All of a sudden, you find yourself without fault or responsibility, even though things are bad. We want market efficiency and not exploitive results. Wanting conflicting things.
He sort of made a career on studying unconscionability. He is a real cynic. He asserts that you can shoot down nearly any normative claim.
Trying to regulate these things is basically playing games: the costs would just get passed on some other way, or the people will engage in a different business altogether.
What do you expect Walker-Thomas to do when the cross-collateral clause is struck down? The least thing possible: just add a sentence or a disclaimer, or something. It'll get litigated again, etc. This is a fantastically expensive way to implement policy: you just nudge teensy individual points around.
Whitford: In consumer laws, that's a place where you want certainty: you need bright-line rules, so that issues can be dealt with quickly and predictably.
Kennedy: he's an incredible speaker, even if you don't agree with him. Individualism/altruism are often in conflict. Did Skelly Wright help Mrs. Williams? Probably not much, but he did what the law allowed his role to accomplish. "It's not enough" is not a reason to do nothing. He urges that people do what they can, but not get too romantic about what we can accomplish.
Consumer protection statutes: trying to spell out all possible unfair trade practices. How do you prove some of these things (i.e., that the repair shop was wrong about what needed to be replaced)? Who uses these laws, and how? Certainly it's more specific than "unconscionability," but how much more specific are they, in practical terms? How do you show that a merchant had reason to show something?
The effect of limiting punitive damages (psychologists): if you don't let the jury give punitive damages, does that affect how much they'll give as compensatory damages? One argument against overturning punitives is that you can't be sure that the compensatory damages would have been the same had the jury known they would not be able to issue punitive damages.
Judge-jury comparison studies indicate that the cases generally come out about the same as they would if there were no juries. That's because judges are so influential in instructing juries. Note that unspoken queues can telegraph to the jury "don't give this guy any money."

5 December... Last class...

We want free contract, but we don't want to enforce certain things; etc. we often want contradicting things. We have a model bargain in mind: each of us knows almost everything, and one gives money for the other's goods. This does not always occur, of course.
Impaired consent: infancy, duress, undue influence, etc. There's a lot of territory between wrongful and OK.
Information defect: one side has harmfully bogus ideas, but trusts in them. Innocent vs. negligent misrepresentations (e.g. warranties).
Indigestable deal: illegality, windfalls to the wicked, unconscionability
We could eliminate arriers to rational self-interest: availability of information, clarity of terms, etc. But would that actually change anything?
We also could look out for everyone, but that gets expensive fast.
Contradictions of contract law (handout redux). Deep down, are we trying to facilitate the market, or correct it? Then we next need to decide between efficiency/predictability and decisions based on individual circumstances. The other major dichotomy: transactional (determine what the Real Deal was and enforce that) vs. Relief (intervention to prevent individual unaccaptable results). See those quadrants.
Efficiency cuts transaction costs and enhances predictability.
Another area of contradiction: the same rules seem to operate rather differently depending on what genre of contracts you're looking at (employment vs. sale of goods vs. form contracts, e.g.). Believing that we can generalize about these things results in some difficulties. Not only that, but there's actually expertise required to understand things like a cross-collateral clause, or the warranty contract that comes in your computer box, incorporating by reference a bunch of terms from an international arbitration organization. There are differences in relationships as well: at-arm's-length bargains vs. long term relationships. These can control the balance of power in a deal.
We want everybody to work as hard as they can to get a good bargain, but we don't want anyone to get a bad bargain.
Property is good duress: if I have something others really want, I can name my price.
How do we affect outcomes? We can change the rules! Just like Brown v. Board of Education ended segregation, right? You can change the institutions, as well: enforcing arbitration keeps things out of the courts. You can add or subtract legal services: awarding lawyer's fees in civil rights and consumer protection helps get people access to representation (but the award only comes if you win... so the lawyers only want clear-cut cases, and decide not to take others); also caps on punitive damages, pain-and-suffering damages, damages for product liability. We can change the parties: in order to play you need a license, and if we don't like the way you play, the license can be revoked. We can improve consumers, maybe, through education or counseling. We can provide direct subsidies to change the playing field (i.e., a state-run PX to bring order to an otherwise predatory market).
Law is uncertain, underrationalized, reflects changing legal cultures, and the remnants of history. There's a reason to doubt whether law could ever be simple and easily understood. Contract law institutionalizes our ambivalence about negotiations and agreements.
Being Americans, we want our cake and to eat it as well. So we have cycles oscillating between these various poles: we go in one direction until we start getting unacceptable results, then we make an exception, then there are too many exceptions and we drift in the opposite way. The Nader pro-consumer era, vs the Reagan pro-corporate era.
Law reflects power. Just following the money is insufficient (it's a part of it), but sometimes the dragon does actually get slain, at least temporarily. Our legal culture changes, in terms of what we expect from power: 100 years ago Katrina would have been a too-bad-so-sad story. You live there, you take your chances. No big government scandal. So sometimes our assumptions about what law should do change. The way we apply the rules can change as well: look at where the judiciary comes from, and how that changes over time. That will affect outcomes as well, for obvious reasons. We can shift responsibilities as well: making crimes federal instead of state, for example, or removing some disputes to arbitration or small claims.
We want everybody to work as hard as they can to get a good bargain, but we don't want anyone to get a bad bargain.
Property is good duress: if I have something others really want, I can name my price.

The exam is in progress, there will be too little time.
It's open book. So you need to master the material, not memorize it. Bring the UCC/Restatement. That is assumed.
Bring whatever serves you as a means of picking apart the story problems. Spotting the issues is the key. Checklists, outlines, etc.
Remedies, knocking down contracts. Those are likely themes. If they are missing, re-read. You want a way of double-checking that you have all the issues, if possible.
Always ask: is there any liability at all? Is there a contract? Reliance? Restitution? Then: what did the parties agree to? What is the deal? Who agreed to do what? Then: are there defenses? Undue influence? Duress? If there's liability, so what? Cover, specific performance, damages?
Almost all issues will involve "what is the law?" CA Parole Evidence Rule vs. NY PER. If there's no rule in our jurisdiction, say what it should or could be. If you want to talk about reliance, deal with whether it was foreseeable, substantial, and whether injustice could be avoided only by enforcement.
Don't be shy about using outline form, but do be sure it's clear and communicative.